Greatland Gold’s share price GGP.LN is attracting a lot of attention right now; perhaps that’s not too surprising given that it has risen by more than +15.0% over the last month to trade more than +41.0% above its recent lows.
Greatland has always been focused on exploring and developing copper and gold assets in Western Australia, in an area known as the PattersonProvince.
Where it has five separate properties alongside four others it operates in different parts of WA.
However, Greatland Gold has recently embarked on a transformative deal that will move the company from being an explorer to being a fully fledged producer.
The deal
The company is set to become a gold producer through a strategic acquisition that could redefine its future.
Greatland is acquiring the Telfer mine and with that an additional 70% stake in the Havieron project from mining giant Newmont.
This transaction, which is valued up to US$475.0 million, represents a pivotal moment for the company.
The Havieron project, located in Paterson Province WA , has been a key asset for Greatland for some years.
Prior to the transaction the company held a 30% stake in a joint venture with Newmont.
The acquisition consolidates Greatlands ownership and of Haverion and should allow them to fully develop the mine’s potential.
Financial projections are promising. Analyst’s are forecasting revenues of £ 357.00 million in 2025, rising to £470.0 million by 2026. The company is also expected to transition from negative EBITDA to profitability, with projected earnings of £120.0 million in 2026.
Billionaire backing
The company’s major shareholder, Wyloo Consolidated Investments, which is backed by Australian billionaire Andrew Forrest, has been instrumental in supporting the acquisition.
A US$334.0 million equity raise to finance the purchase which included a US$100.0 million cornerstone investment from Wyloo, provided the finances for Greatland to be able to make the purchase.
Haverion, which is a Gold-Copper deposit, was discovered by Greatland Gold back in 2018 and had been under a JV agreement with Newmont Mining since 2019.
Work started on the site in 2021 and it is estimated that there are 7.0 million ounces of gold and 275,000 tonnes of Copper within the site.
The proposed acquisition was first announced back on September 10th.
However the completion date was only announced this week and barring any unexpected obstacles the deal will close on December 4th.
The outlook
Post the transaction Greatland Gold is poised to emerge as a significant player in the gold mining sector.
Greatland Gold’s share price has moved inversely to the price of gold over the last year as we can see in the chart below.
That relationship is likely to change as Greatland starts to ramp up production at Haverion.
Gold is trading below its all time highs but the yellow metal is still up by +46.0% over the last two years and whilst inflation may have subsided in most western economies, Geopolitical risk certainly hasn’t gone away and could return with a vengeance in 2025.
Valuing a company that’s undergoing a transformation like this is a difficult thing to do as there is no real frame of reference on which to base your calculations.
Theoretically owning 100.0% of Havieron should be a positive thing for Greatland
The possible pitfalls
However, mining projects are rarely straightforward and we can’t rule out the possibility of further work being needed at the mine.
Which might necessitate an additional cash call at some stage, but that’s in the nature of mineral exploration and production companies.
The large established gold and sIlver producers trade on a PE of around 13.0 times and that should be the target for the stock going forward. The only question is how long will it take Greatland Gold to get there.
Broker Berenberg does not expect positive EPS at the company until 2026, and even then it’s forecasting just 1p per share.
Though at the same time it’s estimating revenue growth of +32.0% in 2026, at the company.
These figures assume a gold price of around US$2320.0 per ounce
If gold prices stay high, and if costs can be kept under control, then over the medium term the outlook for Greatland Gold could be very interesting and potentially very rewarding indeed.
Greatland Gold Share Price Forecast
Forecast
The opportunity for Greatland Gold presented by Haverion is significant and could propel the company into the big league however getting to that point won’t be without its problems. However with gold prices at some of the highest levels they have attained over the last 20 years now looks to be a good time to make the transition from explorer to producer.
On that basis the stock should be considered as speculative buy.
Pros
- Transforming from an exploration to a production company in an environment where gold is within 6.0% of its all time highs.
- A billionaire backer and major shareholder provided significant financing to support the deal but other parties provided the lion’s share duggesting the business is well supported.
- Potential for the business to become profitable in two years and to continue to grow revenues and cash flow thereafter.
- Opportunity for significant multiple expansion- established gold producers trade on PEs that are around twice the current ratio for Greatland Gold.
Cons
- Running a mine in production is very different from prospecting for new deposits. Greatland may need to recruit additional expertise and could face significant capex requirements to get the asset ready for production.
- In the worst case scenario Greatland may need to tap shareholders for additional funds to enable it to start production.
- The resource has been estimated at 7.0 million ounces of gold however there are no guarantees that they are all accessible or accessible at a commercially viable price.
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Outlook
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Overall
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