Here’s why I just bought Greatland Gold shares

After an incredible 2020, Greatland Gold shares have performed poorly in 2021. But Stuart Blair has used its recent dip to buy the stock.

| 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) had an incredible 2020, with its share price rising nearly 2,000%. Nonetheless, 2021 has been significantly less favourable for the stock, which has already fallen 45% this year. This has mainly been caused by some of last year’s optimism starting to falter, alongside the falling price of gold. But this dip has led me to buy Greatland Gold shares. Here’s why.

 

Big opportunities

Greatland Gold’s largest success story is its Havieron deposit in Western Australia. In this area, the company has partnered with the established gold miner Newcrest and so far, has delivered excellent results. Indeed, in 2018, Greatland discovered that there was significant gold mineralisation, and since then, drilling has commenced. As such, the Havieron project has been met with significant optimism, being a fundamental reason for the company’s strong share price performance last year. But I also believe that strong results at Havieron have now been factored in to the Greatland Gold share price. It’s therefore important to look at other opportunities for the company.

One of the other projects is the Juri Joint Venture, where Greatland Gold has continued its partnership with Newcrest. The latter will immediately have a right to earn 25% interest in these licences, and this can be raised to 75% depending on how much it spends on the project. Although this does limit the amount Greatland Gold can earn from the project, Newcrest is still a very useful source of funding. Furthermore, similar traits to the Havieron deposit have been identified in these licences, and this may be very promising.

Alongside multiple different mining operations in Australia, Greatland Gold also operates in Tasmania. As such, it’s evident that the company isn’t overly reliant on its Havieron deposit and has opportunities elsewhere. I think this could bode well for the Greatland Gold share price.

Price of gold

One reason why the shares have fallen in 2021 is because of the declining price of gold. Nevertheless, after rising significantly in 2020, I feel that a correction was necessary. In fact, I believe that gold is now in a strong position to claw back some losses. This is because inflation looks likely to rise this year. Gold is recognised as a very effective inflation hedge, and this bodes well for its value. As the Greatland Gold share price is heavily dependent on the price of gold, this provides me with optimism for the stock.

Risks with Greatland Gold shares

Although I have recently bought Greatland Gold shares, I do recognise that this is a risky investment, and accordingly, it makes up only a small part of my portfolio. For example, although it doesn’t currently generate any revenue, it’s still valued at nearly £1bn. For many, this may signal that it’s overpriced and that the current fundamental value of the business doesn’t justify this market valuation. But as a speculative stock, this isn’t necessarily a bad thing, and the rewards could be handsome. I’m simply not going to invest any more than I can afford to lose.  

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.

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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »