Greatland Gold and Bushveld Minerals. Could this be the future?

The share prices of Greatland Gold (LSE: GGP) and Bushfield Minerals (LSE: BMN) are having a great few months. Is it only hype, or do they have a growth future?

| 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.

The share prices of Greatland Gold (LSE: GGP) and Bushveld Minerals (LSE: BMN) are rallying. Despite the coronavirus-induced stock price plunge in March, shares in Greatland are up 630% from a year ago. Although Bushveld’s market value is still only half its June 2019 price, its shares have climbed 44% over the last three months.

Greatland Gold’s blazing trailing 12-month performance leaves the FTSE AIM in its wake (click chart to enlarge): 

Greatland Gold vs Bushveld Minerals share priceCredit: London Stock Exchange

Bushveld Minerals trails the index in this regard. However, excluding its 2018–19 outlier year, the vanadium miner is trading at prices it’s not seen since 2012.

Every investor wants to buy stocks that perform above the average over time. Indeed, growth stocks such as these miners could be one way to do exactly that.

But, can these two mining stocks be expected to maintain this performance in the future?

Greatland Gold

One person who believes in Greatland Gold’s prospects is its CEO, Gervaise Heddle. Back in March, Heddle bought enough shares in the gold miner to bring his ownership stake to 1.5%.

Some investors believe that putting all your eggs in one basket is a good way to make a fortune. Judging by the optimal timing of his share purchase, this could be true for Heddle, who has intimate knowledge of Greatland’s business.

Not having that intimate knowledge, I’d personally be more hesitant to make a bulk purchase in Greatland, especially after the recent share price hike. Currently trading at around 12.5p, Greatland Gold has no price to earnings (P/E) ratio. This is because it hasn’t reported any previous earnings or any profits with which to calculate a ratio. The current share price is based purely on future optimism.

However, the future could be gold. Greatland’s Havieron gold-copper discovery in Western Australia looks promising. And on Monday, the firm announced a series of agreements, which are now in place, relating to the exploration of the region with partner organisations. These will help with obtaining a mining lease to enable Greatland to begin mining operations. But it will still be a while before the firm begins revenue generation from any gold found.

Bushveld Minerals 

Bushveld Minerals is another stock where the majority broker consensus is to buy. The firm produces Nitrovan vanadium, an additive for high-strength, low-alloy steel that can lower steel production costs.

The Bushveld share price is currently reflective of the trade-off between low vanadium prices and good business management. The former reduced revenue while the latter produced the lower overheads that compensated for that drop.

Although the effects of the Covid-19 pandemic are concerning for the firm, its Vametco mine’s first-quarter vanadium production rose despite the lockdown. Indeed, many analysts are expecting an increase in production for 2020.

As for Bushveld’s future, the recent three-year wage agreement with Vametco’s workers gives stability. Moreover, the firm hopes that the recent addition of the Vanchem plant will turn Bushveld Minerals into one of the most significant low-cost, and most vertically integrated, miners.  

I’m not convinced a portfolio of growth stocks will yield a better return than a more balanced one. It also comes with greater risk, as does gold mining. Greatland Gold’s current price is too speculative for me as its future is too uncertain. But, I am tempted by Bushveld as a speculative purchase in an otherwise balanced portfolio.

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.

Rachael FitzGerald-Finch has no position in any of the shares 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

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »