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Capital Network: Greatland Gold has a suite of exploration assets in Australia

Writen by Sam Catalano

REASONS TO CONSIDER GREATLAND GOLD:

Agreement with a global major: Global major gold miner, Newmont, has recently entered into an agreement with Greatland (GGP.LON) such that Newmont will have access to Greatland’s Ernest Giles gold project for a period of 6 months, and is able to apply their proprietary exploration methods (which, we understand, are ideally suited for identifying large gold systems under cover). Overall, the key point of note for investors is that this commitment from Newmont is a strong validation of the potential exploration upside in Ernest Giles. Typically, global major of this size would be unlikely to be involved in a project unless they saw potential for a large scale resource. News flow from Newmont’s results will be key to Greatland Gold (GGP.LON) shares over this 6 month period.

Stable Jurisdiction: The majority of gold exploration these days is typically either focussed on outcropping (i.e. relatively easy to find) deposits in less established mining jurisdictions (i.e. parts of Africa or central Asia); or on under-cover deposits in well established, less risky jurisdictions. Greatland provides exposure to the latter. 

Canny management: With a management team heavily experienced in both exploration geology and on the financial side of the resources industry, we note that management have shown a canny ability to make smart acquisitions to complement their asset base. For example, recently they purchased airborne survey data over their Ernest Giles tenements, which was completed by a third party at great expense, bur was acquired cheaply by Greatland (GGP.LON). This will allow them to  better focus their own exploration resources more efficiently.

KEY ASSETS

The key asset of note for potential investors over the next six months is the Ernest Giles Project. Located in Western Australia, close to well-established regions for gold production, and 100% owned by Greatland.

ERNEST GILES

The Ernest Giles project is part of an 1,800 square kilometre land holding which Greatland holds on the eastern edge of the prolific Western Gold fields. These eastern areas have previously been very poorly explored due to their remote location and depth of cover over potential mineralisation (as compared to easier to find outcropping mineralisation further to the west).

The key news for potential investors in Greatland is the recent deal which has been signed with the global gold major, Newmont. On 16th May 2017, Greatland announced an agreement with Newmont, whereby Newmont will have access to the Ernest Giles project for a period for 6 months, and is able to apply their proprietary exploration methods which are ideally suited for identifying large gold systems under cover. Key features of the deal are:

• Newmont has first right of refusal should Greatland wish to sell off or JV Ernest Giles during the 6 month period

• All exploration work will be at Newmont’s expense during this period

• Greatland will receive all the final exploration results

Overall, the key point of note for investors is that this commitment from Newmont is strong validation of the potential exploration upside in Ernest Giles.

For those interested in the technical detail, we note that in addition to promising results from airborne surveys, drilling at the Meadows target within Ernest Giles has seen several wide intersections of mineralised zones (up to 60m), with grades peaking at 2g/t of Gold. Cover is ~120m at the shallowest point, and averaging about 200m; which suggests relatively shallow mineralisaton.

The most important takeaway here is that a company like Newmont will typically not become involved in an exploration project unless they see potential for a large scale deposit. So, while the terms of any future JV agreement (were one to come to pass) are not clear with regards to potential shareholder dilution at the project or company level, it would be fair to say that the validation of Newmont to be a JV partner would likely heavily outweigh any such dilution.

We also note that at this stage, there is no native title claim on the Ernest Giles project, thus reducing any risk of costs or delays to the exploration/development process

OTHER ASSETS

Greatland also holds a number of other exploration assets in both Western Australia and Tasmania. The most significant of these at this stage for investors is the Havieron Project in Western Australia.  Havieron is located very close to Newcrest’s Telfer mine, the region has been subject to recent exploration which has outlined several other deposits including Magnum (Au), Calibre (Au), O’Callaghans (Cu) and Maroochydore (Cu).  Drill results at Havieron which show Thick lower grade zones of gold and copper have been intersected, and within these gold grades peak at 15.4g/t and copper to 2.5%. Accordingly, we flag the potential at Havieron as the company progresses work there, but maintain the key focus for investors in the short-medium term should lie with Ernest Giles, and newsflow from Newmont.

CASH POSITION

Post recent warrant exercises, we estimate the company currently holds ~£750k of cash, with no debt. With the Newmont deal removing immediate spend requirements from the Ernest Giles project, cash drain should be minimal (approximately £40K per month) for at least the next 6 months. 
 

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