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While most of the stock market has been tackling trade-related volatility, the Greatland Gold (LSE:GGP) share price has been on fire. The gold exploration business has hit some impressive operational milestones lately, transforming it into a fully-fledged production business, catapulting its market cap to double in just four months!
Considering the market only typically averages an annual return of 8% to 10%, pocketing over 100% in a third of the time is extraordinary. And shareholders are understandably patting themselves on the back. But can this surge be maintained? And could the GGP share price rise even higher?
From exploration to production
Until recently, the investment thesis behind Greatland was its ownership stake in the Havieron project. This is a high-grade copper and gold deposit located in Australia with an estimated 8.4m ounces of gold equivalents ready for extraction.
Assuming the feasibility study comes back positive in the second half of 2025, and there are no construction delays, Havieron is expected to enter commercial production in 2027. Investing early in mining projects is a risky endeavour. But if successful, it can also be immensely rewarding. And this excitement is a big reason why the share price reached record highs in 2020.
Skip ahead to December 2024, management announced that it had completed the acquisition of another gold-copper project called Telfer as well as the remaining stake in Havieron. That’s significant because Telfer is already a working mine. As such, Greatland has officially transitioned from a risky exploration pureplay to a less risky part-producer.
Time to jump in?
With the firm gaining a revenue stream and production volume growth just a few short years away, the risk profile surrounding Greatland Gold has significantly improved. It also helps that gold prices themselves have been steadily rising in the face of geopolitical turmoil, paving the way for explosive profits if prices remain elevated.
As such, the days of massive equity dilution to raise capital might now be in the rearview mirror. So, it’s not too surprising that the average GGP 12-month share price target is close to 20p – around 60% higher than current levels.
That certainly suggests investors should consider buying shares before it’s too late. However, as exciting as this opportunity seems, it’s important not to get carried away. Greatland Gold still remains a risky business to invest in.
The growth expectations from analysts revolve around the Havieron project. And even if all operational activities stay on schedule, there’s no way of knowing where gold prices will be two years from now. If the commodity were to suddenly fall in value, Greatland’s profitability and cash flow would suffer. After all, mining businesses have a lot of fixed costs.
Therefore, with the firm’s valuation tied to uncertain future expectations, this isn’t a business I’m rushing to add to my portfolio despite the explosive potential. But for investors comfortable taking a leap of faith, Greatland Gold might be worth a closer inspection.
