Is Polymetal a bargain compared to its competitors or are there better options out there? Let’s explore.

Will FTSE 100 mining stocks go higher?

Three Footsie mining stocks on my watchlist have made flying starts to 2022.

The Anglo American (LSE: AAL) share price climbed 34% following a $12bn increase in operating profit and a $1.7bn net debt reduction. Over a third of the miner’s 2021 EBITDA came from platinum group metals. Looking ahead, the company should prove resilient to geopolitical uncertainty. Anglo American, which is up 33% in a year, operates on six continents and has no Russian presence, unlike Polymetal.

Antofagasta (LSE: ANTO) is also racing ahead of the Polymetal share price, rising 22% this year (but down 10% over 12 months). As copper mining is the lifeblood of this Chilean multi-national’s business, shareholders will be encouraged by Goldman Sachs‘ 12-month copper price target of $13,000 per tonne. Antofagasta can build on a robust financial position after earnings per share rocketed by $87.80 last year.

Rio Tinto (LSE: RIO) stock completes the trio — it’s up 25% in 2022, but only up 4% in a year. Iron ore production accounts for almost 78% of its underlying earnings. In 2021, Rio Tinto generated +60% net cash and ordinary dividends per share rose 71%. Moreover, China’s iron ore imports remain stable in 2022, despite its economic slowdown. This is good news for the Rio Tinto share price.

With global interest rates rising, metal prices and mining stocks may fall so all of these shares come with risks. However, I believe the metals bull market could just be beginning as production seems unlikely to meet demand. For me, the outlook remains positive while supply side issues persist.

Will the Polymetal share price go lower?

Polymetal’s focus is precious metals, particularly gold and silver. It has operations in Russia and Kazakhstan. Although it consistently increased production over five years, the share price has been hurt by liquidity troubles caused by sanctions on Russian banks.

In further worrying signs, Polymetal postponed its decision on its 2021 final dividend payment. And Deloitte recently resigned as its auditor, threatening its London Stock Exchange listing.

Arguably, the stock’s substantial decline and a dirt cheap price-to-cash-flow ratio of 1.4 mean the risks it faces are priced in. Nascent plans to separate its Kazakh assets from the rest of the business lifted the Polymetal share price somewhat in recent days.

Nonetheless, I’m pessimistic about Polymetal shares. Headquartered in Cyprus, it avoided direct sanctions like those levied on Roman Abramovich’s Evraz. In a rapidly evolving situation, this could change.

The mining shares I’d buy now

Exposure to metals plays an important role in my diversified portfolio. I’m impressed by all three FTSE 100 stocks on my watchlist. They have strong balance sheets and are collectively spread across different geographies and commodities. I’d divide any spare cash between them.

By contrast, I see potential for further declines in the Polymetal share price. It’s simply too risky for me to buy at present, so I’m looking elsewhere for a solid gold miner.

The post Will FTSE 100 miners outshine the Polymetal share price in 2022? appeared first on The Motley Fool UK.

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Charlie Carman 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.

While payouts can never be guaranteed, one way of taking the sting out of inflation is to own big dividend stocks. Here are three that currently take my fancy from the FTSE 100.

Dependable dividend hiker

Top-tier insurance behemoth Legal & General (LSE: LGEN) would definitely be on my list of inflation-busting shares to buy. Analysts currently have the company returning 19.4p per share in FY22. At today’s share price, this becomes a yield of 6.7%. That’s pretty much double what I’d get from the index as a whole!

Yes, the nature of Legal & General’s business means its share price performance is dictated to some extent by the health of the UK (and global) economy. However, a 22% return over the last five years beats the frankly pretty awful 5% achieved by the FTSE 100.

It’s also worth noting that, bar the anomaly that was 2020, the company has been a consistent hiker of cash payouts. An already-sizeable dividend yield that keeps growing? That’s just what I’d be looking for if I were determined to protect my wealth from the “silent killer“. 

At just nine times forecast earnings, I’m not about to complain over the price either. 

Safe as houses

Housebuilder Taylor Wimpey (LSE: PSN) is another stock for tackling rising living costs. It’s got a great track record of returning increasing amounts of cash to its owners. This trend doesn’t look like reversing in 2022.

As things stand, the £5.5bn cap company has a stonking forecast yield of 7.9%. To put that in perspective, even the best Cash ISA right now offers just 0.61% in interest. Importantly, the extent to which this is likely to be covered by profit (and therefore likely to be paid) is also far higher than over at rival Persimmon. To me, this makes Taylor Wimpey the better buy of the two. 

