DGO Gold Limited - Leveraged to the Gold Price with Exploration Upside
DGO Gold Limited
Leveraged to the gold price with exploration upside
DGO Gold Ltd (ASX:DGO) is a gold and copper discovery company with a suite of tenements throughout WA and SA in highly prospective provinces with access to processing infrastructure on success. DGO also has strategic shareholdings in a number of complementary ASX-listed gold companies, 14.5% holding in De Grey Mining (ASX:DEG), 6.8% in Dacian Gold (ASX:DCN) and 20.1% in Yandal Resources (ASX:YRL). The company’s strategy is wealth creation from investment appreciation and, exploration and evaluation across its organic options, from extensive drilling and geophysical campaigns, which are expected to continue through 2022. The key to delivering tangible value is through organic discovery and that means working the asset base. DGO’s differentiated strategic portfolio approach leverages deep domain expertise. The company anticipates maintaining an underlying exploration spend to <5% of its market capitalisation, in the order of $8mn pa to be funded through realising its portfolio holdings, utilising its secured debt facility of $15mn (currently drawn to $3mn) and equity issues. In a post-COVID environment with the world heading along a changing energy and technology pathway, the future for metals demand and pricing looks robust.
A differentiated business model
DGO is a gold and copper exploration company offering a differentiated approach; exploration of highly prospective greenfield opportunities and strategic equity holdings (ordinary shares) in complementary ASX-listed metals plays. The company strategy is to create shareholder value through exposure to both the upside potential of their own exploration projects assets and a portfolio of liquid listed investments with tier-1 growth potential. DGO’s current investments are De Grey Mining (ASX: DEG), Dacian Gold (ASX:DCN) and Yandal Resources (ASX:YRL).
There is exploration with encouraging results at Pernatty
DGO aims to maintain a consistent level of exploration expenditure in the order of $8mn pa pursuing large-scale mineralisation plays. Recent key drilling results include highly encouraging data at Pernatty, Stuart Shelf (SA), defining a 15km transition zone with intersections of ~4m grading up to 0.9%CuEq. A gravity survey is planned through the current quarter to better define another three priority Carrapateena-style targets at Pernatty, whilst further drilling will be undertaken at the Bryah, Yerrida in the Murchison area. By definition, early-stage exploration is a high risk process, with potentially high return in the success case, but can be long-dated and expensive. The Mallina tenements adjoin DEG’s Mallina Gold province including the intrusion-related gold at Hemi. The Bryah and Yerrida tenements target DeGrussa style copper-gold and Zambian copper belt mineralisation potential.
Capitalised for its investment portfolio
The company’s capitalisation trades at a discount to its portfolio of listed share investments, providing a ‘free option’ on the success of the exploration portfolio. DGO’s strategy is differentiated from its ASX-designated peer companies providing an alternate, potentially attractive return profile to the gold price and a nominal free option on any future discoveries.
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