Asset scale that has few peers De Grey Mining ...

29 July 2021

Raising Target Price

De Grey Mining LimitedPrecious Metals - Developer/Explorer

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objectiveviews about any and all the companies and securities that are the subject of this report discussed herein.

RatingSPECULATIVE BUYunchanged

Price TargetA$1.75↑from A$1.60

DEG-ASXPriceA$1.17

Market Data52-Week Range (A$) : 0.69 - 1.67Avg Daily Vol (M) : 5.3Market Cap (A$M) : 1,505.7Shares Out. (M) : 1,292.4Net Debt (Cash) (A$M) : (87.2)Enterprise Value (A$M) : 1,418Cash (A$M) : 87.2Long-Term Debt (A$) : 0.0NAV /Shr (A$) : 1.76NAV /Shr (5%) (A$) : 2.51Net Cash (A$M) : 87.2Major Shareholders: DGO Gold 16%, Van Eck

6%

FYE Jun 2020A 2021E 2022E 2023EGold Production(000oz) 0 0 0 0

All inSustaining Cost(Gold) (US$ /oz)

0 0 0 0

1.8

1.6

1.4

1.2

1

0.8

0.6

Aug-2

0

Sep

-20

Oct

-20

Nov-

20

Dec

-20

Jan-2

1

Feb-2

1

Mar

-21

Apr-

21

May

-21

Jun-2

1

Jul-

21

DEGS&P/ASX 300 (rebased)

Source: FactSet

Priced as of close of business 28 July 2021

Canaccord Genuity (Australia) Limited has receiveda fee as Joint Lead Manager to the De Grey MiningLimited Institutional Placement announced 10September 2020.

Tim McCormack | Analyst | Canaccord Genuity (Australia) Ltd. | [email protected] | +61.8.9268.4810Tyson Kestel | Associate Analyst | Canaccord Genuity (Australia) Ltd. | [email protected] | 08 9263 1156

Asset scale that has few peersInvestment Recommendation

DEG continues to screen as one of the most exciting gold development companieson the ASX, in our view. Off the back of its impressive 6.8Moz maiden Resource atHemi, which took total Resource at the Mallina Gold Project (MGP) to 9Moz, we turnour attention to potential Resource growth over the next 12 months and examineproduction and cashflow implications across various scenarios. The outcomes continueto support our view that MGP is rapidly emerging as a Tier 1 project, capable ofsupporting a +375kozpa production profile, at a time when peer gold producer assetsare diminishing in quality. We maintain a SPEC BUY recommendation with a new pricetarget of A$1.75/sh.

Hemi demonstrating +10Moz potential. We expect DEG to maintain its aggressiveexploration program during FY22 (currently 12 rigs), and with relatively straightforwardstrike and depth opportunities across the deposits (Figure 1), coupled with theincreasing geological understanding, impressive discovery rates (A$8.50/oz) andmanagement Performance Rights (12Moz Resource target), we see Hemi alonebecoming a +10Moz Resource in <12 months. That outcome would place the assetin an enviable group with respect to Australian peers, with only Boddington (15.5Mozincluding Reserves) and the Super Pit (16.8Moz in-pit) having larger open pit Resources.Importantly, we see the +10Moz Resource as achievable from extensions to the definedResources, and with four known intrusions outside the Greater Hemi area, and up to 30potential intrusions identified across the landholding, upside well beyond this estimateremains a realistic possibility.

Upgrading our base case. We have made a number of refinements to our base casedevelopment and production assumptions for DEG's MGP. Key changes are driven byan increased assumed mining inventory (now 6.6Moz from 4.5Moz), larger processingfacility (10Mtpa from 9Mpta) and increased total capex (A$900m from A$800m). Thenet outcome is positive for our valuation, and we now assume the MGP to supporta production profile of 378kozpa at an AISC of A$1229/oz (previously 340koz at anAISC of A$1043/oz) for 16 years (previously 12 years). Notwithstanding the increasedvaluation, we still remain conservative on many of the key inputs and point to aspectslike the project location, proximity to major sealed highways, gas pipelines, high voltagepower lines, ample water supply and flat topography as all representing areas for capitaland operating savings vs. our estimates.

Flex tests and case study support our conviction. We have run scenario analysisacross all the key modelling inputs (capital, grade, strip ratio, throughput, recoveries,mining inventory), which suggests a valuation range of A$0.90-A$2.50/sh and averageFCF of A$370m pa. This highlights the realistic assumptions underpinning our base casevaluation, and we also point to the limited downside (-22%) vs. upside (+122%) underbear and bull case scenarios. We have also completed a case study analysis on GoldRoad Resources' (GOR-ASX: A$1.27 | BUY, A$2.05 PG, Tim McCormack) Resource andReserve evolution from discovery to first production (Figure 12). The trend highlightsthe continued growth of the Measured/Indicated (M&I) Resources during the drill outand the high conversion of M&I to Reserves (84%) at the time of first production.Broadly speaking, +60% of GOR's total Resource was in Reserve at first gold, and thisassumption is in line with our assumed mining inventory for the MGP, based on Hemiincreasing to 10Moz and an overall MGP Resource of ~12Moz (Appendix 1).

Valuation and recommendation. Our A$1.75/sh (previously A$1.60/sh) price targetis based on an NPV10% for the MGP, net of corporate adjustments, and diluted forfuture equity requirements to fund ongoing exploration through FY22-24. SPECULATIVEBUY recommendation maintained.

For important information, please see the Important Disclosures beginning on page 20 of this document.

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FINANCIAL SUMMARYDe Grey Mining ASX:DEGAnalyst : Tim McCormack Rating:

Date: 28/07/2021 Target Price: A$1.75Year End: June

Market Information Company Description

Share Price A$ 1.17

Market Capitalisation A$m 1,505.7

12 Month Hi A$ 1.67

12 Month Lo A$ 0.69

Average daily turnover (3 month) m 5.296

Issued Capital m 1292.4 Profit & Loss (A$m) 2020a 2021e 2022e 2023e

Options m 8.7 Revenue 0.0 0.0 0.0 0.0

Fully Diluted m 1301.2 Other Income 0.4 0.2 0.0 0.0

Operating Costs including royalties -2.6 0.0 0.0 0.0

Valuation A$m A$/share Corporate, O'heads -1.4 -4.3 -2.0 -8.0

Hemi NPV @ 10% 1,739.0 1.25 Exploration (Expensed/WO) 0.0 0.0 0.0 0.0

Exploration & Projects 550.0 0.40 EBITDA -3.6 -4.2 -2.0 -8.0

Corporate (40.8) (0.03) Dep'n -0.3 0.2 0.0 0.0

Hedging (flat forward) - - Net Interest 0.0 0.5 1.0 1.0

Cash & Bullion 87.2 0.06 Tax 0.0 0.0 0.0 0.0

Future Equity Raised 100.0 0.07 NPAT (reported) -3.9 -3.4 -1.0 -7.0

Debt - - Abnormals 0.0 0.0 0.0 0.0

Unpaid Capital (ITM options) 1.8 0.00 NPAT -3.9 -3.4 -1.0 -7.0

TOTAL NAV 2,437.2 1.76

Price:NAV 0.66x EBITDA Margin nm nm nm nm

NAV at Spot US$1,799/oz, AUDUSD $0.73 1.72 EV/EBITDA -395.8x -340.5x -709.2x -177.3x

