Should you buy the Greatland share price today?

The Greatland share price has surged in the past three years. But even after this performance, the stock still seems undervalued, according to this Fool.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investors who were brave enough to buy the Greatland (LSE: GGP) share price three years ago have been well rewarded. The stock has returned 160% per annum since the beginning of 2017. Moreover, £10,000 invested in the business at the beginning of 2016 would be worth nearly £300,000 today.

This performance is quite impressive, especially because Greatland is a small-cap mining company. Most of these tend to be terrible investments over the long term as mining projects never really live up to their hype.

So it seems that Greatland has bucked the trend. But is the stock still a good investment, or should investors bail following its recent market-smashing performance?

Steady progress

Recent trading updates from the organisation show this is no ordinary small-cap miner. It claims to be the only AIM-listed company with exposure to the new “gold/copper rush” in the Paterson region of Western Australia.

Work is progressing well on all of its six 100%-owned gold mining projects in this region. And other parties are taking notice.

Last year, it signed a $65m farm-in agreement with a subsidiary of the global mining giant Newcrest Mining. Not only does this agreement provide valuable resources, but it also allows Greatland to access Newcrest’s experience and equipment.

The company has already agreed to share processing facilities with one of Greatland’s prospects, which will deliver “material benefits for both parties including lower upfront capital costs, reduced time to production and first cash flows.

Road to riches

Updates on Greatlands drilling programmes show the company owns some highly attractive resources. This seems to go some way to justify the recent stock price rally.

However, as is the case with all mining projects, getting the gold out of the ground is going to be the hard bit. This is where Greatland’s partnership with Newcrest could be invaluable. That said, the partnership doesn’t guarantee the company will graduate from being a gold explorer to a gold miner without incident.

As such, while it does look as if this business has some attractive qualities at first glance, it remains a speculative prospect. Therefore, the stock only seems to be suitable for the most risk-tolerant investors.

Cash could also become a problem. While Newcrest is covering $65m of initial spending for mine development, Greatland only had £6.4m of cash in the bank as of August 2019.

That being said, if everything does go to plan, the stock could be worth multiples of the current share price. To get some idea of just how big Greatland’s potential really is, we can look at Newcrest’s Telfer gold mine. Telfer is 45km away from Greatland’s Havieron prospect.

Close partnership

Newcrest is working with Greatland on the Havieron prospect as it believes it could extend the life of the Telfer mine. This is one of Newcrest’s most profitable and productive assets and could be worth over $1bn. That’s compared to Greatland’s current market capitalisation of £180m. A buyout or offer is possible. Newcrest has already agreed to share Telfer’s processing facilities with Havieron. 

These numbers suggest Greatland could be worth substantially more than its current value. Still, there’s no guarantee an offer will be made at this stage.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »