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So I’ve been promising some notes on Greatland Gold…Here goes!
A mainstay in the Freetrade weekly top buys since being added to the Universe back in December, is a micro-cap stock that almost no-one will have heard of.
Sitting in recent weeks alongside giants such as BP and Barclays, commanding a spare-change-busting price tag of 3p per share and a market capitalisation of about 1/10th of a Roman Abrahamovic yacht is a little minnow called Greatland Gold.
So are us Freetrade-ers throwing money down the pan or have we struck gold? (this is not the end of the bad gold jokes) As an unashamed lover of all things mining, I just had to do some digging of my own. Here are the nuggets:
Greatland Golds’ primary aim is the discovery and development of mining sites, with a particular focus on gold. The company was registered in London and admitted to the AIM in 2006.
Greatland Gold currently operates 6 sites across Australia and Tasmania:
In order to avoid making this piece too long, I’m only going to focus on the Paterson project
(spoiler alert - it’s the most interesting) but if you wish to read up on the others check out the following link:
Who is the CEO?
Gervaise Heddle - my mans LinkedIn is here: https://www.linkedin.com/in/gervaise-heddle-205790/
Some quickfire info: Rich mining history across the area, working in various roles at larger miners.
Gervaise was a Non-executive Director of Thor Mining plc, a Non-executive Director of MetalNRG plc, a Division Director of Macquarie Bank and a Fund Manager at Merrill Lynch Investment Managers.
He’s named one of the drill sites “Scallywag”, if that doesn’t make him a suitable CEO, then I’ve got nothing for you.
Strong management team, see here: https://greatlandgold.com/company/board/
The Paterson Project
The Paterson project comprises the Havieron, Black Hills and Paterson East licenses. Roughly covering 385 sq/km of under-explored ground in the Paterson Province, Western Australia.
Some stats on the vicinity:
- Hosts the Telfer gold and copper mine - owned by Newcrest
- Located close to the Port Hedland (which is surprisingly a port!) and existing rail infrastructure.
- Regional geophysical and geochemical data identifies 50 target drilling sites, of which half are in areas held by Greatland Gold.
In March 2019, Greatland Gold signed a Farm-In Agreement (basically can we borrow your diggers please?!) with Newcrest, Australia’s largest gold producer and one of the biggest, low-cost gold miners in the world. Now it’s quite a complex agreement, but essentially the more money Newcrest spend developing and exploring the site, the more they’ll be recompensed, if you’re struggling to sleep, you can read the terms of the agreement here, under the hilariously named ‘highlights’ section: https://greatlandgold.com/paterson/
Remember I mentioned Newcrest’s Telfer site was in the same region? Well if you become a shareholder you’ll have to thank them for developing the surrounding infrastructure.
What exactly have they found?
Here is Gervaise talking about Havieron and its results in early December:
Some bullet points for those short on time:
- 6 drillers working in the peak of the Australian summer - it’s 46 degrees out there!
- Outstanding, high-grade results from Newcrest’s drilling campaign at Havieron significantly extend zones of high-grade mineralisation to the north.
- Step out drill hole HAD023 intersects high-grade mineralisation 300 metres north of HAD005:
- 107m @ 2.2g/t Au from 656m, including 21m @ 10g/t Au from 665m (HAD023)
Gervais explains the findings in the December report:
"These outstanding results significantly extend the known limits of high-grade mineralisation, particularly to the north. It has become clear that the size of the mineralised footprint now significantly exceeds our initial expectations.
“We are very pleased by Newcrest’s continued enthusiasm and commitment to the project, and we look forward to providing further updates on Havieron as drilling continues through the Australian summer period.”
Make no mistake, the grades and the size of the finds to date are signs of a potential tier 1 gold discovery.
But I want to invest in copper!