Target Price (1.00 x NAV) 1.75 EPS nm nm nm nm

EPS Growth nm nm nm nm

PER nm nm nm nm

Dividend Per Share $0.00 $0.00 $0.00 $0.00

Assumptions 2020a 2021e 2022e 2023e Dividend Yield NA NA NA NA

Gold Price (US$/oz) 1,563 1,851 1,789 1,802

AUD:USD 0.67 0.74 0.75 0.75 Cash Flow (A$m) 2020a 2021e 2022e 2023e

Gold Price (A$/oz) 2,328 2,492 2,390 2,414 Cash Receipts 0.4 0.0 0.0 0.0

Cash paid to suppliers & employees -2.8 -3.8 -2.0 -8.0

Sensitivity Tax Paid 0.0 0.0 0.0 0.0

Net Interest 0.1 0.5 1.0 1.0

Other (Expl.& Eval) -14.7 0.1 0.0 0.0

Operating Cash Flow -17.1 -3.1 -1.0 -7.0

Plant & Equipment -0.8 -4.1 0.0 0.0

Capex 0.0 0.0 0.0 0.0

Exploration& Evaluation 0.0 -52.4 -50.0 -50.0

Other -10.1 0.0 0.0 0.0

Investing Cash Flow -11.0 -56.4 -50.0 -50.0

Debt Drawdown (repayment) 0.0 0.0 0.0 0.0

Share capital 58.8 108.2 100.0 0.0

Dividends 0.0 0.0 0.0 0.0

Financing Expenses -3.1 -4.5 0.0 0.0

Others -0.5 -0.3 0.0 0.0

Financing Cash Flow 55.2 103.4 100.0 0.0

Opening Cash 1.3 28.2 71.9 121.0

Increase / (Decrease) in cash 27.2 43.8 49.0 -57.0

FX Impact 0.0 0.0 0.0 0.0

Closing Cash 28.5 71.9 121.0 64.0

Op. Cashflow/Share -$0.01 $0.00 $0.00 -$0.01

Production Metrics 2020a 2021e 2022e 2023e P/CF -80.1x -480.5x -1651.0x -229.3x

EV/FCF -50.6x -23.8x -27.8x -24.9x

Gold production (koz) 0 0 0 0 FCF Yield -2% -4% -3% -4%

AISC (A$/oz) 0 0 0 0

Balance Sheet (A$m) 2020a 2021e 2022e 2023e

Cash + S/Term Deposits 28.2 71.9 121.0 64.0

Reserves & Resources Mt Grade Moz Other current assets 0.5 1.3 1.4 1.5

Resources Current Assets 28.7 73.2 122.4 65.5

Measured 5 1.7 0.3 Mine Properties, Plant & Equip. 1.5 19.2 19.2 19.2

Indicated 80 1.4 3.6 Exploration & Develop. 48.9 85.9 135.9 185.9

Inferred 145 1.1 5.1 Other Non-current Assets 0.7 1.2 1.2 1.2

Total 230 1.2 9.0 Payables 2.9 0.0 0.1 0.1

Short Term Debt 0.0 0.0 0.0 0.0

Reserves Long Term Debt 0.0 0.0 0.0 0.0

Proved 0.0 0.0 0.0 Other Liabilities 1.2 0.1 0.2 0.3

Probable 0.0 0.0 0.0 Net Assets 75.2 179.5 278.5 271.5

Reserves 0.0 0.0 0.0 Shareholders Funds 130.7 238.9 338.9 338.9

Reserves 0.9 0.9 0.9 0.9

Major shareholders Retained Earnings -56.3 -60.3 -61.3 -68.3

DGO Gold Limited 16% Total Equity 75.2 179.5 278.5 271.5

Van Eck 6%

Jupiter Asset Management 6% Debt/Equity 0% 0% 0% 0%

Invesco 5% Net Debt/EBITDA 1.7x 23.0x 124.4x 9.1x

Directors and Management 3% Net Interest Cover nm nm nm nm

ROE -5% -2% 0% -3%

ROIC -7% -3% -1% -3%

Source: Factset, Company reports & Canaccord Genuity estimates Book Value/share $0.06 $0.14 $0.20 $0.20

SPEC BUY

DEG is primary focus is the 100% owned Mallina Gold Project (MGP) in the Pilbara region of WA.

The recent Hemi discovery is an intrusion-hosted form of gold mineralisation which has not been

previously encountered in the Pilbara and with an aggressive exploration effort underway, the

company should grow its existing 9.0Moz Resource considerably over the next 12 months.

$1.00

$1.20

$1.40

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-15% -10% -5% 0% 5% 10% 15%

Gold Price US$ Exchange Rate

De Grey Mining LimitedRaising Target Price

Speculative Buy unchanged Target Price A$1.75 from A$1.60 | 29 July 2021 Precious Metals - Developer/Explorer 2

3

Hemi demonstrating +10Moz potential

In determining our ~10Moz Resource target for Hemi, we have utilised a

multi-faceted approach, and expect it to be achieved in <12 months. When

looking at relatively straightforward strike and depth opportunities, coupled

with increasing geological understanding, aggressive drilling budget vs

finding costs (A$8.50/oz), ounce per vertical metre profile endowment and

management Performance Rights vesting conditions, the estimate is

prudent and achievable, in our view. Further, this is before looking at the

more blue-sky discovery opportunities across the broader landholding or

contemplating the underground potential that is beginning to emerge at

Aquila/Crow/Falcon.

Below we outline the current Resource across the main deposits comprising

Hemi, and highlight the opportunities we see to grow both the Indicated

and overall Resource inventories. We have also ranked the deposits, with

Diucon/Eagle being the highest priority. These are discussed in more detail

in Appendix 2.

Figure 1: Resource growth opportunities across Hemi’s main deposits

Source: Company Reports, Canaccord Genuity estimates

Further reasons we expect the Resource to grow…

Deposit familiarity increasing, +30 targets to test across the landholding

DEG has flagged the increasing ability of its geological team to recognise

highly prospective altered intrusion (signature for lack a better term) in

early aircore drilling and rapidly deploy RC and then diamond rigs, resulting

in the accelerated discovery and drill out of several deposits.

Falcon is an example of the recognition of encouraging altered intrusion in

early aircore drilling leading to infill drilling which resulted in the discovery

of a 1.2Moz Resource in <6 months. Similarly, the Diucon and Eagle

discoveries were based on early geological recognition of similarly

prospective rocks in aircore drilling, which was followed up immediately by

an RC/Diamond program that culminated in a 1.5Moz Resource being

defined in <6 months. We highlight that since the initial discovery, DEG

has now defined four +1Moz deposits within Hemi in ~18 months.

