De Grey Mining (ASX:DEG) has announced definitive feasibility study (DFS) results for its Hemi gold project in the Pilbara region of Western Australia, confirming the project's potential as a Tier 1 gold mine. The company plans to commence full construction activities in the second half of 2024, targeting the first gold pour by the second half of 2026.
The DFS results, disclosed on Thursday, September 28, 2023, suggest that Hemi could become one of Australia's top five {{0|gogold mine} and a top three global undeveloped gold project based on average annual gold production. The project is expected to generate a net present value (NPV5%) of A$4.2 billion pre-tax and A$2.9 billion (USD1 = AUD1.5487) post-tax with an internal rate of return (IRR) of 45% pre-tax and 36% post-tax.
The Hemi project's production profile indicates an annual production range up to approximately 570,000oz in year two, with an average production of 553,000oz over the first five years and 530,000oz over the first ten years. The all-in sustaining costs (AISC) are projected at A$1,229/oz for the first five years and A$1,295/oz for the first ten years.
De Grey also reported that total Hemi mineral resources increased by 1Moz to 9.5Moz and indicated mineral resources rose from 5.8Moz to 6.9Moz. Furthermore, Hemi-only probable ore reserves increased by 0.9Moz to 121Mt @ 1.5g/t Au for 6.0Moz.
To support project execution, De Grey has launched a fully underwritten two tranche placement to raise A$300 million. This capital will strengthen the company's balance sheet and provide flexibility to progress activities. InvestingPro data indicates that De Grey holds more cash than debt on its balance sheet, which aligns with the company's strategy to maintain a strong financial position. This is one of the InvestingPro Tips that are available on the InvestingPro platform, which offers a total of 11 tips for De Grey.
In line with the DFS, De Grey's Board has greenlighted pre-development activities in preparation for environmental approvals and a final investment decision on the Hemi gold project. These activities include ordering critical path long lead items, continuing detailed engineering, refining the project execution plan, advancing major tenders, and finalising the contracting strategy.
The Hemi gold project, discovered in late 2019, is set to transform De Grey Mining into one of ASX's biggest gold producers. The development of Hemi is expected to yield exceptional margins with the current Aussie dollar gold price sitting at $2,942/oz. The company also plans to continue exploration drilling across Greater Hemi and regional areas within its tenements.
InvestingPro data also highlights that De Grey has a market cap of $59.51 million and a P/E ratio of 6.07, which is considered low, indicating that the stock could be undervalued. This aligns with another InvestingPro Tip stating that the company is trading at a low earnings multiple. Furthermore, the company's stock has shown a strong return over the past month, which could be an indicator of its future performance.
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