Greatland Gold interview: Finding the mother lode

It's already struck gold, but now Greatland Gold needs to prove how large the find is. Chief executive Gervaise Heddle tells Lee Wild how he hopes the story will unfold.

Behind every mining company there's a great story. They know where the prize is, just not how much or how good it is. Trick for investors is to spot a great prospect with a better than evens chance of finding the mother lode. Not easy.

Far easier is to be seduced by the story, and Greatland Gold's chief executive Gervaise Heddle has a good one.

Greatland has been around on AIM for a decade or more, delivering the odd spike in share price penny share fans love. They'd not traded above 1p for over five years until last October when a flurry of activity quadrupled the price to a peak of 2.44p. 

Within months, however, they were back near half a penny. A similar thing happened in June, although this time there's been enough interest to keep the shares above a whole penny and the market capitalisation at around £37 million.

That's largely down to progress at Greatland's two 100%-owned licences - Havieron and Black Hills - in the remote Paterson region of Western Australia. A second drilling campaign at Havieron began a few weeks ago, following a first round in the spring that established the presence of a zone of high grade mineralisation.

Source: interactive investor      Past performance is not a guide to future performance

A maiden exploration programme at the 25 square-kilometre Black Hills licence also caused a stir earlier this year. Prospectors there were able to bend down and pick gold nuggets off the ground! It's a long way from establishing a large-scale economic mining operation, but a good starting point nonetheless.

Heddle, a former fund manager at Merrill Lynch, says there a "real buzz" around the area right now as rumours do the rounds that Rio Tinto has made a big copper discovery. Rio remains tight-lipped, but the chatter has triggered a flurry of activity, and there's already been a rush of licence applications.

Replicating success achieved at the nearby Telfer mine is the dream for Greatland. Owned by Newcrest Mining since the 1970s, it's produced millions of ounces of gold, but is nearing the end of its mine life.

Greatland has already made a discovery at Havieron, finding a "significant" intersection with its first hole – 121 metres at 2.93 grammes of gold per tonne. The latest round of drilling there – 10 holes planned at one per week – is designed to derisk the project, and should wrap up before the tropical storms arrive at the end of November. While the first hole suggests there's a big system there, Greatland will need hundreds of metres of mineralisation to really make this work.

Mining majors are increasingly focused on scale, Heddle tells us. They want 10-20 million tonnes. "As long as it's big, low grade can work."

To prove this is a major discovery rather than just a large find - and to trigger a revaluation of the company to reflect that - Greatland says it may have to put two dozen holes in the ground at significant depths.

In the meantime, expect at least more drill results and updates from Havieron before year-end, and results from the recent 3DIP (three-dimensional induced polarisation) survey ahead of first drilling at Black Hills.

Greatland has six projects in all, but these two will remain the potential game-changers. After a £2.65 million fundraising over the summer, the company has £6 million to bankroll development there, but good results could encourage management to be more aggressive and speed things along.

As I've said, every miner has a great story, and there's clearly masses of potential at Greatland. But there's also an incredible amount of hard work to do before we even begin talking about resource, which finally gives big investors something to hang their hat on. It also typically marks the point at which institutional money gets involved.

By that stage, however, a lot of the risk is out of the way, and also the potential for speculative investors to multiply profits. As with all such stocks, this is high risk, seat of the pants stuff where a lot could still go wrong. Many investors would probably avoid it, but for adventurous and seasoned mining sector fans, it's one to follow.