Greatland Gold's Newcrest tie-up is huge

A stock for "seasoned mining sector fans, it's one to follow," we said. The shares have now doubled. 

As the only AIM-listed explorer in one of the most exciting mining territories in Australia, Greatland Gold (LSE:GGP) has rightly been attracting plenty of interest in recent months.

That enthusiasm stepped up a level today when Greatland announced a joint venture with mining giant Newcrest to develop its Havieron licence, which is only 45km from Newcrest's Telfer infrastructure and processing capacity in the Great Sandy Desert of Western Australia.

During the farm-in period for Havieron, Newcrest will also have first right of refusal over the rest of Greatland's Paterson gold and copper project, which includes Black Hills where prospectors were able last year to bend down and pick nuggets off the ground.

Newcrest — Australia's leading gold producer and one of the world’s largest gold miners — said it was "more and more evident" that the Paterson region is highly prospective for under-cover discoveries, highlighting the value of still having infrastructure in the region.

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The Telfer facility has been owned by Newcrest since the 1970s but is nearing the end of its life, having produced millions of ounces of gold. Limited drilling was conducted by Newcrest at Havieron during the 1990s and early 2000s where six holes were drilled with some success.

It is expected that drilling at Havieron will start as soon as next month, under Newcrest's management and expense. There is a minimum commitment of US$5 million over an initial 12-month period, with the potential for Newcrest to earn up to a 70% joint venture interest through expenditure of $65 million over a six-year period.

Source: TradingView (*) Past performance is not a guide to future performance

Greatland's CEO Gervaise Heddle said there was "tremendous benefit" in harnessing Newcrest's Telfer experience and its understanding of the geology of the Paterson region.

He added:

"We believe that this deal represents a win-win for both parties. Newcrest's expertise should help fast track Havieron through to a completed feasibility study and, subject to positive outcomes, into production and positive cash flow."

Shares in Greatland, which has been listed on AIM since July 2006, jumped as much as 38% in early trade to 2.54p, not far off an eight-year high. 

They had not traded above 1p for over five years until October 2017 when a flurry of activity quadrupled the price to a peak of 2.4p in early January. As well as Paterson, the company has five other exploration projects in Australia, including two in Tasmania.

Its strategy is based on the belief that the next generation of large deposits will come from areas under cover that have not been subject to significant exploration in the past. It will be hoping to meet the demands of mining majors, who are increasingly focused on projects of scale.

When we spoke to Heddle in September, the former fund manager at Merrill Lynch said there was a "real buzz" in the region due to speculation about the potential for Rio Tinto (LSE:RIO) to deliver a massive copper discovery. The mining giant reported last month that the results of initial drilling at a site just 130 km from Telfer had been encouraging.

As with all such exploration stocks, Greatland is high risk. But for adventurous and seasoned mining sector fans, its current momentum means it may be one to follow. 

*Horizontal lines on charts represent levels of previous technical support and resistance.