"Developing the growing 1.4Moz Pilbara Gold Project"

Positive gold recoveries enhance

Pilbara Gold Project potential

ASX Announcement

12 February 2019

ASX Code DEG

➢ Breakthrough +90% recovery confirmed for "pyrite dominated sulphide" mineralisation at Withnell - the key sulphide deposit at the project - likely to improve project economics.

FRA Code WKN 633879

➢

Average indicated recoveries for mineralisation types:

ABN 65 094 206 292

• • +94% - Oxide material

  DIRECTORS/MANAGEMENT

• • +92% - Free milling fresh material

• • +90% - Pyrite dominated sulphide material

Executive Chairman

Simon Lill

• ➢ Ongoing optimisation seeking to further improve recoveries

  Technical Director & Operations Manager

• ➢ High gold recovery maintained at coarser grind size significantly reducing grinding requirements and likely the associated power costs.

  Andy Beckwith

  Non-executive Directors Peter Hood

  Brett Lambert

• ➢ Simplified process flowsheet developed, GR Engineering Services now refining plant design, layout and costings. All components to be conventional industry accepted, targeting operating costs equal to or less than industry average for the relevant operation scale.

Steve Morris

➢

Diamond drilling has been underway at Withnell since mid-January.

Company Secretary Patrick Holywell

Craig Nelmes

➢ An RC rig is due to arrive shortly to commence at Toweranna. Priority resource extension drilling will target Toweranna, Mt Berghaus and Mallina during the first half of the year..

Exploration Manager Phil Tornatora

Technical Director Andy Beckwith commented:

CONTACT DETAILS Principal & Registered Office Level 3, 22 Railway Rd, Subiaco WA 6008

"The 90% recovery on the Withnell sulphide mineralisation is an outstanding improvement making Withnell a fundamental long-term baseload to the project. We are increasingly more confident that Withnell will also provide a long term high-grade underground mining opportunity.

PO Box 2023

Subiaco WA 6905

GR Engineering are working on the plant design and costings and from this we will be re-evaluating pit optimisations and the potential to add an underground mining component.

admin@degreymining.com.au

T +61 8 6117 9328

F +61 8 6117 9330

The simplified processing flowsheet, rapid extraction times and reduced grinding requirements, together with on-going exploration success, point to a significantly enhanced operation. We are currently assessing the optimal project."

www.degreymining.com.au

Summary Metallurgy Results

De Grey is pleased to report on positive metallurgical test work undertaken across the Pilbara Gold Project ("PGP"), located immediately south of Port Hedland in the Pilbara Craton of Western Australia (Figure 1).

Detailed metallurgical test work has been on-going since the release of the August 2017 Scoping Study and has recently culminated in the breakthrough results achieved at Withnell, the largest resource at the PGP with rapidly expanding underground potential. This work has involved detailed metallurgical test work on existing drill core and the drilling of dedicated PQ diamond core holes at various deposits for additional sampling material. ALS Metallurgy Services have carried out the testing under the supervision of GR Engineering Services Limited (GRES), with input from De Grey technical staff. All test work was completed to standard industry accepted practices.

Overall average recoveries

• • +94% - Oxide material

• • +92% - Free milling fresh material

• • +90% - Pyrite dominated sulphide material

• • Fast CIL extraction rates of between 6-24 hours

Gravity

• • Positive gravity yields warrant the inclusion of a gravity circuit

Comminution

• • Rock properties indicate low to high hardness and moderate abrasion

• • Coarser grind size improvement from 75-90µm to 106-150µm

• • Coarser grind size leads to expectation of reduced power consumption

Sulphide flotation

• • 5-9% (average 7%) mass pull to sulphide concentrate

• • Flotation effective on all Withnell fresh and transition sulphide mineralisation

Oxidation of Sulphide Concentrate

• • Sulphide flotation concentrate to be oxidised

• • Pressure oxidation (POX) preferred

• • POX requires only small vessel with capacity of 50kt-100kt per annum

Plant Design - underway by GRES

• • All plant componentry is expected to be conventional and industry standard - "tried and tested"

• • Crush, grind, flotation, gravity, POX, CIL tanks, elution and tail disposal

• • Simplified processing flowsheet, rapid extraction times and reduced grinding requirements point to a larger scale throughput which is expected to provide reduced operating costs

Figure 1 Pilbara Gold Project, location plan

Oxide Samples

Composite samples from the oxide domain were assessed, from the following deposits:

Calvert, Mt Berghaus, Camel, Roe and Dromedary.

