De Grey snags mining leases for Hemi, a future top 5 Australian gold mine

Mining leases granted for the Tier 1 Hemi gold project
Project will be a top 5 Australian gold mine when in production
DFS for Hemi is expected this quarter

De Grey Mining has been granted the crucial mining lease for its 9.5Moz Hemi gold project by the Western Australian Department of Mines, Industry Regulation and Safety.

The company discovered the large scale, high-value, near-surface Hemi gold deposit in 2020, which when added to the Regional deposits across the project underpins the company’s world-class 11.7Moz resource.

Last month, RBC Capital Markets initiated a $1.80/sh price target and an ‘Outperform’ rating on the company thanks to its “remarkable large-scale, low-cost project with high upside value potential”.

“Mallina would be a top-5 producing Australian gold mine. Mine life is already nearing two decades, with a capex payback of ~2.5 years,” RBC analysts Alexander Barkley and Paul Wiggers de Vries said.

“Our Mallina NPV of A$0.92/sh (spot A$1.96/sh) is a valuation starting point; with potential life extension and/or processing capacity increases to exploit the vast gold resource.”

Important milestone de-risks the project

This newly granted mining lease (M47/1628) covers the Hemi deposits, proposed mining area and processing plant site and represents an important milestone for De Grey Mining (ASX:DEG) – de-risking the project as it progresses on the path towards development and production.

“The grant of the Hemi mining lease is another significant milestone for De Grey and further demonstrates the company’s systematic approach to de-risking the Hemi gold project,” MD Glenn Jardine said.

“For De Grey shareholders and potential financiers this is a critical approval on the pathway to bringing Hemi into production.”

In addition to Hemi, mining leases to date have been granted over six of the company’s seven regional deposits, including Wingina, Amanda, Mt Berghaus, Calvert, Withnell and Mallina.

The company notes the grant of Hemi’s mining lease does not allow for the commencement of development of the project which remains subject to statutory approvals, including environmental sign off.

DEG has made submissions to the EPBC (Federal) and EPA (State) in May and June 2023 respectively to the Federal Department of Climate Change, Energy, the Environment and Water (DCCEEW) and State Environmental Protection Authority (EPA) for the project – and signed a mining agreement with the First Nations Kariyarra People back in December last year.

De Grey Mining ASX DEG — Pic: Location map of the granted Hemi regional mining leases. Source: DEG.

DFS expected this quarter

The Definitive Feasibility Study (DFS) for Hemi is due for release in the current September 2023 quarter based on the 9.5Moz resource update released on 16 June 2023 which included 6.9Moz in high confidence JORC Indicated resources after incorporating assays from drilling up until 7 March 2023.

At this year’s annual Diggers & Dealers Mining Forum in August, DEG shared it was on track to release the DFS for Hemi in September. The study is targeting a production profile of 500-600kozpa in the project’s first 10 years with >95% reserves and greater than 95% of production from the Hemi deposits.

But the company isn’t finished looking for upside on the exploration front either. Last month, DEG reported major strike and depth extensions from the Diucon and Eagle deposits at Hemi.

Current exploration at Hemi includes RC drilling along the Antwerp trend just west of Eagle, targeting additional resources, with RC drilling also planned for the Brolga South area.

Diamond drilling is also targeting Eagle extensions, in addition to high-grade zones in the east of Crow.

Any new extensional drill results could be added to future open pit and underground mining plans.

“We are committed to ensuring the project creates sustainable long-term benefits to stakeholders and look forward to updating our investors with the outcomes of the Definitive Feasibility Study for Hemi in the coming weeks,” Jardine said.

This article was developed in collaboration with De Grey Mining, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.