De Grey Mining managing director Glenn Jardine says the explorer’s heady market valuation is a fair reflection of the potential scale of its Hemi discovery.
The market capitalisation of the explorer shot through $2 billion last month and is now hovering around $1.7 billion. The company’s 2020 share price momentum has been spurred by a strong series of drilling results at the Hemi deposit at its Mallina gold project in the Pilbara.
Mr Jardine rejected suggestions the share price, which started the year at about 5c, had run too hard too fast or was factoring in a takeover premium.
“We’re being valued on a reserve basis... not on the basis of blue sky and when you do that and make some estimates of the sort of resource that’s sitting at Hemi, those metrics look quite reasonable,” he told reporters after presenting at the annual Diggers & Dealers Mining conference.
“I think what people are seeing is the potential scale of the resource at Hemi even though that hasn’t been announced,” he said. “They’re seeing the potential for more around that, in the immediate greater Hemi area and then also on a tenement-wide scale.”
De Grey said it is aiming to publish a maiden resource for Hemi by the middle of next year.
Mr Jardine said the Hemi discovery had been “transformational” for both De Grey and for the Pilbara region, which is best regarded as a productive iron ore province.
“The discovery of the intrusion style of mineralisation has opened people’s eyes to what the region can generate and changed the way the industry has viewed the Pilbara,” he said
As a strong gold price and the recent $16 billion merger between mid-tier producers Northern Star Resources and Saracen Mineral Holdings fuels speculation about further consolidation in the sector, Mr Jardine firmly rejected suggestions the company could become a takeover target.
He said De Grey planned to develop the project on its own to maximise value for shareholders and had clearly communicated that plan to the sector and to the company’s shareholders.