The test work delivered positive results for each of the oxide domains with an average gold recovery of 94%. Two grind sizes, ranging from 106 and 150µm were used with room to further optimise. All samples demonstrated rapid extraction rates with leach residence times of 6-24 hours. The coarse grinding size of between 106-150µm is expected to provide cost savings due to reduced power requirements and lower grinding media consumption.

The Mt Berghaus sample showed a high gravity recovery component at 49% with Camel at 20%, indicating a gravity circuit could provide benefits to the processing circuit. Wingina and Withnell results are based on previously undertaken test work. Results are summarised in Table 1.

In general, the oxide domains in all deposits assessed to date will require a simple typical oxide CIL processing flowsheet used widely throughout the gold mining industry in Australia.

Table 1

Summary Oxide Metallurgy Test Work

Fresh core samples were assessed for the following deposits:

Withnell, Calvert and Mt Berghaus

The Withnell samples were chosen as the priority to concentrate on the pyrite dominant sulphide mineralisation assessment as it is currently the largest sulphide deposit at the project. The other pyrite dominant sulphide rich deposits include the Calvert, Roe, Dromedary and Calvert, all situated along the Withnell Trend. Mallina is expected to be sulphide rich mineralisation and this deposit is currently being evaluated with new drill core recently submitted to ALS Metallurgy. Results are summarised in Table 2.

Most importantly, the Withnell results have shown that high gold recovery can also be maintained from the fresh pyrite sulphide dominant mineralisation at coarser grind size. Previously proposed fine grinding has been eliminated in favour of a coarser sulphide flotation with a resultant small mass pull (5-9%) into sulphide concentrate followed by oxidation and standard CIL leaching to extract the contained gold. The preferred oxidation process is pressure oxidation (POX). Importantly, the POX component is expected to be significantly smaller with annual capacity of 50kt-100kt depending on final throughput volumes due to the strong volume reduction into the final sulphide concentrate.

Overall, the flotation, pressure oxidation (POX) and cyanide leach test work provided a peak recovery of 95.9% from the concentrate, so when combined with gravity and sulphide flotation recovery provides an overall average gold recovery of +90% of the contained gold. The fresh tail is also proposed to be processed through the standard CIL tanks to ensure the highest recovery of gold is extracted.

The simplification of the processing circuit (Figure 2) together with coarser grind size is considered a substantial improvement, on the previously proposed flotation and ultrafine grind methodology. Reduced operating costs are expected with this simplified flow sheet and importantly enhanced recovery. Results are summarised in Table 1.

Table 2

Summary Fresh Metallurgy Test Work

FRESH		GOLD RECOVERY				ROCK PARAMETERS
Deposit	Nos Samples Tested	Gravity %	Direct CIL %	Float CIL %	Float Oxidise CIL %	Grind Size microns	Bw i kWh/t	Rw i kWh/t	Abrasion
Calvert	2	Not Tested	15.8	70.6%	75 - 212	19.2	20	0.1774
Withnell	12	3	69.5	75.0	91.5%	75 - 150	17.4	20.3	0.203
Mt Berghaus	1	Not Tested	95.0	75	17.5	19.8	0.1318

Figure 2

Simplified processing circuit

Additional Test Work

Ongoing test work is planned to improve the overall knowledge of all the deposits. This work will include similar detailed comminution, recovery and where appropriate sulphide flotation test work as required.

• • Metallurgical test work on the Toweranna and Mallina deposits with purpose drilled PQ core recently submitted to ALS Metallurgy

• • Plant design, capital and operating costs underway with GRES (engineering consultants)

• • Open pit and underground evaluation using new operating costs and recoveries and assessment to increase plant scale planned with CUBE (mining consultants)

Additional evaluation of the Withnell Deeps underground mining potential is currently being advanced with remodelling of the resources below the open pit and this will be followed by mine design and costing. Diamond drilling recommenced in mid-January and this +4000m drilling program is planned to continue through H1 CY2019 to increase resources at Withnell.

For further information:

Simon Lill (Executive Chairman) or

Andy Beckwith (Technical Director and Operations Manager)

De Grey Mining Ltd

Phone +61 8 6117 9328

admin@degreymining.com.au

Competent Person

The information in this report that relates to exploration results is based on, and fairly represents information and supporting documentation prepared by Mr. Andrew Beckwith, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr. Beckwith is a consultant to De Grey Mining Limited. Mr. Beckwith has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012

Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resource and Ore Reserves".

Mr. Beckwith consents to the inclusion in this report of the matters based on his information in the form and context in which it appears.