Many investors looking for profits in an unpredictable market have turned to companies from the mining sector. The Great Britain Gold (LSE:GGP) share price has been highly volatile over the past few months, but has increased by over 20% over the past year. So is there a chance here?

Business

Unlike customary mining companies, Greatland Gold focuses on early-stage exploration. Its main project, the Havieron field located in Western Australia, is a joint venture with a mining giant Mining in Newcrest.

Havieron is a high-grade copper-gold deposit with initial indications of significant potential. However, exploration is an inherently risky endeavor. The success of the project depends on further exploration work which will confirm the commercial viability of the deposit.

This translates into uncertainty for investors as the company may not find enough resources to justify large-scale mining.

Recent volatility

Recent share price movements reflect the changing nature of exploration activities. Unlike established mining companies with steady production, the share price fluctuates significantly depending on exploration updates and investor sentiment.

A major discovery can cause prices to skyrocket, while disappointing results can lead to a significant decline. There have been numerous one-day moves of more than 10% in the past year, which are likely to continue as exploration progresses.

The company ranks well among the most volatile stocks on the market, with average weekly volatility of 9.1% over the past year.

Hidden potential

Despite the risks, many investors are attracted to the potential benefits. The Havieron deposit is located in a region with a opulent history of successful copper and gold production. If exploration confirms the existence of significant, commercially viable resources, the company could become a significant player in the industry overnight.

However, financial realities must be taken into account. Greatland is currently unprofitable and is expected to remain so for the foreseeable future. This means that investors will need a lot of patience and a high risk appetite as returns may not be seen for several years. Numerically, the price-to-book ratio suggests that the company is overvalued, a ratio that is 8.3 times much higher than the industry average of 1.6 times.

The mining industry is also highly competitive. Established players with more resources and stronger balance sheets could pose a threat to the company’s future. Given that annual profits will decline significantly in the coming years, stern challenges may arise if no noteworthy discoveries are made.

Generally

Ultimately, the decision to invest in such a volatile sector depends on a high risk tolerance. In my opinion, the Greatland Gold share price seems to be heading in the right direction, but there is uncertainty about the future. News of a significant discovery may indeed send shockwaves through the market, but for now I will stick to more predictable investments.