Why I’d consider buying GGP shares

Additional positive news flow could send GGP shares surging higher, based on analyst valuations of the firm’s mining assets.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I believe the Greatland Gold (LSE: GGP) share price has the potential to generate enormous returns for investors in the medium term. Today, I’m going to explain why I think this is the case. 

GGP share price

This year, shares in the small-cap mining company have been on a tear. The stock has risen tenfold since the beginning of the year. 

The GGP share price has benefited from several tailwinds in 2020. These include the rising gold price and progress at the company’s key assets. The firm’s larger market capitalisation has also put it on the radar of larger investors. These investors are often prevented from investing in smaller companies. 

The bigger universe of investors has helped increase awareness of the GGP share price and its prospects. 

Greatland’s prospects are exciting. The company’s primary asset is its Havieron prospect in Australia. This has been described as a “unique” tier-1 gold asset by analysts. 

Drilling and exploration activity at the prospect suggest it could have the potential to produce as much as 4.2m oz of gold and 120,000 tonnes of copper, according to analysts. 

Unfortunately, the company doesn’t own all of this prospect. It struck an agreement with gold mining giant Newcrest, whereby the latter would provide experience and funding in return for a stake in the project.

While this does mean Greatland’s upside is capped, is has helped the business develop. In my opinion, it was a sensible trade-off. Without Newcrest on board, the group may have struggled to move forward with Havieron, and the GGP share price may have suffered. 

Still, despite its reduced stake, analysts believe Greatland’s share of the project could ultimately be worth $709m. On top of this, the gold mining group’s Scallywag prospect, where drilling has just started, could be worth $100m. 

Price potential 

These projections are just forecasts at present. But they give us some idea of how much the GGP share price could ultimately be worth. Together, the numbers suggest the two assets are worth $809m or £622m. 

At the time of writing, the firm’s market capitalisation stands at £651m. This implies the company is fairly valued at current levels. However, these figures don’t give any credit to potential upward revisions in resource estimates.

It’s clear Havieron is a high-quality asset, and it could ultimately produce much more gold than initial projections are suggesting. What’s more, exploratory work at the Scallywag project has only just started. 

As such, I reckon there’s a high chance any better-than-expected drilling results could lead to a big jump in the GGP share price. The stock appears to be fairly valued at current levels, and any other positive news could see it jump substantially as analysts rejig their forecasts.

There’s also the prospect of a complete takeover. Any buyer would have to pay a significant premium over the current share price based on the numbers above, in my opinion. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. 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.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »