REG - Shanta Gold Limited - Q1 2021 Production and Operational Update

Shanta GoldAnnouncement

21/04/2021 07:00

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RNS Number : 0937W  Shanta Gold Limited  21 April 2021

21 April 2021

Shanta Gold Limited

("Shanta Gold", "Shanta" or the "Company")

 

Q1 2021 PRODUCTION & OPERATIONAL UPDATE

Shanta Gold (AIM: SHG), the East Africa-focused gold producer, developer and
explorer announces its production and operational results for the quarter
ended 31 March 2021 (the "Quarter", "Q1" or the "Period") for its East African
assets, including New Luika Gold Mine ("NLGM" or "New Luika") and Singida
Project ("Singida") in Tanzania and West Kenya Project ("West Kenya") in
Kenya.

Highlights

·    Zero Lost Time Injuries ("LTI's"), with no LTI's since Q4 2017,
surpassing 6.5 million man-hours;

·    Precautionary COVID-19 measures at all sites to protect the health
and safety of staff and the continuity of operations which remain unaffected;

·    Maiden dividend of 0.10 pence per share announced for payment in
April and a commitment to ongoing sustainable returns;

·    Gross debt of US$11.1 million ("m") reduced to US$1.4 m post Period
following the repurchase of all outstanding convertible loan notes and early
repayment of Exim loan facility;

·    Cash, and available liquidity(1) of US$50.5 m (Q4 2020: US$53.5 m);

·    Net cash(2) of US$31.0 m (Q4 2020: US$37.3 m);

·    Gold production of 14,641 ounces ("oz") (Q4 2020: 20,622 oz);

o  Gold production to increase throughout the year with H1 delivering 45% of
production as previously guided;

o  Ongoing ramp-up of the new third mill at New Luika targeting monthly
throughput of 2,300 tonnes per day during Q3 2021, an increase of 18% compared
with daily throughput in 2020;

o  2021 production guidance of approximately 80,000 oz reiterated;

·    EBITDA(3) of US$7.6 m (Q4 2020: US$15.6 m);

·    Cash Costs of US$829 /oz and All In Sustaining Costs ("AISC") of
US$1,307 /oz (including US$204 /oz in relation to development costs);

o  Q1 AISC higher than 2021 annual guidance, in part due to the profile of
increasing quarterly gold production forecasted for the remainder of the year;

·    Extensive exploration programme on-going with total planned drilling
of up to 80,000 metres in 2021 across the Company's three projects; and,

·    Post period exploration drilling update at Luika deposit has added
76,461 oz of new Indicated resources grading 7.97 g/t (before Q1 depletion).

Operational Summary - NLGM

·    191,767 t milled (Q4 2020: 181,425 t);

·    Average tonnes per day of 2,130 forecasted to increase to 2,300
during Q3 2021;

·    Average head grade of 2.7 g/t (Q4 2020: 3.9 g/t) due to lower grades
achieved compared to forecast in January at the Bauhinia Creek and Ilunga
underground mines;

·    Average recoveries of 89.1% (Q4 2020: 90.4%);

·    Installation of 10 tonne per hour third mill at NLGM completed with
throughput expected to increase further after the tailings pipeline upgrade is
completed in June 2021;

·    Low-cost state ("TANESCO") grid power contributed 11% of NLGM's power
requirements, expected to increase to 37% by H2 2021, reducing power costs and
gradually decarbonising footprint by displacing HFO for largely hydropower and
natural gas powered national grid; and,

·    Run of Mine ("ROM") stockpile of 122,032 t of ore grading 1.31 g/t
(Q4 2020: 154,577 t grading 1.31 g/t).

Financial Summary

·    Unrestricted cash balance of US$41.9 m (Q4 2020: US$41.6 m);

·    4,602 oz contained within doré available for sale at the end of the
Period (Q4 2020: 5,063 oz);

·    VAT receivable increased to US$29.1 m (Q4 2020: US$27.6 m); and,

·    Remaining VAT receivable is subject to verification audit by the
Tanzanian Revenue Authority ("TRA") before being available for further
offsets.

Singida

·    Project build advancing with tenders for work activities being
assessed;

·    Onsite works continue with geotechnical drilling, installation of a
new radio system and site clearance activities underway;

·    US$0.3 m paid towards Crushing Circuit during the Period, with
further US$0.6 m paid post Period;

·    Recruitment drive ongoing with 61 employees at site by the end of the
Period, with 77% of employees at Singida recruited from surrounding villages;
and,

·    Exploration drilling yielded promising grades some of which
significantly exceed the current reserve grade; results are being modelled to
estimate the impact on reserves.

