DE GREY MINING LTD

QUARTERLY REPORT

FOR THE QUARTER ENDING 31 MARCH 2013

ASX: DEG Shares on Issue

464,665,646

Board of Directors

Peter Batten

Executive Chairman

Darren Townsend

Director

Gary Brabham

Director

(resigned 21/03/13)

Jason Brewer

Director Company SecretaryDennis Wilkins Registered Office

Suite 4, 100 Hay Street

Subiaco, WA 6008

Phone: +61 8 9285 7500

Fax: +61 8 9285 7599 www.degreymining.com.au A.B.N. 65 094 206 292

HIGHLIGHTS

Argentina Projects (gold, silver)

• Site visit to Sierra Morena by independent consultant confirms exploration model and validates exploration program

• Completed 14.6 line km of CSAMT survey over SM6 and Vein

Breccia Prospects at Sierra Morena. Multiple drill targets outlined

• At Sierra Morena detailed geological mapping was completed over the SM6 and Vein Breccia Zones

• New zone of mineralization identified at Vein Breccia Zone returned up to 15.8g/t Au, co-incident with a CSAMT anomaly at depth

• 1,500m Diamond drilling program commenced on 22/4/13 at SM6

Prospect

• Appointed Christopher van Tienhoven as Country Manager - Argentina

New Zealand Project (gold, silver)

• Collected 245 sample soil samples over the Harrisons Fault Zone and Boundary Breccia Prospects to assist in drill targeting

• Collected 43 rock chip samples during prospecting of the project area

• Completed drill planning for Bush Hill target

• Negotiated land access agreement over a key property to enable drilling in the June 2013 quarter

Turner River Project (gold, base metals, Polymetals

Mining Ltd earning 75%)

• Polymetals increase gold resource at the Wingina Well Gold

Deposit

• Scoping study commenced over the Wingina Well Gold Deposit

Corporate

• Subsequent to the end of the quarter De Grey raised $484,868 through a placement of 60,608,562 shares

• Gary Brabham resigns as a Director

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

Argentina PROJECTS

Through agreements and tenement applications in its own right, De Grey has secured mineral rights over approximately 4,675 sq km of ground in the Santa Cruz and Rio Negro Provinces of southern Argentina (Patagonia), making the Company one of the largest tenement holders in the region (Figure 1).
During the quarter De Grey appointed Christopher van Tienhoven as Country Manager - Argentina. Christopher has a Degree in Economics from the University of Pennsylvania and has worked in the mining industry for over 21 years.

The majority of this time was spent with the Anglo Group, operating around the world with stints in the UK, Chile, Brazil, Venezuela, South Africa and Argentina before culminating as Country Manager, General Manager and President of Anglo Gold Ashanti's Cerro Vanguardia mine, the largest low sulphidation epithermal gold and silver operation in the Patagonia region of southern Argentina.

In 2008 Christopher accepted the position of Country Manager and Vice President - Argentina of Andean Resources. Christopher managed the local community and government relations and led the company in Argentina and was instrumental in rationalizing the operations post the 2008 financial crisis and thereafter ensuring Andean's success in Argentina that ended with the Goldcorp (TSX:G, NYSE:GG) takeover of Andean in December 2010 for C$3.6 billion.

Christopher brings with him to De Grey a wealth of experience and a degree of local knowledge and contacts that is unsurpassed in the mining industry in this region of South America.

Figure 1: Locations of De Grey's projects, Argentina 2

DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

Santa Cruz Province

De Grey's Santa Cruz projects lie within the Deseado Massif, a geological region of prolific low- sulphidation epithermal gold-silver mineralization that has been recognised only relatively recently. Resources and ore reserves discovered in the region since about 1990 total 17.5Moz Au and 525Moz Ag (Figure 2.).

Figure 2: Locations of De Grey's projects, Santa Cruz, Argentina

Santa Cruz Province - Sierra Morena Project

During the quarter the Sierra Morena site was visited by an internationally recognised epithermal consultant. The purpose of the visit was to review results over the project to date, confirm the exploration model, and validate the exploration strategy.
His report confirmed that veining and mineralization at SM6 and VBZ were typical of the upper levels of low sulphidation epithermal systems and that the relatively low tenor of mineralization intersected in the 2012 drilling was largely due to the target veins being hosted in the less competent Chon Aike Formation ignimbrites and not in more favourable competent units of the Chon Aike Formation at depth, or the underlying andesites of the Bajo Pobre Formation.

