De Grey (ASX:DEG) share price jumps 4% on gold project update

De Grey shares continue the crawl from their gains last week.

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miner giving 'ok' sign in front of mine

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The De Grey Mining Limited (ASX: DEG) share price has leapt into the green during trade on Tuesday. At the time of writing, the De Grey share price is up 4.15% to $1.

Shares in the gold exploration company are lifting today after the company announced an update and made an investor presentation earlier today.

Here’s what we know.

What did De Grey announce?

The De Grey Mining share price is edging higher after the company presented the outcomes from the scoping study at its Mallina Gold Project, located in the Pilbara.

From the results, the company “has identified clear opportunities for improvement”, after completing an initial evaluation of the project.

These come after De Grey announced positive drilling updates at its Greater Hemi Corridor last week, where it intersected numerous gold-arsenic anomalies.

Key takeouts from the scoping study include that “average gold production ranges from approximately 473,000oz per annum for the first five years to approximately 427,000oz pa over the 10 year evaluation period”.

This places De Grey’s project within the top 5 Australian gold mines and “a top 3 global gold development proiect” based on its annual average output.

The study also points to an average all-in sustaining cost (AISC) ranging from $1,111/oz in the first 5 years to $1,224/oz over the 10 year study period.

As per the release, these figures place the project “in the lowest quartile of Australian gold producing peers”.

With respect to capital expenditures to get the project running, De Grey sees a cost of $835 million for the site and its infrastructure.

With its financial projections, it sees a pre-tax undiscounted free cash flow of around $3.9 billion over 10 years ($2.9 billion after tax).

This equates to a net present value (NPV) of about $2.8 billion before tax, meaning the valuation of the project as it stands today sits at $2 billion net of tax.

De Grey also presented its findings to investors in a briefing before the market open today.

What did management say?

Speaking on the scoping study outcomes, De Grey Mining CEO Glenn Jardine said:

The Scoping Study provides an initial evaluation of the Project’s physical and financial metrics, following the discovery of Hemi in February 2020 and the definition of Hemi’s maiden Mineral Resource Estimate of 6.8 million ounces in June 2021. The results of the initial evaluation of the Project are compelling and confirm its status as a Tier 1 gold asset.

De Grey Mining share price snapshot

The De Grey Mining share price has had a difficult year to date and has posted a return of only 0.25% this entire year.

As such, it is 14.5% in the red this past 12 months and has even slipped 12% in the last month alone.

Each of these results is well behind the S&P/ASX 200 index (ASX: XJO)’s gain of around 25% over the last year.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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