While rapid infill drilling and defining the maiden Resource has been the

focus for the company, we expect testing extensions to remain a core pillar

of the exploration strategy going forward, and more regional drill testing

has been flagged as an objective in FY22E. Scooby, for example, is yet to

be fully tested (despite having a bigger footprint and geochemical

signature than Brolga), with drills recently redirected from the prospect to

Diucon/Eagle as they emerged and became elevated in the priority list. In

our view, the geological team has a good handle on the vectors for

targeting, and we expect more intrusion-related discoveries to be made,

Mt grade Moz Mt grade Moz Mt grade Moz Resource extension potential Priority

Brolga 28.1 1.3 1.21 34.7 0.9 1.05 62.8 1.1 2.26Further growth in Indicated Resource expected as only down to ~200m. Resource expansion potential

down plunge (~500m wide target) to the southwest and down dip to the south into Brolga South.High

Aquila 10.6 1.5 0.52 7.4 1.3 0.32 18.1 1.4 0.84Resource growth likely down plunge, but note Aquila is only 12% of overall Resource. Meaningful size

expansion less likely, DEG to focus on converting HG Inferred Resource to Indicated. Medium

Crow 9.8 1.1 0.35 19.5 1.1 0.68 29.3 1.1 1.03Most complex of the Hemi deposits, requires higher drilling density. Focus on McLeod lode where it

merges with Aquila. Infill and depth potential, as well as testing underground potential.Medium

Falcon 17 1.3 0.7 16.6 1 0.53 33.7 1.1 1.23Remains open at depth and along strike and offers good scope for both meaningful Indicated and overall

Resource growth. Intrusion extends ~2km to the south which is a current focus.High

Diucon/Eagle 48.5 0.9 1.45 48.5 0.9 1.45Infill to convert Inferred to Indicated. Exceptional recent results (174m at 1.5g/t, 173m at 1.6g/t, 99m at

1.1g/t outside current Resource). Strike, down plunge and depth opportunities all apparent.Very High

Total Hemi 65.5 1.3 2.78 127 1.0 4.02 192 1.1 6.8

Indicated Inferred Total Deposit



4

leveraging the increasing understanding and confidence in the strategy that

has been used to date.

Hemi is set to remain the core drilling focus, but we note that DEG has

identified four known intrusions outside the Greater Hemi area and has

+30 potential intrusions (Figure 2) to drill test across the landholding. We

stress the importance of the improving geological understanding,

particularly with 12 drill rigs on site and lagged assay turnaround times

when executing an effective drill program. This adds good comfort that

further discoveries will likely be made, in our view.

It is worth highlighting that Hemi’s Resource sits within a seven square

kilometre area, with Greater Hemi spanning some 200 square kilometres

and the entire MGP covering a total area of ~1,500 square kilometres. In

our view, as DEG steps out from the discovery at Hemi the likelihood of

delineating additional Resources is high.

Figure 2: De Grey’s tenure (inclusive of Farno JV)


Discovery costs and ounce per vertical metre profile

Since the initial discovery at Hemi ~18 months ago, DEG defined the

maiden Resource at an impressive discovery cost of only A$8.50/oz, well

below the peer average of +A$20/oz. While DEG hasn’t provided an explicit

budget for FY22, we assume, based on MarQ’21 expenditure and current

drill rates, that the company will spend A$50m pa for the next two years. At

the previous discovery cost per Resource ounce, this would imply an

additional ~5.8Moz being defined per year over the next two years. We

recognise the return on exploration dollars will likely normalise, but even

when using the A$20/oz peer average against our forecast FY22 exploration

spend, this should see Resource growth of ~2.5Moz, putting Hemi well on

its way to being a 10Moz deposit.

We also flag the high ounce per vertical metre profile across the deposits

defined to date, which underpins the rapid rate that the maiden Resource

was able to be delineated. The high endowment is most evident in the

shallow portions of each deposit where the highest concentration of drilling

has been completed. Based on the average endowment per deposit

(5000oz/Vm above ~200m), we expect that if new discoveries in the same

rock types are made, the chance of these being +1Moz is high. This



5

compounds our strongly positive view on the Resource growth potential at

Hemi. Gold endowments by deposit are show below:

o Brolga 9,000oz/Vm (above 200m depth)

o Aquila 2,500oz/Vm (above 240m depth)

o Crow 4,000oz/Vm (above 180m depth)

o Falcon 3,800oz/Vm (above 260m depth)

o Diucon/Eagle 6,000oz/Vm (above 240m depth)

Grades tending to increase with confidence levels

An observation of the current Resource is the relationship with higher

grades in the Indicated vs Inferred category by ~30%. While it’s the natural

tendency to drill out higher grade zones of the Resource, we point to the

infill results recently released at Diucon as supportive of this thesis. With a

significant objective to continue converting Inferred to Indicated Resources

as part of the FY22 drill program, we acknowledge the potential for

additional ounces to be delineated on conversion.

Figure 3: Hemi Indicated & Inferred Resource by deposit


Management’s Performance Rights suggesting 12Moz

Also supporting our view of further Resource growth is the vesting

conditions of management’s Performance Rights outlined in the November

2020 Notice of Annual General Meeting. The vesting conditions include 1)

delineation of a Mineral Resource of at least 12Moz at the company’s MGP

(total Resource currently 9Moz) 2) DFS confirming a 500kozpa project (CG

assumes ~378kozpa) and a LOM of no less than 12 years (CG assumes 16

years); and 3) securing debt and/or equity financing for a Board-approved

project arising from the DFS.

Upgrading our base case

Following DEG’s recent release of its 6.8Moz maiden Resource at Hemi,

covered in our note Maiden Hemi Resource of 6.8Moz, we thought it

necessary to revisit our base case assumptions. While we had been

foreshadowing conservatism in our maiden Resource estimate of 4-5Moz at

1.1-1.5g/t for some time (we didn’t include the 1.45Moz Duicon/Eagle in

our maiden estimates), the extent of the beat remains impressive. As

discussed, we expect DEG will deliver a +10Moz Resource at Hemi within 12

months and is on path to developing a Tier 1 gold asset producing

+375kozpa for over 15 years, generating average annual FCF of ~A$370m.

We have updated our key assumptions in line with what we view as the new

base case scenario at Hemi. The key inputs underlying our base case

valuation are outlined in Figure 4 and discussed in detail below.



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Figure 4: CG base case assumptions vs previous


Given the early-stage nature of the project we thought it prudent to run a

series of simplified scenarios where we flex our base case assumptions to

illustrate the broad range of potential outcomes and demonstrate the

significant upside on offer as well as the robust nature of the economics of

the project.

The simplified scenarios use the same assumptions in Figure 4 (including a

capital intensity of ~A$90/t for varying plant sizes and a Resource to

mineable inventory conversion factor of 65%) but assume a flat LOM head

grade. As a result, our more detailed base case model (which incorporates

higher grade material earlier in the mine plan) generates slightly different

NAV and FCF figures to the simplified scenario analyses we have conducted.

