The past two years have been tough times for the mining industry. Australia has seen an overall shift away from being a mining-reliant economy as commodity prices tumbled and juniors struggled to continue with projects. As precious metal prices begin to stabilise and increase, particularly gold and lithium, De Grey Mining (ASX:DEG) is looking to capitalise on the upswing as it develops the Turner River Project, located in the Pilbara region of Western Australia.
De Grey listed on the ASX in 2002 on the same assets that it is promoting today, those being the Turner River Gold Project and the Turner River Base Metals Project (BMS). By 2006, the company had achieved a market capitalisation of over AUS$60 million based on those resources. De Grey chairman Simon Lill feels this is important because the company’s market capitalisation now sits between $6-8 million and he says the rocks they own have not changed.
In trying to identify how this dramatic swing in market capitalisation has occurred, Lill points to the fact that in 2006 although there were a lot of high grade gold intersections that excited the market, and a measured resource on the Turner River Gold Project was released showing 360,000 ounces (Oz) at 1.6g per tonne, the high grade intersections seemed to get smeared out over a lot of dirt.
At the time, the then management began to focus on iron ore opportunities, with assets in the prolific iron ore territory of the Pilbara and a surging commodity price. Then from 2007-2008 the De Grey assets underwent a series of joint venture programmes.
“That’s done two things,” notes Lill. “We don’t really carry the history [of the projects] from 2007-2013 and when we were handed the project back on 31st December 2013, the database was not in the best of shapes because it had gone through so many different hands.”
Following those joint ventures, Canadian company Rugby international (TSX-V:RUG) approached De Grey in February 2014 with interest in the gold project. With De Grey short of cash at the time, the joint venture seemed like a good fit for the company.
“The joint venture was finalised in April 2014, Rugby duly met our expenditure requirements and then in late 2015 we raised $1.7 million for a rights issue, underwritten by Carmichaels, and Rugby advised us that they will not continue their earn in.”
As De Grey now had some capital Rugby would not be able to swoop in with a cheap offer. Rugby had drilled some holes but Lill knew – having seen the BMS database – that the gold project’s database would require some work.
“The geologist looked at the Wingina Well in particular and has come to us and said ‘this is not a low grade resource, there is some really interesting high grade material in here – the high grade is from surface’,” Lill received that information three months ago and it contributes to his suggestion that the project has been historically misunderstood.
With both projects now firmly back in the portfolio Lill and De Grey are pursuing a number of drilling and exploration programmes across their tenements to build on the previous work and take the assets onto the next stage.
Lithium has been going well in the markets and De Grey’s tenements are located in fruitful lithium areas. Lill says the company has explored some areas and found solid stream samples and a series of pegmatites over an 8.5km trend – and that is only having looked at 5% of the land tenure for pegmatites.
De Grey will continue with the reconnaissance sampling for pegmatites and Lill hopes that will help identify some drill targets in the next couple of months. How they proceed with them – whether De Grey drills them, joint venture them or sell the rights – has not been decided as yet.
“There is some frustration for us because we have a very large land holding in the middle of lithium country. If we had sold the lithium rights the company would probably have a better capitalisation than we do at the moment.
“We have some interest [in lithium] but we are also trying to let the market know we are focusing on gold because it’s a much nearer term production capability on gold. You couldn’t ask for a better commodity than gold at the moment.”
In terms of the gold drilling programmes, De Grey commenced a diamond drilling programme at the Wingina Well in June to test the underground potential at the site. The plan is to use the drilling to; demonstrate continuity in the plunging shoots at depth, define a significant step-out resource extension, define high grade mineralisation in fresh bedrock and obtain metallurgical samples from the fresh material.
There is already data showing a plunging central shoot with contours of 30g per metre of high grade and open at depth, Lill is hoping the shoot they have seen will continue deeper.
“The target zone is 450m and with a bit of luck we will hit it first time and geologically that shoot should be continuing.” However, the shoot may pinch or swirl or the grade could diminish when it gets into fresh bedrock. “There’s a lot of unknowns but we should find that shoot and with a bit of luck it should be higher grade.”
Recent results from diamond drilling one hole at Wingina showed there to be 4m @ 5.57g/t Au from 416, including 1m @ 5.64g/t Au from 417m and 1m @ 13.80g/t Au from 419m.
“We see these results as positive as it shows the mineralisation has continued at depth,” says Lill. “The associated recovery announced also shows that the ore is not refractory in nature which if it had been would have downgraded the fresh rock – as this was the first fresh rock the project has obtained at Wingina.”
The southern shoot has also shown some very good grades further up but it doesn’t hang as well as the central shoot and hasn’t been as extensively drilled. Lill says there are also exploration targets at satellite deposits.
In July, De Grey announced the completion of the RC drilling programmes at the Discovery and Tabba Tabba prospects, both part of the BMS project. A total of 24 holes were completed at Discovery, taking the advance to 1646m and drilling was completed over a strike length of 350m to better define the oxide mineralisation where previous drilling had intersected encouraging shallow mineralisation. The previous intercepts at Discovery were 28m at 1.6 g/t gold, 49g/t silver from 3m (including 11m at 3.17g/t gold, 94.7g/t silver from 3m) and 24m at 2.15g/t gold, 250g/t silver from 18m (including 10m at 3.3g/t gold, 386.2g/t silver from 20m)
Tabba Tabba saw infill drilling of the known gold, silver, zinc, lead and copper mineralisation associated with a priority IP anomaly, with 12 holes completed for an advance of 772m. While fresh sulphide mineralisation of zinc and lead minerals were noted in at least half the holes at Discovery and a limited number at Tabba Tabba.
“The open pit potential for the oxide zone at Discovery is obvious. We have a resource geologist working through the likely size of the oxide portion of the resource – remembering that there is a deeper sulphide zone of ore. We also need to work through the metallurgical issues – is the gold/silver reasonably easily separated from the base metals, and can it then be fed into the same plant as ore from Wingina,” explains Lill.
“This would then feed into a pit optimisation. Assuming there are positive answers to all of the above we would be hopeful that the Discovery resource will provide a high grade feed to a proposed plant, but expect it will not be a long term feed – depending on plant scale. Perhaps 6-24 months.”
Lill is taking the view that if they can get the Turner River Project developed and into production then there are likely to be more resources available for development in the region, and the fact there is no mill and plant is an ‘opportunity and potential benefit’ because had there been then the project would already have been mined and processed.
Looking forward Lill is positive that De Grey can take this project into commercial production – now the focus is on looking at how quickly they can make that happen.
“We are planning to go into economic studies [in the near future]. There’s been an enormous amount of metallurgic work done on this project, there’s a lot of infrastructure around and I wouldn’t be entirely surprised if it went straight into a bankable feasibility study.
“We will be trying to produce that feasibility study and then get it [the project] into an area where we can be mining and producing potentially by 2017.
“Are we going to be a multi-commodity, are we going to joint venture things out, are we going to buy? Only time will tell, but my personal preference would be to keep it all together, there would be a lot of crossover benefits for the projects if they remain under the same ownership.”