The Greatland Gold (LSE: GGP) share price has been in a holding pattern since February. After rising to a high of more than 37p at the end of 2020, the stock fell to around 20p by the middle of February. Since then, it’s struggled to break back above 25p.
This could present an attractive opportunity for long-term investors. Indeed, while the stock has traded sideways over the past five months, the company hasn’t been standing still.
During this period, Greatland has been pushing ahead with the exploration activities at its flagship mining prospect in the Paterson region of Western Australia.
Greatland Gold share price outlook
Today, the company issued an update on its exploration activities with joint venture partner, Newcrest Mining. According to the update, results from seven new drill holes at the Havieron project are “excellent” and support the potential for resource expansion within the system.
Commenting on the results, CEO Shaun Day said: “These latest drilling results add further extensions to the high-grade mineralisation at Havieron while evolving the deposit beyond the existing resource shell.“
He added that with each new set of positive results, the potential size and value of the gold-copper orebody at Havieron grows. So far, the Greatland Gold share price has been supported by nothing but good news from Havieron.
However, full production is still a long way off. The joint venture partners are currently progressing the necessary approvals and permits to develop an operating underground mine.
The goal is to achieve commercial production at the project within three years. To that end, the partners have recently been working on surface earthworks, which are “nearing completion.” In addition, construction of the mine’s underground decline is also underway.
A red flag
All in all, it looks as if Greatland and its partner are making good progress. But, as noted above, the company isn’t yet producing any sales or profits. That, to me, is a big red flag.
Until production is underway, there’ll always be a risk with early-stage mining companies that problems could emerge, which throw the project into doubt.
Indeed, the vast majority of mining projects don’t make it from the exploration to production stages. A lack of funding and planning permissions are the main reasons why projects fail.
Nevertheless, having a significant partner like Newcrest on side will be helpful. Greatland is already benefitting from the larger firm’s experience and deep pockets.
And while it’s impossible to say with any certainty if the Greatland Gold share price will head higher, I think the fundamentals are encouraging.
If the company continues to report favourable drilling results and doesn’t run into any other problems, I see no reason why the stock can’t head higher in the long run.
Still, in the meantime, the company has to get to the production stage. So, considering the risks facing the enterprise, I’d only buy a small, speculative position for my portfolio.
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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.