It has not been a glittering year for investors in Greatland Gold (LSE: GGP). The share price has crashed 36% over the past 12 months.
From a longer-term perspective though, things look better. In the past five years, the shares have increased in value more than tenfold. What might happen next – and should I take advantage of the weakened share price to buy some for my portfolio?
2023 business prospects
Last year saw the company move closer to production at its flagship project, the Havieron joint venture in Australia.
A feasibility study at the site is ongoing and I expect the firm to announce its results this year. If they are positive, that could be a trigger for the share price to go up — perhaps dramatically.
But there is downside risk too. Havieron is a key plank of Greatland’s strategy. I therefore see promising prospects there as pivotal to the company’s medium-term success. If the feasibility study is disappointing, that could send the shares plummeting.
Key focus
Meanwhile, is there much else to get excited about when it comes to Greatland?
Personally I do not think so. As an investor, I see the Havieron project as the most interesting thing about the business, which has a market capitalisation of over £400m. It is huge in scale and dangles the prospect of both gold and copper deposits.
For now, the company has no commercial revenue. Developing mining prospects is not cheap. Last year, Greatland’s loss more than doubled to £11.4m. The net cash outflow for the year was even bigger at £34.9m. I expect cash outflows could stay high. It is unlikely it will see any meaningful revenue in the near future, unless the company decides to offload unwanted assets.
My take
So for now I see a company with an unclear long-term commercial outlook, no revenue and ongoing cash burn. That does not strike me as an attractive proposition. There is potential upside here, for example if the Havieron feasibility study turns out to be very positive. But there is also a lot of risk.
Investing in gold shares involves considering precious metals pricing in general as well as the prospects of a specific company. The gold price has been riding high. Copper is also performing strongly and the threat of a growing mismatch between demand and supply could push it higher in 2023. That could help the long-term value of Greatland’s projects and, in turn, its share price.
But commodity prices will likely go down at some point in future due to their cyclical nature. They are outside Greatland’s control. I feel the company offers potentially high reward, but also more risk than I like as an investor. So although I think the share price could potentially rebound this year, I have no plans to invest.
