AFR - De Grey targets top five gold mine

Oneof this year's best Australian gold discoveries could become one of thenation's top five gold mines if targets included in De Grey Mining's executive remuneration package are any guide.

Shares in De Grey have risen 24-fold over the past nine monthsafter it found gold at Hemi, located about 80 kilometres south of Port Hedlandin Western Australia.

Investor confidence that Hemi will one day be the site of amajor mine was strong enough to raise close to $140 million of new capital thisyear, and De Grey's board provided insight to its ambitions in documents filedon Friday.

The board asked shareholders to approve a plan that would seemore than half a million dollars worth of shares issued to managing directorGlenn Jardine. Those shares are set to vest upon production of an independentlyverified feasibility study for a mine at Hemi that produces 500,000 ounces ofgold a year for "no less than 12 years".

A mine of that size would be among the five biggest goldproducers in Australia. Surbiton Associates reported in February that Newmont'sTanami mine in the Northern Territory was Australia's fifth-biggest producer in2019 after 500,000 ounces were extracted.

Theother criteria for the shares to vest would be for Mr Jardine to declare anofficial mineral resource of 12 million ounces of gold in the provincesurrounding Hemi.

For context, that would be almost six times the size of the 2.2million ounce resource currently attached to the project.

The same vesting conditions will apply to more than half amillion dollars worth of options that will be offered to De Grey's technicaldirector Andrew Beckwith if shareholders give their blessing at the annualmeeting scheduled for December 4.

Goldfever

New gold discoveries have been eagerly embraced by investorsthis year amid very strong gold prices and inflated valuations on existingproducers.

Of the $1.34 billion raised by listed exploration companies inthe three months to June 30, more than 57 per cent was raised by those drillingfor gold.

Greatland Gold's London listed shares have risen almost as muchas De Grey's since the start of 2020 on the back of encouraging drillingresults from the Havieron joint venture withNewcrest Mining in WA.

From microcap status at the start of the year, both Greatlandand De Grey now boast billion-dollar valuations, with the latter's marketcapitalisation standing at $1.5 billion on Friday.

Massive stimulus spending and quantitative easing by manynations in response to the coronavirus pandemic has added fuel to the gold price boom that was ignited in November 2018 when the US Federal Reserve started to signal that it would not raise interestrates as aggressively as expected.

From $US1200 an ounce in mid-2018, gold surged above $US2000 anounce for the first time this year. It fetched $US1939 per ounce on Friday.

The price increase has been even greater for Australianproducers, whose costs have effectively shrunk on the back of the Australiandollar's slide against the US dollar over the past three years.

Newcrest's Cadia mine in NSW was Australia's biggest goldproducer in 2019, but may not have that title for much longer now that its bestgold grades have been extracted.

Western Australia's Boddington and Tropicana mines also made thetop five by volume in 2019, along with the Fosterville mine in Victoria that ismanaged by Kirkland Lake Gold.

PeterKer covers resource companies, based in Melbourne.