Greatland Gold PLC (LON:GGP) is unique amongst London-listed gold stocks, according to broker Canaccord Genuity, which today kicks off its coverage of the mining share with a ‘speculative buy’ recommendation.
It has been a strong performing share on AIM nonetheless with a price target of 25p the broker suggests some 25% of further upside to the current price. Meanwhile, analyst Sam Catalano highlights a number of possible value catalysts that may push the price further.
“We would agree that on the currently defined resource base, current trading levels are difficult to justify fundamentally. However, we outline a number of scenarios which we believe illustrate the modest level of exploration success required to justify significant valuation upside for this compelling equity story,” the analyst said in a note.
Catalano believes significant exploration news flow from Greatland’s fast-moving Havieron project is highly likely. The analyst reckons the valuation metrics can change “very swiftly” through the remainder of 2021.
Moreover, Catalano emphasised that although Greatland is nominally an exploration company, it benefits from significant differentiating factors compared to its AIM market peers – namely it is a low-risk quasi-brownfield project, in a low-risk jurisdiction, driven by a motivated and well-funded JV partner (Newcrest Mining).
Catalano digs into the Greatland’s funding options for Havieron, including an option for Newcrest to buy another 5% of the project potentially unlocking sufficient funds to cover AIM-firm’s outlay.
Alternatively, the analyst said the company’s funding position is robust.
He reckons the capex range would most likely fall between US$800mln to US$900mln – with US$853mln seen as the base-case for an 8mln tonne p.a. operation, to produce 514,000 ounces each year.
That would mean Greatland’s share of capex would be around US$240mln to US$270mln, versus attributable earnings of around US$190mln per year, Catalano highlighted, making debt financing an attractive solution.
In the context of the company’s market cap (which equates to about US$1.2bn) the analyst similarly said that an equity-based funding could be possible with only modest dilution.
Looking at the forward schedule, he expects to see regular drilling updates covering both infill and growth drilling, prefeasibility study news and updates, along with updates to the project’s existing mineral resource estimates. All of which are presented as potential value-adding catalysts for Greatland shares.
“Compared to other London-listed junior gold mining peers, Greatland stands out to us as a differentiated player, with a significant stake in what we believe will become a large scale, top-tier asset,” the analyst added.