De Grey Mining
(ASX:DEG) announced it had more than $340 million in cash on hand, positioning it strongly to advance its Tier 1 Hemi gold project in WA’s Pilbara, the cornerstone of its growth strategy. This revelation, along with ambitions to refine the development of the vast Hemi prospect with its 12.7 million ounces of resources, was disclosed in the December quarterly report issued this week.
During this quarter, De Grey initiated a second round of discussions with potential funders for the $1 billion plus Hemi development. The Definitive Feasibility Study (DFS) indicated that the project could support up to $1 billion in debt, resulting in a reduction from 15 to 11 possible financiers for further negotiations.
Additionally, the company expanded the total mineral resource at the Hemi gold project in WA Pilbara by another 1 million ounces to 12.7 million, including 10.5 million ounces at Hemi itself. This increase was based on results from additional drilling conducted on other prospects in the area, not included in the previous estimate as of June 30.
De Grey emphasized that these results, from drilling at the Diucon and Eagle prospects, revealed continuing strike and depth extensions. There is potential to incorporate these extensions into future open pit and underground mining plans.
These developments have prompted De Grey to explore ways to enhance the DFS on Hemi to improve returns, despite the study already indicating the project's viability. The final investment decision is expected in 2025.
Key opportunities identified to enhance the DFS outcomes include:- Expanding the scale of the Eagle and Diucon open pits due to significant extensions found in drilling after the June 2023 cutoff date.
- Evaluating the potential construction of a separate regional concentrator at Withnell to process regional deposits, targeting an initial production rate of 150,000 ounces per annum.
- Exploring the potential for concurrent underground production alongside open pit production at Hemi, following positive results at Diucon and Eagle.
In late November 2023, the Mineral Resource Estimate (MRE) was updated, increasing the Global Project MRE to 296 million tonnes at 1.3 grams per tonne of gold for a total of 12.7 million ounces. The MRE for Hemi specifically grew by 1 million ounces to 255 million tonnes at 1.3 grams per tonne of gold for 10.5 million ounces.
De Grey initiated the second stage of engagement with project financiers, receiving non-binding proposals from 15 leading global financial institutions. These proposals, with competitive terms reflective of the Tier 1 quality and jurisdiction of the Project, indicated that the Project could support a debt capacity range between $0.9 billion to $1.2 billion, with the majority suggesting approximately $1.0 billion. De Grey has shortlisted 11 groups to determine the optimal financing structure, considering gearing and other financial parameters, and will proceed with detailed due diligence and documentation in the near-term. Furthermore, two Government Funding Agencies are participating in the due diligence and documentation processes, potentially offering longer-term loans suited to the Project's extended mine life.