Government pressure on developers to cover the costs of removing dangerous cladding from flats across the UK means housebuilders haven’t had the best of starts to 2022. However, news that prices in January climbed at the fastest annual pace in 17 years suggests the property boom still has legs to it. 

At eight times earnings, I’d be happy to buy Taylor Wimpey for the passive income it throws off. 

Monster yielder

A final stock I’d consider buying to counter the impact of inflation is precious metals group Polymetal International (LSE: POLY). At 9.3%, it’s currently one of the highest-yielding stocks in the FTSE 100.

Normally, such a huge number would be a red flag. Since dividend yields are negatively correlated with share prices (when one goes up, the other goes down), Polymetal’s incredible cash returns imply investors are concerned about the company’s outlook. 

That’s probably not far from the truth. Clearly, the ongoing tension in Eastern Europe can’t be helping sentiment. Polymetal does, after all, operate mines in Russia and Kazakhstan. The gold price has also been in the doldrums recently.

That said, a lot of this looks priced in. The shares have tumbled 34% in the last year alone and now trade at less than seven times earnings. That’s arguably very cheap considering the regularly-hiked dividend should be comfortably covered by earnings.

Throw in the diversification Polymetal offers by operating in a completely different sector and I think this is another worthy candidate for an inflation-busting portfolio.

The post 3 inflation-busting FTSE 100 dividend stocks to buy appeared first on The Motley Fool UK.

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Paul Summers 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.

My bullish call on penny stock Greatland Gold (LSE: GGP) back in August 2019 remains one of my most satisfying. A little over a year later, the GGP share price had jumped to 38.5p. That represents a gain of around 2,200%, by my calculations.

Since then however, the value of the stock has more than halved in value. Will the publication of the pre-feasibility study (PFS) for the firm’s Havieron project arrest the gold miner’s decline?

Great potential

If you’re new to mining stocks or investing in general, it’s worth clarifying the purpose of this analysis. A pre-feasibility study is conducted early on in the lifecycle of a mine. It gives a company, its backers and would-be backers an idea about whether it makes economic sense to carry on digging. 

As my Foolish colleague Zaven Boyrazian reported on Tuesday, there was a lot to like about Greatland’s PFS on the South-East Crescent of the deposit. An estimated rate of return of 27% means GGP (and partner Newcrest) should only take three years to recoup costs once production begins. 

The fact that this study was only focused on 28% of the initial resource estimate also gives some indication of just how big (and lucrative) Havieron could become. 

Unfortunately, the GGP share price fell heavily on this news and now sits at just above 17p. This is the case despite GGP investors now having some concrete numbers to work with. It’s also despite gold being seen as a good hedge against inflation, which might not be as transitory as some economists previously believed. 

Wait – why did the GGP share price FALL?

I suspect it’s down to investors’ expectations becoming a little more realistic. This makes would-be buyers less likely to get carried away and bid up the share price to questionable levels. When this is accompanied by a wave of ‘sell on the news’ traders, GGP’s share price fall does make some sense.

There are other considerations. Even if everything goes to plan from here (and that’s extremely rare for mining projects), Greatland doesn’t expect to begin extracting the precious metal until 2024. That’s a long time for holders to wait while the share prices of other penny stocks zip ahead.

As always, investing requires reflecting on what I’m potentially giving up elsewhere by staying loyal to a particular stock (otherwise known as ‘opportunity cost’).

Other risks to consider are that miners are never in control of the price of whatever they dig up. After years in the wilderness, the precious metal’s valuation soared last year in the aftermath of the Covid crash. In 2021, it’s been a very different story.

Without a mine in operation, that’s arguably less important for GPP than an established player. However, it won’t always be the case. 

Buy the eventual dip?

Is GGP a beaten-down bargain? Possibly. Tuesday’s report certainly highlighted the massive potential of the project. I also think there’s a lot to be said for Havieron being located in a mining-friendly, politically stable part of the world.

At £700m however, I reckon it will take a lot more than before to move the company’s valuation significantly higher for a while. Perhaps this is now one for me to snap up in the next (inevitable) market crash?

The post The GGP share price: is this penny stock now a beaten-down bargain? appeared first on The Motley Fool UK.

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Paul Summers 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.

