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Big numbers might put

target on De Grey

he market reaction to it was positive, public companies,” Argonaut Securities The Mallina exploration camp will be in
Tthe question now is whether the scop- director of research John Macdonald place for many years yet given the wealth of
ing study released by De Grey Mining Ltd said in a recent note to clients. “Mal- regional work still in front of De Grey
last month has put the company and its lina is the only proposed or producing
Mallina gold project in play as an M&A plus-400,000 ozpa project in Australia
target. or North America not owned by one of with ongoing resource extension and
De Grey has been subject of much Barrick [Gold Corp], Newcrest [Mining definition drilling and exploration suc-
speculation since it made the Hemi dis- Ltd], Newmont [Corp], Kirkland/Agnico, cess,” he said.
covery at Mallina – in the Pilbara, West- Northern Star [Resources Ltd] or Anglo- As evidence, Jardine pointed to recent
ern Australia – in January 2020. The pro- Gold Ashanti [Ltd]. exploration success at the Duicon and
ject’s immediate potential was confirmed “Argonaut thinks De Grey and Mallina Eagle zones which had seen results of
in June when a maiden resource of 66mt 84m @ 2.8 g/t gold from 126m, 70.8m @
@ 1.3 g/t for 2.8 moz (indicated) and 1 g/t from 318.2m and 26.6m @ 0.8 g/t
127mt @ 1 g/t for 4 moz (inferred) was Tier-1 from Day 1: from 429.8m (Eagle) and 17m @ 7.5 g/t
announced. The Mallina scoping study. from 175m, 19m @ 4.1 g/t from 115m and
Three months on, the scoping study 21m @ 3.2 g/t from 196m (Duicon).
contains the first concrete evidence of Capex: $835 million None of the recent drilling was includ-
what the company has been saying for Throughput: 10 mtpa ed in the scoping study.
18 months; Mallina and, Hemi in particu- De Grey floated a capex figure of $835
lar, already looks like a world-class gold Production: 427,000 ozpa million in the study, with sustaining capex
asset. Life-of-mine: 10 years of $9.3 million a year.
Gold M&A has been gathering pace Canaccord Genuity (Australia) analyst
in the last six weeks with St Barbara Ltd AISC: $1,224/oz Tim McCormack was impressed by the
and Westgold Resources Ltd launching NPV: $2.764 million (pre-tax) capital numbers and even expects those
unsolicited takeover offers for WA juniors IRR: 60% (pre-tax) to soften as Hemi is taken through the
Kin Mining NL and Gascoyne Resources development cycle.
Ltd, respectively. In North America, Kirk- “We expect the project’s favourable
land Lake Gold Inc and Agnico Eagle will be targeted by larger, established location [70km from Port Hedland] to
Mines Inc announced a merger which gold producers, and that the price will present ongoing capital and operational
would create a new $US24 billion, 49 be less of an obstacle than assurance of savings as De Grey moves the project
moz reserve gold powerhouse. outcome. De Grey management believes forward through to PFS and beyond,”
A life-of-mine production profile of it can add further value, so an agreed McCormack said.
427,000 ozpa gold over 10 years at AISC deal is unlikely for now. However, the Macdonald held a similar view, point-
of $1,224/oz would see Hemi immedi- time will come.” ing to the conservative estimates con-
ately elevated to the Top 5 of Australian Macdonald’s last line will likely be cru- tained within the study.
gold operations. And, with a project NPV cial. De Grey managing director Glenn “It looks like a sensible starting point
of $2.8 billion dwarfing De Grey’s current Jardine and technical director Andy for Mallina’s development studies,” Mac-
$1.57 billion market cap, any potential Beckwith have long maintained the dis- donald said. “The strip ratio/grade profile
suitors would be well placed to extract covery is still in its infancy and will con- suggests De Grey has allowed for a bet-
immediate value. tinue to grow in coming months. ter than average margin by not driving
The dearth of opportunities in Tier-1 On announcing the results, Jardine the pits too deep.”
jurisdictions provides Hemi added allure. said the scoping study provided only an
“Of 35 gold projects worldwide ca- “initial evaluation” of the project’s physi- – Dominic Piper
pable of producing more than 400,000 cal and financial metrics.
ozpa, three [including Mallina] are major- “The company sees further improve-
ity owned and operated by single project ments and optimisation of the project

aUSTRaLIa’S PaYDIRT NOVeMBeR 2021 Page 5