Now I hear you - “Copper is the new gold”. Well, good news, they’ve found some of that too:
“HAD020: A 100m step-out hole to the west of HAD014 to test for mineralisation beneath HAD005 and HAD014. Assay results (final)
- 122.9m @ 1.7g/t Au, 0.36% Cu from 673m, including
- 14.6m @ 9.1g/t Au, 0.48% Cu from 705m
- 114.8m @ 0.84g/t Au, 0.13% Cu from 809.2m, including
- 10m @ 3.4g/t Au, 0.01% Cu from 895m”
Admittedly, that’s not a lot of copper, but if those ratios remain accurate, there’s enough to process a secondary return.
So is gold a good hedge?
Pensioncraft has a great video on this, but no doubt you’ll already have an opinion:
Ray Dalio’s opinion differs somewhat:
Even if you don’t think gold is a great long term hedge - gold stocks are undeniably a happy medium between the two schools of thought.
Mining is not a fast-moving beast, although the next drilling report is imminent (this week!!). I’d expect further reports June to July after the Australian summer, with the following afterwards:
- A pre-feasibility study by Q1 2022
- Feasibility report by Mid-2023
- Pre-production Mid 2024/25
- Gold out of the ground anywhere between 2025 -28
Even working at the speed they are, it’s unlikely there will be any gold out of the ground at this site until 2025 at the earliest…
Edit: Since I started writing this piece GGP have released further reports on their Firetower site in Tasmania, they’re just as positive, see:
What’s the likeliest positive outcome
I think there are two potential positive outcomes:
- Newcrest takes over the full site either buying out Greatland Golds remaining share or acquires the company in full. Check out this curious interview with Brent Cook:
- Another miner buys Greatland Gold share of the Paterson project.
- Rio Tinto buys Newcrest and Greatland Gold.
Options 1 & 2 would likely result in Greatland Gold receiving a gold royalty over the life of the mines. If you want to research companies that have got the whole gold royalty business nailed down I’d check out Franco Nevada:
Gold at the moment is roughly $1350 per oz with average recovery costs in the industry of around $1000 per oz. So even with a 10- 15% factor of safety built-in, there’s plenty of headroom.
(This is where Port Hedland being nearby is of great benefit, as it allows the gold to be sent to smelters in cheaper countries.)
Now, according to Primorus Investments, there’s a potential haul of 20mil ounces in Havieron, of which Greatland retain a 25-30%% share of (depending on Newcrest development).
So if there are around 4 billion shares issued (factoring in some further dilution)… well I’ll let you work out fair value.
The bears’ case
This is not a stock for the faint-hearted. If volatility isn’t your thing then stay away!
- Drill out phase it’s the most risk-reward phase of a mining company, it really all could go right or wrong from here!
- There’s always the risk that Greatland Gold runs out of money and loses its license to competitors, especially if the exploration phases drag out longer than planned.
- To avoid this Greatland Gold may issue more shares diluting the price
- Newcrest’s Telfer site as of last year was not cash positive, being so local there’s every chance the Havieron site could follow suit.
Always worth remembering the famous Mark Twain quote when he reportedly defined a gold mine as:
“a hole in the ground with a liar standing next to it.”
I hope you’ve got to the end of this as surprised as I was about just how much potential this company has and the quality of its’ current drilling sites. It has plenty of room to grow, despite the glaringly obvious risks!
I’m rounding up my purchases in Monzo this year, I think I could do far worse then deploy that capital in Greatland Gold.
So here are my notes, I’ve obviously tried to keep it light and interesting so errors and omissions are expected. Please don’t make decisions solely on the above information, make sure you do your own research and always fully understand the implications of investing in such a small, speculative business.
I have an appendix of further information, if you’d like some more broad reading on gold mining and how to value miners in general, dm me and I’ll pop it over.
Lastly is this something you’d be interested in reading more of? I’d love to share my notes on some of the more “overlooked” shares on Freetrade. So please give me any feedback you deem appropriate or any companies you’d like me to consider.
Oh and thanks to @engineer for the inspiration!