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.

What caused the strong performance yesterday?

There were a couple of factors that caused the 25% rise yesterday. Firstly, Greatland Gold’s partner, Newcrest Mining, announced that it intends to release its pre-feasibility study results from Havieron on 12 October. After a series of positive updates from this deposit, the results are expected to be positive, and hopefully, there may be a decision to mine at some point soon. This could see the GGP share price soar.

Secondly, the bank Berenberg also reiterated its buy rating for GGP, giving it a target price of 26p. This implies that shares have potential upside of 32% from the current price. As such, I feel this could have reignited the optimism that abounded in 2020, causing the GGP share price to rise as a result. Hopefully, this optimism will continue into the future.

Other factors

Despite both these factors being positive, a rise of 25% is still extremely large, and there’s the potential that some of these gains may be lost over the next few weeks. Indeed, GGP is still in its exploration stages, meaning that it’s pre-revenue. Accordingly, it’s incredibly hard to value the stock, and its current share price is solely based on speculation. Extreme volatility is, therefore, the likely result. This means that, despite the potential that the company has, there are still plenty of risks.

Further, if the results at Havieron disappoint, this is likely to see the stock drop significantly. This is because its share price rise last year was heavily reliant on its success at Havieron. The 25% rise yesterday also demonstrated that expectations are very high and there seems very little room for bad news.

Where next for the GGP share price?

Due to difficulties around finding a suitable valuation, it’s hard to say where the GGP share price will go next. Nonetheless, I’ve been willing to add the shares to my portfolio. This is due to their incredible potential and the indications that the company is sitting on a ton of gold. There have also been encouraging results from other deposits, such as the Juri joint venture. Hopefully, this may see the company start generating revenues at some point soon, something I feel would have a very positive impact on the GGP share price. As such, although I want to keep GGP as just a small part of my portfolio, I’m still tempted to add a few more shares.

The post As the Greatland Gold (GGP) share price explodes, should I buy more? appeared first on The Motley Fool UK.

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Stuart Blair owns 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.

Drilling results

As a brief recap, GGP is still in its exploration stage. This means that mining has not yet commenced, and instead the company is drilling to determine whether its sites are commercially viable. So far, this process is going extremely well.

Indeed, in the flagship project at Havieron, where GGP has a joint venture with Newcrest, there are signs that the company is sitting on a lot of gold. In fact, current estimates suggest that there is as much as 4.2m ounces of gold at Havieron, equivalent to around £5.6bn at the current price of gold. This has led to GGP CEO Shaun Day describing the opportunity as “tremendous”. Accordingly, I’m confident that a decision will be made to mine soon, and this will hopefully see the GGP share price soar.

But there are other projects alongside Havieron that are showing promise. An example is the Juri Joint Venture, once again with Newcrest. The company recently reported gold mineralisation in the area, which means there is hope that this could also become commercially viable. The same can be said for the 100% owned project at Scallywag, where the company has just commenced drilling.

Risks

Because GGP is pre-revenue, the risks are also abundant. Indeed, without funding from established gold-miner Newcrest, GGP may find itself unable to finance the projects. This could lead to the company running out of cash and leaving shareholders with nothing.

Further, there is always the chance that the miner decides not to start digging at Havieron. Although I don’t personally believe that this would happen, it would have a devastating effect on the GGP share price if it did. This is because the share price rise last year, was largely due to the expected success of this project.

Finally, the GGP share price is heavily dependent on the price of gold, which has recently fallen back from over $2,000 per ounce to $1,800. This does not bode well for the company, and further downward pressure will likely dampen shareholder optimism in it.

What’s next for the GGP share price?

Despite these risks, I believe that GGP holds too much potential for me to ignore completely. The Havieron deposit looks like a world-beating asset and will hopefully pay off at some point in the future. This is why the miner makes up a small part of my portfolio. For now, I’m just accepting that there will be a lot of volatility and it may drift lower in the short term.

The post Is the Greatland Gold (GGP) share price an opportunity not to be missed? appeared first on The Motley Fool UK.