Plant size and capex

Under our new base case we model an expanded 10Mtpa operation

(previously 9Mtpa) producing ~378koz of gold per year for 16 years. We

have increased our capex assumption in line with our increased plant size at

a flat rate of A$90/t for a total capex of A$900m. Capex is the least

sensitive valuation driver under our base case – we note that a A$100m

increase in total capex (to A$1.0bn) drops our valuation by only A$0.05/sh

to A$1.70/share. Figure 5 below illustrates the impact of further capex

increases to our overall valuation (assuming a 10Mtpa plant).

Figure 5: Base Case sensitivity to capex


Metric Measure CG Previous CG New

Thoughput Mtpa 9.00 10.00

Avg. Head Grade g/t 1.3 1.3

Strip ratio x 3.00 3.75

Avg. Recoveries % 90% 90%

Mined ounces LOM koz 4.5 6.6

Avg. Annual Gold Prod. koz ~340 ~378

First Production year FY25 FY25

Ore Source OP/UG Open Pit Open Pit

Mine Life years 12 16

Capex A$m 800 900

Sust. Capex A$mpa 10 30

Long-term Gold Price US$/oz 1,796 1,848

FX AUD/USD 0.75 0.75

Long-term Gold Price A$/oz 2,395 2,477

Avg. AISC A$/oz 1,043 1,229

NPV (10%) A$m 1,517 1,739

Valuation A$/sh 1.60 1.75

Capex (A$m) NAV/sh Change

600 1.93 10%

700 1.87 6%

800 1.81 3%

900 1.75 0%

1,000 1.70 -3%

1,100 1.64 -6%

1,200 1.59 -10%



7

We have also increased our annual sustaining capex costs by 200% which,

along with a 25% increase in our assumed strip ratio, has increased our

AISC’s by ~18% to A$1,229/oz.

Grade

We have maintained an average mining head grade of 1.3g/t in our new

base case model (slightly higher in the first half of the mine and lower in

the latter half, see Figure 24).

While our LOM head grade from Hemi may appear optimistic at 1.3g/t, we

point to the high correlation between increased drill density and improving

grades in the Hemi Resource as encouraging, with total Indicated Resource

grades 30% higher than Inferred (Figure 6). We point to the infill results

recently released at Diucon as supportive of this thesis (see Exceptional

results at Diucon). With a significant objective of the FY22 drill program

being to continue converting Inferred to Indicated Resources, we highlight

the potential for higher grades (and increased ounces) to be delineated on

conversion.

Figure 6: Hemi Indicated & Inferred Resource by deposit


Further, Figure 7 demonstrates the robust nature of the Resource at higher

cut-off grades with a move from a 0.3g/t cut-off to a 0.7g/t cut-off

increasing grade by +36% to 1.5g/t and still hosting a 5.6Moz Resource

(45% Indicated).

We also note that a 0.2g/t increase in the cut-off grade to 0.5g/t increases

the overall head grade of the Indicated Resource +15% to 1.5g/t (from

1.3g/t) and Inferred to 1.2g/t (from 1.0g/t).

Figure 7: Maiden Hemi Resource at various cut-off grades


We assume a cut-off grade of 0.5g/t for the Hemi Resource based on our

assumed unit costs for mining, processing and administration. This equates

to a current Resource of 6.3Moz grading 1.3g/t which we expect to grow to

+10Moz with grade being maintained as Inferred Resources increase and

are progressively converted to Indicated.

Our valuation is particularly sensitive to grade, as illustrated in Figure 8.

Under a 10Mtpa scenario a 15% increase in grade from 1.3g/t to 1.5g/t,

increases the valuation by 22% to A$2.09/sh, similarly a 15% decrease to

1.1g/t decreases the valuation by 24% to A$1.30/sh.



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Figure 8: Simplified scenario: grade and plant size impact on NAV


Figure 9: Simplified Scenario: Grade and plant size impact on annual FCF


Figure 10: Simplified Scenario: Grade and recoveries impact on annual FCF


Resource and Mining Inventory

Underpinning our base case is the assumption of a +10Moz Resource at

Hemi which would increase group Resource to +12Moz.

Not to be overlooked, DEG has an existing Resource base for Mallina of

2.2Moz (1.8g/t), which has been the subject of Mining Studies and, in our

view, could potentially support an 80-100kozpa production scenario

irrespective of Hemi. With the inclusion of Hemi, however, we see DEG

being afforded the luxury of cherry-picking the best parts of the existing

Resource, thereby bolstering the potential mine life and production profile.

By way of example, the Withnell (85% M&I) and Wingina (76% M&I)

deposits both have +250koz open pit Resources and are <25km from Hemi,

and Toweranna (58% M&I) has a +450koz (+2g/t) open pit Resource that

is ~60km from Hemi. Naturally, the ultimate economics on Hemi will dictate

whether ore is displaced to make way for potentially higher-grade satellite

deposits, but we see this as a nice problem to have, and one that at a

minimum is supportive of a longer-life project. In an effort to capture the

1.0 1.1 1.2 1.3 1.4 1.5

7 Mtpa 0.92 1.12 1.31 1.48 1.65 1.80

8 Mtpa 0.97 1.18 1.37 1.56 1.73 1.90

9 Mtpa 1.04 1.26 1.47 1.66 1.85 2.01

10 Mtpa 1.07 1.30 1.52 1.73 1.91 2.09

11 Mtpa 1.11 1.36 1.58 1.79 1.99 2.17

12 Mtpa 1.15 1.40 1.64 1.85 2.05 2.24

13 Mtpa 1.15 1.41 1.65 1.88 2.07 2.26

14 Mtpa 1.20 1.47 1.71 1.93 2.15 2.34

15 Mtpa 1.26 1.54 1.79 2.01 2.22 2.44

Grade (g/t)NAV (A$/sh)

1.0 1.1 1.2 1.3 1.4 1.5

7 Mtpa 114 153 192 232 271 310

8 Mtpa 138 183 227 272 317 362

9 Mtpa 163 213 263 313 364 414

10 Mtpa 187 243 298 354 410 466

11 Mtpa 211 272 334 395 457 518

12 Mtpa 235 302 369 436 504 571

13 Mtpa 259 332 405 477 538 567

14 Mtpa 284 362 440 507 544 570

15 Mtpa 309 393 476 510 544 583

Grade (g/t) FCF p.a

(LOM average)

1.0 1.1 1.2 1.3 1.4 1.5

85.0% 156 208 261 314 367 420

87.5% 171 226 280 334 388 443

90.0% 187 243 298 354 410 466

92.5% 202 260 317 375 432 489

95.0% 218 277 336 395 454 513

FCF p.a

(LOM average)

Grade (g/t)



9

potential economic benefit of the higher-grade existing Resources we model

a slightly higher-grade profile in the first half of the mine life in our more

detailed base case model (Figure 24).

We use a Resource to Reserve conversion factor of 65% on our assumed

+10Moz Resource at Hemi to arrive at a mineable inventory of ~6.6Moz. In

determining our Resource conversion factor, we looked at a number of

small to large scale open-pit gold projects in Australia and their respective

Resource to Reserve ratios prior to first gold pour. We then calculated an

average and applied an arbitrary discount in the interest of conservatism

(see Figure 11).

