De Grey Mining Limited (ASX:DEG) Executive Chairman, Simon Lill talks about the company's Pilbara Gold Project, timelines and strategy.
Anna Napoli: Hi, I'm Anna Napoli for the Finance News Network and joining me now from De Grey Mining (ASX:DEG) is Executive Chairman Simon Lill. Simon, welcome to FNN.
Simon Lill: Thanks Anna.
Anna Napoli: Now, first up, can you give us an introduction to De Grey Mining (ASX:DEG)?
Simon Lill: De Grey Mining's a gold development story. We're based in the Pilbara region of North-western Australia. We started up there actually in 2003. We've got over 1,500 square kilometres of contiguous tenements. We've got a board that is led by myself as Executive Chairman, but we've just recently been moving to improve the board, strengthen the board I should say.
We've got Mr. Andy Beckwith who is our technical director and really in charge of the geology which is what we're all about at the moment, Mr. Brett Lambert who is a mining engineer and we have just really employed a gentlemen by the name of Mr. Peter Hood who is the recently retired president of the Australian Chamber of Commerce and Industry so we see him as a good appointment.
Then there's myself and Mr. Steve Morris who have been with the company now for five or six years.
Anna Napoli: Simon, you mentioned the Northwest region of Western Australia. What makes this area so unique?
Simon Lill: Well the Northwest, the Pilbara region in particular is renowned for its iron ore and Port Hedland is the world's largest export port for iron ore. I think they move something like half a billion tonnes a year through there which is an enormous amount. It's not renowned for its gold and yet it sits in a basin that is somewhere between 2.7 and 3.3 billion years old which as I understand it is the period where something like 80 per cent of the world's gold has been deposited and found from. So it's not recognised as a gold province which we find unusual because we would suggest that we've got lots of gold.
Anna Napoli: So let's talk about your Pilbara Gold Project. What's the size of the resource?
Simon Lill: At the moment we've just recently announced we've got 1.4 million ounces of gold. It's at a grade of about 1.6 grams per tonne. Something like over 50 per cent of that is measured in indicator, which is a huge bonus for us, in terms of drawing out resources for financing purposes, etc.
More importantly we've just recently been stating that our target is to get to two million ounces and beyond. We've got a corporate target of three million ounces. So we believe there's quite a significant amount of gold in the region.
Anna Napoli: And, how is the drill program progressing?
Simon Lill: We've been drilling for us as a small company quite aggressively for the last 12 months and our plan is to continue through the next 12 months. There are some seasonality issues. January, February, March is the wet season up there and it's hard to get the rigs to the right spots at times.
But we have ongoing drilling there at the moment. We've got three rigs working there at the moment.
Anna Napoli: Okay, and what are the economics of the projects?
Simon Lill: We did a scope in study over 12 months ago. That showed positive economics. There were probably some disappointments in one sense that the recoverable resources weren't as significant as we initially had hoped. That showed that there'd be a 4.8 year mine life. But we also knew where we had to go. We had to increase resources. That was pretty simple. We had to improve the metallurgy.
We've been doing a lot of work on the metallurgy. We haven't said anything about that yet but we are getting good results there, as well. We're very comfortable that as we move into pre-feasibility studies to have a better look at a new look at the economics, that we're going to show a plus seven-year mine life. The economics will commensurately look a lot better but they were positive initially anyway.
Anna Napoli: Let's talk about financials. Can you give us a snapshot of your company's financial position?
Simon Lill: As a junior explorer life's always a bit tough. We have fortunately literally just finished the exercise of 60 million options at 10 cents. So we've just raised six million dollars. We probably had one or two in the bank prior to that.
So as we finish the year we're in a reasonable good shape to carry out the exploration program through the first half and beyond of next year. We've got a couple of good shareholders in Kirkland Lake Gold (ASX:KLA) and DGO Gold (ASX:DGO). We don’t tap them for money automatically, but we think they're supportive moving forward as well.
Anna Napoli: Okay, and finally a comment on your share price.
Simon Lill: If we approach I need to say, the plus three million ounce corporate target. I need to stress that it is a target. But if we start moving in that direction companies such as ours tend to be valued at AUD$40 to AUD$60 per resource ounce, or thereabouts.
We believe the cost of finding resources will be significantly cheaper than that. We think we can do under AUD$20. That should result in share price appreciation.
Anna Napoli: Last question, Simon. Is there anything else you'd like to mention?
Simon Lill: Well, I haven't mentioned the conglomerate gold, which really kicked off what they described as the Pilbara Gold Rush last year. Little bit of the heat seems to have gone out of that sector, but we have been doing test work there. We've always said if we get five grams a tonne out of it, we're pretty happy with it.
The results seem somewhat commensurate with that, and that to us is another gold resource target that is different to our structural gold that we've been discussing. Apart from that, yes, we've got quite an interesting grassroots lithium project. We're in lithium country in the region. There are three or four very significant lithium projects within 50 kilometres from us so we don't know where that will head and we've also got a pretty good base metals resource that actually is in the inferred category so it's a good starting point for base metals resource. So, we have other things, other than just our structural gold.
Anna Napoli: Simon Lill, thank you for the update.
Simon Lill: Thank you.