It was a great month for Greatland Gold (LSE:GGP). The AIM-listed mining development and exploration company saw the stock fly higher. Even though it has been historically volatile, the 39% jump in the GGP share price was based on more than just speculation. Here are the details.
Key factors from May
The stock entered the month with momentum. At the end of April, the business released an upbeat update regarding progress at a key project, the Havieron gold-copper deposit site located in Paterson.
The update noted that “construction of important underground infrastructure was completed”, with “approximately 80% of vertical distance through to the top of the Havieron ore body” done. This represents good progress and ultimately brings it closer to being able to extract elements.
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On top of this, more news broke in May regarding the granting of an exploration licence. This was for a new gold-copper exploration project established in the Gascoyne region. According to Greatland, this area has historically been under explored, so represents a good potential commercial opportunity.
Of course, this is just the license, a lot more work needs to be done from here. But the share price jumped based on the optimism that surrounds this site and the yield that it could offer investors.
The direction of travel for June
The news from last month really helped the stock to jump. It’s now up 3% over the past year. At 8p, it’s still a fair way off the 52-week highs of 11.5p. Therefore, existing shareholders will be hoping this momentum continues in June and beyond.
It has the potential to do this, based on the retail investing base. It’s a popular stock, and due to the sharp spike will likely attract even more interest this summer. Speculative traders could push the price up further, hoping to make a quick buck. With a relatively small market cap just over £400m, volatile price swings can be caused by not a huge amount of buying activity.
On the other hand, a lack of any fresh updates could see the stock start to fall. This would be the case if the short-term traders don’t get the move they were looking for and decide to sell and move on to another opportunity.
Taking a step back
Fundamentally, the business does need to start making some money. The half-year report to the end of 2023 showed a loss of £5.47m with zero revenue to speak of. It does have a cash position of £12.7m and debt facilities. So although I don’t see financial risk over the next year, the long-term future doesn’t look hugely optimistic.
The swings higher and lower in the stock remind me of other exploration companies in the commodity space. In my view, a lot of the hype doesn’t have much substance behind it. I’m in the business of making money in the lowest-risk way possible. For me, Greatland Gold doesn’t tick this box.
