What is a Realistic Price for De Grey Mining Shares? (ASX:DEG)

What is a Realistic Price for De Grey Mining Shares? (ASX:DEG)

The De Grey Mining Ltd [ASX:DEG] share price has set a new 52-week high today as exploration at its Mallina gold project adds another extension.

At the time of writing, DEG shares are up 14 cents or 12.73%, trading at $1.24 per share.

Our previous looks at the DEG share price has focused on it regaining and beating the $1 per share mark.

The past weeks have seen it climb comfortably above this level.

With the delivery of Mallina’s initial resource expected sometime next year, let’s look at where the share price could head before then.

Extensions coming in thick and fast

A large driving factor behind the rapid rise in the DEG share price has been the frequency with which the company has been expanding their resource.

The Hemi gold discovery being the focus of the project.

Since the beginning of the year, there has been 11 announcements relating to mineral extensions at the project.

Of course, it’s the quality, not the quantity that matters. Which DEG has not been lacking.

Today, another piece of the puzzle falls into place.

DEG announced it has identified a new 1.8km-long extension at Hemi.

Named Falcon, the newly-discovered gold intrusion is thought to be up to 80m thick and to continue 200m below surface.

Highlights include:

  • 21m at 3.4 grams of gold per tonne (g/t) from 40m, including 19m at 2.1g/t from 68m
  • 12m at 2.0g/t from 93m
  • 21m at 1.1g/t from 102m
  • 9m at 1.3g/t from 56m

De Grey managing director, Glenn Jardine commented:

The discovery of the Falcon intrusion demonstrates the potential to significantly grow the gold endowment at Hemi as we expand our drilling footprint.

Reinterpretation of the overall geology shows the Aquila intrusion strikes for 1.2km in a southwest orientation and the new Falcon intrusion strikes for over 1.8km in a distinctly north-south orientation. Aircore drilling is continuing to track the Falcon intrusion to the south.

Where will the share price settle?

If the gold price keeps rising and the extensions continue, DEG shares may hit the $1.50 mark before the end of September.

Nothing is certain though.

For instance, the US dollar may strengthen again should the economic recovery continue.

And more stimulus is still on the cards, as well.

In my opinion, DEG have been modest about the potential at Hemi.

And have been keeping their cards close to their chest as to not give too much away before Hemi’s maiden resource estimate.

The upside to DEG is that they already have a 2.2Moz resource outside of Hemi, meaning come next year, they could have a very sizable resource comparable to some of the larger gold stocks on the ASX.

The other potential upside to the DEG share price comes from a developing macro trend.

Australia is getting ready to surpass China as the undisputed global leader in gold exploration, mining and production. In her latest report, gold expert Shae Russell breaks down what Australia becoming the new gold ‘epicentre’ means for gold and your Aussie gold stocks. Click here to download the free report.

Kind regards,

Lachlann Tierney

For The Daily Reckoning Australia