Greatland Gold (LSE: GGP) shares have taken a hit recently. But is now a buying opportunity? I think so. I reckon the investment case for the stock still remains intact to me.
In fact, recent announcements from the AIM-listed company makes me believe Greatland Gold shares have further potential. Here’s why I’d buy the stock in my diversified portfolio.
Why have Greatland Gold shares fallen recently?
In a nutshell, the company is mining for gold in Western Australia. I should say that it’s an expensive business but the rewards are huge if the precious metal is discovered.
Last year, Greatland Gold had major drilling success at its Havieron deposit. While it’s still early days, this site demonstrates the potential for a large, underground mining operation. The company couldn’t afford the mining costs itself. So for Havieron, Greatland Gold joint-ventured with Newcrest.
The shares had been rising up until January when it announced that the initial drilling results at its Scallywag project weren’t positive. This is a 100% owned license by Greatland Gold rather than a partnership.
I want to highlight that not every drilling hole dug will be successful. This is why Greatland Gold explores many sites and learns from the unsuccessful ones.
I reckon after the success of Havieron, investors expected the positive results to continue at every site. Especially from one that is fully owned by the company. To me, the share price fall is a reality check.
Out with the old in with the new
New CEO Shaun Day has now is now on board, taking over from his predecessor Gervaise Heddle, who will remain on the Board until March 12 to ensure a smooth transition.
But Heddle hasn’t left without buying £112,000 of Greatland Gold shares. I think he’s filling his boots with the stock as there’s huge potential ahead. After all, who knows the company better than its departing CEO. This gives me some confidence and is a reason why I’d buy the stock in my portfolio.
I also view this change in leadership as a positive thing for the stock. The company had grown so far under Heddle’s direction. I think the company needs a CEO with large-scale mining experience to take it to the next level. Especially when I reckon Havieron has the potential for commercial production.
The risks
Greatland Gold shares are still a risky prospect. It hasn’t generated any revenue and therefore is loss-making. This could continue and may impact the share price negatively.
The stock is volatile and I’d only invest what I could afford to lose. While Greatland Gold continues to drill, I also acknowledge there’s no guarantee of further drilling success.
VanEck ETF
Earlier this month, Greatland Gold shares were included in the VanEck Vectors Junior Gold Miners ETF. VanEck is now a 6% shareholder of the company.
I view this as a positive move because it has pushed the shares into the limelight. In time, I reckon more investors will become familiar with the stock and its growth potential, thereby increasing the share price.
For the reasons above I’d buy the shares in my diversified portfolio. Just yesterday, Greatland Gold announced that it has made an application for a new exploration license in the Paterson region. Apparently this new site has similar traits to Havieron. I guess time will tell if it’s successful.
