Greatland Gold plc

Greatland Gold plc

The Paterson Province is emerging as one of the most exciting gold-copper exploration plays in Australia this year. A number of companies, including Greatland Gold (the only AIM-listed explorer in the region), have recently announced gold/copper discoveries. The Great Sandy Desert covers much of the area, and sand cover and the lack of rock outcrops means that the region has been relatively underexplored, notwithstanding the fact that the area contains the huge Telfer gold mine. Drilling at Greatland’s Havieron prospect has yielded extremely encouraging gold and copper intersections, and visible gold has been found in surface samples at Black Hills.

Promising gold-copper exploration in the Paterson Province

Greatland is well financed to pursue several ambitious exploration campaigns across its exciting portfolio of 100% owned projects in 2018. We expect Greatland to capitalise on successful campaigns at Ernest Giles, Havieron and Panorama this year, and to launch field exploration at the recently acquired Black Hills gold project. In May 2017, Greatland signed an agreement granting Newmont Exploration access to the Ernest Giles project tenements and exploration data for six months, with a right of first refusal on any deal during that period. While it is clearly disappointing that Newmont has not pursued the opportunity further, the group’s involvement defined a new large gold anomaly and Greatland remains committed to an exploration programme using Newmont’s survey results. In our view, Ernest Giles remains an exciting project in which a methodical exploration campaign, using the latest available technology, is gradually unveiling what could be a major new goldfield in the Yilgarn block.

Well positioned for 2018

An agreement with Newmont Exploration, a subsidiary of NYSE listed Newmont Mining Corporation – one of the world’s largest gold producers – provides a significant endorsement of Greatland Gold’s exploration strategy and underlines the potential of its projects. It grants Newmont access to Greatland’s Ernest Giles project tenements and exploration database for six months and gives Newmont a right of first refusal on a purchase or joint venture during that period. Greatland’s previous drilling identified two large zones of gold mineralisation. Greatland’s recent application for four additional licence areas effectively completes its coverage of the newly discovered buried Ernest Giles greenstone belt.

Agreement with Newmont on Ernest Giles

In October 2016, Greatland announced that drilling had commencedat its Ernest Giles project in Western Australia. The programmeincluded plans for approximately 6,000 metres of reverse circulation (RC) drilling on a wide-spaced grid pattern, to follow up on previous drilling and soil sampling that identified gold, arsenic and antimony anomalies, and to identify targets for follow up exploration. Greatland recently released the results of the drilling which have identified two large zones of gold mineralisation and which suggest that Greatland has discovered a gold district in this virtually unexplored region. The majority of the RC holes drilled intersected mineralisation. Several intersected wide zones of anomalous gold mineralisation and the cover sequence was shallower than expected, with shallowest intercept of 119m, but generally around 180m depending on location. We believe that this is a significant step in a systematic exploration campaign of this very promising buried greenstone discovery. Greatland is preparing to drill at the Empress gold target.

Ernest Giles drilling results

Since our last update, Greatland Gold has produced its interim results for the current financial year, introduced new members to its Board, raised further equity and put in place two drilling programmes. With new Board members bringing further mining experience to the business, the rejuvenated team has stated that it intends to accelerate plans to exploit the existing pipeline of internal projects and actively seek new external opportunities to capitalise on current depressed valuations in the sector. This refocussed strategy has resulted in the announcement of preparations to drill at the Bromus and Ernest Giles projects. As at 21 June 2016, Greatland noted that it had around £875,000 at bank and no debt.

Further impetus

Greatland’s FY15 results were in line with our expectations at the operating level, with a £0.5m impairment charge associated with asset disposals producing a pre-tax loss of £1.1 million. The Group notes a challenging operating environment but remains encouraged by the surveys at its retained assets and associated drilling programmes. It has reiterated the findings of September’s strategic review, which target a focus on advanced exploration assets and near-term producing opportunities with a reduction in Greatland’s exposure to early stage mineral exploration. We make small adjustments to our FY16E estimates and introduce FY17E numbers.

FY15 results reiterate progress

The major developments since our last research note dated 24th November 2014 have been the announcement of a new drilling campaign at the Ernest Giles and Carnegie prospects in Western Australia, and the abandonment of the Lisle prospect in Tasmania. This note provides more detail on both aspects of the group’s development, explaining the rationale for each, and we look forward to further newsflow over coming weeks as the Ernest Giles drilling results become available.

Pushing ahead at Ernest Giles

Greatland Gold’s FY14 results included a reported loss of £864,270 (FY13, a loss of £422,239) equating to a loss of 0.16p per share (FY13, loss of 0.12p per share). There were a number of one-off items during the year which totalled more than £300,000. During the financial year in question, Greatland Gold raised £675,000 through two placings and at the end of the period its cash deposits stood at £556,085. It raised a further £500,000 subsequent to the year-end and reported that it had £850,000 cash and no debt towards the end of September 2014. The year saw good results across Greatland’s portfolio and the outlook statement maintains a positive view on the company’s prospects. We have reviewed our estimates for FY15 and have increased our expected EBITDA loss for the year to around £0.6 million from £0.5 million given the opportunities and funding which the business currently enjoys.

Full year results

Since our last publication on Greatland Gold, the company has released a series of encouraging updates on its projects and raised more funds. Its most recent announcement highlights several new targets at its Western Australian projects and the disposal of Lackman Rock project licences. Importantly, discovery of the Carnegie nickel sulphide prospect in the Ernest Giles area confirms a shift in focus for Greatland from almost exclusively gold to gold and nickel at a time of increasing nickel prices. To provide the company with better focus on the locations with the highest potential for economic deposits, it has also reduced the licenced areas both in the south of the Bromus project and in the Warrentinna project area. We shall revisit our forecasts once the Company has published its FY14 results, due to be released during Q4 2014.

A series of encouraging developments

Greatland Gold’s first half numbers showing an Operating Loss of £0.23 million and a loss per share of 0.04p were in line with our runrate expectations for the full year. That prompts only very minor adjustments to our estimates. The outlook statement reflects a positive view on the company’s positioning in the market. During the six months to the end of December 2013, the company has concluded two equity raisings totalling £675,000 and issued a number of positive updates on its projects in Tasmania and Western Australia. The latter included new targets in the Ernest Giles and Bromus projects. In Tasmania, positive exploration results have been to the fore and we comment on the most recent progress at Warrentinna in more detail in this note.

Interims confirm further progress

Following the August announcement of further progress at its three projects in Tasmania, Greatland Gold has delivered the promised update on its Western Australian projects. Again, there is significant positive news. A new target has been identified within the exciting Ernest Giles project while further geochemical targets have been found at Bromus and there is confirmation of gold prospective rocks at Lackman Rock.

Between the two updates on its projects, Greatland has raised further capital (taking the total raised in FY14 so far to £675,000) and reported results for its financial year to the end of June 2013. Those results were well within expectations and featured carefully controlled exploration investment. Our estimated loss per share for FY14 reduces from 0.12p to 0.09p (partly reflecting the higher share count following the placings) and we introduce our estimates for FY15.