DEG 6.72% $1.25 de grey mining limited

Broker reports

  1. 606 Posts.
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    As I suggested in one of my prior posts, these recent recoveries were ahead of where the brokers had previously pegged them, and will likely improve as they refine the most optimal processes. The refractory nature of the ore (and the subsequent POX circuit) are not new ideas, and had been well flagged by the company prior to last week's announcements.

    There are many great snippets here but some of the highlights:
    "While preliminary in nature, Argonaut regards these results to be a positive outcome and better than our previous modelled recoveries of 89-93% from POX and CIL. "
    "Significantly, 92-93% of gold was recovered in >10% of the initial mass from flotation of fresh ore. This would substantially reduce the scale of POX plant under a development scenario (assuming POX is the preferred method for sulphide oxidation). As a comparative, Alacer Gold’s (AQG) Çöpler sulphide ore is less amenable to flotation and applies whole ore POX. "
    "We highlight that Hemi is still in the rapid expansion phase and remains open in nearly every direction. Based on drill intercepts to date, Argonaut estimates the current endowment could be ~3.6Moz @ ~1.6g/t."
    "Argonaut’s revised valuation for DEG is 1.45ps (from $0.65ps) primarily driven by a change to a DCF based valuation (previously EV/Resource based). We apply a 20% discount to NAV to account for development risks to achieve a $1.16ps target price."

    Brokers are not the be-all and end-all, and may have conflicts of interest, however if you look through the lofty valuations the research itself is generally very much on point. Nevertheless, for what its worth (to be taken with a grain of salt) Argonaut have raised their price target from $0.65 to $1.16 (factoring in a 20% reduction for development risk).

    Take a read. Hopefully it will alleviate some of the concerns that we've seen on here lately. Remember, these brokers saw this POX circuit coming, unlike some of the other members here who were taken by surprise and are perhaps 'selling first asking questions later'. Whether DEG is currently over/undervalued is open to debate (and I'm not entirely sure where I land, but I was here from the early days so am willing to ride it out and see what develops).
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