Shares in De Grey fly high following resource increase
Shares in De Grey Mining (ASX:DEG) soared 50% when the market opened on Tuesday morning in response to a substantial increase in resource for its Turner River Volcanogenic Massive Sulphide (VMS) deposits located 50 kilometres south of Port Hedland in Western Australia.
However, they did retrace later in the morning and it should be noted that past trading patterns are not an indication of future share price performance and should not be used as the basis for an investment decision.
The updated Mineral Resource Estimate which was the basis for the rerating relates to its wholly-owned Discovery and Orchard Tank VMS style base metal deposits. These are strategically situated in an area that has ready access to both road transport and deepwater ports.
The resource updates include results of recent drilling at the Discovery deposit. Management explained that geological interpretations at both deposits were revised to better identify and quantify the massive sulphide mineralisation that occurs within a broader zone of disseminated mineralisation.
Importantly, the size of the resource has also been upgraded with approximately 30% of the estimate now in the indicated category.
Promising exposure to zinc and lead
With zinc and lead being two of the best performing base metals in 2016, the grade increases of 23% and 31% respectively at the Discovery deposit represent a material development. Similarly, circa 40% grade increases in zinc and lead at the Orchard Tank deposit is likely to be viewed favourably.
Management highlighted the fact that the zinc price had increased by more than 50% over the last 12 months, and with medium-term estimates pointing to a world production deficit, this positive momentum is likely to be maintained.
However, investment decisions should not be based on forward looking statements regarding commodity price fluctuations or exploration activity, and independent financial advice should be sought if considering this highly speculative early stage mining stock.
Management expects further exploration success in highly prospective region
Management highlighted that the Tabba Tabba greenstone belt has proven to be a fertile VMS environment and this style of deposit is well known to form in clusters of deposits.
Given this trend, Executive Chairman Simon Lill said, “As the potential for further discoveries is considered high, future work includes a full assessment of previous IP surveys and other geophysical and geochemical data sets along strike for resource extensions, repetitions and new targets”.
DEG now controls more than 60 kilometres of Tabba Tabba territory
The promising prior background of this region prompted management in October to secure 9 kilometres of underexplored and highly prospective stratigraphy with excellent potential for further gold and base metal discoveries.
This boosted the company’s area of control to more than 60 kilometres in a region which hosts the Wingina and Amanda gold deposits.