Figure 11: Resource to Reserve conversion ratios


Gruyere Resource/Reserve case study

We have examined the evolution of Gruyere’s Resource and Reserves from

discovery through to production as a potential analogue to the development

pathway for Hemi.

Gruyere’s maiden Resource was announced in August 2014 just 10 months

after its initial discovery (Hemi 18 months); it totalled 3.84Moz with 41% of

the Resource in the Measured and Indicated (M&I) category (Hemi currently

41% M+I). 12 months later the Resource had grown 46% to 5.62Moz with

73% in the M&I category (4.12Moz).

In February 2016 Gruyere’s maiden Reserve was announced at 3.17Moz,

representing a conversion of 77% of M&I Resources.

Gruyere’s total Resource continued to grow over 2016, reaching 6.16Moz

before optimisation and a new pit shell design in February 2019 culminated

in a Resource of 5.78Moz with ~75% in the M&I category. Gruyere’s

Reserve grew by 14% to 3.61Moz, over the same time, representing a

conversion of 84% of M&I Resources and 63% of total Resources.

The final pit depth of the Ore Reserve at Gruyere was ~380m, notably

~94% (6.39Moz) of Hemi’s maiden Resource sits above 370m depth.

Figure 12 illustrates Gruyere’s Resource and Reserve development from

maiden Resource in August 2014 through to first production in July 2019.



10

Figure 12: Gruyere Resource and Reserve development leading up to production


Current Hemi Resource alone underpins a fully diluted A$1.38/sh valuation.

Figure 13 illustrates a range of valuation outcomes under various

throughput and Resource scenarios. Most notably, under our base case

assumptions if we assume no Resource growth and use the maiden Hemi

Resource as is (i.e., mining inventory ~4.1Moz), this supports a 10Mtpa

project producing 378kozpa for ~10-years with a NAV of $1.38/sh, on a

fully diluted basis. Alternatively, if we use a 0.3g/t cut-off grade for Hemi

(Resource of 6.8Moz at 1.1g/t gold) it supports a 317kozpa project for +13

years with a NAV of A$1.10/sh.

At DEG’s current share price of A$1.17/sh, it is currently trading ‘in-the-

money’ under each of the scenarios shown in Figure 13.

Figure 13: Simplified Scenario: Resource and plant size impact on NAV


Recoveries

We have kept our assumed recoveries at 90%, which sits well below the

metallurgical test work done to date which has seen recoveries average

~94% using the POX ad Albion processes on ore from Brolga and Aquila.

If we were to use a recovery rate of 95%, it would be the equivalent of

adding 0.1g/t to the assumed LOM head grade and increases our valuation

by 10% to A$1.91/sh on a fully diluted basis.

Figure 14 and Figure 15 illustrates the valuation outcomes under several

scenarios, flexing recoveries, throughput and grade.

Figure 15 and Figure 16 demonstrates the impact of recoveries, throughput

and grade on FCF.

77%of

M+I

74%of

M+I

82%of

M+I

84%of

M+I

84%of

M+I

41%

62%73%

73% 70%70% 72% 75%

59%

38%

27% 27%

30% 30%28% 25%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Aug-14 May-15 Sep-15 Feb-16 Apr-16 Oct-16 Jan-18 Feb-19

Mo

z

Reserve M+I Inferred

6.3 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0

7 Mtpa (264kozpa) 1.27 1.32 1.39 1.45 1.49 1.53 1.56 1.57 1.57 1.57

8 Mtpa (302kozpa) 1.30 1.36 1.44 1.51 1.56 1.61 1.65 1.69 1.72 1.72

9 Mtpa (340kozpa) 1.35 1.43 1.52 1.60 1.68 1.73 1.78 1.83 1.86 1.89

10 Mtpa (378kozpa) 1.38 1.46 1.57 1.66 1.73 1.81 1.86 1.92 1.97 2.00

11 Mtpa (416kozpa) 1.40 1.49 1.61 1.72 1.81 1.88 1.95 2.02 2.07 2.12

12 Mtpa (453kozpa) 1.42 1.53 1.65 1.77 1.87 1.95 2.02 2.10 2.16 2.22

13 Mtpa (491kozpa) 1.43 1.52 1.66 1.78 1.89 1.99 2.08 2.14 2.22 2.28

14 Mtpa (529kozpa) 1.44 1.58 1.70 1.85 1.95 2.07 2.15 2.25 2.31 2.40

15 Mtpa (567kozpa) 1.45 1.60 1.78 1.91 2.03 2.14 2.26 2.35 2.43 2.50

Contained Gold Resource (Moz)NAV (A$/sh)



11

Figure 14: Simplified Scenario: Recoveries and plant size impact on NAV


Figure 15: Simplified Scenario: Grade and recoveries impact on NAV


Figure 16: Simplified Scenario: Recoveries and plant size impact on annual FCF


Figure 17: Simplified Scenario: Grade and recoveries impact on annual FCF


85.0% 87.5% 90.0% 92.5% 95.0%

7 Mtpa 1.35 1.42 1.49 1.56 1.64

8 Mtpa 1.41 1.49 1.56 1.64 1.72

9 Mtpa 1.50 1.59 1.68 1.76 1.85

10 Mtpa 1.55 1.64 1.73 1.82 1.91

11 Mtpa 1.61 1.71 1.81 1.91 2.00

12 Mtpa 1.66 1.76 1.87 1.97 2.07

13 Mtpa 1.68 1.79 1.89 2.00 2.11

14 Mtpa 1.73 1.84 1.95 2.06 2.17

15 Mtpa 1.80 1.92 2.03 2.14 2.26

RecoveriesNAV (A$/sh)

1.0 1.1 1.2 1.3 1.4 1.5

85.0% 0.92 1.14 1.35 1.54 1.72 1.89

87.5% 0.99 1.22 1.43 1.64 1.82 1.99

90.0% 1.07 1.30 1.52 1.73 1.91 2.09

92.5% 1.15 1.38 1.61 1.82 2.01 2.19

95.0% 1.23 1.47 1.70 1.91 2.10 2.29

97.5% 1.30 1.55 1.78 2.00 2.20 2.39

Grade (g/t)NAV (A$/sh)

85.0% 87.5% 90.0% 92.5% 95.0%

7 Mtpa 203 217 232 246 260

8 Mtpa 240 256 272 288 304

9 Mtpa 277 295 313 332 350

10 Mtpa 314 334 354 375 395

11 Mtpa 351 373 395 418 440

12 Mtpa 388 412 436 461 485

13 Mtpa 425 451 477 503 530

14 Mtpa 452 479 507 535 562

15 Mtpa 455 482 510 538 566

Recoveries FCF p.a

(LOM average)

1.0 1.1 1.2 1.3 1.4 1.5

85.0% 156 208 261 314 367 420

87.5% 171 226 280 334 388 443

90.0% 187 243 298 354 410 466

92.5% 202 260 317 375 432 489

95.0% 218 277 336 395 454 513

FCF p.a

(LOM average)

Grade (g/t)



12

Strip ratio

We have increased the average life-of-mine strip ratio by 25% to 3.75.