Bridgepoint: FTSE 250 bound

Private equity group Bridgepoint‘s (LSE: BPT) inclusion in the FTSE 250 looks nailed on to me. Having arrived on the market last month, shares have already rocketed from their listing price of 350p to 520p. 

Rather conveniently for a company entering the UK’s second tier, Bridgepoint focuses on investing in the mid-cap space. Already managing roughly €27bn of assets, the money raised from July’s IPO should give the company plenty of ammunition for an acquisition spree. And one could argue that there’s never been a better time to go hunting with plenty of UK firms still reeling from the pandemic. 

As a potential buyer of the stock, I’m just wondering whether we could see it lose some steam over the next few weeks as the IPO shine wears off. This is a trend we’ve seen in some stocks in 2021, most notably across the pond. Knowing that the company’s original owners offloaded a whole heap of stock as it arrived on the market, while understandable, isn’t ideal either.

Still, one can’t deny that the shares haven’t done well so far. The listing of a private equity group is also rare, giving BPT some novelty value for retailer investors like me. If FTSE 100 peer 3i Group is anything to go by, the long-term returns could be rather tasty.

On balance, though, I’m happy to sit on the sidelines for now. 

Contrarian bet

West African-focused Endeavour Mining (LSE: EDV) also looks primed to join the FTSE 250 following its recent London listing.

In addition to several promising exploration projects, EDV already has mines operating in Senegal, Cote d’Ivoire, and Burkina Faso. Collectively, these help the company to feature in the top 10 of global gold producers.

This month’s Q2 update suggested the company was firing on all cylinders. Gold production rose 18% in the previous quarter while costs fell. As a result, EDV now thinks it can hit the top half of full-year guidance. 

While the shares haven’t performed as well as those of BPT, some in the market are very bullish. Broker Berenberg, for example, has a target price of 2,800p on the stock. That would be a rise of 60% from today’s share price. Although an ambitious goal, inclusion in the FTSE 250 won’t do the firm’s profile any harm.

Then again, one does need to be conscious of the risks. As any Fools who remember what happened in 2016 will know, mining can be a highly cyclical sector. In addition to the difficulties and costs encountered in digging up precious metals in politically sensitive regions, those doing so are never in control of how much the shiny stuff sells for. And, over the last few months, the gold price has performed poorly despite concerns over inflation. 

Given that I already have exposure to gold miners via a low-cost exchange-traded fund, EDV is not for me right now. However, an improving balance sheet (net debt fell by $85m during the quarter to $77m) and dividends make it one I’ll keep an eye on.

The post FTSE 250 reshuffle: time to buy these stocks? appeared first on The Motley Fool UK.

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Paul Summers 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.

Significant sales growth

‘Variety goods’ retailer B&M European Value (LSE: BME) is a good example of the sort of stock I’d be interested in. Last month’s Q1 trading update sounded pretty bullish to me.

The company said it had made a “strong start” to its financial year with revenue up 3.1%. Naturally, this rate of growth was a lot lower than last year, due to a lack of lockdown-related stockpiling by shoppers. A normalisation of grocery spending was also seen at the company’s Heron Foods business. 

Still, the fact that sales “remain significantly above pre-pandemic levels” gives some indication this is a company going in the right direction. It should also mean the rapidly-appreciating dividends are safe too.

Looking ahead, B&M said there’s a lot of uncertainty as to where consumer spending will go in the near term. I therefore wouldn’t be surprised if the shares lost some of their steam over the next few months.

Notwithstanding this, I’d leave space for this 3.6%-yielder in my income portfolio.

7% yield!

With the gold price failing to respond to the threat of rising inflation, FTSE 100 precious metals miner Polymetal (LSE: POLY) may appear a controversial income pick.

However, I think there’s a lot to like about the company. The £7bn-cap scores high on quality metrics such as returns on capital and operating margins. I also see it as a potential hedge should markets, particularly the US, finally take a breather. 

Nevertheless, I’d need to keep in mind is that Polymetal has a relatively small ‘free float’ for a FTSE 100 business. This is the proportion of the company’s shares actually trading. This can accentuate moves up when the stock is in demand. Unfortunately, the opposite is also true. 

Then again, it might be argued that the dividend stream is worth the risk. As things stand, Polymetal yields a little over 7%, covered by profits. That’s a lot of income for me to reinvest and compound over time.

It won’t be an easy ride and some diversification is still essential. However, I’d be prepared to buy today. 

Defensive dividends

A final FTSE 100 stock I believe offers me an enticing balance of quality and income is consumer goods giant Unilever (LSE: ULVR).

