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Mining
Gold Road Resources (ASX:GOR) is yet to reveal its intentions as De Grey Mining (ASX:DEG) sews up $600 million in fresh equity to bankroll its world class Hemi gold project.
The status of the Gruyere gold mine half-owner is a matter of conjecture in analyst circles, especially after the company pulled out of the race for a 40% share in Equinox Gold and Orion’s Greenstone Gold Mines in Canada.
It has yet to settle on a second project since Gruyere was brought to life half a decade ago.
GOR has maintained a near 20% stake in De Grey and its 10Moz plus Hemi mine–- which a DFS last year suggested would produce 530,000ozpa over its first decade – since acquiring Ed Eshuys’ DGO Gold a couple years ago.
On a call today, De Grey boss Glenn Jardine said Gold Road had been wall-crossed but that its intentions were not yet known.
The raising will include a 1 for 7.95 pro rate non-renounceable entitlement offer to raise $256.1m including a $174.2m institutional component and $82m retail component, as well as an institutional placement to raise around $343.9m.
Canaccord and Argonaut are on the raising, which is priced at $1.10 a share — a 13% discount to $2.3bn De Grey’s last trading price of $1.265.
The entitlement offer will give De Grey a more than $900m cash runway ahead of its FiD on the Hemi gold mine near Port Hedland.
Part of the 12.6Moz Mallina gold project, the project carries a DFS level capex estimate of almost $1.3 billion, with a 1.8 year cashback period.
The equity component is a major condition ahead of debt financing, with De Grey CFO Peter Canterbury saying ten banks and two government agencies had given indications of intentions to provide between $900-1.2b in debt funding, with De Grey targeting a $1b facility with a cost overrun facility of $100m.
Based off a reserve of 6Moz at a grade of 1.5g/t, much of Hemi is refractory in nature, meaning it will require more complex processing techniques than a conventional gravity and cyanide leach process to liberate its gold.
De Grey’s chosen method is pressure oxidation, a pathway operated at around 20 sites worldwide.
For the investment community, many of the questions around Hemi come down to the expected performance of the POX circuit.
“We’re very comfortable with pressure oxidation. Almost 40% of the world’s gold production comes from refractory ore bodies,” Jardine said.
“There are 20 pressure oxidation plants around the world, including three or four in the Asia-Pacific region.
“We don’t see any particular concerns with commissioning that plant.”
Jardine noted project director Peter Holmes was in charge of commissioning Barrick Gold’s Pueblo Viejo project in the Dominican Republic, regarded as one of the largest POX plants in the world.
Located near Port Hedland, down the road from major lithium discoveries like Pilgangoora, Wodgina and Andover, Jardine said De Grey wouldn’t be pressured into selling its own lithium prospects to help fund Hemi unless the right deal came along.
“We looked at the potential of the lithium on our ground, but not necessarily for funding for project development,” he said.
“There’s a couple of reasons for that. One is as you may be aware, the lithium market is somewhat up and down lately. So getting a line through the value of that asset in the last six months has probably been a little bit problematic for ourselves and others.
“And of course we didn’t really want that asset to have the tail wagging the dog on Hemi. We’ve got a great project at Hemi we’ve got a game plan there in place. Potentially the work around that given the variation in lithium prices and values could have represented a distraction from the main game, which is getting him into production.
“Having said that, we continue to assess options regarding the lithium and we’re looking at options that would present a material difference for the company in terms of feed through value.”
Hemi is coming towards the construction phase with gold prices near all time highs at spot prices of $3525/oz, well above the $2700/oz price used in last year’s DFS.
The materials sector dropped 0.27%, affected by red days for the iron ore majors.
Gold producers were also topsy-turvy despite a lift in underlying gold prices overnight with copper and coal stocks equally recording a big, fat meh.
The biggest news outside De Grey’s big cash call was the sale of Leo Lithium’s (ASX:LLL) final 40% stake in the Goulamina lithium project in Mali.
The stock has been suspended for months amid disputes with the Mali Government – currently a military junta after a 2021 coup.
Leo will exit the show after a US$60m settlement with the Malian Government, banking US$342.7m from Ganfeng for the final 40% the Chinese lithium giant doesn’t own.
Fellow Malian lithium stock First Lithium (ASX:FL1) rose 6.82% in response to the news.
Chalice Mining (ASX:CHN) (Nickel/PGE) + 11.4%
Mader Group (ASX:MAD) (mining services) +4%
Liontown Resources (ASX:LTR) (lithium) +3.1%
West African Resources (ASX:WAF) (gold) +2.1%
Imdex (ASX:IMD) (drilling services) -5.5%
Syrah Resources (ASX:SYR) (graphite) -3.2%
Paladin Energy (ASX:PDN) (uranium) -3.1%
Adriatic Metals (ASX:ADT) (silver) -2.6%
At Stockhead, we tell it like it is. While De Grey Mining and First Lithium were advertisers at the time of writing, they did not sponsor this article.
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