Can Greatland Gold become great again?
“…The GGP share price doesn’t need to soar back to historic levels to allow for the possibility of a healthy return: a positive Havieron Feasibility Study, scheduled for later this year, promises to inject new life into the company’s value…”
Greatland Gold (AIM:GGP) continues to work towards bringing the highly prospective Havieron project in Western Australia to production, boosted by a funding arrangement that promises to secure the funds the company needs to meet its share of the cost of developing a working mine.
The Havieron discovery, close to Newcrest’s Telfer mine and Rio Tinto’s Winu discovery, propelled GGP’s share price into the stratosphere back in 2020, quadrupling in value to break through 40p and push the company’s market capitalisation over £1bn. The surge was comparable to market ramps in the past few years for pre-revenue mining prospects associated with SolGold and Bushveld Minerals, earning investors who took a stake in GGP in 2018 a return of more than 4,000pc.
The long road to production
GGP, and its share price, have subsequently come back to earth, as the company has embarked on the hard road of turning the prospect into production. Soon after the discovery GGP entered into a joint venture partnership with Newcrest, the terms of which commit the Australian giant to shoulder $50m of the cost of exploring Havieron in return for the right to earn up to a 70pc interest. Subject to a positive Feasibility Study, due to be published later this year, and a subsequent decision to mine, Havieron’s ore will be toll processed at the Telfer mine, located within 45 kilometres.
While GGP has sought funding for its share of the cost of bringing the prospect into production, Newcrest has continued to delineate the scope of the potential resource. Test drilling prior to Newcrest’s involvement had indicated the presence of significant gold and copper mineralisation around 400 metres below surface, including one intercept of 275m at 4.77g/t Au and 0.61pc Cu. A hugely promising Initial Inferred Mineral Resource estimate published in 2020 indicated a multi-billion resource, results including 52Mt at 2.0g/t Au, 0.31pc Cu or 2.5g/t AuEq for 3.4 Moz Au, 160Kt Cu or 4.2Moz AuEq.
Subsequent updates have confirmed Havieron’s promise. A Stage 1 Pre-Feasibility Study (PFS) on the South-East Crescent of the Havieron deposit released last October, indicated – in GGP’s words – ‘the tip of the Havieron iceberg with a fraction of the initial resource supporting the total capex of the project’, and signposted ‘a globally unique opportunity for bringing a low risk, low capex tier-one gold-copper mine into production’. Drilling undertaken last year, encompassing 219,561 metres over 266 holes, found ‘significant mineralisation’ in 19 holes, leading to an upbeat Mineral Resource update published this March, extending the prospect’s gold estimate by 50pc. Ore Reserves were now to 5.5Moz Au and 218kt Cu, or 6.5Moz AuEq, an increase of 2.1MoZ Au Eq over the last Mineral Resource update.
The estimate was consolidated by further updates this autumn. The most recent Mineral Resource defined a total 85Mt @ 2.0g/t Au and 0.26pc Cu for a total of 5.5Moz of Au and 223kt of Cu. And an exploration and development update presented a series of new intercepts, including 27m @ 1.9g/t Au & 0.19pc Cu from 1170m at the prospect’s Eastern Breccia region, 20m @ 7.6g/t Au & 0.14pc Cu from 1453m at the South-East Crescent, and 39.9m @ 4.6g/t Au & 0.1pc Cu from 1401.1m at the Northern Breccia. Drilling is underway to test regional geophysical targets outside of the main Havieron system. GGP said the ‘schedule for first ore continues to be reviewed and will be updated with the release of the Feasibility Study, which remains on track for completion during the December 2022 quarter.’
For its part, GGP secured a significant breakthrough last month through the securing of debt and equity agreements that promise to bring in AUD$340m to enable the company to fully fund its 30pc share of the cost of bringing Havieron into production. Some AUD$220m will be met through a seven-year debt syndicate with three Australian and New Zealand banks, and a further $120m through an equity investment by Wyloo Metals. Wyloo, which according to the agreement will pay in two phases, will become GGP’s largest shareholder, with an 8.6pc stake. CEO Shaun Day said: ‘The significant size of each bank’s commitment together with the strategic support from Wyloo highlights the long-term confidence in the Havieron gold-copper project and the strength of this world class asset.’ The announcement followed welcome news that Newcrest had decided not to exercise its option under the Havieron Joint Venture agreement to acquire an additional 5pc in the venture. Newcrest would have paid $60m for the additional stake, but GGP’s preference was to retain its 30pc share.