Figure 18 demonstrates the impact of various head grade and strip ratio

combinations. It is clear that our valuation is far more sensitive to moves in

grade than to strip ratio. For example, an increase in the strip ratio from

3.5 to 5.0 (+50%) can be offset by a 0.1g/t increase in the mined head

grade.

Figure 19 shows the impact of plant size (throughput and capex) and strip

ratio combinations on FCF.

Figure 18: Simplified Scenario: Strip ratio and grade impact on NAV


Figure 19: Simplified Scenario: Strip ratio and plant size impact on FCF


Peer Comparisons

Figure 20 highlights the significant discount DEG trades on vs. some of the

recent relevant transactions in the Australian gold sector. We are of the

view that as the company continues to de-risk the project and move it

towards production the gap between the metrics below should begin to

close.

Figure 20: DEG EV metrics vs recent gold asset acquisitions

Source: Company Reports, Canaccord Genuity estimates. *CGe assumed mineable inventory, not Reserve. ^DEG = CGe LOM annual average production. Kundana based on 120kozpa incl $90m capex, Tropicana production = CGe FY22,

NST/SAR based on FY20 production.

While we recognise this is not a like-for-like exercise, in our view Figure 21

highlights the potential trajectory for large-scale assets once in production.

5.0 4.5 4.0 3.5 3.0 2.5 2.0

1.0 0.90 0.97 1.04 1.11 1.17 1.24 1.31

1.1 1.14 1.20 1.27 1.33 1.40 1.47 1.53

1.2 1.36 1.42 1.49 1.55 1.62 1.68 1.74

1.3 1.57 1.63 1.69 1.76 1.82 1.88 1.94

1.4 1.76 1.82 1.88 1.94 2.00 2.06 2.12

1.5 1.94 2.00 2.06 2.12 2.18 2.23 2.29

Strip ratioNAV (A$/sh)

Grade

(g/t)

5.0 4.5 4.0 3.5 3.0 2.5 2.0

7 Mtpa 208 217 227 236 246 255 265

8 Mtpa 245 256 267 278 289 300 311

9 Mtpa 283 295 307 320 332 344 357

10 Mtpa 320 334 348 361 375 389 402

11 Mtpa 358 373 388 403 418 433 448

12 Mtpa 395 412 428 445 461 478 494

13 Mtpa 433 451 468 486 504 522 539

14 Mtpa 460 479 498 516 535 554 573

15 Mtpa 463 482 501 520 538 557 576

FCF p.a

(LOM average)

Strip ratio

Metric DEG*

EVN /

Kundana

RRL /

Tropicana NST / SAR

A$/Resource oz $154 $164 $388 $367

A$/Reserve oz $210 $691 $1,098 $744

A$/Production oz^ $3,667 $4,083 $6,945 $10,248



13

Figure 21: Open pit gold assets producing >300kozpa

Source: Company Reports, Canaccord Genuity estimates. ^CGe CY21 Production. *10% Discount rate and CGe LOM annual average production

Figure 22: CG modelled production and AISC’s Figure 23: CG modelled C1 and AISC’s vs gold price

Source: Canaccord Genuity estimates

Source: Canaccord Genuity estimates

Figure 24: CG modelled material movement and grade Figure 25: CG modelled plant throughput and recovery

Source: Canaccord Genuity estimates Source: Canaccord Genuity estimates

Hemi* Boddington^ Tropicana KCGM Gruyere Cowal

Detour

Lake^

Round

Mountain

NPV 5% (A$m) 1,739 6,623 2,500 5,524 3,224 2,047 7,725 1,553

Production (koz) 378 833 427 499 308 247 696 327

NPV/Production (A$/oz) 4,600 7,950 5,854 11,059 10,464 8,274 11,100 4,750

0

150

300

450

600

750

900

1050

1200

1350

1500

0

50

100

150

200

250

300

350

400

450

AIS

C (

A$/o

z)

Go

ld P

rod

ucti

on

(ko

z)

Prod AISC

0

500

1,000

1,500

2,000

2,500

3,000

Co

sts

an

d G

old

Pri

ce (

A$/o

z)

C1 AISC CGe Gold Price Spot Gold Price

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

0

5

10

15

20

25

30

35

40

Min

ed

Gra

ge (

g/t

)

Mate

rial M

ined

(M

t)

Ore Mined Waste Mined Grade

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

2

4

6

8

10

12

14

Re

co

ve

ry (

%)

Pla

nt

Th

rou

gh

pu

t (M

t)

Throughput Recovery



14

Figure 26: CG modelled EBITDA Figure 27: CG modelled FCF, annual and cumulative

Source: Canaccord Genuity estimates Source: Canaccord Genuity estimates

Appendix 1

Figure 28: Maillina Gold Project – Global Mineral Resource Estimate

Source: Company Reports

Appendix 2

Open at depth and along strike: Where we see the easy wins

The 6.8Moz Hemi Resource comprises a cluster of six individual gold

deposits: Brolga, Aquila, Crow, Falcon and the more recent discoveries

(January 2021) of Diucon and Eagle. The maiden Resource is based on 688

RC holes (134,166m) and 169 diamond holes (69,061m including RC pre-

collars) for a total of 203,228m. All deposits remain open at depth (94%

shallower than 370m), with limited testing (Figure 30 and Figure 31) and in

most cases along strike, with significant drill programs continuing at each

Hemi deposit targeting further extensions and infill drilling to improve the

existing Resource categories.

0

100

200

300

400

500

600

EB

ITD

A (

A$m

)

Base Case Base Case at spot

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

-600

-500

-400

-300

-200

-100

0

100

200

300

400

500

600

Cu

mu

lati

ve

FC

F (

A$

m)

FC

F (

A$

m)

Base - FCF Base - FCF at spot

Base - Cum FCF Base - Cum FCF at spot



15

Figure 29: Hemi overview the Mineral Resource across the six deposits


As demonstrated in Figures 30 and 31, limited drilling has been completed

deeper than 300m. While beginning to push the limits of open pit mining,

we see good scope for additional ounces to be defined between 300m and

400m that could still fall into open optimisations.

Figure 30: Greater Hemi – all drilling to date (23-Jun-21) Figure 31: Greater Hemi – all drilling below 300m depth



Diucon and Eagle

The most recent and perhaps the most rapidly advancing aspects of the

overall Resource are Diucon and Eagle, currently comprising 1.5Moz

(0.9g/t, Inferred) of the overall Resource. Important to note is that the

deposits were discovered in January 2021 and have only been tested to

300m below surface.



16

Mineralisation is hosted within multiple stacked lodes contained within a

broader intrusion that remain open at depth, which in our view provides

excellent potential to rapidly increase Resource with further drilling. Given

the early-stage nature, the deposit has only been drilled at an 80x80m

spacing, and further infill drilling is expected to provide added confidence of

continuity to allow conversion to Indicated Resources.