Like B&M, Unilever doesn’t boast the highest yield in the lead index. In fact, the forecast 3.5% yield is half that offered by POLY. Even so, it’s slightly higher than that generated by the index as a whole (3.4%).

Now, some might say that isn’t much additional compensation for the risks involved in buying a company’s stock. That argument is valid. Unilever’s share price has, after all, been in the doldrums of late, due to inflationary pressures impacting margins.

Then again, I believe the company’s portfolio of ‘sticky’ brands makes it more defensive than most FTSE 100 members. Besides, the company regularly raises its payout and, again, dividends look safely covered by profits. Returns on capital, while slipping recently, remain very decent.

Embracing my contrarian side, I’d buy ULVR for my own portfolio today.

The post FTSE 100: 3 quality dividend stocks to buy in August appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value and Unilever. 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.

As my Foolish colleague Malcolm Wheatley commented in his recent piece: “Inflation is a devastating destroyer of wealth and standards of living.” Strong words but he’s absolutely on the money.

Like Malcolm, I believe the best way to beat inflation is via the stock market. However, there are certain parts that could prove particularly good destinations for my cash.

Buy quality to beat inflation

I’m a big fan of quality stocks. These are companies that have strong brands, sound finances, consistent earnings, and big profit margins. On a geekier note, they also tend to be capital-light and able to generate great returns on the money they invest, otherwise known as Return on Capital Employed (ROCE). Let me explain.

Naturally, I want a business that produces a higher return than inflation. If prices jump by 10%, any stock generating the same ROCE (or worse) isn’t really doing anything. However, one generating a ROCE of 20% is still doing well for investors, under the circumstances.

I’m not the only one who thinks this is a good way to beat inflation. Biased he may, be but top UK money manager Terry Smith thinks stocks in the Fundsmith Equity fund have that quality tilt which should preserve (and eventually enhance) investors’ wealth. That said, there’s nothing to stop the actual value of these holdings from falling if investors head for the exits.

Grab some shiny stuff

Another way to beat inflation would be to have some exposure to precious metals. One obvious candidate here is gold. Historically, anything connected to the shiny stuff tends to do well in inflationary times because of its trusted ability to hold its value.

If stuffing a load of gold bars under the bed doesn’t appeal, UK investors have a number of options. In the FTSE 100, there’s producer Polymetal International. In the FTSE 250, there’s Centamin. If diversification was important, I could buy an exchange-traded fund (ETF) that holds the biggest miners around the world.

Another option would be to buy a passive fund that tracks the gold price. This might be the least risky option since it avoids any company-specific risks. That’s not to say it’ll always be a comfortable ride, of course, especially if interest rates rise. After all, gold doesn’t generate income on its own! 

Don’t forget real estate

Thanks to the growing desire to work from home, post-coronavirus, the UK property market has been in fine form in 2021. However, owning stocks that have links to real estate can also help investors beat inflation. 

Step forward REITs (Real Estate Investment Trusts). These are listed companies that generate income for holders from property. Although nothing can be guaranteed, this asset tends to increase in value when inflation rises because price increases are passed through in rental leases (assuming demand for property is there). 

As you might expect, there’s no shortage of options out there for UK investors. These can be invested in office space, healthcare buildings and retail units. Thanks to the huge and growing popularity of online shopping however, my favourite pick in this space is warehouse owner Tritax Big Box.

The post 3 ways to beat inflation with stocks appeared first on The Motley Fool UK.

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Paul Summers owns shares in Fundsmith Equity. The Motley Fool UK has recommended Tritax Big Box REIT. 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.

The rising GGP share price

Greatland Gold is an early-stage exploration business with various projects across Western Australia. And as the name suggests, it primarily focuses on extracting gold from ground. Last year’s explosive performance was mainly caused by a series of positive results surrounding its Havieron project.

This project commenced back in 2018. And looking at the latest set of drilling results could contain a deposit of 4.2 mega-ounces of gold and equivalents. That’s around £4.45bn worth of material to dig up based on today’s prices. Needless to say, it’s a massive opportunity for the business. So, seeing the GGP share price surge last year is not that surprising to me.

Given the potential growth opportunity this project presents, why is the stock now falling? Since the start of 2021, the price of gold has been declining. As a result, the estimated value of Havieron has consequently suffered, leading to a sell-off by investors. 

