Greatland Resources (ASX:GGP) $1.2bn Of Gold Produced In 9 Months, And It’s Still Ramping

$260m Cash Build In One Quarter, Zero Debt

Greatland Resources saw a sharp re-rating after delivering a strong production update. In the March quarter, the company produced 82,723 ounces of gold and 4,128 tonnes of copper from its Telfer mine.

Across the first three quarters, Greatland has now produced roughly 250,000 ounces of gold. At today’s gold price of $4,821, that equates to about $1.2 billion worth of gold production. That is a substantial amount of value already coming through the operation.

That also means the company now needs only around 10,113 ounces in Q4 to reach the bottom end of guidance. In other words, Greatland is already sitting comfortably within range and is now tracking toward the top end. Management has gone a step further and said it expects production to come in at or above the upper end of the 310,000-ounce range, which effectively amounts to a guidance upgrade.

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$1.2 Billion Cash Zero Debt. This Is Rare.

The company is now sitting on a huge amount of cash and has no debt. That is rare, and it goes a long way in explaining why the market has re-rated the stock so strongly over the past year. With a strong balance sheet and a favourable gold price, the company now has roughly $1.2 billion in cash.

This quarter alone delivered a cash build of $260 million, even after capex and a $73 million tax bill. That is a powerful demonstration of how profitable the mine is and how strongly it is converting into free cash flow.

Middle East Conflict, Why Telfer Is Insulated

Telfer, which is Greatland’s mine, is not exposed to Middle East diesel disruption in the way that some other mines are. Fuel is supplied directly by a global oil major under a long-term contract via Port Hedland, giving the company a domestic supply route with no exposure to the Red Sea or Middle Eastern shipping lanes.

That is not a small point. Many remote Australian mines rely on imported diesel and carry real supply chain risk during periods of global energy disruption. Greatland has structured its fuel supply to avoid exactly that problem.

In our view, that means the company’s profitability should be far less exposed to a blowout in operating costs from diesel disruption. At a time when many investors are repricing global commodity stocks for Middle East risk, Greatland is getting ahead of that concern and showing that the risk is materially lower here.

Is Greatland Resources a buy

Looking at the share price move, the company has already undergone a significant re-rating. We think the outlook is strong: the business is generating solid revenue, is already profitable, is well capitalised, and is delivering strong margins.

That said, after such a sharp run, we think this is one to keep on the watchlist and wait for a better entry point.

It is also important to remember that a sharp reversal in gold prices would materially hit cash generation, given how much the current earnings base is leveraged to the gold price. But if you believe gold still has further room to run, this is a producer worth paying attention to.