DEG - De Grey Mining

[rcw1]

Good morning. DEG have been good for me, remembering the running with WAF traders. Will be picking up more around 70 to 80cts next week. Only my opinion n hope. I had stopped trading it n switch to PLS. Another Good one for me. Restricted retiree pocket money, can't spread too widely trading.

hook in mate
rcw1

 

[Sean K]

Good morning. DEG have been good for me, remembering the running with WAF traders. Will be picking up more around 70 to 80cts next week. Only my opinion n hope. I had stopped trading it n switch to PLS. Another Good one for me. Restricted retiree pocket money, can't spread too widely trading.

You may get some in the 80s if the market tanks. You may also if the Capex in the PFS is materially different to the scoping study. Say, in the $1.2b vicinity.

 

[Rabbithop]

You may get some in the 80s if the market tanks. You may also if the Capex in the PFS is materially different to the scoping study. Say, in the $1.2b vicinity.

Yes, it could well be that way in the current rocking time.

 

[Sean K]

The PFS is due in the Sep Quarter so just a few weeks time.

Since the June 21 MRE and the Scoping Study the resource has grown significantly both along strike and depth, particularly Diucon and Eagle. I don't think the last significant intercept 200m under Diucon made the cut off for the PFS so we'll have to wait for the DFS for that to be included next year.

With the additional resources included in the PFS I reckon we'll see a substantial increase in the projected ounces per year and LOM. Should be over 500k oz pa for past 12 years as a pluck. Maybe out to 15 years. So, this chart below should see the bars higher and further out to the right.

The Scoping Study on the 2021 resource gave this a pre-tax NPV of $2.8b, so with the additional production and mine life that should go up substantially.

Currently trading around the $1.4b mark. I'm not sure if the additional drilling success over the past year has been factored in to the current SP. Obviously have to find around a $bill for the Capex though.

View attachment 145969

Not a great day for DEG to come out with this, but it looks a little better than I expected, but most importantly, the Capex doesn't look to have blown out way past $1b, which would have been a major worry. So, this is good news to me.

Over 500koz pa for 10+ years is incredible. 637Koz in year 5 will be a banger. 2 year payback is significant for that much Capex. NPV $3.9b v 2.8b in the scoping study is quite a jump. All these figures should get even better with further resource growth and likely exploration success. Not many stand alone mines of this scale in the World.

 

[Rabbithop]

If I am looking way ahead into the company future sp, may be its time to throw in a K on low today...shall wait n see today

 

[Sean K]

If I am looking way ahead into the company future sp, may be its time to throw in a K on low today...shall wait n see today

Current MC at $1.2b and an NPV of $3.9b pre-tax and $2.7b post tax means there is quite an arbitrage at current price.

 

[Sean K]

Well, this was my tip in the monthly comp hoping that this PFS would surprise to the upside, which I think it did, just, but it's only up a measly 3%. I think general POG downhill slide and risk-off punting is probably holding it back, like a lot of explorers at the moment. Oh well. :-(

 

[rcw1]

Good afternoon
DEG rocks 13.4% gain at the minute
Happy days

Kind regards
Rcw1

 

[Rabbithop]

Good afternoon
DEG rocks 13.4% gain at the minute
Happy days

Kind regards
Rcw1

Happy too just earned myself a profit.

 

[JohnDe]

Happy too just earned myself a profit.

Same. Have held for quite a while, took the profit today and investing elsewhere

 

[Sean K]

Same. Have held for quite a while, took the profit today and investing elsewhere

I'm holding till it gets to a EV closer to it's NPV on the DFS.

 

[rcw1]

Same. Have held for quite a while, took the profit today and investing elsewhere

Good afternoon JohnDe
rcw1 will trade until the cows come home …
Not holding

Kind regards
rcw1

 

[Rabbithop]

Same. Have held for quite a while, took the profit today and investing elsewhere

This is another of my trading stock , buy low to sell since the early years. Still recalling having some competition with WAF traders/holders.
My only lament today, bite my bullet and had pay high on PLS n now wish that I have a bit more patience before entering.

 

[The Triangle]

Not a great day for DEG to come out with this, but it looks a little better than I expected, but most importantly, the Capex doesn't look to have blown out way past $1b, which would have been a major worry. So, this is good news to me.

Over 500koz pa for 10+ years is incredible. 637Koz in year 5 will be a banger. 2 year payback is significant for that much Capex. NPV $3.9b v 2.8b in the scoping study is quite a jump. All these figures should get even better with further resource growth and likely exploration success. Not many stand alone mines of this scale in the World.


View attachment 146529

Seems a reasonable enough PFS. I can't see any glaring issues. My only skepticism is if the grade will hold up as they expect or if it will be 0.1 to 0.2 g/t lower when they actually start mining - which often seems to be the case.

I'm holding till it gets to a EV closer to it's NPV on the DFS.

It appears to be a recent phenomenon over the past few years to push pre-tax NPVs and IRRs in resource projects. When I look to invest, I always look at after tax profits and I'm quite certain that was always the way it was... DEG is valued at 48% of the post-tax NPV. I think that is a fair valuation at this stage, it's still a big chunk of money they need to get their hands on. Surely Newcrest or someone will look to buy them out. Will be interesting to see what catalyst there is outside of gold price increases to lessen the gap between NPV and EV.

