REG - Shanta Gold Limited - Q1 2023 Production and Operational Update

Shanta GoldAnnouncement

24/04/2023 07:15

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RNS Number : 1387X  Shanta Gold Limited  24 April 2023

24 April 2023

Shanta Gold Limited

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

Q1 2023 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 2023 (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:

"I am pleased to report a strong start to 2023, with first gold pour at our
new Singida Gold Mine taking place on the 30th of March. As a result, Shanta
is now a 100,000 ounce per year gold producer with a diversified resource
base, a de-risked balance sheet, and significantly more financial flexibility.
Ramp up at the site is progressing well, with 2,200 ounces produced in the
first 22 days of April 2023, and we expect to announce our 2023 production
guidance and five-year plan in this quarter.

Production during Q1 at New Luika was 15,317 ounces, slightly lower than
budget due to temporarily reduced availability of underground equipment in
February, which was rectified in March, and generally excessive rains. Despite
this, gold production for both January and March was above budgeted
production. April production is on track for approximately 6 Koz and we remain
confident of hitting full year guidance at the mine of 66-72 Koz.

"At West Kenya, we announced an exciting resource update following exceptional
exploration and drilling results and resources now total 1.76 million ounces
at 5.55 g/t Au including 0.72 million ounces in the Indicated category grading
11.45 g/t Au. With drilling set to recommence in the next few weeks, we are
excited by the potential for West Kenya to become one of Africa's next
high-grade gold mines.

"Our performance is underpinned by our excellent safety record, which
continued throughout the Quarter and saw no recordable incidents at both
Singida and New Luika. Meanwhile, our balance sheet remains healthy
positioning us well to unlock further long-term value for our shareholders for
the remainder of the year."

Highlights

·    First gold pour at the new Singida Gold Mine on 30 March 2023;

o  Singida increases Shanta's production to approximately 100,000 oz pa;

o  Ramp-up at Singida progressing well including 2,200 oz produced in the
first 22 days of April 2023;

·    NLGM Q1 production of 15,317 oz;

·    Updated West Kenya Project mineral resource estimate to 1.76 Moz
grading 5.55 g/t Au;

·    Group total resources updated to 3.67 Moz grading 3.28 g/t Au;

·    VAT refunds and offsets of US$5.7 m in Q1; and,

·    Excellent safety record with TRIFR rate of 0.00 (Singida) and 0.00
(NLGM).

Q1 2023 Financial Summary

·    Cash, and available liquidity(1) of US$11.5 m at 31 March 2023 (Q4:
US$13.0 m), including US$1.5 m undrawn from the working capital facility;

·    Gross debt of US$29.1 m (Q4: US$24.1 m);

·    Operating costs of US$1,141 /oz (Q4: US$1,112 /oz) and AISC of
US$1,429 /oz (Q4: US$1,347 /oz) in the Quarter, respectively; and

·    Capital expenditure and investment totalled US$9.8 m including US$6.7
m for Singida construction, US$2.4 million for NLGM, and US$0.7 m for West
Kenya.

Q1 2023 Operational Summary

New Luika Gold Mine

·    Zero LTIs during the Quarter;

·    217,479 t milled (Q4: 227,207 t) from underground and open pit
sources;

·    Average head grade of 2.52 g/t Au (Q4: 2.60 g/t Au) blended from
underground, open pit, and existing ROM stockpile sources;

·    Average recoveries of 87.1% (Q4: 88.0%);

·    Gold production of 15,317 oz (Q4: 16,742 oz);

·    Run of Mine ("ROM") stockpile of 224,426 t of ore grading 0.99 g/t Au
(Q4: 207,392 t grading 0.92 g/t Au) containing approximately 7,124 oz.

Singida Gold Mine

·    Zero LTIs during the Quarter.

·    Singida achieved first gold pour in March 2023 which will increase
Shanta Gold Group production by approximately 45%-50% to 100,000 oz/pa;

·    Construction was completed on time and on budget;

·    Average head grade of 3.15 g/t Au from open pit and existing ROM
stockpile sources;

·    Ore stockpile level at Singida is currently 194,196 t grading an
average of 2.70 g/t Au (Q4: 171,500 grading 2.61g/t Au) for 16,883 contained
ounces;

·    Ramp-up at Singida is progressing well including 2,200 oz produced in
the first 22 days of April 2023;

·    Commercial production, 2023 production guidance, and 5-year plan
expected in Q2 2023.

