REG - Shanta Gold Limited - Q1 2022 Production and Operational Update

Shanta GoldAnnouncement

26/04/2022 07:16

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RNS Number : 3374J  Shanta Gold Limited  26 April 2022

26 April 2022

Shanta Gold Limited

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

Q1 2022 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 2022 (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.

Eric Zurrin, Chief Executive Officer, commented:

"It's been a great start to the year operationally, with mining beginning at
the high-grade Bauhinia Creek Crown Pillar at New Luika one month ahead of
schedule. With the initial ore being mined at the expected grades of 8 g/t, we
are confident that our 2022 guidance of 68-76 Koz has been significantly
de-risked.

The Singida Project remains on budget and on schedule and with construction
well underway there is a clear pathway to Shanta becoming a 100,000 oz pa gold
producer in Q1 2023. In order to maximise investment flexibility as we focus
on the delivery of our growth projects, and being cognisant of the global cost
inflation, we are exploring the possibility of securing some traditional debt
funding and hope to be able to conclude those discussions in the coming weeks.

We were also pleased to announce a 31% increase in the Mineral Resource
Estimate at West Kenya to 1.55 Moz during the period, showcasing the depth of
quality and potential for growth throughout the portfolio. The Feasibility
Study workstream will begin at West Kenya in May 2022.

Finally, the steady performance of the Company during Q1 continues to be
underpinned by our first-class health and safety record, and I would like to
congratulate the Shanta team on achieving a landmark 8.8 million man-hours
without an LTI. We have always placed safety and social responsibility at the
heart of our business, and in keeping with this approach, we have taken the
important step this year to release our inaugural Sustainability Report.
Acting responsibly and ethically is central to delivering sustainable returns
for our shareholders, and we are committed to further enhancing our disclosure
during 2022. This has been a very encouraging start to the year, and we look
forward to updating shareholders further in due course.

Highlights

·    Zero Lost Time Injuries ("LTI's"), with no LTI's since Q4 2017
surpassing a landmark 8.8 million man-hours without a Lost Time Injury;

·    Gold production of 11,408 oz (Q4: 12,244 oz), in line with guidance
provided in January 2022;

·    West Kenya Project upgraded mineral resource estimate including 31%
increase to 1.55 Moz and 221% increase in Indicated resources to 378 Koz
grading 11.7 g/t;

·    New Ramula Regional Centre within West Kenya Project, with maiden
resources totalling 434 Koz grading 2.08 g/t and 7 new targets identified;

·    Announced for the 3rd consecutive year that all mined ounces have
been replaced during the year with newly defined reserves;

·    Newly defined reserves of 110,000 oz added in 2021, before depletion,
predominantly from the Luika Underground project;

·    Inaugural 2021 Sustainability Report published in the Period; and

·    Shortly after the Period end, and one month ahead of schedule, the
Bauhinia Creek Crown Pillar was accessed with high grade ore being mined
beginning April 19(th).

Financial Summary

·    Cash, and available liquidity(1) of US$13.4 million ("m") (Q4:
US$15.9 m);

·    3,446 oz contained within doré available for sale at the end of Q1
(Q4: 1,593 oz);

·    Gross debt of US$6.8 m (Q4: US$2.4 m);

·    Operating costs of US$1,297 /oz (Q4: US$1,254 /oz) and AISC of
US$1,760 /oz (Q4: US$1,624 /oz) in the Quarter, respectively. The increase in
the AISC is largely due to fewer ounces being recovered in the Period in line
with the full year production plan, and cost inflation.

·   Capital expenditure and investment to pursue high quality growth
initiatives totalled US$9.5 m including US$4.9 m for Singida construction,
US$2.7 million for NLGM, and US$1.9 m for West Kenya;

·    VAT receivable of US$25.1 m (Q4: US$26.8 m), of which approximately
US$23 m relates to the historical period July 2017-June 2020. An application
for an Out of Court Settlement now lodged in country; and

·    Positive engagement with the Tanzanian Revenue Authority ("TRA") as
evidenced by a US$3.0 million VAT offset allowed against Corporate Income Tax
and a further VAT cash refund of US$1.4 m in Q1.

