ASX:DEG
De Grey Mining Ltd
Investment Summary
The fund managers believe that De Grey Mining Ltd presents a compelling investment opportunity, particularly since the company received a takeover offer from Northern Star, valuing the stock at a 37% premium to its last close price. This offer aligns with their investment thesis that the Hemi Gold project, a new tier one gold discovery in the Pilbara, will deliver over 500koz of annual gold production for decades, making it one of Australia’s largest gold producers. The fund managers emphasize that the project's full potential is underappreciated in the current share price and that the scarcity of high-quality gold discoveries enhances its attractiveness as a consolidation target. They assert that the announced transaction reduces project execution risks for De Grey shareholders and promises a robust return outcome. As market conditions improve with rising gold prices, investor interest is expected to strengthen further as the shareholder vote on the takeover approaches in April 2025.
Commentary From The Managers
L1 Capital
31 Jan 2025
$2.01
- De Grey (Long +14%) shares rose as gold price increased 7.8% in January.
- Under takeover offer from Northern Star, benefiting from rising gold prices before April 2025 shareholder vote.
- Owns 100% of the Hemi Gold project, a significant tier one gold discovery in the Pilbara.
- Hemi expected to deliver annual gold production of over 500koz for decades, positioning it as a major Australian gold producer.
- Northern Star’s offer aligns with L1 Capital's investment thesis on Hemi being a genuine tier one project with significant upside.
- Scarcity of new high-quality gold discoveries makes such projects attractive consolidation targets for larger producers.
L1 Capital
31 Dec 2024
$1.77
- De Grey Mining Ltd. shares saw a significant increase of 27% during the quarter following a takeover bid from Northern Star at a 37% premium to the last closing price.
- The company fully owns the Hemi Gold project, a major new gold discovery in the Pilbara.
- Hemi is anticipated to reach annual gold production exceeding 500koz over many decades, which would position it among Australia’s largest gold producers.
- At the time of the offer, De Grey was nearing the end of permitting stages and headed towards commencing construction on the $1.3 billion project in 2025.
- The investment thesis by L1 Capital emphasizes that Hemi is a genuine tier one project with potential for substantial upside beyond initial estimates.
- It argues that the project’s complete value was not adequately reflected in the De Grey share price.
- The scarcity of new, high-quality gold discoveries makes such tier one projects highly attractive for consolidation by large producers.
- L1 Capital believes the transaction reduces risks associated with project execution for De Grey shareholders while providing a favorable return outcome.
L1 Capital
31 Dec 2024
$1.77
- De Grey Mining shares increased by 16% following a takeover offer from Northern Star at a 37% premium.
- 100% ownership of the Hemi Gold project, a significant tier one gold discovery in the Pilbara.
- Hemi is projected to yield over 500koz of annual gold production for multiple decades.
- Positioned to become one of Australia’s largest gold producers.
- De Grey was nearing final stages of permitting and on track for a $1.3b project construction in 2025.
- Northern Star’s offer aligns with L1 Capital's investment thesis that Hemi represents a genuine tier one project.
- Significant upside potential identified beyond initial metrics, with full value not reflected in share price.
- Certain scarcity of new high-quality gold discoveries enhances attractiveness as consolidation targets for major producers.
- L1 Capital believes the transaction de-risks project execution for De Grey shareholders while ensuring a favorable return outcome.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.