West Kenya

·    Second drill rig now on site and operational as first phase of infill
drilling progresses, third rig to arrive shortly;

·    Encouraging assay results received from initial diamond drilling
("DD") holes, with a number showing high grade intersections;

·    Highlights included:

o  LCD0218 (Isulu) intersected 2.0 m grading 15.9 g/t Au from 233 m,
including 0.5 m at 45.4 g/t;

o  LCD0223 (Bushiangala) intersected 22.9 m grading 4.81 g/t Au from 124 m;

o  *LCD0228 (Bushiangala) intersected 1.8 m grading 20.99 g/t from 187 m;

o  *LCD0231 (Bushiangala) intersected 4.9 m grading 14.35 g/t Au from 111 m;

o  *LCD0236 (Bushiangala) intersected 15.8 m grading 4.08 g/t Au from 111 m;
and,

·    Vocational security guard training programme delivered for 50
participants in partnership with a local security company.

* Results announced post period

New Luika Exploration

·    Underground drilling at the Luika deposit ("Luika") generated
positive results, including:

o  Hole CSD206, which intersected 9.29 m grading 11.27 g/t Au from 441 m,
incl. 4.88 m at 20.07 g/t Au;

·    Updated Luika resource block model has additional 76,461 oz of new
Indicated resources grading 7.97 g/t (before Q1 depletion), post Period; and,

·    Further drilling is planned at Luika and Porcupine South for Q2 2021
to target conversion of Inferred resources into Measured and Indicated
resources.

Corporate Social Responsibility ("CSR")

·    175 students in Songwe being sponsored by Shanta for 2021;

·    Over 600 textbooks donated to secondary schools in the region;

·    150 iron sheets donated to the Songwe District Commissioner to help
with a range of school construction projects;

·    250 acres of sunflower cultivated by local farmers around New Luika
with seeds donated by Shanta;

·    Shanta continues to adopt several COVID-19 best practices to protect
the safety and wellbeing of its employees, and is educating communities in
Songwe to uphold its commitment to Health; and,

·    Shanta awarded top prize by the Tanzanian Government in respect of
its Local Content Compliance for 2019 and 2020.

 

Post Period

·      76,461 oz Indicated resources added at Luika deposit grading 7.97
g/t (before Q1 depletion);

·      All outstanding convertible loan notes have been repurchased from
external noteholders;

·      Shanta's debt facility with Exim Bank repaid early and in full;
and,

·      Group debt now comprises residual balances on specific equipment
financing arrangements only.

2021 Guidance

·      Annual guidance of approximately 80,000 oz at AISC at US$1,050 -
1,100 /oz including development costs (in line with the World Gold Council
("WGC") definition) reiterated for 2021.

 

Note: 1. Available liquidity has been derived as unrestricted cash, restricted
cash and the sale value of doré available for sale at the end of the Period
(net of royalties and expected selling costs).

 

Note: 2. Net cash includes liquidity available from 105 oz unsold at the
refinery at 31 March 2021.

 

Note: 3. EBITDA is earnings before interest, tax, depreciation and
amortisation which has been derived as operating profit exclusive of
depreciation/depletion of tangible assets and amortisation of intangible
assets.

 

 

 

 

Eric Zurrin, Chief Executive Officer, commented:

"2021 continues to be a year of strength for Shanta. Following the
announcement of our maiden dividend in March, we remain committed to enhancing
our robust fundamentals to protect long-term sustainable returns.

Reducing our debt is a key part of that strategy. The early repayment of the
Exim loan facility and the repurchasing of all outstanding convertible loan
notes demonstrates our financial discipline and further strengthens our
balance sheet.

Beyond the income opportunity for shareholders and the steady gold production
at New Luika, our exploration programme continues to unlock further capital
growth within the portfolio. We are seeing encouraging drilling results across
all three of our assets having completed 19% of the drilling programme so far
this year which has already unlocked an additional 76,461 oz of new Indicated
resources at Luika. We look forward to providing further updates as our
drilling programme advances."

Underpinning our performance and operational track record in Tanzania is the
strength of our relationships with our in-country stakeholders. We are
incredibly proud to have been awarded Tanzanian Government's Local Content
award for 2019-20. It reflects the core purpose of our business to create
value and opportunity for Shanta and the people of Tanzania through our
operations.

