I made a error in calculating the resource size of DEG. Which resulted in a higher Market Cap / Resource multiple of 7.9 (previously 5.3). This has resulted in a valuation of $2.00 per share down from $2.20-2.70. Indicating that more of the upside is already priced into DEG's current share price of $1.33. I still like DEG and the potential upside they have. I believe due to the favourable economics of their project and that they will most likely attract a premium due to their assets being based in Australia, my valuation is on the conservative side. Measure twice cut once they say. 

Updated 9th December 2023: 

De Grey Mining (ASX:DEG) 

Added to watchlist: 8th Dec 2023 | Valuation $2.00.

I’m looking to add some gold to my current holdings and like the looks of DEG. I have done a bit of research and have a valuation of $2.00 per share. Here are the key takeaways form my research:

  • Based on their DFS they will be a low-cost gold producer with all in sustaining cost (AISC) of $1,295 per oz.
  • Have a large but lower grade resource 278mt @ 1.5 g/t when compared to the other mining companies I looked at.
    • Mine is based in WA Australia.
    • Of the gold stocks I looked at they will be the third largest gold producer at 540koz pa.
    • Upside as their DFS is based on 6moz reserve and DEG have 12moz classified as mineral resource estimate, and
    • DEG are expecting first gold production in the second half of CY26.

Table 1:

Company
Market Cap (m)		ResourceMetricJORCGRADECommodity Mk Cap/Resource RatioAISCstatus
RSG819156mtIIM2.0g/tGold5.32242Producing
NST13600891mtMII2.1g/tGold15.31759Producing
RED1000106mtIIM1.4g/tGold9.51696Producing
EVN6300277mtIIM1.1g/tGold22.71450Producing
DEG2200415mtII1.5g/tGold

7.9

1295Exploration

Looking at Table 1, I have calculated a Market cap / Resources multiple. Which is indicating gold stocks that are producing gold are priced at a premium (as they have a higher multiple) compared to DEG and other factors like a higher AISC, mine locations, and grade can negatively impact the multiple and of the gold stocks I looked at it appears gold miners with all or majority of their mining operations based in Australia trade on a higher multiple.

Table 2:

Share PriceSharesMarket  CapResourceRatio
1.22180022002787.9
1.39180025002789.0
1.671800300027810.8
1.941800350027812.6
2.221800400027814.4
2.781800500027818.0
3.331800600027821.6
3.891800700027825.2

Using this information, and once DEG start producing gold in the second half of CY26 and given the favourable economics of their operation. It is not farfetched that DEG would be trading…

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