De Grey Mining Limited (ASX:DEG) has a wide range of projects but in terms of generating medium-term cash flow, the focus is on its Pilbara Gold Project.
Management is forecasting a pre-feasibility study to be completed on the project in the fourth quarter of 2018.
The current resource is 1.2 million ounces with 590,000 ounces in the measured and indicated category.
Scoping study points to annual production of 57,000 ounces
While a scoping study conducted in 2017 suggested average production would be nearly 60,000 ounces per annum, there is the prospect of significant upside.
The scoping study did not include resources at Toweranna (40,700 ounces) and Mallina (147,000 ounces).
Management said there is also potential for improvements from increased open pit and high-grade underground resources.
With exploration initiatives underway, new discoveries and extensions to existing mineralisation have the potential to add feedstock.
Broker sees interest returning to conglomerate gold stocks
DJ Carmichael analyst Paul Adams sees the prospect of investors returning to conglomerate gold stocks such as De Grey which gained momentum in 2017 but fell out of favour towards the end of the year.
De Grey’s share price has more than halved from its 2017 high of 38 cents despite the fact that it is not just a conglomerate gold play and has a medium-term production profile.
Negative sentiment appeared to be driven by a lack of evidence that gold was hosted within conglomerate sequences in just the same way as that found by Novo (CVE:NVO) at Purdy’s Reward and Comet Well, 80 kilometres west of De Grey’s Indee tenements.
Near-term catalysts
Looking at upcoming catalysts, Adams said, “Over the coming weeks, Novo will be releasing its much-anticipated results from its bulk sampling program on its Pilbara tenements.
“De Grey is also about to embark on the next phase of its evaluation of its conglomerate gold mineralisation.
“Both companies have seen a resurgent share price over the last few weeks as activity increased and results were anticipated.”
It is worth noting that De Grey’s shares have rallied 50% since February.
Strengthening macro environment
Adams believes the dormant conglomerate gold sector could receive increased interest driven by macro tailwinds for gold generally.
He also expects increased interest in the Australian gold sector from overseas investors and, although still at a very early stage, specific interest in the potential for a significant gold discovery in the Pilbara.