Greatland Gold (GGP) - 8p per share, on a fully diluted basis.
AIM-listed Greatland Gold (GGP) is exploring three projects covering a total area of approximately 300 square kilometres one of which has already shown that it has the potential to be a commercially viable gold resource. The flagship project in Tasmania is Firetower and in the same state it also owns the Warrantinna project. In Western Australia, it owns the Lackman Rock project in the Yilgarn region in the south west of the state. All three prospects are located in areas of high-grade gold and base metal mineralisation and display similar geology to large deposits nearby.
At Firetower, there is an existing inferred JORC compliant resource of 90,000 oz gold, as well as other identified targets. The property has high-grade gold mineralisation at surface and drill intercepts of up to 30 g/t of gold.
The resource estimate is likely to climb steadily as the year progresses, but the current resource could be exploited commercially by simply trucking rock to a nearby processing plant under a toll arrangement. This scheme would, we believe, be worth a multiple of the current market capitalisation. However, Greatland believes that it can deliver greater value by increasing the resource estimate via further drilling and supporters believe that Firetower could contain one million oz of gold and gold equivalent.
Elsewhere, Greatland’s exploration efforts at Warrentinna include geological mapping of historic goldfields and surface sampling to determine the extent of the Derby-Mara goldfields and the trends within the Forester-Linton areas. Drilling results so far have returned high-grade gold values and have extended the scope of previously identified mineralisation. The company’s grass roots gold and nickel prospect at Lackman Rock in Western Australia lies in the south Yilgarn region which is host to significant deposits of gold and nickel sulphides. The company views this as a strong greenfield opportunity from a geological perspective, but its value, at this stage cannot be said to be material.
Valuation of Greatland Gold is based on Firetower and on the company’s net cash and liquid investments.
Option one
The company has two alternative options in seeking to deliver value to its shareholders at the Firetower property. The first is the base case option of cashing in immediately from its investment by selling the gold bearing rock outright to an existing treatment plant 20 miles from Firetower. It would cost around $400 per oz to take the rock from Firetower, dig it out with excavators, load it on to trucks, take it down the road and have it processed. If the company could then sell that gold for $650 oz, then even with the already proven resource would be worth $12.5 million (proven resource of 50,000 oz at $250 profit margin) or £6.25 million. That, together with Greatland’s current cash position, would offer an immediate uplift of 180% . But that is a base case scenario and Greatland believes that it can extract a far greater return for investors with a more ambitious business model.
Option two
The second scenario would see Greatland undertake an aggressive drilling programme to expand its resource to make it economically viable as a stand alone producer. Gold grades up to 16.47 g/t gold plus other minerals from surface sampling at this project cause the company to believe that it can, in due course, prove up a resource of up to one million ounces. If Firetower is indeed a one million oz resource, then it can be developed into an open pit mine which could be worth at least 15 times the current market capitalisation.
We have made a number of assumptions in modelling the potential value of this project. Firetower could be operated as an open cast mine commissioned and constructed , with an open pit mine life of 10 years, and starting productionat a 100,000 oz rate capacity per annum. As a rule of thumb, we take the view that an open cast mine and processing plant would cost the company around $100 million to develop – financed 70% by debt and 30% by equity.
Assumptions include an operating cash cost of US$225 oz, a taxation rate of 30%, a discount factor of 10%, a royalty rate of 3%, and an exchange rate of 1.95. On a heavily risk weighted approach (20%), our base case valuation for the Firetower property is £15.7 million, or 5p per share on a fully diluted basis. With a higher level of confidence on the gold price, we arrive at a target valuation of £23.5 million or 8p per share, on a fully diluted basis.
Clearly, there is the potential to reduce our risk weightings as the company firms up its resource base and moves towards production. On an unrisked basis our best case valuation would thus be 40p per share.
The clear threats to the second scenario are on the exploration front, and the risks of not achieving funding. If those hurdles can be overcome this is an investment which offers spectacular upside. The attraction for investors is that even without any additional funding and based on the current resource alone, there is the potential for Greatland to deliver a return of more than 250% for investors. On that basis we initiate our coverage with a stance of buy.
Potential for mining at gold deposit outside Devonport
A gold deposit south of Devonport has strong potential for mining.
Parts of it have six times the gold grade that the Henty mine has recently produced.
The Firetower deposit has so far been defined as 400 metres long with a width of up to 80 metres.
Drilling to date had found gold grades of up to 30 grams a tonne, Henty Gold Mine operator Unity Mining Limited said in its 2012-13 annual report.
The Henty mine produced at a grade of 5.3 grams a tonne over the past financial year.
Mined and current resource at Henty cover a much bigger area.