Operational Summary

New Luika Gold Mine

·    214,204 t milled (Q4: 218,991 t) from underground and open pit
sources;

·    Average head grade of 1.9 g/t (Q4: 2.0 g/t) blended from underground,
open pit, and existing ROM stockpile sources;

·    Average recoveries of 87.2% (Q4: 87.1%);

·    Run of Mine ("ROM") stockpile of 155,233 t of ore grading 1.0 g/t
(Q4: 150,549 t grading 1.0 g/t) containing approximately 5,000 oz;

·    Underground actual mined ore grade reconciling +3% YTD versus grade
control model;

·    Underground mining equipment performing in line with expectations and
underground mined ounces up 15% versus plan during the Quarter resulting from
better than expected tonnes and grade mined versus plan;

·    Open pit mining representing 20% of total planned mined ounces during
the Quarter was impacted by underperformance of the mining contractor due to
delays in spares and availability of mining equipment resulting in a deficit
of approximately 1,700 oz during the Quarter, expected to be partially
recovered in future quarters; and

·    Bauhinia Creek Crown Pillar successfully accessed one month ahead of
schedule. Mining of high grade ore started on April 19th, with initial
material being mined at approximately 8 g/t consistent with expectations.

Singida

·   Singida remains on track for first production in Q1 2023 and will
transform Shanta Gold into a +100,000 oz/pa producer with a diversified
resource base;

·    Successful delivery of the Metso built Crushing Circuit in December
2021. All equipment and steel required was delivered in the Quarter with
assembly beginning in April 2022;

·    Manufacturing of the Grinding & Gravity Circuit Mill by NCP in
South Africa is 100% complete with delivery due in late April 2022;

·    Tailings Storage Facility Dam design is completed, all permits
received, and approval has been granted by the regulators to commence
construction in April 2022;

·    Key infrastructure including bulk power, water, buildings, and
fencing are progressing on track;

·    Ore stockpile levels total 59,470 tonnes grading 1.72 g/t for 3,291
contained ounces at the end of the Quarter; and

·    During the Period, phase 1 grade control drilling at the Gold Tree
deposit returned +5% reconciliation versus the reserve model which de-risks
the initial 12 month production plan following commissioning. The Gold Tree
deposit contains 61% of the current mineral reserves at Singida.

West Kenya

·   The Mineral Resource Estimate (MRE) at the West Kenya Project,
increased by 31% to 1.55 Moz and Indicated resources have increased by 221% to
378 Koz grading 11.70 g/t;

·    Successful regional drilling results at the Ramula Regional Center,
within the West Kenya Project, were announced and a maiden Inferred resource
of 434 Koz grading 2.08 g/t was declared;

·    Drilling ongoing during the Quarter with all three rigs operational
by March 1(st) following a period of one rig for the first two months of 2022
while the Mineral Resource Estimate was being completed; and

·    Commencement of the West Kenya Project Feasibility Study workstream
begins in May 2022.

Corporate Social Responsibility ("CSR")

·    Shanta is pleased to announce that in the Period, the Company
published its first Sustainability Report, which covers its activities for the
year ended 31 December 2021;

·  Materiality assessment completed with internal and external stakeholders
to proactively address key ESG risks and identify opportunities to maximise
positive impact for stakeholders;

·    Sustainability Report prepared in line with the Sustainability
Accounting Standards Board (SASB) standards;

·    Commitment in 2022 to start aligning climate disclosure against the
framework set out by the TCFD to report in line with best practice for main
market listed companies;

·    Committed sponsorship of 2,100 primary and secondary school children
in the community surrounding NLGM;

·    Completed construction of the Saza Secondary Dormitory which will
accommodate 80 female students; and

·    2,100 farmers, up from approximately 150 farmers in 2018, have
enrolled in Shanta's Mining Agriculture Improvement Program ("SMAP") which
provides advice, training, and farming materials to farmers in the local
surrounding Mbangala and Maleza villages.

