Greatland Resources Ltd (ASX: GGP) announced a significant increase in its cash reserves this week, reaching $948 million. The company’s gold production for the December quarter is expected to align with the upper end of its guidance. Despite these positive indicators, analysts at Jarden have expressed concerns regarding the stock’s valuation, suggesting it may be overpriced.
In a recent research note, Jarden highlighted that Greatland’s shares have surged nearly 100% over the past three months, contrasting sharply with the stagnant performance of the broader S&P/ASX 200 Index (ASX: XJO) during the same period. The analysts estimate that the current market capitalisation of Greatland, which has jumped by almost $5 billion in three months, implies a long-term gold price of approximately US$4,600 per ounce.
Valuation Concerns Amid Production Success
Jarden’s analysts noted that while management has effectively navigated key mining operations, they find the current market capitalisation of $9.7 billion challenging to sustain, particularly for the high-cost Telfer operation and the technically complex Havieron development project. They have revised their 12-month price target for Greatland shares to $5.50, which is significantly lower than the current trading price of $13.89. This price target is based on a more conservative long-term gold price of US$2,400 per ounce. Notably, if gold prices were to reach US$5,000 per ounce, Jarden suggested the target could rise to $13, closer to the current spot price of $5,481.89.
In light of these evaluations, Jarden has downgraded its rating on Greatland shares to underweight, expressing a preference for other mid-tier gold companies such as Capricorn Metals Ltd (ASX: CMM) and Bellevue Gold Ltd (ASX: BGL).
Solid Production Figures Reported
Despite the valuation concerns, Greatland Resources reported robust production figures for the December quarter. The company produced 86,273 ounces of gold, which marks a 6.7% increase from the previous quarter, with an all-in sustaining cost (AISC) of $2,196 per ounce. Additionally, Greatland generated 3,528 tonnes of copper during this period.
The operational cash flow for the quarter was reported at $406 million, contributing to the substantial increase in cash reserves from $750 million at the end of the September quarter. Greatland’s Managing Director, Shaun Day, expressed satisfaction with the results, noting the company’s solid operational performance and increased open-pit ore mined.
Mr. Day mentioned that the company anticipates full-year production to trend towards the higher end of the guidance range of 260,000 to 310,000 ounces. He also indicated that the anticipated AISC is likely to remain towards the lower end of the guidance range of $2,400 to $2,800 per ounce.
As Greatland navigates its future amid fluctuating gold prices and evolving market conditions, stakeholders will be closely monitoring both the company’s production outcomes and its stock performance in the coming months.
