2021 has not been kind to the Greatland Gold (LSE: GGP) share price. Despite the stock exploding nearly 1,900% in 2020, the excitement surrounding this young business has fallen drastically. Year-to-date, it has lost more than half its value. Although it’s worth noting that over the last 12 months, the stock is still up by around 16%.
This week, the shares saw a temporary boost after the company announced its latest drilling progress. So, let’s take a closer look at what’s happened and whether I should be adding this business to my portfolio.
The progress continues
As a quick reminder, Greatland Gold is an exploration business that’s in the process of evolving into its production stage. After securing a partnership with Newcrest Mining to help fund its flagship Haverion project, the GGP share price exploded. And rightfully so, given the site is expected to contain £5.5bn worth of gold!
There remains a long journey before any digging can begin. The company is completing a pre-feasibility study, which is expected to be finished before the end of 2021. This report will essentially state whether Haverion will be economically viable to develop.
But that’s not what boosted the GGP share price this week. Greatland Gold has other projects in its portfolio. And the company has just begun drilling at its Scallywag site in Western Australia after detecting conductive materials. The drilling will provide more information about the quantities and types of metals hidden beneath the surface. And since Scallywag is 100% owned, Greatland Gold is currently set to reap all the profits should it find anything.
Needless to say, this is positive news, especially since it also led to identifying new target sites in the region. Three additional locations are now being investigated titled, Architeuthis, Teach, and Barbossa West, continuing the pirate naming theme. So, seeing the GGP share price rise is hardly surprising.
Risks surrounding the GGP share price
Seeing a young mining business sat on top of several piles of untapped riches can be quite an exciting investment opportunity. However, the majority of exploration companies like Greatland Gold fail at this stage. Why? Because even if they discover a literal mountain of wealth, the value of these projects become irrelevant if it’s not economically viable to extract.
The company is getting close to discovering whether Haverion can deliver on shareholder expectations. But suppose the pre-feasibility study comes to an unfavourable conclusion? In that case, I think it’s more than likely, the GGP share price will continue to fall off a cliff.
The bottom line
Over the long term, the success of Haverion may not matter. After all, the company is by no means a one-trick pony. But should it succeed, then the GGP share price could be set to explode, reaching new record highs.
Having said that, the level of risk is substantial at this stage. Therefore, until the pre-feasibility study results are released, I’ll be keeping this mining stock on my watchlist.