Figure 32: Eagle-Diucon-Crow – Long section showing 3km scale & depth potential


Since release of the maiden Hemi Resource, DEG has only provided an

exploration update on the Diucon deposit. The extensional and infill results

from Diucon were impressive and demonstrate significant widths and grade

continuity both within and outside the current Resource. Best results

include:

o 174m @ 1.5g/t Au from 271m — 80m below the current resource

o 99m @ 1.1g/t Au from 256m and 173m @ 1.6g/t Au from 366m —

160m below the current Resource

o 108m @ 0.8g/t Au from 281m — 80m below the current resource

o 58.7m @ 2.0g/t Au from 224m – infill



o 42m @ 4.2g/t Au from 278 – infill

The new results bode well for increasing both the size and grade of the

existing Resource. We highlight the increasingly apparent correlation

between drill density and higher grades as demonstrated in the maiden

Hemi Resource, where the grade is ~28% higher on average in the

Indicated category vs Inferred. The Diucon results support this thesis, while

increasing the scale of the asset considerably. Mineralisation at Diucon is

now defined over a ~900m strike and remains open to the west, down

plunge and at depth. We point to the cross-section (Figure 33) as

demonstrating the significant high-grade mineralisation intersected outside

the current Resource, which remains open and is increasing in width at

depth (up to 300m).



17

Figure 33: Diucon cross section showing intercepts outside current Resource


Brolga

Mineralisation at the 2.3Moz (1.1g/t) Brolga deposit is currently defined

over 1000x300m and down to depth of 500m. Resource growth

opportunities appear more limited in terms of strike extensions at Brolga, in

our view, and we expect DEG to focus on opportunities down plunge to the

southwest and down dip to the south into Brolga South. We also note that

the 1.2Moz (1.3g/t) Indicated Resource (54% total Resource) is hosted

within 200m of surface, (77% is within 140m from surface), and we see

good potential for this to grow considerably with increase drilling density

during FY22.



18

Figure 34: Brolga – down plunge potential


Aquilla

Located 100m to the north of Brolga, Aquila represents a northeast to

southwest trending zone on the southern margin of the Crow intrusion. The

840koz (1.4g/t) deposit tends to demonstrate stronger sulphide

development and more intense alteration towards the western end which

correlates to the consistently higher-grade gold mineralisation. The deposit

remains open at depth to at least 500m, and we expect DEG to focus on

down dip extensions during the FY22 drill program, particularly at the

western end of Aquila where it coalesces with the Falcon deposit and is

coincident with a high-grade plunge. Drilling has been generally been

completed on a 40x40m spacing, with 62% of the Resource currently in the

Indicated category (<200m deep).

Crow

Crow is located adjacent and to the north of Aquila, with mineralisation

linking into the Crow intrusion. Notwithstanding the rapid delineation of the

mineralisation at Crow, it appears to be more complex than other Hemi

deposits and as such has largely been infill drilled to a 40x40m spacing. The

strongest mineralisation at Crow occurs within the McLeod lode, strikes

east-west and merges with the Aquila lode on the eastern side of the Crow

intrusion.

Drilling at the McLeod lode at Crow has resulted in the high-grade portion

being extended ~40m to the east with 25.0m @ 12.1g/t Au from 164 and

48.7m @ 2.8g/t Au from 195m. Extensional drilling intersected a new lode

of mineralisation to the north of Crow, 62m @ 0.9g/t Au from 25m. The

lode is yet to be fully delineated with further drilling planned. Infill drilling at

Aquila returned strong results; 11m @ 10.5g/t Au from 51m, 44m @ 2.0g/t

Au from 48m and 57m @ 1.4g/t Au from 117m

The McLeod and Aquila lodes intersect at the eastern end, with the

company expecting these lodes to support a combined open-pit scenario

and to provide scope for potential underground mining given their high-

grade nature and depth. We have yet to incorporate any underground

potential in our base case valuation and note that this could offer

considerable upside potential if it evolves as a genuine development



19

proposition over time. Diamond drilling continues to target further

extensions.

Falcon

The 1.2Moz (1.1g/t) Falcon deposit is located ~500m to the west of Brolga,

and is a steeply dipping, linear intrusion approximately 1000x50m wide

with the northern limits intersecting the western end of Aquila. Gold

mineralisation has been identified up to 500m deep and remains open at

depth and along strike. Resource drilling is generally on a 40x40m spacing

(currently supports the 57% Indicated Resource) in the shallower zones

and 80x80m at depth. Infill and extensional drilling of the deeper portions

of the deposit is ongoing, and we note that the intrusion extends a further

2km to the south which is also currently being tested with shallow wide

spaced aircore drilling. Depending on the success of the strike testing,

deeper RC and diamond drilling will follow up for mineralised extensions

along this prospective zone. We see both the strike and depth potential as

exciting areas to grow the Resource size and confidence.



Appendix: Important Disclosures

Analyst Certification

Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) therecommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent andobjective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoringanalyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, relatedto the specific recommendations or views expressed by the authoring analyst in the research, and (iii) to the best of the authoringanalyst’s knowledge, she/he is not in receipt of material non-public information about the issuer.

Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associatedpersons of Canaccord Genuity LLC and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions oncommunications with a subject company, public appearances and trading securities held by a research analyst account.

Sector Coverage

Individuals identified as “Sector Coverage” cover a subject company’s industry in the identified jurisdiction, but are not authoringanalysts of the report.

Investment RecommendationDate and time of first dissemination: July 28, 2021, 16:30 ETDate and time of production: July 28, 2021, 10:37 ETTarget Price / Valuation Methodology:

Gold Road Resources Limited - GOR

Our price target is based on 1x forward curve NPV5% for the Gruyere Gold project, net of corporate and other adjustments.

De Grey Mining Limited - DEG

We have based our valuation for DEG on a DCF analysis (forward curve NPV10%) for the MGP, assuming a standalone developmentscenario. We see good potential for DEG to delineate a 10Moz Resource at Hemi within 12 months, building on the existing 2.2MozResource which, in our view, should underpin a +375kozpa production scenario. Our valuation conservatively assumes first goldproduction in FY25, allowing 24 months from the Hemi maiden Resource (mid 2021) to complete infill drilling and Feasibility Studiesfollowed by 18 months for project construction and commissioning.

Risks to achieving Target Price / Valuation:

De Grey Mining Limited - DEG

Financing risks

As a pre-production company with no material income, DEG is reliant on equity and debt markets to fund development of its assetsand progress its regional exploration pipeline. Total development and working capital requirements are subject to completion offeasibility studies. There are no guarantees that studies will result in a positive investment decision for the MGP. Further, we can makeno assurances that accessing these markets will be done without further dilution to shareholders.

Exploration risks

Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated withconversion of inferred Resources and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. Noassurances can be given that exploration will delineate further mineral Resources nor that the company will be able to convert thecurrent mineral Resource into minable Reserves.

Operating risks

If/when in production, the company will be subject to risks such as plant/equipment breakdowns, metallurgical (meeting designrecoveries within a complex flowsheet), materials handling and other technical issues. An increase in operating costs could reducethe profitability and free cash generation from the operating assets considerably and negatively impact valuation. Further, theactual characteristics of an ore deposit may differ significantly from initial interpretations which can also materially impact forecastproduction from original expectations.