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

The report also stated that there are "many instances of poorly mineralized surficial breccias developed within incompetent host rocks passing downwards to quality banded veins in underlying host rocks (Hishikari, Japan; El Penon, Chile; Mariana Vein at Acata, Peru)."
The report highlighted that crystalline hypogene kaolinite in the mapped acid sulphate cap at SM6 indicates that this cap represents the upper levels of an epithermal system, with significant potential at depth for mineral shoots to form where the collapsing acid cap intersects feeder structures.
The report posed possible settings for quality vein mineralization at Sierra Morena including:

• "Competent host rocks, such as the welded tuff granoso unit which typically occurs at the base of the Chon Aike formation or the underlying Bajo Pobre andesite.

• Settings where rising ore fluids might mix with the low pH waters responsible for the formation of acid sulphate caps, promoting efficient gold deposition and elevated grades.

• Polymetallic Ag-Au mineralization with Mn carbonate discernible at surface as MnO."

The report concluded by recommending that work continue at Sierra Morena and that the proposed detailed mapping at 1:2000 scale and CSAMT survey was fitting as the next phase of the exploration cycle for the prospects reported on.
A 14.6 line km CSAMT survey was completed during the quarter over the SM6 and Vein Breccia Zone Prospects. The aim of the survey was to identify deep resistors (zones of silicification) in both prospect areas to refine drillhole targeting.

Figure 3: Acid cap resistor - SM6 4

DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

The survey was successful in identifying a number of resistors at both SM6 and VBZ. Combining geological, structural and geochemical factors it has been a simple process to prioritize drilling targets form the CSAMT survey.
At SM6 a high priority vertical resistor was detected on the west vein at a depth consistent with the comments in the expert's report for favorable mineralization conditions (Figure 4). Similarly, a resistor has been identified over 3 of the CSAMT lines that has developed under the acid sulphate cap on the regionally favourable NW trend was outlined (Figure 3). Drilling of these targets will commence during April.

S

M SM - 12 - 06

-

12

- (Holes on 87250N, 50m north of profile)

Planned drilling - April 2013

Figure 4: West Vein deep resistor - SM6

At Vein Breccia Zone 4 strong continuous resistors were defined in the CSAMT survey coincident with mapped structures, alteration and anomalous surface geochemistry. The highest rated resistor detected during the survey was at VBZ where a NW trending resistor intersects with a NNW resistor.
The NW trend is regionally significant being the predominant orientation of gold mineralized veins at nearly all the resource deposits in the Deseado Massif and specifically at Cerro Vanguardia, Cerro Negro and San Jose. The NNW trend is interpreted as a pressure release structural orientation and is commonly mineralized.
Geological mapping showed the NNW trending vein to be up to 0.5m wide on the surface and outcrops over a distance of 390m, sampling has returned grades of up to 15.85g/t Au. This vein represents the upper levels of a polymetallic type vein, and is developed within less competent rocks of the Chon Aike Formation. Where this vein is hosted in more competent units at depth, excellent potential exists for the

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

discovery of a significant zone of mineralization. This vein is also evidenced on CSAMT line 4688600N, and on adjoining lines to the north, and south (Figure 5).

Planned drilling - May 2013

Figure 5: Vein Breccia Zone - priority resistor

Drilling is planned for these resistors in 2013 following the drilling at SM6 and results from this programme with programme completion in May and the laboratory results are expected in June.

Santa Cruz Province - Pachi Project

Land owner access agreement discussions over the Pachi Project continued during the quarter and it is now expected that drilling of defined targets will not occur until the 2013-2014 field season.
An extension has been granted on the Pachi project that will allow De Grey to complete the planned drilling of the Pachi targets after winter 2013.

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

Santa Cruz Province - Other Properties

No work was completed on other Santa Cruz Properties during the quarter.

Rio Negro Province

De Grey intends to re-commence exploration in Rio Negro during the winter when fieldwork is difficult in
Santa Cruz Province.

Figure 6: Locations of De Grey's projects, Rio Negro, Argentina

NEW ZEALAND - PUHIPUHI EPITHERMAL GOLD/SILVER PROJECT

During the quarter, De Grey received Ministerial consent from the New Zealand Ministry of Economic
Development for the transfer of Exploration Permit EP51985.
The Project comprises one exploration permit (EP51985) that was granted in 2009 and has a term of five years (with the right to a further five year extension available). The permit area comprises 6,116 hectares located approximately 30km NNW of Whangarei, in the Northland Region of New Zealand.