 

 

Analyst conference call and presentation

Shanta Gold will host an analyst conference call and presentation today, 21
April 2021, at 09:30 BST. Participants can access the call by dialling one of
the following numbers below approximately 10 minutes prior to the start of the
call or by clicking on the link below.

UK Toll-Free Number: +44 (0) 800 358 6374

UK Toll Number: +44 (0) 330 336 9104

PIN: 876209

https://events.globalmeet.com/Public/ClickToJoin/ZW5jPUs2NWZKU2ZndWdwaE5vTStZMHBla3RzaHl1NW5jVGVodEtGUTJ0WFZJNjdlZGFmRUxiWXZIZz09

 

Participant Passcode: 876209

 

The presentation will be available for download from the Company's website:
www.shantagold.com. A recording of the conference call will subsequently be
available on the Company's website.

 

Enquiries:

 

 Shanta Gold Limited
 Eric Zurrin (CEO)                                              +44 (0) 14 8173 2153
 Luke Leslie (CFO)

 Nominated Adviser and Joint Broker
 Liberum Capital Limited
 Scott Mathieson / Ed Thomas / Louis Davies / Nikhil Varghese   +44 (0) 20 3100 2000

 Joint Broker
 Tamesis Partners LLP
 Charlie Bendon / Richard Greenfield                            +44 (0) 20 3882 2868

 Public Relations
 FTI Consulting
 Sara Powell                                                    +44 (0) 20 3727 1426

 

About Shanta Gold

Shanta Gold is an East Africa-focused gold producer. It currently has defined
ore resources on the New Luika and Singida projects in Tanzania and holds
exploration licenses covering approximately 1,100 km(2) in the country. Shanta
Gold also owns the West Kenya Project in Kenya with defined inferred mineral
resources of 1.2 Mt grading 12.6 g/t and continuous exploration licences
covering 1,162 km(2). Shanta's flagship New Luika Gold Mine commenced
production in 2012 and produced 82,978 ounces in 2020. The Company has been
admitted to trading on London's AIM market and has approximately 1,048 m
shares in issue. For further information please visit: www.shantagold.com
(http://www.shantagold.com) .

 

Competent Person Statement

The technical information contained in this announcement was reviewed by
Evance Rwiza (the Company's Senior Resource Geologist) who is a Member of the
Australasian Institute of Mining and Metallurgy (AusIMM) Membership No.317697
and Yuri Dobrotin, P.Geo. Membership No.0702 (Shanta's Group Exploration
Manager), who is a practicing member of the Association of Professional
Geoscientists of Ontario, Canada (PGO).

They have sufficient experience that is relevant to the style of
mineralization and type of deposit under consideration and to the activity
being undertaken to qualify as a Competent Persons as defined in the 2012
Edition of the 'Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves' and for the purposes of the AIM Guidance
Note on Mining and Oil & Gas Companies dated June 2009, and National
Instrument 43-101 (''NI 43-101)

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit)
Regulations 2019.

 

 

Q1 2021 PRODUCTION & OPERATIONAL UPDATE

Safety, Health and Environment

There were no Lost Time Injuries during the Period and the Company has now
surpassed 6.5 million man-hours without a Lost Time Injury. Shanta maintains
its track record of operating among the safest gold mining operations of its
peers and had a Total Recordable Injury Frequency Rate ("TRIFR") (per 1
million hours worked) of 0.00 for Q1 (Q4 2020: 0.00), significantly below the
industry average.

Shanta continues to adopt several best practices designed to prevent the
COVID-19 pandemic from entering NLGM and these measures remain in place. The
safety and wellbeing of our employees remains the Company's highest priority
and precautionary safeguards in place at the mine are robust. The Company is
educating communities about the virus locally within Songwe, where Health
remains one of the core pillars to Shanta's social responsibilities strategy.

Operational Summary - NLGM

Production Summary

                               Q1 2021  Q4 2020  Q3 2020  Q2 2020
 Tonnes ore milled             191,767  181,425  181,036  176,415
 Tonnes ore milled per day     2,131    1,972    1,968    1,939
 Grade (g/t)                   2.67     3.91     3.84     4.36
 Recovery (%)                  89.1     90.4     89.4     89.7
 Gold (oz)
 Production                    14,641   20,622   19,973   22,216
 Sales                         15,149   19,018   20,192   23,932
 Silver production (oz)        17,360   26,544   25,016   21,378
 Realised gold price (US$/oz)  1,801    1,376    1,524    1,633

 

Gold production during the period was 14,641 oz. Overall, a total of 127,721 t
of ore grading 3.9 g/t was mined from underground in Q1 compared with 155,859
t of ore grading 4.5 g/t in Q4 2020. A further 5,059 t ore grading 0.7 g/t was
mined from open pits in Q1 compared with 44,691 t of ore grading 1.4 g/t in Q4
2020. 191,767 t of ore was milled during the period (Q4 2020: 181,425 t). The
ROM stockpile at the end of Q1 was 122,032 t of ore grading 1.31 g/t (down
from 154,577 t grading 1.31 g/t at the end of Q4 2020). Average recoveries of
89.1% were achieved in the plant during the period (Q4 2020: 90.4%).