 

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).

 

 

Analyst conference call and presentation

Shanta Gold will host an analyst conference call and presentation today, 26
April 2022, at 10:00am 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) 800 279 6894

UK Toll Number: +44 (0) 330 165 3641

PIN: 204102

https://events.globalmeet.com/Public/ClickToJoin/ZW5jPUVRNmNWaVloU1JzVUJCaU9qcVVjcWRzaHl1NW5jVGVodEtGUTJ0WFZJNjcxTnNvcEN2ZDhoZz09
(https://events.globalmeet.com/Public/ClickToJoin/ZW5jPUVRNmNWaVloU1JzVUJCaU9qcVVjcWRzaHl1NW5jVGVodEtGUTJ0WFZJNjcxTnNvcEN2ZDhoZz09)

 

Participant Passcode: 204102

 

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.

 

Investor Conference Call

Shanta Gold is hosting a live investor presentation via the Investor Meet
Company platform today, 26 April 2022, at 11:00 am BST. The presentation is
open to all existing and potential shareholders and questions can be submitted
any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Shanta
Gold via:
https://www.investormeetcompany.com/shanta-gold-limited/register-investor
(https://protect-za.mimecast.com/s/Z9HnCVmrpNhwlrGCGefj-)

Investors who already follow Shanta Gold on the Investor Meet Company platform
will automatically be invited.

 

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 / 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 / Nick Hennis                      +44 (0) 20 3727 1426

 

About Shanta Gold

 

Shanta Gold is an East Africa-focused responsible gold producer, developer,
and explorer. The company has an established operational track record, with
defined ore resources on the New Luika and Singida projects in Tanzania, with
reserves of 645 Koz grading 3.0 g/t, and exploration licences covering
approximately 1,000 km(2) in the country. Alongside New Luika and Singida,
Shanta also owns the high-grade West Kenya Project in Kenya and licences with
resources of 1.6 million ounces including 378 Koz in the Indicated category
grading 11.70 g/t. With a strong balance sheet, a growing diversified
portfolio and a maiden dividend paid in 2021, Shanta offers a resilient
investment opportunity for the near and long-term. Shanta is quoted on
London's AIM market (AIM: SHG) and has approximately 1,048 million shares in
issue.

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.

 

Competent Person Statement

The technical information contained within this announcement has been reviewed
by Juma Kisunda (the Company's Technical Services Manager), who is a Member of
the Australasian Institute of Mining and Metallurgy (AusIMM) 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 mineralisation 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 Mineral 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 2022 PRODUCTION & OPERATIONAL UPDATE

Safety, Health and Environment

There were no LTIs during the Period and the Company has now surpassed a
landmark 8.8 million man-hours without an LTI. Shanta maintains its track
record of operating among the safest gold mining operations of its peers and
achieved a Total Recordable Injury Frequency Rate ("TRIFR") (per 1 million
hours worked) of 1.72 for Q1.

Operational Summary - NLGM

Production Summary

                               Q1 2022  Q4 2021  Q3 2021  Q2 2021
 Tonnes ore milled             214,204  218,991  223,338  200,511
 Grade (g/t)                   1.90     2.00     2.23     2.49
 Recovery (%)                  87.2     87.1     88.6     88.6
 Gold (oz)
 Production                    11,408   12,244   14,194   14,201
 Sales                         10,527   13,538   12,001   16,828
 Silver production (oz)        14,615   14,270   17,748   16,870
 Realised gold price (US$/oz)  1,883    1,796    1,790    1,812

 

Gold production during the period was 11,408 oz in line with guidance provided
in January 2022. Overall, a total of 173,652 t of ore grading 2.46 g/t was
mined from underground in Q1 compared with 177,256 t of ore grading 2.5 g/t in
Q4 2021. A further 41,062 t ore grading 1.17 g/t was mined from open pits in
Q1 compared with 32,562 t of ore grading 1.3 g/t in Q4 2021. The ROM stockpile
at the end of Q1 was 155,233 t of ore grading 1.00 g/t (Q4: 150,549 t grading
1.00 g/t). Average recoveries of 87.2% were achieved in the plant during the
period (Q4: 87.1%).