However, governments worldwide have begun issuing stimulus packages to accelerate the Covid-19 recovery of their economies. As a consequence, inflation is now expected to rise. But gold is often used as a hedging tool against the devaluation of money, so I think its price has the potential to start climbing again, taking the value of Havieron with it.

There are some considerable risks

The GGP share price clearly reflects the tremendous progress made in 2020. And based on a recent operational report, the early-stage development process of Havieron has begun. But while this is a step in the right direction, the site may take up to three years before commercial production can commence.

As it stands, Greatland Gold does not have any active mining operations in its portfolio. In other words, it currently has no source of revenue and thus is dependent on raising outside funding to keep the lights on.

At the end of 2020, the firm had around £5.9m cash on its balance sheet, providing some notable liquidity. But developing a fully operational mining site is an expensive endeavour. And so, to raise enough capital for Havieron, it sold a 70% royalty claim to Newcrest Mining. Consequently, its potential earnings from the project have been significantly limited.

The bottom line

Establishing large royalty partnerships is not uncommon among young mining companies. And a 30% claim still represents a £1.34bn potential return.

But as it stands, I think it’s too soon to invest in this business. A lot of things can go wrong in three years. And given that the GGP share price currently places a valuation of around £790m on a pre-revenue business with non-producing core assets, the level of investor expectations is exceptionally high. Therefore I won’t be adding this stock to my portfolio today.

The post Why is the Greatland Gold (GGP) share price crashing this year? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own 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.

A rising RMM share price

Rambler is a copper and gold producer that operates within the Baie Verte Peninsula in Canada. In recent years the company has been struggling. And once Covid-19 hit, it actually came close to insolvency. But based on the latest set of published results, it seems that this risk has receded for now.

The management team successfully completed the sale of its gold circuit as well as other exploration properties and royalties to Maritime Resources for US$2m (all monetary figures are in US dollars). In addition, it was able to perform a major financial restructuring through an oversubscribed share placement that raised a further $10.5m.

Using these funds, the firm negotiated new financing agreements and satisfied existing creditors that brought the overall level of debt back under control. After all this, total debt was reduced from $13.8m in 2019 to $3.5m at the end of 2020. Similarly, the cash on the balance sheet rose from $1.9m to $6.2m.

And so, with a much stronger financial position, the business not only survived the impact of the pandemic but also came out stronger, in my opinion. Therefore the recent surge in the RMM share price doesn’t surprise me.

What’s next for the business?

With the looming threat of bankruptcy no longer a primary concern, all focus is being placed on restoring production volumes to pre-pandemic levels. Ming Mine is the firm’s primary asset and its production levels dropped considerably last year.

The management team has begun restoring Ming to its full capacity of 1,350 tonnes per day. This process is expected to be completed by December this year at the latest. What’s more, the company is also investing in expanding this production capability to 2,000 tonnes per day by 2022. And at the same time, it’s establishing an ore sorting facility at the Ming Mine site to improve operational efficiency.

Needless to say, this sounds very promising. But it’s worth remembering that any delays or further disruptions to its operations could cause significant volatility for the RMM share price. Also, because this is a mining business, it is very susceptible to fluctuating commodity prices. Copper is in high demand at the moment, which has increased its value. But as more mines become operational and the metals shortage nears an end, these increased prices may not last. This could have a negative impact on Rambler’s operating profits.

The bottom line

I believe the worst has passed for Rambler. The business appears to be back on track, and if it can increase its production volumes to the forecast level, I think the RMM share price can continue to rise.

Having said that, like many small-cap mining companies, it still carries a considerable level of risk. Personally, I’m going to wait and see how it progresses in restoring Ming’s production volumes before adding any shares to my portfolio.

The post Why is the Rambler Metals & Mining (RMM) share price surging? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in Rambler Metals & Mining. 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.

A hidden mountain of wealth

As previously stated, SolGold is a young mining business that’s still firmly within its exploratory phase. It operates primarily within Ecuador at the Andean copper belt. But it also has operations in Australia and the Solomon Islands.

What makes the company quite unique is its Alpala project. Despite its youth, it’s secured the rights to a site that sits directly on top of a vast copper, silver and gold deposit. The management team has already proclaimed it to be among the world’s best-underdeveloped locations, with an estimated mining lifetime of 55 years. And based on the preliminary results, I’d certainly agree.

The multi-billion-dollar project is estimated to contain up to 9.9 Mt of copper, 21.7 Moz of gold and 92.2 Moz of silver. Needless to say, that’s a mountain of wealth to be extracted. So, given the enormous opportunity this project presents, why is the SOLG share price behaving like it’s on a rollercoaster?

