Analysts at Berenberg have reiterated a 'Buy' rating on Greatland Gold PLC (AIM:GGP, OTC:GRLGF) following recent key funding and board strengthening news plus its plans to list on the Australian Stock Exchange (ASX)
The Berenberg analysts, however, cut their share price target for Greatland Gold to 18.00p from 22.00p to reflect higher dilution than previously expected. In late afternoon trade on Tuesday, Greatland shares were trading at 9.05p, up 0.3% on Monday's close having jumped higher that session when the news was announced.
In a note to clients, the Berenberg analysts said: "Greatland Gold has, in our view, materially strengthened its board with the appointments of Mark Barnaba, Elizabeth Gaines and James Wilson. Mark Barnaba is deputy chair of Fortescue Metals and will join as non-executive chair, while Elizabeth Gaines was CEO of Fortescue and will join as a non-executive director and deputy chair, and James Wilson was previously president of BHP’s iron ore division."
The analysts noted that Greatland has also signed an A$220mln debt term sheet with a syndicate of three Australian banks and a strategic equity investment from Wyloo Metals for A$60mln at 8.20p per share, with a potential further equity contribution of A$60mln through the issue of 1,000p warrants.
They said the debt has a seven-year term and is at an interest rate of 3.5%, plus the Bank Bill Swap Bid Rate (BBSY) benchmark reducing to 3.25% post-project completion, with an early repayment facility through a 5% cash sweep, which is materially below the more than 8% payable under the current Newcrest Mining facility, and the funds will be used in part to refinance the US$50mln loan with Newcrest.
The analysts pointed out that Wyloo is owned by Andrew Forrest, founder and executive chair of Fortescue and Australia’s richest man. Following the initial investment, Wyloo will hold 8.6% of the Greatland shares.
They said: "This Wyloo investment means that Greatland should be fully funded for its 30% share in Havieron based on the 2021 pre-feasibility
study (PFS) and well positioned in terms of expanding the project."
The analysts said the cut in their share price target is based on the PFS for the South-East Crescent Zone at Havieron and their assumption of a further 11.5 mln ounces being delineated outside of the PFS reserve, which they value in line with the Australian mid-tier gold miners, and assumes that Greatland retains a 30% interest in Havieron, with Newcrest holding 70%.
The Berenberg analysts concluded that they "view the board appointments, debt and investment by Wyloo as material as they bring in a heavyweight partner and put in place a comprehensive funding package for the company’s share of Havieron".