Actual mined ore from underground reconciled +3% in the Quarter versus the
grade control model. Underground mining equipment performed in line with
expectations and underground mined ounces were up 15% versus plan during the
Quarter resulting from better than expected tonnes and grade mined versus
plan. Open pit mining representing 20% of total planned mined ounces during
the Quarter was impacted by underperformance of the mining contractor due to
delays in spares and availability of mining equipment resulting in a deficit
of approximately 1,700 oz during the Quarter which is expected to be partially
recovered in future quarters.

The Bauhinia Creek Crown Pillar was successfully accessed one month ahead of
schedule. Mining of high grade ore commenced on April 19(th) with initial
material being mined at approximately 8 g/t consistent with expectations. The
2022 guidance of 68,000 - 76,000 oz has been de-risked following successful
commencement of mining from the Bauhinia Creek Crown Pillar.

Processing of milled ore during the Quarter totalled 214,205 tonnes, in line
with plan (Q4: 218,991 t). The average head grade of 1.9 g/t (Q4: 2.0 g/t)
included a blend of material from underground, open pit, and existing ROM ore
stockpile sources.

The demand for skilled operators across Africa continued from 2021, including
demand for growing workforces in Tanzania as new operations commenced. This
has led to upward pressure on employee compensation and turnover. Shanta has
adopted a policy of training and development in situations where re-hiring was
not possible or deemed economically unfavourable.

Financial

Adjusted Operating Costs of US$1,297 /oz (Q4: US$1,254 /oz) and AISC of
US$1,760 /oz (Q4: US$1,624 /oz) were achieved in the Quarter, respectively.
The increase in the AISC is largely due to fewer ounces being recovered in the
Period in line with the full year production plan, and cost inflation.

Cost inflation has been experienced across key parts of the cost structure
including consumables, spares and equipment being procured from outside
Tanzania. Energy and emulsion are two of Shanta's key input costs. Shanta has
proactively decreased its reliance on oil since 2019 and now sources
approximately 25% of energy from the state electricity grid (largely hydro)
and solar. The remaining 75% of energy needs comes from heavy fuel oil and
subject to changes in the underlying oil price.

Ammonium nitrate, an important ingredient in emulsion production, has
historically been 40% sourced from Russia. Since the war in Ukraine and new
sanctions, shipments have disrupted global flow of supply which will continue
until sanctions reverse or substitution of processing centres emerges (eg away
from Russia). Shanta's supplier of emulsion is based in South Africa and has
shifted to domestic supply of ammonium nitrate. The global price of ammonium
nitrate has increased q/q since Q1 2021 when it was US$560/t to a March 2022
price of US$1,225/t. Shanta consumes approximately 2,000 tonnes pa of ammonium
nitrate at New Luika.

A total of US$4.4 m of the VAT receivable was received as a refund/offset from
the TRA in Q1 (Q4: US$4.2 m). The Company's Tanzanian VAT receivable decreased
from US$27.7 m to US$25.1 m, the entirety of which is subject to verification
audit by the TRA before being available for further offsets. Approximately
US$23 million of the US$25.1 million relates to the period July 2017-June
2020. An application for an Out of Court Settlement has now been lodged in
country.

Capital expenditure at New Luika was US$2.7 m (Q4: US$3.8 m) for the Quarter,
which predominately related to underground development at the Bauhinia Creek
and Luika mines, vehicles, and equipment.

At the end of the Quarter, US$5 million was drawn from an unsecured standby
facility with Standard Bank in Tanzania (US$1 million at Q4 2021). Shanta is
exploring the possibility of securing some traditional debt funding and hope
to be able to conclude those discussions in the coming weeks.

