De Grey Mining : Toweranna –high impact resource extension drilling underway

ASX Announcement

13 March 2019

Toweranna -high impact resource extension drilling underway

➢

Toweranna shows significant potential to extend resources +5000m step out RC drilling program has commenced

Targeting resource extensions to a minimum of 200-250m depth Diamond drilling to initially target to 400m depth and then 800m planned

• ➢ Diamond drilling intersects significant Mineralisation in both the Eastern and Western zones

• ➢ New diamond drilling results in the Eastern Zone include: 5.8m @ 5.79g/t Au from 140.2m in TD002 incl 1.6m @ 16.04g/t Au from 140.2m 7m @ 4.02g/t Au from 8m in TD003 incl 1m @ 22g/t Au from 8m

• ➢ Metallurgical diamond hole confirms high grade zones in the Western Zone: 10.4m @ 4.93g/t Au from 8m in TD007 incl 3.25m @ 12.51g/t Au from 11m 4.8m @ 9.94g/t Au from 48.2m in TD007

  Preliminary ore sorting evaluation commenced

• ➢ Toweranna Exploration Targets defined as follows:

(0-200m)	4.8Mt - 5.6Mt @ 2.1g/t to 2.3g/t for 340,000oz - 400,000oz
includes existing resource of 2.01Mt @ 2.2g/t Au for 143,900oz
(200-400m)	4.8Mt - 5.6Mt @ 2.1g/t to 2.3g/t for 340,000oz - 400,000oz
supported by limited but positive drilling to 420m depth
Total Exploration Target (0-400m)	9.6Mt - 11.2Mt @ 2.1g/t to 2.3g/t for 680,000oz - 800,000oz
includes existing resource of 2.01Mt @ 2.2g/t Au for 143,900oz

Exploration Target Cautionary Statement - The potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration to determine a mineral resource and there is no certainty that further exploration work will result in the determination of a mineral resource.

Andy Beckwith, Technical Director commented:

"Toweranna is growing in stature with every drill hole and the shallow resource potential to 200-250m depth provides the opportunity to underpin a substantial step-change in the future open pit dimensions and economics. This new style of mineralisation in the region demands attention with high priority resource extension drilling underway.

On the regional exploration front, we are assessing two early stage targets for similar style granite hosted gold, one to the east of Toweranna and another southwest of Mt Berghaus."

De Grey Mining Limited (ABN: 65 094 206 292)

ASX Code: DEG FRA Code: WKN 633879
Level 3, 24-26/22 Railway Rd	PO Box 2023	T: [phone]	E:[e-mail]
Subiaco WA 6008, Australia	Subiaco WA 6904	F: [phone]	W:www.degreymining.com.au

Toweranna - priority resource extension target

De Grey Mining Limited (ASX: DEG, "De Grey", "Company") is pleased to announce promising diamond drilling results, as well as a substantial initial resource exploration target at the Toweranna gold deposit.

The Company also announces the commencement of a significant +5000m resource extension RC drilling program at Toweranna, which forms part of the 1.4Moz Pilbara Gold Project ("PGP"), located near Port Hedland in the Pilbara region of Western Australia. (ASX release "2018 Total Gold Mineral Resource increases to 1.4Moz", 3 October 2018)

The Company has set a corporate goal of increasing overall project resources at PGP to 2.0Moz by the end of the 2019. Toweranna is considered one of four highest priority targets, including Withnell Underground, Mallina and Mt Berghaus, for significant resource extensions that are likely to impact the 2.0Mtpa PFS currently underway.

The Toweranna deposit currently hosts a shallow resource of 2.01Mt @ 2.2g/t Au for 143,900oz (JORC 2012) to approximately 100-120m depth. Recent assessment shows the Toweranna deposit is under drilled with potential to extend both the shallow resources to the east within the granite body and also substantially increase resources at depth. Further resource extension drilling is warranted to enable the final proposed open pit limits to be accurately defined. A planned +5000m RC drilling program has commenced to test mineralisation to 200-250m depth (Figure 1). Further infill and extension drilling will be planned subject to positive results.

Figure 1

Toweranna Schematic Cross Section

The current resource indicates an average of approximately 1,400 ounces per vertical metre occur in the first 100m. This RC drilling program is expected to increase resources in the eastern shallow portions (<100m) of the deposit, which in turn is likely to further increase the ounces per vertical metre. Any increase in ounces per vertical metre is expected to improve the final open pit design and economics.

Gold mineralisation clearly extends beyond 100m depth and has been shown to occur to at least 420m depth in limited historic drilling. Historic gold results below 200m depth include 3.05m @ 13.46g/t, 2.13m @ 6.77g/t, 0.61m @ 38.7 g/t, 1.22m 11.25g/t and 0.61m @ 4.61g/t (refer to Figure 1). These high grade results are consistent with the shallower resource drilling results and are associated with similar quartz-sulphide veining. Deeper diamond drilling to test beyond 250m is likely to follow the current RC program and will test to 400-500m in depth, with selected deeper holes targeting to 800m.