Commodity price and currency fluctuations

As with any mining company, DEG is directly exposed to commodity price and currency fluctuations. Commodity price fluctuations aredriven by many macroeconomic forces including inflationary pressures, interest rates and supply and demand factors. These factorscould reduce the profitability, costing and prospective outlook for the business.

Gold Road Resources Limited - GOR

Gruyere is located in a remote region and there is very limited infrastructure, with most facilities needing to be constructed on site.The adoption of gas pipeline will reduce logistics requirements (i.e. trucking diesel).



GOR’s Yamarna tenement is understood to cover several Aboriginal heritage sites. None of the sites are on the recently granted ML.This risk is mitigated with the recent signing of Native Title agreement.

Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated withexploration techniques and lack of accuracy in interpretation of geochemical, geophysical, drilling and other data. We note the mineplan comprises ~2 years of Measured material and does not comprise Inferred Resource. This enhances our confidence in the MineralResources and Reserves, particularly in the early years. No assurance can be given that exploration will delineate further minableReserves. We have ascribed a value of ~A$134m for exploration upside in our valuation.

The company as a gold developer is exposed to commodity price and currency fluctuations, often driven by macro-economic forcesincluding inflationary pressure, interest rates and supply and demand of commodities. These factors are external and could reducethe profitability, costing and prospective outlook for the business.

Distribution of Ratings:

Global Stock Ratings (as of 07/28/21)Rating Coverage Universe IB Clients

# % %Buy 632 66.74% 43.99%Hold 143 15.10% 23.78%Sell 11 1.16% 36.36%Speculative Buy 152 16.05% 64.47%

947* 100.0%*Total includes stocks that are Under Review

Canaccord Genuity Ratings System

BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.

HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.

SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.

NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.

“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the designated investment orthe relevant issuer.

Risk Qualifier

SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments inthe stock may result in material loss.

12-Month Recommendation History (as of date same as the Global Stock Ratings table)

A list of all the recommendations on any issuer under coverage that was disseminated during the preceding 12-month periodmay be obtained at the following website (provided as a hyperlink if this report is being read electronically) http://disclosures-mar.canaccordgenuity.com/EN/Pages/default.aspx

Required Company-Specific Disclosures (as of date of this publication)De Grey Mining Limited currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. Duringthis period, Canaccord Genuity or its affiliated companies provided investment banking services to De Grey Mining Limited.In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking servicesfrom De Grey Mining Limited .In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of a public offering of securities of De Grey Mining Limited or any publicly disclosed offer of securities of De Grey MiningLimited or in any related derivatives.

Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for InvestmentBanking services from De Grey Mining Limited and Gold Road Resources Limited in the next three months.

An analyst has visited the material operations of De Grey Mining Limited. Full payment was received for the related travel costs.

Canaccord Genuity (Australia) Limited has received a fee as Joint Lead Manager to the De Grey Mining Limited Institutional Placementannounced 10 September 2020.



http://disclosures-mar.canaccordgenuity.com/EN/Pages/default.aspx

http://disclosures-mar.canaccordgenuity.com/EN/Pages/default.aspx

De Grey Mining Limited Rating History as of 07/27/2021

AUD2.00

AUD1.50

AUD1.00

AUD0.50

AUD0.00Oct 16Jan 17Apr 17Jul 17Oct 17Jan 18Apr 18Jul 18Oct 18Jan 19Apr 19Jul 19Oct 19Jan 20Apr 20Jul 20Oct 20Jan 21Apr 21Jul 21

I:SB:AUD1.4009/01/2020

SB:AUD1.5011/23/2020

SB:AUD1.3501/19/2021

SB:AUD1.5003/23/2021

SB:AUD1.3504/15/2021

SB:AUD1.6005/11/2021

Closing Price Price Target

Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)

Gold Road Resources Limited Rating History as of 07/27/2021

AUD2.50

AUD2.00

AUD1.50

AUD1.00

AUD0.50Oct 16Jan 17Apr 17Jul 17Oct 17Jan 18Apr 18Jul 18Oct 18Jan 19Apr 19Jul 19Oct 19Jan 20Apr 20Jul 20Oct 20Jan 21Apr 21Jul 21

SB:AUD1.0505/31/2018

SB:AUD1.2005/07/2019

SB:AUD1.1506/20/2019

SB:AUD1.3506/26/2019

SB:AUD1.6010/22/2019

B:AUD1.7001/30/2020

B:AUD2.0002/25/2020

B:AUD2.1004/08/2020

B:AUD2.1504/21/2020

B:AUD2.2005/20/2020

B:AUD2.1007/14/2020

B:AUD2.2009/23/2020

B:AUD2.0510/23/2020

B:AUD1.9501/19/2021

B:AUD2.0001/22/2021

B:AUD2.3002/16/2021

B:AUD2.0004/15/2021

B:AUD1.9506/28/2021

B:AUD2.0507/07/2021

Closing Price Price Target

Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)

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Past performance

In line with Article 44(4)(b), MiFID II Delegated Regulation, we disclose price performance for the preceding five years or thewhole period for which the financial instrument has been offered or investment service provided where less than five years. Pleasenote price history refers to actual past performance, and that past performance is not a reliable indicator of future price and/orperformance.

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principal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealerwith principal offices located in Sydney and Melbourne.

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Short-Term Trade Ideas

Research Analysts may, from time to time, discuss “short-term trade ideas” in research reports. A short-term trade idea offers anear-term view on how a security may trade, based on market and trading events or catalysts, and the resulting trading opportunitythat may be available. Any such trading strategies are distinct from and do not affect the analysts' fundamental equity rating forsuch stocks. A short-term trade idea may differ from the price targets and recommendations in our published research reports thatreflect the research analyst's views of the longer-term (i.e. one-year or greater) prospects of the subject company, as a result of thediffering time horizons, methodologies and/or other factors. It is possible, for example, that a subject company's common equity thatis considered a long-term ‘Hold' or 'Sell' might present a short-term buying opportunity as a result of temporary selling pressure inthe market or for other reasons described in the research report; conversely, a subject company's stock rated a long-term 'Buy' or“Speculative Buy’ could be considered susceptible to a downward price correction, or other factors may exist that lead the researchanalyst to suggest a sale over the short-term. Short-term trade ideas are not ratings, nor are they part of any ratings system, andthe firm does not intend, and does not undertake any obligation, to maintain or update short-term trade ideas. Short-term tradeideas are not suitable for all investors and are not tailored to individual investor circumstances and objectives, and investors shouldmake their own independent decisions regarding any securities or strategies discussed herein. Please contact your salesperson formore information regarding Canaccord Genuity’s research.

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For United States Persons:



Canaccord Genuity LLC, a US registered broker-dealer, accepts responsibility for this research and its dissemination in the UnitedStates. This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing toeffect transactions in any designated investment discussed should do so through a qualified salesperson of Canaccord Genuity LLC.Analysts employed outside the US, as specifically indicated elsewhere in this report, are not registered as research analysts withFINRA. These analysts may not be associated persons of Canaccord Genuity LLC and therefore may not be subject to the FINRA Rule2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by aresearch analyst account.

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