Ground Breakers: Hemi gets even bigger, stamping its future credentials as one of Australia's Top 5 gold mines

De Grey announces Hemi as future Top 5 gold mine with PFS outlining plans to produce 550,000oz of gold a year
The Mallina gold project will carry a $985 million capex bill, but will sit alongside mines owned by Newmont, Northern Star, AngloGold and Newcrest as one of Australia’s biggest
Mining stocks run, led by record share prices for lithium miners Pilbara Minerals and Allkem

Gold bugs love the precious metal but these days when new discoveries are typically found at obscene depths and finds are few and far between, a big bonanza really gets the masses in a lather.

De Grey Mining’s (ASX:DEG) Hemi find in WA’s Pilbara gold fields is one of the few that has, to date, met early hype.

And it has got even bigger today, with a new PFS delivering a proposed production rate that would place the closely watched discovery among the top 5 gold mines in Australia if it were producing today.

Hemi, or the broader 10.6Moz Mallina gold project to be precise, would produce 540,000ozpa in its first decade of life, 550,000ozpa in its first five years and peak production of 637,000oz in its fifth year of operation.

That is a scale comparable with some of the nation’s largest gold deposits like Cadia, the Super Pit, Tanami, Tropicana and Boddington.

It has been derisked with the announcement alongside the PFS of a maiden ore reserve of 103Mt at 1.5g/t for 5.1Moz. Massive number that.

At a capital cost of around $985 million, the mine boasts a post-tax internal rate of return of 41% and payback of 1.8 years post tax at a gold price of $2400/oz and avaerage all in sustaining costs of $1220/oz over its first five years and $1280/oz over its first decade.

Malline would return 6.4Moz over an initial 13-year mine life, around 50% higher than the 4.3Moz envisaged in an earlier scoping study.

Waiting in the wings?

De Grey boss Glenn Jardine says a DFS is due for completion in mid-2023, with a project funding outcome also expected to be completed in line with that.

There are almost certainly suitors waiting in the wings for the $1.3 billion explorer though. Notably Gruyere gold mine owner Gold Road Resources (ASX:GOR) has amassed a nearly 20% stake in De Grey through its takeover of De Grey’s former major shareholder DGO Gold.

Jardine said on a conference call today that no discussions had taken place with Gold Road and that it had not requested a board seat.

But it is unsurprising there is interest in De Grey.

The nearly $1 billion mine near Port Hedland is the first mine of its scale to enter the production pipeline in WA since the Tropicana discovery was made by IGO and AngloGold Ashanti in 2005.

Early efforts are also being made to bring down the future carbon intensity of the mine.

“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,” Jardine said.

“The Company has incorporated ESG principles in its decision making process during the PFS. In addition, the PFS decarbonisation plan shows the Project commencing at a carbon intensity of 0.6 tonnes of CO2 per annual ounce of gold production reducing to 0.3t.CO2/ozpa.

“The reduction is planned to be achieved through a combination of increased use of renewable energy and transition of the mobile equipment fleet away from diesel. Further opportunities to decrease carbon intensity will be pursued.”

De Grey Mining (ASX:DEG) share price today:

What’s going on on the market?

Wowee, a massive turnaround for local mining stocks after yesterday’s tough trot.

Lithium stocks were the big winners, with $12.5 billion capped Pilbara Minerals (ASX:PLS) storming to a record high of $4.19 and Allkem (ASX:AKE) up 6.07% to $14.94.

Iron ore miners were also on the recovery trail, led by a more than 3% gain for Fortescue Metals Group (ASX:FMG) and 5.85% run for Mineral Resources (ASX:MIN) while Northern Star (ASX:NST) led the gold miners as a weaker US dollar prompted a more than 1% rise in bullion to ~US$1720/oz.

Materials is up over 1.5%, with the enthusiasm only tempered in the energy sector, which is down a massive 3.5% as crude oil indexes slumped more than 4% to under US$90 a barrel largely because of China’s lockdowns. Woodside (ASX:WDS) also went ex its very big 2022 dividend.

There were a few positive news stories for miners yesterday. China’s copper imports were up 26% year on year in August while iron ore imports, while down slightly on last August, were up on July numbers.

Singapore 62% Fe futures are up 1.03% to US$97.45/t this morning.