New Toweranna drill results

A drill program comprising 175m of RC precollars and 747m of diamond drilling was recently completed. Four diamond holes were drilled at the Eastern Zone to determine lode orientation to align RC drilling for resource drilling. An additional diamond hole, TD007(PQ core size), was completed from surface for metallurgical evaluation of the oxide and fresh portions of the Western Zone.

Drilling intersected significant mineralisation in both Eastern and Western Zones, with results over 20gram x metres shown below. Full intersections are given in Table 1.

Eastern Zone

Western Zone

5.8m @ 5.79g/t Au from 140.2m in TD002 incl 1.6m @ 16.04g/t Au from 140.2m 7m @ 4.02g/t Au from 8m in TD003 incl 1m @ 22g/t Au from 8m 10.4m @ 4.93g/t Au from 8m in TD007 incl 3.25m @ 12.51g/t Au from 11m

4.8m @ 9.94g/t Au from 48.2m in TD007

The Western Zone drilling confirmed high grade mineralisation and similar east dipping quartz veins as seen in the western zone. New RC resource drilling has now been planned based on this vein orientation and is in progress.

Drill hole TD007 was specifically drilled for metallurgical purposes. The results confirm the previous RC drilling lodes and provide good quality core for detailed metallurgical test work (Figure 2). The metallurgical test work is being carried out be ALS Metallurgy with results to be used in the expanded 2.0Mtpa PFS.

March 2019 Resource extension drilling

The new resource extension drilling program comprises RC drilling on a 40m x 40m basis for a total of approximately 5000m. This initial RC drill program is already in progress and is expected to be completed during March.

Following the RC drilling program, a program of deeper diamond drilling is planned to test the resource potential from 250m to 400m depth. This program will utilise the RC drill holes as precollars with diamond tails extending at depth. Final hole design is subject to results of the RC program currently underway.

As part of the deeper diamond drilling program, an additional deeper scout diamond hole is planned to test mineralisation between 400-800m.

Figure 2

Toweranna Cross Section 7679970N

Figure 3

Toweranna - Quartz-Sulphide veins (ore) verses granite host (waste) in drill core.

Ore sorting potential

Preliminary ore sorting test work has commenced with Tomra Sorting Pty Ltd (Tomra). Core samples from previous diamond holes have been submitted with initial work focussed on the ability to distinguish and separate the various lithological rock types and quartz-sulphide veining using various sorting techniques. Once results are received and assessed it is expected a larger bulk sample of ~200kg will be processed to evaluate the benefits of sorting in terms of percentages sorted, grade distribution of the products and potential cost benefit evaluations.

Geologically, the ability to ore sort is considered high, as the white quartz-sulphide veins are visually distinct to the grey medium grained granite (Figure 3). If amendable to ore sorting, the economic benefits of the resultant high grade "quartz vein concentrate" feed into the mill and reduced haulage costs will be evaluated as part of the 2.0Mtpa PFS.

Toweranna Exploration Targets

The significance of the Toweranna deposit is growing and the overall size of the deposit is expected to grow substantially. Recent modelling and evaluations suggest the current resource is restricted by drilling and the future open pits have the potential to grow larger and deeper with extended resources. The positive impact of a larger open pit to the PFS is potentially significant and may provide a step change in the open pit scheduling and financial benefits.

The current resource remains open in the zone between 0-100m depth. The current RC drilling program aims to test and extend the resource in this zone. The volume represents approximately 20-40% of the untested granite between 0-100m.

Below 100m, the resource remains completely open with strong indications the resource will extend at depth. Previous drilling on the western margin supports continued lode definition and similar grade potential. Drilling is underway to test to mineralisation between an overall 200-250m depth.

The Exploration Target (0-200m) assumes the area tested extends mineralisation to 200m at a similar tonnage and grade as the existing resource. This total depth is considered potential amendable to open pit mining methods.

Beyond 200m depth, the Exploration Target 200-400m assumes doubling of the 0-200m total exploration target based on similar granite host and supporting high grade gold mineralisation including 3.05m @ 13.46g/t, 2.13m @ 6.77g/t, 0.61m @ 38.7 g/t, 1.22m 11.25g/t and 0.61m @ 4.61g/t known to extend to at least 420m depth in limited historic drilling. These high grades provide support that selective underground mining methods may be possible at these depths and grades provided sufficient resources can be defined.

The Toweranna Exploration Targets (Figure 4) are based on increments in depth are defined as follows:

Exploration Target (0-200m)	4.8Mt - 5.6Mt @ 2.1g/t to 2.3g/t for 340,000oz - 400,000oz
includes existing resource of 2.01Mt @ 2.2g/t Au for 143,900oz
Exploration Target (200-400m)	4.8Mt - 5.6Mt @ 2.1g/t to 2.3g/t for 340,000oz - 400,000oz
supported by limited but positive drilling to 420m depth
Exploration Target (0-400m)	9.6Mt - 11.2Mt @ 2.1g/t to 2.3g/t for 680,000oz - 800,000oz
Exploration Target Cautionary Statement

*Exploration Target - The potential quantity and grade of the exploration target is conceptual in nature. There has been insufficient exploration to determine a mineral resource and there is no certainty that further exploration work will result in the determination of a mineral resource.