Hey Paul,
Just enjoying the discourse and if fellow posters enjoy it, all the better
Cheers for the great reply too!
I won't delve into the motives of the many diverse posters
Agree about the M&I, however, as you say, its simply the very first MRE, from now on, we will basically always see more conversion to M&I.
I think your thoughts on 'what next', are very pertinent. Hence, to date the board has shown itself to be savvy and cognizant of what actually needs to happen to ensure that DEG does not go the way of ah, less successful enterprises. The fact the company is quickly moving to a scoping study shows me they are very, very focused on ensuring that Hemi becomes a mine in the quickest time-frame possible.
For reference, lets take a look at how GOR went about getting their discovery into a mine: (discovered Oct 2013- First Gold Oct 2019 = 6 Years)
(A very impressive achievement considering the size of the project and it being in W.A, which whilst mining friendly, has a lot of paperwork....)
*Gruyere discovered Oct 2013.
*Maiden MRE August 2014 (3.8m ounces) (done in 10 months, so, faster than DEG, however that will be discussed later)
Scoping Study Jan 2015 (based on the above resource only, so... hopefully this starts to show just how early and preemptive the scoping study is. Its just a starting point. The DFS for Gruyere is soooo different to the scoping study, yet, as Paul points out, to get into production, these milestones need to be completed. We will have one within the next 3 months or so.
*Scoping study Jan 2015 - (190k p.a. for 11 years. 7mtpa plant planned. Based on the above MRE)
*Updated MRE May 2015 (5.5m ounces resource) (no reserve yet)
*Updated MRE Sept 2015 (5.6m ounces resource) (no reserve yet)
*Maiden reserve Feb 2016 (3.2m ounces)
*Updated MRE April 2016 (6.2m ounces resource) At this point, the MRE actually does not increase ever again, in fact, it decreases by 100k in Feb 2019). Average grade for the reserve, has also slowly decreased from the initial MRE grade to 1.24g/t. As GOR/Gold fields optomise the main pit, and basically keep adding more ounces, but, slightly lower grades.
*Feasibility study Oct 2016 (3.5m ounce reserves.
270k p.a for 12 years. 8.8mtpa plant (with expansion to 10mtpa - which GOR now has basically be upgrading to in the past 18 months)
The expansion of the plant is going to likely push production up towards 350k+ p.a.
Finance/Deal completed late 2016.
Project construction starts Dec 2016 (but.... really on pre-works)
First gold pour July 2019
Commercial production Oct 2019
At this point, I want to show that after the initial discovery, GOR was able to increase the MRE by 60%. It is a single, bit pit. Great, but... whilst it goes deeper, the grades don't really increase. A good outcome, however, GOR was also spending on average, $30m+ per year on exploration, in that time (6 years, they have basically discovered nothing else, yep, thats almost $200m, but nothing significant since). I also believe that Hemi alone will prove higher grade than Gruyere, especially, if you include the feeder satellites, which I continue to feel, are basically discounted and forgotten.
Just for those, that.... enjoy a little hype, if DEG were able to spend a similar amount, at $8.5 per ounce, we are talking almost 24m ounces.
Now that is out of the way, back to reality. I think unless we find another Hemi, the cheapest ounces have likely be found, in the sense that they are shallow, thick etc. Sure, they are going to prove up a lot more more ounces just from the known deposits, though of course, there is very little known about the U/G at Hemi (at Gruyere, they have gone deep, and so far, low grades are the norm).
The scoping study for DEG is going to finished is going to be finished around 20 months from first discovery. That sits pretty well within GORs timeline (they completed theirs in 14 months). Then, I believe we are going to see a similar push to achieve a maiden reserve, within perhaps 12 months of the scoping study, which would see it around August 2022. Then more MREs, perhaps more upgrades to the reserve, and the Feasibility study will be completed.
At that point, if we are following the GOR script/timeline, we will be looking at finance, or... perhaps a J/V like what GOR did with the goldfields.
Pre-production could be occurring by the end of next year....
Now... the 800 pound gorilla, or... bear with me, $800m heavy capex, would seem to be scaring many off. Yet... Gruyere ended up costing $621m!
I might add, that is before you include the costs of increasing the throughput to 10mtpa (I have struggled to find exact costings for this).
Perhaps the challenge for some, is not being able to understand why, its ok to spend $800m on a massive plant (at Hemi with sattelite deposits providing both Open pit & U/G), whilst happily spending, what I believe, is a similar amount at Gruyere for a project that will producer perhaps only 2/3rds as much gold.... Makes a lot of sense to me!
I think the big end of town know and understand the power of economies of scale, plus, the bigger you are, the easier it is for the behemoths of the investment world, to buy a slice of you.
Now.... why did I just spend an hour pondering all this (first... I am on holiday
, though mainly because I find it very interesting).
If investors think that DEG is going to at best, only emulate GOR, then... yep, DEG is fully valued currently. However, if.... you view things differently, and think that DEG is not going to only have 1 main pit, which is literally, confined by pit depth & pit optomisation cuttoffs, then thing stay interesting.
Finally, I will end with what I hope, really shows why, Hemi, is going to prove very, very pofitable.
Gruyere deposit:
Hemi deposit:
Phew, cheers for giving the motivation to finish this post Paul!
(just need to close the 40+ tabs on my screen, hmmm....)
(20min delay)