De Grey positive on Mallina project

De Grey Mining has released a positive scoping study for its Mallina gold mine in the Pilbara, which will cost nearly $900 million and be one of the largest in Australia.

Upon the release of its scoping study today, the company said it would proceed immediately with a prefeasibility study.

Managing director Glenn Jardine said the scoping study provided an initial evaluation of the project’s physical and financial metrics.

“The results of the initial evaluation of the project are compelling and confirm its status as a Tier 1 gold asset,” Mr Jardine said.

The scoping study was based on average gold production of 473,000oz pa at an average feed grade of 1.6g/t over the first 5 years and 427,000oz pa at an average feed grade of 1.4g/t over the 10-year evaluation period.

This would make it the sixth largest gold mine in Australia, based on annual production data compiled by Surbiton & Associates.

The larger mines are Newcrest’s Cadia mine in NSW, Newmont’s Boddington mine in WA, Kirkland Lake Gold’s Fosterville mine in Victoria, Newmont’s Tanami mine and Northern Star Resources’ Super Pit in Kalgoorlie.

The capital cost of developing Mallina is estimated to be $893 million, inclusive of pre-stripping costs and a $167 million contingency.

The company said the all-in sustaining cost was estimated to be $1,224/oz over 10 years, placing it in the lowest quartile of Australian gold miners.

The scoping study followed the discovery of the Hemi deposit in February 2020 and the definition of its maiden mineral resource estimate of 6.8 million ounces in June 2021.

De Grey said the production rate and mine life was expected to grow with ongoing resource extension and definition drilling and exploration success.

It added that the six existing zones at Hemi provided it with the flexibility to sequence production according to gold grade, gold endowment per vertical metre, mining advance rate and the strip ratio of each zone.

The Hemi deposits comprise approximately 80 per cent of the production over the 10-year study evaluation period.

Metallurgical testwork has demonstrated that consistently high gold recoveries can be achieved across the different zones at Hemi.

Further testwork and trade-off studies will seek to optimise capital cost, operating costs, recoveries and operability.

“The study provides justification that the Mallina gold project is commercially viable and accordingly the board has approved progression of the project to a PFS,” Mr Jardine said.

The PFS will immediately commence in parallel with ongoing resource extension and definition drilling, exploration activities and further metallurgical testwork.

The results of the PFS are expected to be provided in the second half of calendar year 2022.

Shares in De Grey were up 6.7 per cent to $1.03 today.

The shares traded as high as $1.60 earlier this year.