De Grey Mining just released the preliminary feasibility study (PFS) outcomes for its Mallina gold project in the Pilbara, and thanks to the enormous Hemi deposit, the economics are looking solid gold. 

The expected average total annual gold production has risen by more than 25% to 540,000ozpa over the first 10 years, including 550,000ozpa in years 1 to 5 and peak production of 637,000ozpa in year 5.

And the Hemi deposit alone contributes average annual gold production of approximately 500,000ozpa over the first 10 years and 520,000ozpa in years 1 to 5 – thanks to its maiden probable ore reserve of 103Mt at 1.5g/t gold for 5.1Moz which was also announced today.

Total production is expected to be 6.4Moz over a 13.6-year life-of-mine.

Commercially viable Tier-1 project

De Grey (ASX:DEG) says the PFS confirms that the Mallina Gold Project is a globally significant Tier 1 project and presents a potentially commercially viable development opportunity, with significant upside.

The project has Net Present Value (NPV) of $3.9 billion pre-tax and $2.7 billion post-tax, an Internal Rate of Return (IRR) of 51% pre-tax and 41% post-tax, an Average All-in Sustaining Cost (AISC) of $1,220/oz (Yrs. 1-5) and $1,280/oz (Yrs. 1-10), along with a payback of 1.6 years pre-tax and 1.8 years post-tax.

And since the scoping study last year, total production has increased by nearly 50% to 6.4Moz thanks to the high-grade Hemi reserve and longer mine life.

“The increased production has been achieved at increased levels of JORC Measured and Indicated Resources within the production profile averaging close to 90% over the first ten years of production compared with 70% in the scoping study,” MD and CEO, Glenn Jardine said.

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Figure 1: Australian Gold Producer Annual Production (kozpa) Comparison made between Mallina PFS estimates and current producing gold mines in Australia.

Lowest quartile of Australian gold producers

Capital cost for the 10Mtpa plant and site infrastructure estimated to be $985M inclusive of $100M in growth allowance, with additional mine preproduction pre-strip capital cost of $68M.

While these costs have increased by approximately 15% from the scoping study, DEG says this was not unexpected given inflationary pressures but it was hopefully pricing may be close to its peak.

Jardine also says Mallina will be in the lowest quartile of Australian producing gold mines and one of the world’s lowest capital-intensive gold projects.

“Despite the capital cost increase, the payback period of the project remains below two years with an excellent internal rate of return of approximately 50%, underlining the quality of the Project and its insensitivity to capital cost,” Jardine says.

“The Project has one of the lowest capital cost intensities of any large scale, undeveloped gold project on a global basis and with operating costs remain within the lowest cost quartile of Australian gold producer operating costs.”

Plus, the project will have an average feed grade over the first 10 years of 1.8g/t gold.

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Figure 2: Hemi Open Pit Layout

Final investment decision mid-2023

“The PFS provides justification that the Project is commercially viable and accordingly will progress to a definitive feasibility study (DFS) expected for completion in mid-2023,” Jardine said.

“In parallel with the definitive feasibility study, the company will engage further with potential Project financiers to achieve an appropriate Project funding outcome by mid-2023 in line with the completion of the DFS.

“Initial engagement has shown strong interest from Australian and International financial institutions in project debt funding.”

Jardin says the company is also “enthusiastic about the prospect of increasing resources and reserves at Hemi and the regional deposits with continued resource extension drilling.”




This article was developed in collaboration with De Grey Mining Ltd, 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.