The GGP (LSE: GGP) share price has been on the up over the past few weeks. Shares in Greatland Gold have jumped by nearly a third since the beginning of November.
Following this performance, some investors, including this author, might be tempted to buy into the stock ahead of further growth.
Considering the firm’s long term potential, I’m starting to think that could be a great idea.
GGP share price performance
In its latest results release, the company laid out its successes over the past 12 months. In what was a transformational year for the group, Greatland and its partner Newcrest drilled some 100,000 metres at the Havieron gold-copper prospect, which has quickly become GGP’s flagship asset.
So far, drilling results have been nothing short of exceptional. The company is planning to start the next stage of the mine’s development at some point in the next six months.
The GGP share price has edged slowly higher following the trickle of positive results from the prospect over the past year.
However, as is the case with many early-stage mining projects, the market was sceptical that Greatland would have the skills and financial resources to push Havieron to the revenue stage.
That all changed at the end of November. On the last day of the month, Greatland announced that it had signed a new series of agreements with Newcrest.
New agreements
These agreements sealed a formal framework between the two parties for work beyond the existing Farm-in Agreement. The agreements put in place a structure to progress the prospect to the new stage.
They facilitate the expansion of exploration activities at Havieron and the acceleration of early works, including the construction of a box-cut and decline. Greatland has also secured $50m of funding for the project.
Together with Newcrest’s existing sole funding commitments under the Farm-in Agreement, management believes this capital will be enough to fund GGP’s share of joint-venture costs up to the Feasibility Study.
The next stage
I believe these new agreements are hugely positive for the GGP share price. Indeed, they remove some of the uncertainty that’s shrouded the business since the beginning.
The company is edging closer to production. What’s more, the continual stream of positive results from the prospect increases the chances of a possible takeover. I’m not saying a takeover is guaranteed, but it’s one avenue Newcrest might want to explore, although I’m sure it’ll want a good deal.
As such, I’m going to be paying close attention to the GGP share price from now on. As it’s still at what I would call the pre-revenue stage, I’m not willing to invest in the business just yet. I like to buy companies that have a proven and profitable business model.
Nevertheless, my view on the business is likely to change as it progresses towards production. That’s why I’m going to be watching it closely and waiting for a potential opportunity.
