$600m to be raised at $1.10 per new share through a combination of a placement and accelerated non-renounceable entitlement offer
Brownfield exploration continues for potentially significant resource conversion
Studies for additional production from Hemi underground and regional deposits ongoing
Special Report: West Australian gold starlet De Grey Mining has rattled the tin to raise $600m in a fully underwritten equity raising – marking a key milestone towards fully funding the development of its giant +10Moz Hemi gold deposit.
De Grey Mining’s (ASX:DEG) Hemi deposit will be one of the largest gold mines in Australia with first production targeted for the second half of 2026.
A definitive feasibility study of Hemi based on the 6Moz at 1.5g/t Ore Reserve, part of the project’s more than 10Moz gold endowment, has envisaged a 530,000ozpa operation over an initial 10 years.
The DFS also showed great economics, with an AISC of $1,295/oz (throughout those first 10 years) on an assumed gold price of $2,700/oz for a post-tax cashflow of $4.5bn.
That $4.5bn is highly likely to increase (as is its post-tax IRR of 36%) – as the spot gold price is currently ~$800/oz more valuable at $3,516/oz and could continue to rise long term.
Equity raise metrics
The equity raising for Hemi is comprised of a $256m 1 for 7.95 pro-rata entitlement offer and a $344m institutional placement for a total $600m.
These will come at a fixed price of $1.10 per share, representing a 13% discount to the last closing price of $1.265 per share and a 10.4% discount to the TERP – the assumed price the stock will have following the rights issue.
Funding crucially satisfies a typical pre-condition access to debt financing and provides leverage to optimise final project financing arrangements with credit approved term sheets expected from financiers in mid-2024 to complete the project funding.
“The underwritten equity raising represents a landmark milestone and a key de-risking event for De Grey and underpin our ongoing project debt financing workstreams which are progressing well,” DEG managing director Glenn Jardine says.
“The significant level of support received from key stakeholders to date provides strong validation of the high-quality nature of Hemi and our strategy of becoming a material Australian gold producer.”
Based on the completion of the equity raise, De Grey will have a strong $919m cash balance prior to receiving credit approved commitments that are expected to be in place by mid-2024.
In the meantime, De Grey will use funds to progress development activities and strategic objectives towards final project approval.
De Grey Mining’s 12-month FID plan. Pic: DEG
Use of funds and exploration activities
Project execution workstreams are continuing and funds will be applied to ordering long lead items, key contractor appointments and advancing engineering and design activities.
They will also go toward initial infrastructure costs and further ongoing exploration and studies.
The company says brownfield exploration continues to provide very strong results with potential for significant resource conversion, including at its the 1.44Moz Ashburton gold project which De Grey holds an option to acquire.
Studies on potential additional production from the Hemi underground and regional deposits are progressing and greenfield exploration across greater Hemi and regional areas, including the Egina JV, is underway.
This article was developed in collaboration with De Grey Mining, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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