West Kenya Project

·    Total resources increased to 1.76 Moz grading 5.55 g/t Au, from 1.18
Moz since Shanta commenced drilling at the start of 2021;

·    Indicated resources increased 1.14 Moz grading 4.86 g/t Au including
722 Koz grading 11.45 g/t Au;

·    Drilling to recommence in the next few weeks following the recent
completion of the updated Mineral Resource Estimate and preparation of Phase 3
drilling plans;

·    Workshop planned this month to assess accelerated timeline to
permitting and path to production;

Corporate Social Responsibility ("CSR")

·    Ongoing construction of two classrooms and one teachers' office at
the Mbangala secondary school and one teachers' house at the Miembeni primary
school;

·    Shanta committed to an Underprivileged Students' Sponsorship Program
for 2023;

·    Completion of the construction of Mwau primary school toilets &
maternity ward at the Mang'onyi dispensary.

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

Note: 2. AISC figures published include development costs, in line with the
WGC definition

 

Note 3. Adjusted EBITDA is earnings before interest, tax, depreciation, and
amortisation which has been derived as operating profit exclusive of
depreciation/depletion of tangible assets, amortisation of intangible assets
and exploration expenditure at the West Kenya Project totalling US$0.7 m.

 

 

Analyst conference call and presentation

Shanta Gold will host an analyst conference call and presentation today, 24
April 2023, at 09:30am BST. Participants can access the call by registering
via the link below.

 

https://secure.emincote.com/client/shanta/shanta003/vip_connect
(https://secure.emincote.com/client/shanta/shanta003/vip_connect)

 

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, 24 April 2023, at 10:30 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
 Michal Devine (CFO)

 Nominated Adviser and Joint Broker
 Liberum Capital Limited
 Scott Mathieson / Kane Collings / Nikhil Varghese / Lucas Bamber  +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 625 Koz grading 2.9 g/t Au, and exploration licences covering
approximately 800 km(2) in the country. Alongside New Luika and Singida,
Shanta also owns the high-grade West Kenya Project in Kenya with resources of
1.76 Moz including 0.72 Moz in the Indicated category grading 11.45 g/t Au,
and exploration licences covering  580km(2) containing multiple
highly-prospective targets. With a strong balance sheet, a growing diversified
portfolio and consistent dividend payments, 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 1,051 million shares in
issue.

 

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 2023 PRODUCTION & OPERATIONAL UPDATE

Operational Summary - New Luika Gold Mine

Safety, Health and Environment

There were no LTI's in the period with a total of 2,159,374 man-hours worked
without a Lost Time Injury. 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
0.00 for 2023 (Q4: 0.00).

Production Summary

                               Q1 2023  Q4 2022  Q3 2022  Q2 2022
 Tonnes ore milled             217,479  227,207  217,108  216,184
 Grade (g/t Au)                2.52     2.60     3.18     2.83
 Recovery (%)                  87.1     88.0     88.0     88.7
 Gold (oz)
 Production                    15,317   16,742   19,532   17,527
 Sales                         15,995   16,621   19,321   17,225
 Silver production (oz)        23,152   19,790   26,856   26,536
 Realised gold price (US$/oz)  1,918    1,731    1,727    1,866

 

Gold production during the period was 15,317 oz. Production was impacted in
February by underground equipment availability which was restored in March
2023 and operational challenges faced due to excessive water from unexpected
levels of rainfall in the month which impacted the crusher and haulage of
mined physicals. During the quarter, it was resolved to install a pre-leach
thickener at New Luika Gold Mine as recommended late last year targeting an
improvement in gold recoveries supported by an attractive payback period. The
thickener project will commence in May 2023 with commissioning expected in Q1
2024.

Gold production for both January and March were above budgeted production by
1% and 3% respectively.

A total of 166,186 t of ore grading 3.30 g/t Au was mined from underground in
Q1 compared with 176,997 t of ore grading 3.41 g/t Au in Q4 2022. 64,308 t ore
grading 1.44 g/t Au was mined from open pits in Q1 compared with 65,207 t of
ore grading 1.53 g/t Au in Q4 2022. Mined ore from open pits was 34% above
budget of 47,998 t, attributable to better surface mining equipment and
mechanical availability following the engagement of a second contractor in
Q4-2022.

The ROM stockpile at the end of Q1 was 224,426 tonnes of ore grading 0.99 g/t
Au (Q4: 207,392 t grading 0.92 g/t Au).