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Stuart Blair owns 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.

The Bluejay Mining share price (LSE: JAY) jumped today following news of a joint venture agreement with fellow exploration firm KoBold Metals. While a positive announcement in itself, it’s who is behind the deal that’s getting the market excited. 

Big backers

KoBold “uses machine learning to guide exploration for new deposits rich in the critical materials for electric vehicles“. Among its backers is a climate and technology fund called Breakthrough Energy Ventures. This fund is overseen by none other than Microsoft founder (and now committed philanthropist) Bill Gates. 

But Gates isn’t the only name that will be familiar to Foolish readers. Investors in his fund include former Amazon CEO Jeff Bezos, Alibaba‘s Jack Ma, and legendary money manager Ray Dalio. Michael Bloomberg and Norweigian energy giant Equinor are also on board. As rosters go, I’m not sure they get much better. 

So, what’s the deal?

The agreement will see Bluejay and KoBold develop the former’s Disko-Nuussuaq project in Central West Greenland. Once up and running, this “world-class battery deposit” will hopefully produce nickel, copper, and cobalt. We already know the electric vehicle revolution will place huge demand on miners to generate sufficient quantities of metals. Since this should push prices up, it’s fair to say this has the potential to be a highly lucrative investment for those involved. 

For its trouble, KoBold will be entitled to 51% of Bluejay’s licence for the area under a “two-stage earn-in” agreement. The remainder stays with the AIM-listed stock who will also manage field operations over this period. 

Unsurprisingly, Bluejay CEO Bo Stensgaard described today’s agreement as “transformative” for the company. So, where might the JAY share price go from here?

Where next for the JAY share price?

Today’s big uplift will naturally be welcomed by those already invested. However, it’s important to put this rise in perspective.

I last looked at Bluejay almost four years ago. Back then, the stock was available for a little over 18p a pop. Since then the JAY share price has been as high as 26p. This huge volatility tends to be the norm with junior miners, however promising they might be. Even so, it’s sobering that those who took positions back then will still be underwater.  

Of course, those that picked up the stock for around 3.5p as the first UK lockdown kicked in will have done very well indeed. So, the fact that JAY’s share price has been all over the shop doesn’t mean it hasn’t generated great returns for some investors already. Whether the announcement of a new partner means it now follows in the footsteps of Greatland Gold and multi-bags from here remains to be seen. 

Cautiously optimistic

It’s hard to look at today’s announcement and be anything but optimistic. Having some of the world’s best business minds on board certainly won’t do the JAY share price any harm either. 

As with other investment themes, however, a truckload of patience will be required. Drilling using KoBold’s tech will take time and a slowdown in global growth could be a catalyst for yet more volatility. For this reason, I’d need to make sure I was properly diversified elsewhere before taking a stake.

Bluejay could prove very rewarding in a few years’ time but one should never overlook the potential perils of penny stock investing.

The post Here’s why the JAY share price is rocketing 25% today! appeared first on The Motley Fool UK.

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• Want to start investing in the stock market? Have a spare £200 or £300?
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Amazon, and Microsoft. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.

With this in mind, here are three high-risk, high-reward plays trading under a pound that have grabbed my attention.

Cheap penny stock

One penny stock that could turn out to be a bargain in time is Safestyle UK (LSE: SFE). The firm manufactures and sells PVCu replacement windows and doors to the UK homeowner market. That’s about as dull a company as you’re going to find on the market. Notwithstanding this, I’m encouraged by recent trading.

Last month, Safestyle revealed it had managed to grow revenue, margins and its order book over the first half of 2021. In fact, it now expects full-year performance to be “ahead of current expectations“. That’s impressive, considering just how damaging the pandemic was to business last year.

Naturally, there are still risks. We could see a normalising of demand as people spend their lockdown savings on other things. The rising cost of materials used by Safestyle can’t be discounted either. 

With a net cash position and shares trading at less than 13 times earnings however, I think the potential reward might be worth it. 

Buy the dip?