The overall Firetower project covered 265 square kilometres and had similar rocks to those at Henty, the company said is a recent report for a mining conference.
The project comes under an agreement between Unity and London-listed Greatland Gold.
The agreement would allow Unity to earn up to 75 per cent from the tenements in return for spending $7 million in two stages.
Unity is also continuing exploration efforts at Henty, on the West Coast.
It will focus exploration spending on resource extensions at its Read Zone.
Unity made a gross profit of $3.9 million for 2012-13
That was largely due to impairment expenses, corporate expenses and exploration expenses.
The Firetower area is about 35 kilometres from Devonport.
Investor Presentation
February 2014
Unity Mining Limited
unitymining.com.au
Henty Gold Mine – Description
 Aerial view of Henty Gold Mine Processing Facility
The Henty Gold Mine is an underground gold mine that commenced operation in 1996 and is located in glaciated mountainous terrain in the upper Henty Valley on the West Coast of Tasmania, adjacent to the Southwest Conservation Area. The nearest main towns are Rosebery, 10 kilometres to the north, Zeehan, 19 kilometres to the west and Queenstown, 23 kilometres to the south.
Henty lies within the mineral rich Mt. Read Volcanic Belt in Western Tasmania that hosts the Hellyer, Que River, Rosebery, Hercules and Mount Lyell base metal deposits. The eastern side of the belt is dominated by the Henty Fault which runs north-east for over 60 kilometres between Mount Charter and Mount Read. The Henty operation is based on a series of structurally complex high-grade zones of gold mineralisation that occur within a package of highly altered volcanic rock adjacent to the Henty Fault.
Access from surface to the series of orebodies at Henty is via shaft and decline, linked to a common portal exit. Mining methods used at Henty vary according to the ore body geometry and geotechnical characteristics of the ore body and host rock. The main mining methods are longhole bench stoping, transverse open stoping and flatbacking (cut and fill). Stopes are filled with either paste fill or mullock.
The process plant has an annual plant capacity of 300 kt/y and utilises a static grizzly, SAG mill, gravity circuit and conventional CIL plant.
Rehabilitation of selected areas disturbed by mineral exploration within the Henty lease commenced in 1993. Progressive rehabilitation associated with mine infrastructure was undertaken during and after construction, with works carried out in the vicinity of the administration office, process plant facilities, wetlands and settling ponds.
Henty Gold Mine location map.
Greatland Gold Share Price Information
Name| Greatland Gold | EpicGGP | Sector| Mining | ISINGB00B15XDH89 | Activites| Greatland Gold plc was incorporated as a mineral exploration and development company. Its wholly owned subsidiary, Greatland Pty Ltd, based in Perth Western Australia, has gold resource assets in Tasmania and in Western Australia. The Board seeks to increase shareholder value by the systematic exploration of its existing resource assets as well as the acquisition of suitable exploration and development projects and producing assets. | Indexn/a |
Latest Share Price (p)| 0.41 | Net Gearing (%)-19.47 | Market Capitalisation (£m)| 2.43 | Gross Gearing (%)1.82 | Shares in issue (m)| 579.23 | Debt Ratio0.00 | P/E Ratio| -3.50 | Debt-to-Equity Ratio0.00 | Total dividends per share (p)| 0.00 | Assets / Equity Ratio1.02 | Dividend Yield (%)| 0.00 | Price to book value1.74 | Dividend Cover| 0.00 | ROCE-0.37 | Earning per share (p)| -0.12 | EPS Growth (%)36.84 | 52-week high / low (p)| 1.04 / 0.23 | DPS Growth (%)n/a |
Greatland Gold Director Deals
DateDirectorTypeVolume / PriceTrade Value | 17 Jan 2012 | Callum Baxter | Buy | 100,000 @ 0.97p | £970.00 | | 17 Jan 2012 | Callum Baxter | Buy | 100,000 @ 0.95p | £950.00 | | 17 Jan 2012 | Callum Baxter | Buy | 100,000 @ 0.92p | £920.00 | | 17 Jan 2012 | Callum Baxter | Buy | 200,000 @ 0.97p | £1,940.00 | | 06 May 2009 | Callum Baxter | Buy | 192,000 @ 75.00p | £144,000.00 |
More Greatland Gold Director Deals >
Greatland Gold Company News
Mining Mining
16:07 27 May
Firetower diamond drilling starts, says Greatland
08:26 27 May
FLASH: Greatland confirms start of diamond drilling at Firetower
07:30 27 May
Greatland confirms positive results at Warrentinna
07:38 22 Apr
FLASH: Greatland confirms positive results at Warrentinna
07:09 22 Apr
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