Institutions are waving money at De Grey for Mallina funding

Confidence in De Grey’s Mallina gold project in Western Australia’s Pilbara region is clearly high, with 14 leading financial institutions expressing interest in providing traditional debt funding.

Significantly, most of these institutions have indicated that the project supports funding of about $800m based on the September 2022 Pre-Feasibility Study, which had estimated capital costs at about $985m.

The indicative commercial terms from the non-binding proposals also reflects the high quality of De Grey Mining’s (ASX:DEG) Mallina gold project, the studies completed to date and its location in one of the world’s top mining jurisdictions.

And it’s not hard to see why.

Mallina not only features very attractive economics – including post-tax Net Present Value and Internal Rate of Return of $2.7bn and 41% respectively – and a top tier resource of 10.6Moz, it includes the play-opening Hemi discovery that hosts the bulk (8.5Moz) of the resources contained within the project.

Hemi not only alerted the rest of the Australian mining community to the fact that intrusion-hosted style gold deposits were very much a thing in the Pilbara, it remains the archetype that has yet to be surpassed despite the resulting surge in activity.

More gold to come

The company has also proven that there is yet more gold to be found along the Greater Hemi corridor with drilling at the Antwerp trend returning tasty, high-grade hits which are indicative of a new, large-scale surface intrusion.

“We’ve been heartened by the strong response to our request for traditional project financing proposals for the Mallina gold project. A range of indicative proposals have been received from highly regarded financial institutions which have significant experience in the mining sector,” chief financial officer Peter Canterbury said.

“The company feels confident that it can deliver an attractive funding package for the development of the project, subject to a Final Investment Decision by the De Grey board.

“During 2023 we will further assess and progress various debt, equity and other strategic funding sources available to determine the optimum financing structure to deliver the greatest long-term value for De Grey shareholders from the Tier 1 discovery at Hemi.”

The project financing process is expected to conclude in the second half of 2023.

Large-scale gold project

While the Definitive Feasibility Study is not due for completion until mid-2023, the PFS has already outlined the potential scale of the Mallina project.

Expected average annual gold production is estimated to hit 540,000oz per annum during the first 10 years – most of it from Hemi, with total production expected to hit 6.4Moz during the current planned 13.6 year mine life.

Needless to say, the ongoing exploration successes could deliver further resource growth that will in turn deliver extensions to that mine life.

Payback on the project is expected in less than two years, which further underscores its attractiveness.

De Grey has also ensured that the Traditional Owners of the land will benefit from the project with a Native Title Mining Agreement already in place with the Kariyarra People for the project.

This will provide employment, training and contracting work for the Kariyarra People, and establish a Kariyarra ranger program to support Aboriginal cultural heritage and land management.

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.