Those of a superstitious nature might not get out of bed today (Friday 13 September). But those hiding away will miss the news that the Greatland Gold (LSE:GGP) share price is, at the time of writing, up 5%.
That’s because the company’s successfully raised enough funds to enable it to acquire the 70% stake in the Havieron gold-copper mine that it doesn’t own, along with other assorted assets.
The purchase price is $475m which will be funded through a combination of cash, shares and deferred payments. At completion, the company will be debt-free. However, to develop Havieron, it’s reached agreement with a syndicate of banks will provide loans of up to $775m.
Shareholders will be hoping that it’s the end of a series of fundraising activities that’s depressed the share price in recent years. Both the retail offer and private placing were oversubscribed, which suggests investors like what they hear.
A new chapter
With the gold price close to an all-time high, now is a good time to acquire the Telfer mine. Unlike Havieron, this is already up and running and should help provide some much-needed cash.
Indeed, it will be the company’s first revenue since it was formed in 2005.
Once the new shares have been issued for trading and the deal is finalised, the company’s estimating that it will have a stock market valuation of £628m.
And on the face of it, the deal seems to be a great bargain for Greatland Gold. In the middle of 2022 — when copper and gold prices were 20%-30% lower than they are today — Havieron was valued at $1.2bn (£910m at current exchange rates).
The group’s expected market cap will be approximately 30% lower.
I suspect the differential reflects the fact that the company’s flagship project is several years away from generating revenue. But it does suggest now could be a good time to invest.
And as we all know, timing is everything when it comes to successful investing.
Buyer’s remorse
Unfortunately, I did take a position in Greatland Gold when its share price was around 23p. I doubt I’ll ever get my money back.
However, the miner looks to be in much better shape now than when I first took a stake. It’s always tempting to try and get in at an early stage (like I did). But often it’s better to wait. With the benefit of hindsight, I think I’d now have a better chance of making a decent return than when I first decided to part with my cash.
But mining is probably the most difficult industry around. There are numerous operational, technical and financial risks. And there’s a need for huge capital expenditure. If that wasn’t enough, commodity prices fluctuate so it’s difficult to produce accurate forecasts.
Personally, I think there’s a good chance that the miner’s share price will start to do well as it moves closer to commercialising production at Havieron. Its financing requirements appear to be sorted and it now owns 100% of its principal asset.
But I don’t want to add to my existing shareholding. I’ve learned my lesson. If I wanted to invest in the sector, I’d rather buy shares in a company that’s moved from the development phase and is now in production.
