De Grey lays $1bn plan for Mallina

De Grey Mining estimates it will cost $1 billion to transform its famed Mallina discovery into a 540,000 ounce per annum gold operation and one of the largest by output in Australia.

A pre-feasibility for the Mallina gold project unveiled by De Grey this morning outlined new project economics and gold production estimates for the Pilbara-hosted site, which has propelled the explorer to prominence in recent years.

Annual gold production has been lifted from a previously estimated 473,000 ounces per annum to 550,000 ounces for the first five years, before hitting peak production of 637,000 ounces in year five.

Total production for Mallina is slated at 6.4 million ounces over a 13.6 year mine life.

Based on those estimates, Mallina is shaping up to become one of the top five gold mines in Australia ahead of the likes of Northern Star’s KCGM operation and Newmont’s Tanami.

Total pre-production capital costs to build a 10 million tonnes per annum processing plant and site infrastructure have not been shielded from inflationary pressures, however.  

Citing increases to labour, equipment and diesel costs, total pre-production capital has gone up by around 18 per cent from $893 million anticipated in a scoping study to just over $1 billion.

Though De Grey said conversations with suppliers and contractors lead the team to believe that prices were starting to peak and should level out by 2023, when Mallina is targeting construction.

The updated development schedule has Mallina operational in 2025.

With the pre-feasibility study completed, De Grey managing director Glenn Jardine said the team had turned its focus to completing a definitive feasibility study and project financing, both targeted for mid-2023.

“Now that we’ve finished with the PFS we’ll go with a concurrent process involving debt funding and a funding solution for the project,” he told investors.

“At the same time that we do a definitive feasibility study.”

He said the level of detail in the PFS meant the company could use it to engage further with financial institutions.

“Initial engagement has shown strong interest from Australian and International financial institutions in project debt funding,” he said in a statement.

Environmental submissions are expected to be filed in the coming weeks.

Mr Jardine estimated it would take around 14 months to progress through the approvals process. 

The managing director was also quizzed on the company’s relationship with Gold Road Resources since it lifted its presence on De Grey’s share register to 20 per cent, spurring speculation of a potential takeover.

“We’re very comfortable with then being on the register,” Mr Jardine said.

“We haven’t had any formal discussions with Gold Road, and we’re all in very close proximity and catch up with each other at various conferences.

“But apart from that no formal discussions.”

Gold Road has previously stated that it does not intend to make a takeover bid for De Grey.

De Grey shares were up 4.35 per cent to trade at 96 cents.