De Grey Mining Limited

DEG Details

Recent Update: De Grey Mining Limited (ASX: DEG) is a gold exploration company, mainly involved in the development of its 100% owned Mallina Gold Project in the Pilbara region of Western Australia. 

• Director’s Interest Notice: Recently, the company informed the market that Peter Hood, a director in the company, had acquired 21,816 share rights.
• New Results from Diucon: On 17 December 2021, DEG released the latest exploration results from the Diucon deposit at Hemi, which demonstrated related alteration and sulphide development as witnessed at the adjacent deposits of Crow, Aquila, Falcon, Brolga, and Eagle. Notably, the recent drilling at Diucon has boosted the depth of mineralisation to ~550m below surface and remains open in all directions.
• New Results from Eagle Zone: On 10 December 2021, the company also received significant drilling results from the Eagle deposit at Hemi, which have demonstrated the clear potential that can carry high gold grades and random visible gold. Notably, the recent drilling at Eagle has boosted the depth of mineralisation at least ~350m below surface and remains open.

September 2021 Quarter Highlights:

• Positive Results from Metallurgical Testwork: From the metallurgical testwork at the Falcon and Crow zone, an average metallurgical recovery of 94.2% and 96.8% was achieved on a bulk composite of primary mineralisation, respectively.
• Regional Exploration Activities Outside Greater Hemi Corridor: In September 2021, DEG continued regional exploration activities outside of the greater Hemi corridor to identify new, large scale, high value, and new structural shear zone targets.
• Remains Well Funded: At the end of the September quarter, the company’s cash reserves stood at ~$36.0 million and remains well-funded to undertake a Pre-Feasibility Study and continued exploration.

Cash Balance Highlight (Source: Analysis by Kalkine Group)

Risk Analysis: The restrictions and temporary lockdowns triggered by the COVID-19 pandemic could disrupt the company’s operations. Since DEG is currently in the exploration stage, its future performance is highly dependent on the results of its ongoing drilling exploration programs. 

Outlook: The company intends to continue the resource definition drilling at Eagle and Diucon to increase the resource estimate's confidence level and follow up higher-grade mineralisation. The company is focused on enhancing management and exploration team capabilities for the next growth phase.

Stock Recommendation: The stock went up by ~50% in the last year and ~20.5% in the past week. The stock has a support and resistance level of $1.37 and $1.5, respectively. The stock is currently trading higher than the average 52-week price level band of $0.797 -$1.67. On a TTM basis, the stock is trading at a P/BV multiple of 10.7x, compared to the industry median (Metals & Mining) of 2.7x. Thus, it seems that the stock is overvalued at the current trading levels. Considering the valuation on a TTM basis, current trading levels, solid rally in the past few months, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.455, as on 20 January 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

DEG Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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