Another penny stock that grabs my attention is Greatland Gold (LSE: GGP). I first became bullish on this miner when its shares changed hands for less than 2p a pop. From there, the price exploded to a high of 38.5p last December, thanks to positive drill results and the involvement of industry giant Newcrest.

Unfortunately, GGP has now retreated in value. In fact, its share price has fallen by over 50% in 2021, so far. This can be a common trend with penny stocks, especially miners.

After all, finding precious metals is just half of the challenge. Digging it up can be just as problematic, as well as costly. I’d need to keep this in mind if I were to invest in Greatland now.

However, I do think this remains one of the best junior copper/gold plays around. Last month, the company announced that recent drilling results “continue to support the potential for resource expansion” at its joint-owned, world-class Havieron project.

This could add even more value to the deposit GGP has located. The fact that it also operates in Western Australia rather than a more politically volatile part of the world is another attraction.

Travel surge

With signs that Covid-19 is in retreat, investors will be looking to play the full recovery in travel and leisure stocks. One that probably stays off most radars however, is Hostelworld (LSE: HSW).

Back in April, the online booking platform reported that uptake volumes had been “weak” throughout the first quarter of its financial year. Nevertheless, domestic trade was described as “recovering“, with the North and Central American markets looking the most sprightly.

Since then, of course, vaccination programmes have been in full swing. This may allow the company to provide some guidance on full-year earnings when it reports interim numbers next Wednesday (11 August). 

If the outlook has improved (and I think it has), this penny stock could be trading over a pound soon. Then again, the drop in the share price over the last few years, not to mention the strong competition it faces, suggests I’d still need a strong stomach to invest.

The post 3 high-risk, high-reward penny 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.

A bright future ahead for this gold miner?

Greatland Gold (LSE: GGP) had an incredible 2020, with its share price rising over 1,800%. Nonetheless, 2021 has been far less favourable, and the Greatland Gold share price has fallen nearly 50% year-t0-date, to a price of 19p.

I feel that this decline offers the perfect opportunity to buy this penny stock though. Firstly, although the company is pre-revenue, there is a ton of potential. This is mainly due to the Havieron deposit, where GGP has a joint venture with Newcrest. In fact, it is believed to hold around 4.2m ounces of gold, which is equivalent to around £5.58bn in gold at current prices. On Thursday, the company also reported a strong update on the progress at Havieron. This gives me hope that production is not too far away, and means GGP may soon become profitable. This is the main reason why I have added GGP to my portfolio.

On the other hand, there are risks that must be considered. For example, GGP is pre-revenue, yet is still valued at around £750m. This valuation is solely based on speculation that GGP will become profitable in the future. Setbacks are therefore likely to be met with major falls in the GGP share price and are a risk that must be considered. This is the reason why GGP only makes up a small part of my portfolio.

Another gold-mining penny stock

Pan African Resources (LSE: PAF) is another gold miner yet has a number of differences to Greatland Gold. For example, PAF has started gold production, and has been profitable for the last two years. Things also look promising for 2021. In fact, the miner is expected to produce over 200,000 ounces of gold, around 12% higher than 2020. PAF has also managed to reduce its senior debt from $62m last year to $33.8m. This demonstrates that the firm is in a strong position right now.

Unlike GGP, PAF pays a dividend of around 4%. This is far higher than a number of other UK shares, especially in comparison to other penny stocks, and offers a compelling reason to invest, I feel. With dividend cover of 2, it is also well supported by profits. As such, I cannot see the company cutting its dividend. This was the main reason that tempted me into buying PAF shares for my portfolio.

Of course, like all other gold stocks, the PAF share price is heavily dependent on the price of gold. After soaring in 2020, the price of gold has struggled more recently, and this has negatively affected many gold stocks. Therefore, there is the risk that the price of gold will continue to decline, and PAF’s profits will also be hit. This is also completely out of the company’s control.

The post 2 UK penny stocks to buy now appeared first on The Motley Fool UK.

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Stuart Blair owns shares in Greatland Gold and Pan African Resources. 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.