This report is an updated version of the report published on 20 September 2024 at 4:05 PM AEST.

De Grey Mining Limited (ASX: DEG)

De Grey Mining Limited (ASX: DEG) is an Australian mineral exploration and development company primarily focused on gold. The company is engaged in the exploration and evaluation of its extensive landholdings in the Pilbara region of Western Australia, particularly the Mallina Gold Project.

Recommendation Rationale – SELL at AUD 1.365

• Trading Around Resistance: DEG’s share price is hovering close to its 52-week high, and it has already surpassed the ‘Resistance 2’ level recommended on 10 September 2024; thus, share price can face resistance at the current levels.
• Technical Standpoint: Given that the 14-day RSI is currently around 70.18 level, indicating it is in the overbought zone and can face retracement in the short term.
• High Capital Costs: The total pre-production capital costs for the Hemi project are substantial at AU$1.345 billion. Such high expenditures increase financial risk, especially if market conditions fluctuate or project costs escalate. Moreover, the final debt drawdown for the Hemi Gold Project is contingent on receiving environmental approvals and a Final Investment Decision (FID). Delays in these approvals could impede funding and project timelines.
• Debt Reliance: While the company has secured a senior debt facility, reliance on external financing can lead to increased financial burden and interest rate exposure, particularly in volatile economic environments.

DEG Daily Chart

 (Source: REFINITIV; Analysis by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (FY Jun'25E) (Illustrative)

DEG is likely to trade at a slight premium on the back of positive update on Hemi Regional Scoping Study and Australian Government’s NAIF (Northern Australia Infrastructure Facility) funding agreement for AU$150M loan. The following peers have been considered for conducting valuation: Northern Star Resources Ltd (ASX: NST), Liontown Resources Ltd (ASX: LTR), and Strickland Metals Ltd (ASX: STX).

Given its current trading levels, market uncertainties, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 1.365, as of 20 September 2024 at 12:50 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 20 September 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.