Commissioning of a new 10 tonne per hour third mill at New Luika was completed
in the Period. This has increased throughput capacity by 8% which is expected
to grow further once the tailings pipeline upgrade is completed in June
2021.Low-cost grid power contributed 11% of New Luika's power requirements in
the Period. This is expected to increase to a 37% contribution by H2 2021
which will help further reduce costs at New Luika.

Financial

During the Quarter, a total of 15,149 oz of gold was sold at an average price
of US$1,801 /oz against the average spot price for the quarter of US$1,793
/oz.

Cash Costs of US$829 /oz and AISC of US$1,307 /oz (including US$204 /oz in
relation to development costs) were achieved in the Quarter respectively.

Working capital in the Quarter reduced by US$6.4 m, accounted for by an
increase in trade and other receivables (US$0.8 m), an increase in trade and
other payables (US$3.2 m) and a decrease in inventories (US$3.9 m). The
movement in trade and other receivables includes the VAT receivable which
increased by US$1.5 m to US$29.1 m. The remaining VAT receivable is subject to
verification audit by the TRA before being available for further offsets. The
decrease in inventories includes ROM stockpile which reduced by US$3.0 m and
spare parts and consumables which reduced by US$1.0 m.

Capital expenditure was US$4.7 m (Q4 2020: US$3.4 m) for the Quarter, which
predominantly related to underground development at BC, Luika and Ilunga.

Singida Gold Mine

Construction of Singida Gold Mine advanced during the Period with work on
detailed designs for key project equipment and infrastructure progressing
well. Tenders for surface equipment hire, production and grade control
drilling, and open pit blasting services have been approved  and contracts
for these workstreams are expected to be awarded during Q2. US$0.3 m deposit
was paid for the crushing circuit in the Period, and a further US$0.6 m has
been paid post Period.

Onsite work has progressed, with geotechnical drilling and the installation of
a site-wide radio system completed during the Period. Bush clearance in
preparation for planned TSF and plant infrastructure is ongoing.

Headcount at Singida has increased in line with increasing operational needs.
Recruitment in the Period included a newly appointed Construction Manager and
Environmental Officer. 77% of employees at Singida are from villages
surrounding the mine site.

Exploration conducted during the Period targeted Cornpatch West with a Reverse
Circulation ("RC") drilling programme. 11 holes were drilled representing
1,855 metres, targeting the upgrade of Inferred resources to the Indicated
category. Drilling highlights included:

o  Hole SC715 intersected 5.0 metres grading 5.10 g/t Au;

o  Hole SC719 intersected 7.0 metres grading 7.30 g/t Au; and,

o  Hole SC717 intersected 4.0 metres grading 3.14 g/t Au.

 

These drilling results included some intersections with grades significantly
exceeding the current reserve grade at Singida and these are being modelled to
estimate any potential impact on reserves.

 

West Kenya

Investment in exploration at the West Kenya Project continues at pace and the
number of drill rigs onsite increased to two in the Period with a third
expected to be added shortly. A total of 32 holes for 4,873 metres were
completed in the Period, representing 54% of the initial 9,000 metre programme
planned for Phase 1 of the Company's wider exploration strategy.

Assay results have been received for 7 DD holes. These comprised of 5 holes at
Isulu totalling 1,136 metres and 2 holes at Bushiangala totalling 402 metres.
Highlights included:

o  LCD0218 (Isulu) intersected 2.0 metres grading 15.9 g/t Au;

o  LCD0221 (Bushiangala) intersected 1.5 metres grading 4.15 g/t Au;

o  LCD0223 (Bushiangala) intersected 22.9 metres grading 4.81 g/t Au;

o  *LCD0227 (Isulu) intersected 1.50 m grading 13.9 g/t Au;

o  *LCD0228 (Bushiangala) intersected 1.8 metres grading 20.99 g/t Au;

o  *LCD0231 (Bushiangala) intersected 4.9 m grading 14.35 g/t Au;

o  *LCD0233 (Bushiangala) intersected 4.40 m grading 8.37 g/t Au; and,

o  *LCD0236 (Bushiangala) intersected 15.8 m grading 4.08 g/t Au.