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

The Project is wholly contained within an area defined by the New Zealand Government's Ministry of Economic Development as being open for mineral exploration. The majority of the project is located on private lands, predominantly farmland and the area provides straightforward access, an educated workforce and good availability of drilling contractors.
The Project is interpreted to represent a well preserved hot spring sinter/breccia system that formed as an outflow from a venting geothermal system. Mineralization in these systems is commonly restricted to fluid upflow settings and very low gold contents are deposited at surficial levels. Fluid upflow settings typically form fissure vein systems at depth, developed in competent basement rocks and fluid quenching in such an environment may produce good gold grades. Fissure vein epithermal gold-silver mineralization commonly forms in dilatant structural environments and examples of these systems include Hishikari (Japan), Cracow (Queensland), Sleeper (Nevada) and Waihi (New Zealand).
The potential for Puhipuhi to host such a fissure vein system has been recognized by several explorers during the last 30 years, however drilling to date has only been relatively shallow, and hasn't tested the deeper parts of the system where the gold-silver mineralization is expected to occur. Other drill targets generated from multi-element surface geochemistry and ground based geophysical surveys (IP and CSAMT) also remain untested within the Project area.
During the quarter De Grey collected a total of 245 close spaced soil samples over the Harrison's Fault Zone and Boundary Breccia Prospects. A total of 45 rock chip samples were collected throughout the project area, including around the Northern Silver workings.
Results from this work are expected to be reported next quarter.
A land access agreement was also negotiated during the quarter with a key landowner, which will allow the completion of drilling over the Bush Hill Prospect. This drilling is expected to commence in 2013.

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

Figure 7: Locations of Puhipuhi project, New Zealand

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

WESTERN AUSTRALIA - TURNER RIVER PROJECT

In September 2012, Polymetals acquired 100% of Lansdowne Resources, which gives Polymetals the rights to earn into a 75% share of the Turner River Gold and Base Metals Joint Venture (Figure 8), and the option to purchase a 75% interest in the Wingina Well gold resource.
Upon Polymetals earning its interest, a 75:25 joint venture will be formed and Polymetals will continue to fund all expenditures up to a Decision to Mine. Upon a Decision to Mine, a mining joint venture area will be declared and mine development expenditures will be funded by De Grey and Polymetals in proportion to their JV interests. De Grey's free carried interest will continue in respect of project areas outside of the mining joint venture area. Upon earning into the Gold Project joint venture Polymetals has the option to purchase a 75% interest in the Wingina Well gold resource with a milestone payment of $4.1 million to De Grey.

Turner River Base Metals

Since assuming management, Polymetals has completed 1,948m of RC drilling, 860m of Diamond core drilling, and a surface channel sampling and geological mapping programme over the Wingina Well project. Drill holes were targeted for resource extension and representative geotechnical and metallurgical testing sampling of the deposit.

Figure 8: Turner River Gold and Base Metals project areas

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DE GREY MINING LTD QUARTERLY OPERATIONS REPORT FOR THE QUARTER ENDING 31 MARCH 2013

A scoping study into the Turner River Project will be conducted in the first half of 2013. The study will consider heap leaching and CIL processing of the ore from the Wingina Well, Amanda and Mt Berghaus prospects. Any plant design and capital works will factor in the possible synergies from potential additional base metal recovery from the Discovery and Orchard Tank deposits.
Preliminary open pit optimization work has indicated economic mining development scenario's for Wingina Well, Amanda, and Mt Berghaus gold deposits, and the Discovery and Orchard Tank base metal deposits. Further work will be undertaken with a revised resource model to finalize these assessments for the scoping study.

CORPORATE

On April 4th, 2013 De Grey announced a share placement of 60,608,562 shares in the company at an issue price of 0.8 cents per share to raise $484,868. De Grey also has provided existing shareholders with an opportunity to participate in a renounceable entitlement offer that will raise up to $1,858,662 by offering eligible shareholders one (1) fully paid share for every two (2) shares held at 0.8 cents each.
The capital raising will fund drilling programs in Argentina and New Zealand which will both commence in the June 2013 quarter.
Non-Executive Director Gary Brabham resigned from the board of directors on 21 March 2013. Gary first joined De Grey as a Non-Executive Director in November 2005 and was appointed Managing Director in January 2008. Gary stepped down as Managing Director in June 2012 and had continued with the Company in a Non-Executive role. Gary's eight year involvement with De Grey has helped establish the Company as a committed gold explorer in Argentina and the Board thanks him for his contribution.

The information in this report that relates to exploration results is based on information compiled by Mr Glenn Martin, who is a Member of the Australasian Institute of Mining and Metallurgy and a full time employee of De Grey Mining Limited. Mr Martin has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves." (the JORC Code). Mr Martin consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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