Is it safe to buy the dip in Greatland Gold shares?
Greatland Gold (LON: GGP) share price has pulled back sharply in the past few days as gold prices retreated. The shares dropped to a low of 7.13p, which is lower than this month’s high of 9.23p.
Potential catalysts for GGP
Greatland Gold is a junior gold and copper mining company that has operations in Australia. The company has a 30% stake in the Havieron mine where it has partnered with Newcrest. Newcrest is one of the biggest gold mining companies in the world. It is being pursued by Newmont, the biggest firm in the world.
Greatland Gold is pre-revenue, having spent the past few years developing the Havieron mine. Despite this, the company has a market cap of 382 million pounds. It derives this valuation from the vast resources in Havieron.
Havieron has about 5.5 million ounces of proven gold reserves and 220k tons of copper. Therefore, at the current prices, these reserves are all valued at over $13 billion. 30% of these funds are equivalent to over $4 billion.
There are two other benefits for the company. First, it has a partnership with Newcrest, which has a lot of expertise in the gold mining industry. This means that the firm will use this expertise to reduce its extraction cost. This is important since its mining is fully funded, meaning that the firm will not need to raise cash.
Second, Greatland Gold is based in Australia, a country that has no major geopolitical issues and is well-developed. These benefits will also help it lower the cost.
Most importantly, I believe that the price of gold and copper will continue to rise in the longer term. Countries are buying gold to hedge against risks while copper is expected to move into a surplus soon.
Greatland Gold share price forecast
The daily chart shows that the GGP stock price has made a bearish breakout in the past few days. This price action happened after the stock tested the key resistance point at 9.23p, the highest point on February 7.
Further, the shares have moved below the 25-day and 50-day exponential moving averages (EMA), It also sits at an important support at 7.31p, the lowest point on February 2.
Therefore, the shares will likely have a bearish breakout in the near term. In the longer term, the shares will rebound as the company’s mining starts. I would recommend buying the shares if the prices move above 9.23p.
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