*               Results announced post period

Exploration activities will continue throughout 2021 with the main focus being
conversion of Inferred resources to the Indicated category.

Shanta conducted a vocational guard training programme in partnership with KK
Security during the Period. 44 out of 50 graduates have received full-time job
offers from KK in various parts of Kenya, and the Company plans to expand its
Kenyan CSR initiatives in the near-term to drive local socioeconomic growth.

Exploration - New Luika

Exploration drilling was conducted in the Period at the Luika deposit and
assay results were received for exploration drilling at Porcupine South. Luika
is located 1.8 km to the northwest of the NLGM processing plant and is one of
NLGM's three actively mined underground deposits. Porcupine South is a new
target located about 22 km to the east of the NLGM processing plant.

At Luika, 7 DD holes were drilled in the Period totalling 2,875 metres.
Drilling has so far intersected mineralisation with sizeable widths, including
the following encouraging results:

 

o  Hole CSD206 intersected 9.29 metres grading 11.27 g/t Au;

o  Hole CSD208 intersected 5.44 metres grading 2.61 g/t Au;

o  Hole CSD209 intersected 2.06 metres grading 3.08 g/t Au;

o  Hole CSD210 intersected 3.16 metres grading 5.37 g/t Au;

o  *Hole CSD211 intersected 8.30 metres grading 4.89 g/t Au; and,

o  *Hole CSD214 intersected 4.60 metres grading 24.47 g/t Au.

*               Results announced post period

In addition, assay results received have been used to update the Company's
Mineral Resource Estimate ("MRE") for Luika and resultantly 76,461 oz of gold
has been added to Indicated resources. As at the end of March 2021, Luika's
JORC compliant MRE totals 3.8 Mt, grading 3.47 g/t and containing 425 koz of
gold using a cut-off grade of 1.0 g/t.

 

At Porcupine South, assay results were received for five drill holes (two RC
holes, three DD holes) which were part of the Q4 2020 drilling campaign.
Highlights included:

 

o  Hole PSCD001 intersected 5.95 metres grading 1.43 g/t Au;

o  Hole PSDD001 intersected 2.35 metres grading 4.60 g/t Au; and,

o  Hole PSRC045 intersected 2.00 metres grading 1.80 g/t Au.

 

Drilling at Luika and Porcupine South will continue into Q2 with focus
remaining on converting Inferred resources into the Measured and Indicated
categories and generating additional Inferred resources.

Corporate Social Responsibility ("CSR")

Shanta has continued its education sponsorship programme for underprivileged
students, and 175 students from primary and secondary schools in the local
area have been sponsored for 2021. Towards the end of the Quarter the Company
distributed stationery and exercise books to students, procured on their
behalf from local suppliers in the area. Separately, Shanta has also donated
over 600 textbooks to secondary schools in Songwe to help replace materials
that were lost during a fire in 2020.

Work is ongoing at several of Shanta's recent education infrastructure
projects. Construction of a new dormitory at Saza secondary school is underway
with foundations and wall framework now largely completed. This dormitory will
provide children who live remotely with accommodation during the week, thus
overcoming a barrier to attendance and increasing local access to education.
To help support the wider Songwe District, Shanta also donated 150 iron sheets
to the Songwe District Commissioner in the Period to aid the construction of
new schools in the region.

Shanta's agricultural projects continue to support local farmers. Using
sunflower seeds donated by the Company, 250 acres of sunflower have been
cultivated by 175 farmers local to New Luika. These have the potential to
produce an annual crop harvest of approximately 125,000 kg.

The Company attended the recent Mining Investment Forum in Dar Es Salaam. The
Forum was organised by the Government of Tanzania through the Ministry of
Minerals and brought together a range of stakeholders in the Mining Industry
for discussion, sharing of experiences and wider learning. Shanta's
contribution to local development was recognised and the Company was awarded
the top prize for Local Content Compliance in respect of its performance
during 2019 and 2020.

Post Period

The Company announced an exploration drilling and resource update post period,
with a notable increase to the Indicated resources at Luika deposit of 76,641
ounces grading 7.96 g/t.

In addition, the Company completed the repurchase of all outstanding
convertible loan notes from external noteholders post period for US$9.8
million and fully repaid its debt facility with Exim Bank. Group debt is now
limited to specific equipment financings in place at the end of 2020 totalling
US$1.4 m.

 

ENDS

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