A few years ago, Greatland Gold PLC (AIM:GGP, OTC:GRLGF) was just another penny stock with licences over some dusty ground in Australia. Companies like that come and go on the world’s stock exchanges all the time, diluting shareholders down to crumbs and then consolidating their shares and starting all over again.
But Greatland Gold proved to be the exception that proved the rule.
In the London market, only one other company, Solgold, has come close to what Greatland has achieved - making a major discovery and then keeping hold of a significant portion of it as the big money comes in to move it forward into production.
Solgold had Cascabel in Ecuador and Greatland has Havieron.
Both companies made early backers overnight millionaires when the extent of their discoveries became apparent, and both companies have subsequently been on a rollercoaster ride in terms of share price as the market struggles to come to terms with what such huge discoveries are really worth when held by smaller companies that are trying to punch above their weight.
Cascabel became the subject of a tug of war between two major mining companies, and some of the intricacies of that fight went on to damage sentiment.
But in the case of Havieron, it’s been more straightforward.
Those who came later to the party are now underwater as the share price has dropped away from the heights it reached last year.
But the recent news of a financing package that will allow Greatland to fully fund its 30% share of the development costs at Haviernon did boost the share price by more than 10%. Concurrently, new board members were announced, including as non-executive chairman Mark Barnaba, who is the current deputy chairman of Fortescue Minerals, a A$50bn company.
Greatland has hit the big time, and the big hitters are accordingly coming in to meet it.
Serial small-cap non-executive Alex Borelli, who was chairman, will remain on the board as “London representative.”
And so Greatland survives the threat of extinction by a major, and lives to fight another day. The arrival of a serious mining investment vehicle on the register in the shape of Wyloo Metals adds strength in depth to any potential defence in the face of a hostile advance from Havieron’s now-majority owner Newcrest.
Newcrest and Greatland have always seemed to get along reasonably well in public, even if Newcrest has at times appeared to downplay the dollar value of Havieron to suit its own ends. The thinking has been that a reduced Greatland price would suit Newcrest very well, and allow it to come in and make a bid at what initially would appear to be a nice premium, but which in fact would be a significant discount on the real value of Havieron.
These debates are purely abstract for the time being, though, and the presence of Wyloo means that it’s more likely now that they will remain so as the mine goes into production. After all, Greatland’s current share price remains a shadow of its former 37p high, since even after the recent bump, it’s still trading at below 10p.
And even broker Canaccord Genuity (TSX:CF, LSE:CF), a supporter, doesn’t reckon it’s going quite back to its former levels. Instead, the broker set a target following the news of the funding and board appointments of 25p, more than two and a half times where it is now, and a valuation, which, if borne out, would take Greatland’s market capitalisation back towards the £1bn mark.
Such a valuation may now be justified given that Havieron looks to be headed towards production with Greatland likely to retain its 30% ownership all the way. But there remains execution risk, and the significant factor that when all’s said and done the ball remains largely in Newcrest’s court.
There may well be significant moves towards a re-rating in the coming months, but nothing like the spectacular rise that shareholders saw at the end of 2020 is likely to be repeated.
And there remains, too, the question of the longer term.
What will Greatland look like in the future?
Will it continue to be an exploration play, working up its other claims in the Paterson Range? Or will it instead simply become a cash cow, focussed primarily on deriving its value from the sizeable dividends that will shortly start to come rolling in from the Havieron operation?
Time will tell if the big company mentality makes itself felt. For now, Greatland remains the beacon for all smaller companies to set their navigation lights by – representing as it does the transformation of dusty ground into hundreds of millions of dollars worth of gold and opportunity.