Is the Greatland Gold (GGP) share price set to explode?

The Greatland Gold (GGP) share price has collapsed in 2021. But is this a buying opportunity? Zaven Boyrazian investigates.

| 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.

Gold bullion on a chart

Image source: Getty Images.

The Greatland Gold (LSE:GGP) share price has had a fascinating recent history. After rising by nearly 1,900% in 2020, the stock has since lost around half of that gain. And for the past couple of months has remained relatively idle, hovering around 20p per share. Despite the significant decline seen at the start of 2021, the 12-month performance of the GGP share price is still a rise of nearly 60%. But is it about to rise again?

Exciting growth on the horizon

I’ve explored Greatland Gold before. But as a quick reminder, it is an early-stage exploration business that is beginning its transition into the production phase of its mining sites. In fact, this transition is responsible for the explosive performance of the GGP share price last year. Why? Because the management team announced that its flagship project, Havieron, contains an estimated 4.2 mega ounces of gold and equivalent metals. That’s worth around £5.4bn based on today’s prices.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Despite the idle state of the GGP share price, the company has been rather active. Recently, it published the latest set of drilling results that continued to impress. High-grade gold deposits continued to be discovered relatively close to the surface, allowing for cheap and bountiful extraction. At the same time, copper levels remain in line with previous results. Needless to say, this is very encouraging news. So why didn’t the stock move to reflect this?

The idle Greatland Gold (GGP) share price

While these latest results are undoubtedly promising, there remains a long road ahead before Greatland Gold can actually begin mining. The pre-feasibility study has yet to be completed. It is currently scheduled to be published in the second half of this year. One potential reason behind the recent flat performance of the GGP share price is investors holding their breath until this report is released. Why? Because in short, the pre-feasibility study will basically determine whether Havieron is an economically viable project. Suppose the results are negative? In that case, this mountain of wealth may be unobtainable.

Beyond this, the management team is still pursuing the necessary approval and permits to begin mining operations. And the underground decline access for the ore bodies only started being excavated in May. So, even under the assumption that nothing goes wrong, current forecasts indicate that it could be another three years before commercial production of the site actually begins.

The Greatland Gold GGP share price has its risks

The bottom line

Given that Greatland Gold currently carries a lofty £740m valuation despite being pre-revenue, the level of shareholder expectations remains incredibly high, in my opinion. However, if the management team can continue delivering excellent results, then this inflated share price may be justified.

One significant risk a lot of young mining companies tend to face is a lack of funding. However, in the case of Greatland Gold, the Havieron project is actually a joint venture with Newcrest Mining. That provides the firm with some pretty deep pockets to keep operations going until a revenue stream emerges.

Overall, it seems to me that the GGP share price might see some explosive growth over the long term. But having said that, I’m going to wait for the pre-feasibility study results before making any investment decision.

More on Investing Articles

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

4 no-brainer stocks to buy for chunky dividends in July

Jon Smith outlines some of the stocks he's looking to buy for the upcoming month that pay out above average…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

2 beaten-down UK shares I just bought in a heartbeat

UK shares have outperformed other global stocks in recent months. However, here are two that have been beaten down recently…

Read more »

Engineer Project Manager Talks With Scientist working on Computer
Investing Articles

This FTSE stock has defensive traits! Should I buy shares?

Due to the current economic volatility, this Fool is looking for FTSE stocks with defensive capabilities to boost his holdings.

Read more »

Electric cars charging in station
Investing Articles

Lithium stocks could be set to soar! Here’s 1 I like

Lithium stocks are rising in prominence. This Fool delves deeper into this penny stock to see if it could be…

Read more »

Preparing a budget during a pandemic
Investing Articles

With the Jupiter dividend over 11%, should I keep buying?

With the Jupiter dividend yield now north of 11%, should our writer load up on the fund manager's shares?

Read more »

Lady wearing a head scarf looks over pages on company financials
Investing Articles

Am I missing something about Royal Mail shares?

Jon Smith scratches his head at the continued fall in Royal Mail shares and tries to find out what's going…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

This Warren Buffett gamble could return over 20% in the next year

Warren Buffett has loaded up on Activision Blizzard stock, aiming to make a handsome profit in the next 12 months.

Read more »

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

IAG shares fall again! Is this stock now too cheap to miss?

IAG shares have not been kind to shareholders this year. And losses were compounded on Thursday amid more bad news.

Read more »