Greatland Gold (LSE: GGP) was one of the standout performers in 2020, rising 1,800% over the year. But 2021 has been far less favourable for this AIM-listed gold-miner, and the share price has halved in value. This is partly due to the falling price of gold, which has prompted some investors to bank profits. But the potential of the stock is strong, and as such, will the GGP share price be able to rise over the next few years?
As a brief recap, GGP is still in its exploration stage. This means that mining has not yet commenced, and instead the company is drilling to determine whether its sites are commercially viable. So far, this process is going extremely well.
Indeed, in the flagship project at Havieron, where GGP has a joint venture with Newcrest, there are signs that the company is sitting on a lot of gold. In fact, current estimates suggest that there is as much as 4.2m ounces of gold at Havieron, equivalent to around £5.6bn at the current price of gold. This has led to GGP CEO Shaun Day describing the opportunity as “tremendous”. Accordingly, I’m confident that a decision will be made to mine soon, and this will hopefully see the GGP share price soar.
But there are other projects alongside Havieron that are showing promise. An example is the Juri Joint Venture, once again with Newcrest. The company recently reported gold mineralisation in the area, which means there is hope that this could also become commercially viable. The same can be said for the 100% owned project at Scallywag, where the company has just commenced drilling.
Because GGP is pre-revenue, the risks are also abundant. Indeed, without funding from established gold-miner Newcrest, GGP may find itself unable to finance the projects. This could lead to the company running out of cash and leaving shareholders with nothing.
Further, there is always the chance that the miner decides not to start digging at Havieron. Although I don’t personally believe that this would happen, it would have a devastating effect on the GGP share price if it did. This is because the share price rise last year, was largely due to the expected success of this project.
Finally, the GGP share price is heavily dependent on the price of gold, which has recently fallen back from over $2,000 per ounce to $1,800. This does not bode well for the company, and further downward pressure will likely dampen shareholder optimism in it.
What’s next for the GGP share price?
Despite these risks, I believe that GGP holds too much potential for me to ignore completely. The Havieron deposit looks like a world-beating asset and will hopefully pay off at some point in the future. This is why the miner makes up a small part of my portfolio. For now, I’m just accepting that there will be a lot of volatility and it may drift lower in the short term.
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Stuart Blair owns shares in Greatland Gold. 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.