SolGold’s volatile share price

It seems there remains quite a bit of uncertainty surrounding the Alpala project. There have been consistent delays in the completion and publication of the company’s pre-feasibility study. Consequently, it’s unlikely SolGold will be able to take advantage of current high commodity prices.

However, the business of metals exploration is fraught with risk. And while delays are frustrating, the additional due diligence of the management team does seem a prudent decision, in my opinion.

But delays raise costs. So far, the Alpala project’s expenses are estimated to be between $2.4bn and $2.8bn. This is particularly troublesome as SolGold currently has no revenue stream. That means the company is entirely dependent on external funding, which created some problems for Cornerstone Capital Resources.

The Canadian firm owns a 15% stake in the Alpala project as well as an 8% interest in SolGold itself. And unfortunately, the two firms have a conflict of interest. The first wants to sell the project, while the second intends to develop it. The situation only got worse after a failed hostile takeover, adding even more uncertainty to the SOLG share price.

The bottom line

There’s no denying the Alpala project is an enormous opportunity for this business. And if executed correctly, I believe the SOLG share price could explode in the next few years. However, early-stage mining companies are already exceptionally risky. And seeing stakeholders in the project have significantly different strategies on how to proceed raises some alarm bells.

As big as this opportunity may be, the level of uncertainty and discord gives me pause. Therefore, I’ll be keeping SolGold on my watch list for now. At least until more information becomes available.

The post Is the Solgold share price about to explode? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in SolGold. 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.

2020 was a tough year for many mining companies as the pandemic brought most operations to a halt. And yet, the share price of Greatland Gold (LSE:GGP) surged from 1.8p to 36.9p. That’s a massive 1,950% increase in the space of 12 months!

But since the start of 2021, the GGP share price has been on a downward trajectory and has halved to 18.9p. Why did the stock price explode in the first place? Why is it falling now? And is this a buying opportunity for my portfolio? Let’s take a look.

The rising GGP share price

Covid-19 has had virtually no impact on GGP’s business. Why? Because the mining company isn’t actually mining anything yet. It is still firmly within its exploratory phase of development and does not have any active sites. So what caused the share price to surge?

The GGP share price began its climb in early 2020 following the release of preliminary drilling results for its Havieron project. It confirmed the discovery of a massive gold and copper deposit starting from a relatively shallow depth of 600 meters. By comparison, the average mining depth is around 1,000 metres, indicating a potentially cheaper operation once the site becomes active.

Following four sets of drilling tests, each with increasingly positive results, the company confirmed that an estimated 3.4Moz of gold and 160 kilotons of copper are available for extraction. Based on today’s market value of these metals, this represents a gross value of £5.26bn. So I’m not surprised that the GGP share price exploded on the news. 

Some risks to consider

When the GGP share price was trading at its highest point in December last year, the market capitalisation stood at just over £1bn. Today it’s closer to £740m. Why did it fall? This appears to be linked to both copper and gold’s contracting prices since the start of the year. Let’s not forget that mining companies have no pricing power. And so, if the market value of these metals declines, then profit margins get squeezed.

The reduced price does look enticing. However, to fund the mining operation that has yet to begin, GGP formed a joint partnership with Newcrest Mining. It will provide a one-off payment of $65m to help get things started. In exchange, Newcrest is entitled to 70% of all extracted resources from the Havieron project. That means GGP will only receive an estimated £1.58bn of the potential £5.26bn. That’s still more than double the current market capitalisation of the firm. But constructing the mining site and extracting these resources is a multi-year process during which the value of these metals may decline, taking the GGP share price with it.

The bottom line

The Havieron project is undoubtedly a fantastic opportunity for GGP and will likely enable the firm to thrive in the future. But there is still a long road ahead, and I think investors may have been a bit over-excited.

The average profit margin of a developed gold mining company is around 35%. This would indicate a rough estimate of £552m net income from the Havieron project over its multi-year lifespan. GGP does have other projects in its portfolio that could provide additional income. However, just like Havieron, none have yet begun any mining, so the firm currently has no revenue.

All things considered, I’m waiting to see how the company performs once it begins its mining operations. And so I’m not adding GGP to my portfolio today. But I will be watching it closely.

The post The GGP share price is crashing. Should I buy now? appeared first on The Motley Fool UK.

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• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Zaven Boyrazian does not own 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.