GGP was also able to announce further backing for the venture in the form of the appointment of three established figures in the Australian mining world to its management team. Mark Barnaba, who for the past five years has guided Fortescue, the world’s fourth largest iron ore producer, becomes Non-Executive Chairman. Elizabeth Gaines, another former Fortescue leader, joins as a Non-Executive Director, and BHP veteran James ‘Jimmy’ Wilson becomes Executive Director. GGP is also beginning the process of cross listing on the Australian Securities Exchange (ASX) to increase liquidity and provide additional access to capital.
GGP beyond Havieron
GGP has become synonymous with Havieron over the past few years, but the company has other interests in Australia and Tasmania, most notably the Juri Joint Venture, also with Newcrest, and, again, in the Paterson region. The Venture consists of two exploration licences, Paterson Range East, and Blackhills. GGP currently has a 49pc stake, but Newcrest has the right to earn up to 75pc interest by spending up to AUD$20m in total as part of a two-stage farm-in over five years. Drilling last year, comprising nine holes for 4,958 metres, testing six targets, and electromagnetic surveying, identified several promising targets for this year’s follow up programme, which got underway in June, focused on the drilling of three high-priority targets. Work continues on the interpretation of electromagnetic survey data, and a programme of soil sampling along existing tracks has been completed and submitted for geochemical analysis to assist in identification of undercover geology and potential subtle mineralisation trends.
GGP has several fully-owned projects, notably the Scallywag and Rudall and Canning projects, both prospective for copper and gold, and both adjacent to Havieron. Drilling at Scallywag has intercepted 2.6m @ 0.19g/t Au from 35.4m and 3m @ 0.19g/t Au from 430m at one hole, and anomalous gold and pathfinders at three further holes. The 2022 programme, currently underway, is designed to test ground Electro-Magnetic conductors for Telfer style mineralisation at the prospect’s Pearl, Swan and Swan East targets. A maiden exploration drill programme is underway at Rudall and Canning.
GGP has a set of other projects earmarked for exploration. The Ernest Giles project, in central Western Australia, covers an area of approximately 1950km2 with around 180km of strike of rocks prospective for gold. The eastern Yilgarn Craton is one of the most highly mineralised areas in Western Australia and is considered prospective for large gold deposits. The Panorama project, three adjoining exploration licences, covering 157km2, located in the Pilbara region of Western Australia, in an area considered to be highly prospective for gold and cobalt. The Bromus project, in the southern Yilgarn region of Western Australia, consists of two licences, covering 87km2 of under-explored greenstone and intrusive granites of the Archean Yilgarn Block at the southern end of the Kalgoorlie-Norseman belt. GGP has two further prospects in Tasmania: the Firetower project, covering an area of 62km2, and Warrentinna, covering an area of 37km2 with 15km of strike prospective for gold.
Outlook
The shine has come off GGP’s share price over the past year, down around 50pc to just over 7.5p at the time of writing, taking the company’s market cap to £324m. A $25m placing undertaken in August accounted for some that. And, as TMS has noted in several articles this autumn, the accumulating global economic slowdown is weighing on commodities, copper included. The long-term investment case for copper, perhaps the most critical of all energy transition metals, remains: the world is going to need a lot of the red metal, and there is simply not enough of it. Inventories fell to 15-year lows last year, and analysts expect prices to nearly triple to more than $20,000 per metric ton in the next three years. But gathering economic clouds have pushed prices down by a third since March. China’s faltering property market is a particular drag on demand. The price of gold continues to waver as the market tries to discern the extent and nature of the likely downturn. If it turns out to be stagflation – a combination of high inflation and low growth – expect the yellow metal to resume its traditional role as a last-resort bolthole, as it did at the height of the pandemic.
Prospective investors should also be wary of expecting that GGP’s stock will again touch the heady heights reached in 2020: commodities shares can shine brightest when a discovery is first announced, irrespective of whether the prospect moves to production. But GGP’s price doesn’t need to soar to those levels to allow for the possibility of a healthy return: a positive Havieron Feasibility Study, scheduled for later this year, promises to inject new life into the company’s value. The steady flow of robust drilling updates augur well for a Study paving the way for production. With the company’s shares currently becalmed, now might be a good time to make a move.