 

Singida Gold Mine

Construction of the Singida Gold Mine is progressing on schedule and in line
with capital spending expectations. Several major project milestones have now
been completed on site with construction now 51% complete highlighting a clear
path to transforming Shanta into a +100,000 oz/ pa gold producer in Q1 2023.
US$4.8 m in capital expenditure was incurred in Q1 2022.

Significant construction milestones were achieved in the Quarter with delivery
of the newly designed Crushing Circuit and with all equipment and steel now on
site, assembly is underway. Manufacture of the Grinding and Gravity Circuit
mill is 100% complete with shipment to site targeted for late April 2022 and
installation planned for May 2022. The Tailings Storage Facility ("TSF") and
Waste Rock Dump construction has begun following the approval of permits in
2021 and the appointment of the Independent Registered Engineer. Further key
infrastructure including bulk power, water, buildings, fencing are progressing
steadily on track.

Open pit operations continued during the Quarter with operations focused
mainly on stripping waste in Gold Tree pit. Overall ore stockpile levels to
date at Singida are 59,470 tonnes grading an average of 1.72g/t for 3,291
contained ounces.

During the Period, phase 1 grade control drilling at the Gold Tree deposit
returned +5% reconciliation versus the reserve model which de-risks the
initial 12 month production plan following commissioning. The Gold Tree
deposit contains 61% of the current mineral reserves at Singida.

West Kenya

During the Quarter, Shanta announced that the Mineral Resource Estimate (MRE)
at the West Kenya Project increased by 31% to 1.55 Moz and Indicated resources
increased by 221% to 378 Koz grading 11.70 g/t.

The results of the regional exploration drilling at the Ramula target were
also announced in the Quarter, adding a further 434 Koz grading 2.08 g/t to
total resources at the West Kenya Project, delivering a 37% increase in the
West Kenya Resource and confirming Shanta's confidence in district scale
potential.

The exploration strategy for West Kenya over the remainder of 2022 is to
increase the resource conversion with approximately 700,000 oz of additional
Inferred resources being targeted for potential conversion to Indicated
category and expand the existing resource inventory.

There are currently three drill rigs operational at West Kenya with
Feasibility Study work due to begin in May 2022. Drilling in Q1 totalled 7,007
metres.

Corporate Social Responsibility ("CSR")

In Q1, Shanta published its inaugural Sustainability Report, which covers its
activities for the year ended 31 December 2021 both at a corporate level and
on the ground at the New Luika Gold Mine, Singida Project, and the West Kenya
Project. In 2022 Shanta will look to enhance the disclosure in anticipation of
mandatory TCFD reporting for AIM-listed companies and further enhance the
Companies sustainability performance with a focus on setting clear targets and
pathways and integrating these into our operations.

Shanta has continued developing the education prospects of local communities
around NLGM. 185 (2021: 175) students from primary and secondary schools in
the local area have been sponsored for 2022. Each student will be provided
with two pairs of uniforms, one pair of shoes and stationery to cover for the
whole 2022 academic year.

During the Quarter Shanta completed the construction of the Saza Secondary
Dormitory which will accommodate 80 female students preventing the need for
them to walk over 16 kilometers to and from school to attend classes. Work to
complete construction of the Saza dispensary staff house progressed well
during the Quarter, upon completion the house will accommodate up to five
medical staff members and is expected to be complete by May 2022.

Uptake in Shanta's Mining Agriculture Improvement Program ("SMAP") continued
to increase during the Quarter, and there are now approximately 2,100 farmers
enrolled for the 2022 farming period. During the Period, the CSR team
coordinated a two-day capacity building training for AMCOS leaders from two
wards being Saza and Mbangala where 90% of the enrolled farmers attended. To
improve the efficiency and to add value to the farming practices in the
surrounding community, Shanta has ordered 14 seed planters of 2 different
models, which will be distributed in the villages around May 2022.

Post Period

Shortly after the Period end, and one month ahead of schedule, the Bauhinia
Creek Crown Pillar was accessed with high grade ore being mined beginning
April 19(th).

ENDS

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