Below are some excerpts from an old, but still good report on NPV ratios and valuations in the market. The graph is also from the report and is telling. Take for example BGL, after the initial feasibility it was probably valued at 100-130% of the NPV and had a resource grade just blow 10g/t. CAI was an outlier. They always had/have a very high EV/NPV - but they had low capex and thus lower risk of major blowouts.

For the first time in this series of reports, Edison performed a price to project NPV analysis for a sample of 63 companies. The results correlate extremely closely to Edison’s past analyses of companies at different stages of development in terms of variable discount rates. The ‘average’ project has a published NPV of US$433.1m, an average IRR of 43.2% and the average company valuation is 52.4% of NPV. However, the skewness of the distribution of valuations relative to project economics renders mean values of much less use in formulating valuations than modal values. In determining a company’s valuation, we also prove that the most important tangible factor is its project grade, followed by its IRR, its jurisdiction and its size. However, all vary with time. In general though, investors appear to exhibit a preference for projects with a lower capital intensity – perhaps as a consequence of a lack of certainty over the size and direction of future metals’ price movements.

 

[Sean K]

Seems a reasonable enough PFS. I can't see any glaring issues. My only skepticism is if the grade will hold up as they expect or if it will be 0.1 to 0.2 g/t lower when they actually start mining - which often seems to be the case.

It appears to be a recent phenomenon over the past few years to push pre-tax NPVs and IRRs in resource projects. When I look to invest, I always look at after tax profits and I'm quite certain that was always the way it was... DEG is valued at 48% of the post-tax NPV. I think that is a fair valuation at this stage, it's still a big chunk of money they need to get their hands on. Surely Newcrest or someone will look to buy them out. Will be interesting to see what catalyst there is outside of gold price increases to lessen the gap between NPV and EV.

Below are some excerpts from an old, but still good report on NPV ratios and valuations in the market. The graph is also from the report and is telling. Take for example BGL, after the initial feasibility it was probably valued at 100-130% of the NPV and had a resource grade just blow 10g/t. CAI was an outlier. They always had/have a very high EV/NPV - but they had low capex and thus lower risk of major blowouts.

For the first time in this series of reports, Edison performed a price to project NPV analysis for a sample of 63 companies. The results correlate extremely closely to Edison’s past analyses of companies at different stages of development in terms of variable discount rates. The ‘average’ project has a published NPV of US$433.1m, an average IRR of 43.2% and the average company valuation is 52.4% of NPV. However, the skewness of the distribution of valuations relative to project economics renders mean values of much less use in formulating valuations than modal values. In determining a company’s valuation, we also prove that the most important tangible factor is its project grade, followed by its IRR, its jurisdiction and its size. However, all vary with time. In general though, investors appear to exhibit a preference for projects with a lower capital intensity – perhaps as a consequence of a lack of certainty over the size and direction of future metals’ price movements.
View attachment 146655

Yes, a major must be looking. I was tipping Gold Fields due to the GOR linkage, but they've got a lot of debt and mild cash flow compared to the others. Newcrest are in the middle of a couple of major growth projects so not sure if they have the capacity to take this on. I would like them to as I'm a very long term NCM holder.

The other factors with discount to NPV are location (not just jurisdiction) and perhaps blue sky exploration potential. The market might be underestimating how good DEGs ground is positioned and the prospect of finding another Mallina. Or, Mr Market is right, and these things are factored in...

That's a great report you linked in there, thanks Triangle.

 

[rcw1]

DEG rocking
K A R C H I N G
Kind regards
rcw1

 

[Sean K]

For what is effectively still an explorer with a PFS (maybe developer) they are chewing through the cash. A huge management team to work on a DFS. I guess it’s a big project…

 

[frugal.rock]

?

 

[mullokintyre]

Gold Road boss Duncan Gibbs may have given a hint to the holder of de Grey mining that they are not satisfied with 20% of the stocks and may go higher. From The Australian

Shareholders in De Grey Mining who are yet to top up their position through the company’s share purchase plan may want to have a quick listen to the comments made by Gold Road boss Duncan Gibbs before Friday’s cut-off date.
The $1-a-share SPP is already a no-brainer for those with the spare cash lying around, given that De Grey has been trading above the issue price since mid October.

But in last week’s analyst call to discuss Gold Road’s September quarter production figures, Mr Gibbs added just a touch more fuel to the speculation that Gold Road may not quite be finished with its 20 per cent holding in De Grey.
De Grey is on the hunt for some fresh faces for its board, after the surprise resignation of Samantha Hogg ahead of the company’s November 24 annual shareholder meeting.

It also lost non-executive directors Ed Eshuys and Jeffrey Parncutt in early September.

Both were directors of DGO Gold, and left the De Grey board after DGO was taken out by Gold Road.

That takeover resulted in Gold Road emerging with a 14.5 per cent stake in De Grey, which it has since topped up to 19.99 per cent.

Mick

 

[Sean K]

Gold Road boss Duncan Gibbs may have given a hint to the holder of de Grey mining that they are not satisfied with 20% of the stocks and may go higher. From The Australian

Mick

I can't see how GOR can take over DEG unless Gold Fields are along for the ride. I still don't understand why one of the other majors didn't swoop this up earlier. Maybe waiting on the development studies and ore processing capex/opex. Seems like it's going to be around the billion mark +/- which will be paid back pretty quickly. Maybe there's something about the deposit that the majors don't like.