Greatland Gold shares: should I buy for my 2021 portfolio?

Greatland Gold shares have been a multi-bagger to its shareholders. Royston Roche makes a deeper analysis to decide whether to include it in his portfolio.

| 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.

Greatland Gold (LSE: GGP) is an AIM-listed natural resource exploration and development company. Its shares rose 310% in the past year. It has outperformed the FTSE 100 index by a wide margin. Over the past five years, Greatland Gold shares have risen by an unbelievable 32,600%.

Greatland Gold’s projects

Greatland Gold has four projects in Western Australia, namely, Paterson, Panorama, Ernes Giles, and Bromus. The Paterson project comprises of two joint ventures, the Havieron and Juri, and two 100% owned licences (Scallywag and Rudall), collectively covering more than 450 square kilometres. As per the management, the Paterson region is underexplored with significant potential. The region has witnessed significant recent discoveries, including Rio Tinto’s Winu discovery and Greatland/Newcrest’s discovery in Havieron. 

Exploration activities at Havieron are currently operated by Newcrest Mining Limited (ASX: NCM) under a joint venture agreement with Greatland. Greatland had very good results from two drilling programmes in 2018. In March 2019, Newcrest Mining Limited and Greatland signed a $65m four-stage farm-in agreement to develop Greatland’s Havieron gold-copper deposit. In November 2020, Newcrest met the stage 3 expenditure of $45m. They expect to progress to mining operation in the next two to three years.

I believe the partnership with Newcrest Mining is a big positive for Greatland as it has the operation and financial support from a company that has a market capitalisation of about £12bn. Another advantage for the company is that the ore will be processed at Newcrest’s Telfer Gold Mine, which is 45 kilometres to the west of Havieron. The management believes that it’s a win-win situation for both the companies as it lowers upfront capital costs, reduces time to production, and potentially delivers a significantly higher net present value for the project.

Greatland also signed a Juri joint venture with Newcrest in November 2020. It is a farm-in and joint venture agreement with respect to Greatland’s Black Hills and Paterson Range East projects. Drilling of high-priority targets, including Parlay and Goliath, is expected to commence in early 2021.

Greatland Gold’s results

The company has no revenues at the moment. It reported a net loss of £5.1m compared to a net loss of £3.3m for the fiscal year 2019. Net loss per share was (£0.14) for the fiscal year 2020 compared to a net loss per share of (£0.10) for the previous year. It had cash of £6.0m as of 30 June 2020. Cash used in operating activities was £4.6m for the fiscal year 2020. 

Like in any other stock, there are some risks. Greatland Gold has yet to start mining operations and has no revenues. The company’s losses have increased in the fiscal year 2020. There is no assurance that the mineral resources can be extracted economically. The stock has performed well in the past few years and there could be profit booked in the near term, but nothing is certain. Another risk to consider is that commodity prices are highly cyclical and the future profits will depend on the commodity prices. 

The stock is currently in a downward trend since the beginning of this year. I will wait before deciding whether to buy Greatland Gold shares. I believe the stock’s valuation is expensive for a company that is still in the exploration and development stage.

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.

Royston Roche 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

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »