Where next for Greatland Gold following landmark Newcrest deal?
The rise of Greatland Gold continued this week, with shares advancing by more than a fifth on the news that it had secured a $65m farm-in agreement with global mining major Newcrest for its Havieron project in Australia. With the business boasting a strong cash position and an extended portfolio of exploration assets, we ask whether shares can continue to rise from their current 2.1pc.
Led by Gervaise Heddle, Greatland Gold is a natural resource exploration and development outfit with a primary focus on gold, copper, and nickel. The firm aims to identify untouched projects that have the potential to host large mineralised systems. It then looks to progress these sites using advanced exploration techniques. Greatland says it is widely accepted that the next generation of large deposits will come from undeveloped areas like this.
Where possible, Greatland’s strategy is to maintain 100pc ownership of its projects, maximising the potential range of options for eventual monetisation.
The firm currently has six 100pc-owned projects in Western Australia and Tasmania. However, the most exciting source of newsflow in recent months has been its Havieron gold-copper project.
Havieron is based within the highly prospective Paterson region of Western Australia. The area hosts numerous large gold and copper deposits, including the vast Telfer and Nifty mines. It has been subject to renewed attention recently, receiving multiple new exploration licence applications and activity from key regional players like Rio Tinto.
Within Paterson, Havieron is a sizeable geophysical target that consists of a coincident magnetic and gravity anomaly covering 1km by 1km. In the late 90s, Newcrest completed six drill holes at the site, all of which intersected significant alteration with several high-grade zones detected.
Greatland has stepped up its activity at Havieron considerably over the past year. First-of-all, its maiden drilling programme last April highlighted the potential for the asset to represent an extensive mineralised system.
Then, in November, the business shot up by nearly 60pc in a day after announcing what it called a ‘world class’ intersection from the first drill hole of its second drilling campaign at Havieron. Hole HAD005 intersected total mineralisation of 275m at 4.77g/t gold and 0.61pc copper within two wide zones of mineralisation.
The results enabled Greatland to completely buck the resources bear market than flawed many of its peers and peak at a multi-year high of 2.5p. They also significantly extended the known high-grade mineralisation found in the previous drilling and established new peak grades of 211.3g/t gold and 8.45pc copper.
Following this, geological models indicated the potential for mineralisation to extend further than expected to depths of more than 1,200m. Finally, Greatland released the full results of the drilling programme in February. These extended known mineralisation significantly and established new peak copper and cobalt grades of 12.38pc and 4,104ppm respectively.
The scale of Havieron’s prospectivity was confirmed earlier this week when Greatland announced a landmark farm-in with Newcrest to advance the asset. Newcrest is Australia’s leading gold producer and one of the world’s largest gold mining companies. The deal, which sent Greatland’s shares soaring by more than a fifth to 2.3p, gives Newcrest the right to acquire up to a 70pc interest in the blocks covering Havieron.
To reach this stake, it must spend up to $65m and complete a series of exploration and development milestones in a four-stage farm-in over six years. The business must incur at least $5m in expenditure within 12 months of the farm-in commencing. Once it has met all of these milestones it will have the option to acquire a further 5pc position at ‘fair market value’.
Drilling at Havieron is now expected to begin again in April under Newcrest’s management and expense. Greatland said both firms hope to process all ore from Havieron at Newcrest’s Telfer gold mine, located around 45km away. It added that this would deliver ‘material economic and operational benefits’ such as leveraging existing infrastructure, reducing upfront capital costs, and potentially increasing net present value.
An understandably delighted Heddle commented: ‘In summary, we are very excited about the future of Havieron and the Paterson region more generally and we believe that this agreement with Newcrest will serve as a foundation on which we can build Greatland into a large and successful business delivering significant returns to our shareholders.’
The Havieron farm-in deal also gives Newcrest a first right of refusal over the Black Hills and Paterson Range East licences on Greatland’s Paterson blocks.
Acquired by Greatland during the bear market, Black Hills sits adjacent to the north-west border of the Havieron licence and hosts known high-grade gold at the surface in a similar style to the Telfer mine. Greatland launched its first exploration campaign at the asset last year, encountering many gold nuggets and pieces in bedrock within the first few days. It ultimately determined that the licence is prospective for high-grade, near-surface gold mineralisation.
On this, Heddle added: ‘We believe that Newcrest’s first right of refusal over the remainder of Greatland’s Paterson project (the Black Hills and Paterson Range East licences and the areas of the Havieron licence not included in the Tenement Blocks) represents a strong endorsement of the attractiveness and prospectivity of our licences in the region.’
Alongside its Paterson acreage, Greatland owns several other prospective assets. These include the Firetower and Warrentinna targets in Tasmania.
The firm carried out a 3DIP survey at the 62km2 Firetower site last year to help it outline a trend of mineralisation across a 1.6km strike length. This work highlighted a large 1000km-long target that travels east to west across the project. Greatland hopes to launch a drilling programme to test the target in the second quarter of 2019. Meanwhile, drilling results at Warrentinna in 2016 included 5m at 2.4g/t gold including 1m at 4.7g/t gold.
Elsewhere, Greatland’s Ernest Giles project covers a vast and virtually unexplored greenstone sequence over a 200km strike of gold prospective rocks. The organisation says it chose this area because greenstone belts host most of the major gold deposits in Western Australia. Last year, a drilling campaign extended two previously identified large zones of gold mineralisation while deep sensing geochemistry work has located several further anomalies.
Finally, the business owns two further early stage projects called Panorama and Bromus. Panorama hosts two styles of potential gold mineralisation while the exploration model at Bromus is currently under review.
Can it continue?
Greatland’s impressive progress across Havieron and Black Hills throughout 2018 and early 2019 have seen its shares rise from 0.6p to their current 2.1p over the last 12 months. This is remarkable in any market, let alone one where declining commodity prices were flawing most resources players in the face of global growth and trade concerns.
Some are likely wondering if they have now missed the boat. However, it is worth remembering that the company has a lot of strength underpinning its current £69.2m market cap.
Indeed, as of 31 December, Greatland boasted a cash balance of £4m. With monthly admin costs coming in at roughly £87k (based on £523,026 in six months to 31 December 2018), the business can put a large amount of this money in the ground. What’s more, with Havieron now funded by Newcrest, the firm can focus more capital into its Black Hills, Ernest Giles, and Tasmania-based sites. This should ensure a strong pipeline of newsflow.
Greatland has also attracted the backing of significant institutional investors, including Primorus Investments (1.15pc) and Starvest (2.8pc), while management has some additional skin in the game.
All-in-all, it will be hard for Greatland to replicate the share price gains it has enjoyed over the past 12 months, especially given that it was coming up from such a low base. However, if it can continue to secure major deals and report strong progress at Havieron and its other assets, then it should be favoured by this year’s (touch wood) stronger commodity market.
Gervaise Heddle, CEO of GGP, tells Andrew Scott 2019’s off to a great start after signing a farm-in agreement with Newcrest
The author was remunerated but does not hold shares in the company