The Greatland Gold (LSE:GGP) share price has had a fascinating recent history. After rising by nearly 1,900% in 2020, the stock has since lost around half of that gain. And for the past couple of months has remained relatively idle, hovering around 20p per share. Despite the significant decline seen at the start of 2021, the 12-month performance of the GGP share price is still a rise of nearly 60%. But is it about to rise again?
Exciting growth on the horizon
I’ve explored Greatland Gold before. But as a quick reminder, it is an early-stage exploration business that is beginning its transition into the production phase of its mining sites. In fact, this transition is responsible for the explosive performance of the GGP share price last year. Why? Because the management team announced that its flagship project, Havieron, contains an estimated 4.2 mega ounces of gold and equivalent metals. That’s worth around £5.4bn based on today’s prices.
Despite the idle state of the GGP share price, the company has been rather active. Recently, it published the latest set of drilling results that continued to impress. High-grade gold deposits continued to be discovered relatively close to the surface, allowing for cheap and bountiful extraction. At the same time, copper levels remain in line with previous results. Needless to say, this is very encouraging news. So why didn’t the stock move to reflect this?
The idle Greatland Gold (GGP) share price
While these latest results are undoubtedly promising, there remains a long road ahead before Greatland Gold can actually begin mining. The pre-feasibility study has yet to be completed. It is currently scheduled to be published in the second half of this year. One potential reason behind the recent flat performance of the GGP share price is investors holding their breath until this report is released. Why? Because in short, the pre-feasibility study will basically determine whether Havieron is an economically viable project. Suppose the results are negative? In that case, this mountain of wealth may be unobtainable.
Beyond this, the management team is still pursuing the necessary approval and permits to begin mining operations. And the underground decline access for the ore bodies only started being excavated in May. So, even under the assumption that nothing goes wrong, current forecasts indicate that it could be another three years before commercial production of the site actually begins.
The bottom line
Given that Greatland Gold currently carries a lofty £740m valuation despite being pre-revenue, the level of shareholder expectations remains incredibly high, in my opinion. However, if the management team can continue delivering excellent results, then this inflated share price may be justified.
One significant risk a lot of young mining companies tend to face is a lack of funding. However, in the case of Greatland Gold, the Havieron project is actually a joint venture with Newcrest Mining. That provides the firm with some pretty deep pockets to keep operations going until a revenue stream emerges.
Overall, it seems to me that the GGP share price might see some explosive growth over the long term. But having said that, I’m going to wait for the pre-feasibility study results before making any investment decision.