Processing of milled ore during the Quarter totalled 217,479 tonnes, in line
with plan (Q4: 227,208 t). The average head grade of 2.52 g/t Au (Q4: 2.60 g/t
Au) included a blend of material from underground, open pit, and existing ROM
ore stockpile sources. Average recoveries of 87.1% were achieved in the plant
during the period (Q4: 88.0%).

Financial

Underground mining cash costs were US$9.8 m for Q1, coming in 8% below
budgeted costs of US$10.6 m. These cost savings can be attributed to a change
in backfill strategy as part of a mine plan optimisation task and ongoing cost
saving initiatives and efficiency improvements conducted in the Quarter.

Adjusted Operating Costs of US$1,141 /oz (Q4: US$1,112 /oz) and AISC(1) of
US$1,429(1) /oz (Q4: US$1,347 /oz) were achieved in the Quarter, respectively.
Q1 AISC was 5.3% higher than budget due to slightly lower than budgeted
production and higher royalty payments owing to a higher than budgeted gold
price of US$1,700 /oz.

Gold spot prices continued their upward trend in Q1 resulting in the average
selling price achieved per ounce being US$1,918 /oz, up from US$1,731 /oz in
Q4 2022. Throughout the Quarter, free cash flow generation has been
prioritised to complete construction at the Singida Gold Mine.

An adjusted EBITDA(2) of US$7.4 m (Q4: US$5.9 m) was achieved for the Quarter.
The increase being mainly attributable to the increase in gold spot selling
prices and reduced exploration and evaluation costs.

In Q1, capital expenditure at New Luika was US$2.4 m (Q4: US$4.4 m), which
predominately related to underground development at the Luika mine, and
Tailings Facilities expansion.

In the Quarter, the company received a VAT offset of US$4.6 m, which was
offset against its 2022 year-end tax liability and a cash refund of US$1.1 m.
The company's Tanzanian VAT receivable increased from US$29.3 m in Q4 to
US$32.0 m in Q1.

At the end of March 2023, remaining gold price protection outstanding relating
to the Standard Bank loan and Stanbic Bank working capital facility in the
form of Zero Cost Collars totalled 6.3 Koz including 5.3 Koz covering the
period March to June 2023 between US$1,600-US$1,950 /oz, and 1.0 Koz covering
in April 2023 between US$1,725- US$1,756 /oz. The hedge contracts were entered
into as a condition to the working capital facility. No additional hedges will
be added.

Note: 1 AISC figures published include development costs, in line with the WGC
definition

Note 2. Adjusted EBITDA is earnings before interest, tax, depreciation, and
amortisation which has been derived as operating profit exclusive of
depreciation/depletion of tangible assets, amortisation of intangible assets
and exploration expenditure at the West Kenya Project totalling US$0.7
million.

 

Operational Summary - Singida Gold Mine

The Singida Project had no LTI's in the Quarter with a TRIFR of 0.00. A total
of 972,479 man-hours has been worked without a Lost Time Injury (LTI).

Construction of the Singida Gold Mine progressed as planned and on budget,
with the mine achieving first gold pour on 30 March 2023. With first
production at Singida completed, the mine will add 45%-50% to the Group's
annual production profile.

Open pit mining continued with operations focused on Gold Tree and Vivian
pits. Total ore of 33,221 t was mined in the Quarter, 54% higher than budgeted
levels of 21,580 t. Contained gold ounces mined in the Period was 2,983 oz,
77% higher than budget of 1,683 oz. Overall ore stockpile level at Singida is
currently 194,196 t grading an average of 2.70 g/t Au (Q4: 171,500 grading
2.61 g/t Au) for 16,883 contained ounces (Q4: 14,395 ounces).

Ramp-up at Singida is progressing well including 2,200 oz produced and 16,000
tonnes milled in the first 22 days of April 2023.

Declaration of Singida commercial production, Singida 2023 guidance and
Singida 5-year mine plan is expected to be communicated later in Q2 2023.

West Kenya Exploration Project

During the Quarter, the Project announced a Resource Update following a year
of exceptional exploration and drilling results. Total West Kenya resources
now stand at 1.76 Moz, an increase from 1.18 Moz since Shanta commenced
drilling at the start of 2021. Indicated Resources totalled 1.14 Moz, an
increase from NIL since the start of 2021.

The assessment of the Ramula targets continued in Q1 2023, with the Ramula
Camp currently including four high priority targets located less than 5km from
Ramula. 2023-24 planned drilling on the targets adjacent to Ramula is aiming
for a substantial resource additions and new discoveries. In addition, seven
early stage high-prospective targets have been identified between 5 km to 30
km from Ramula.

Geotechnical logging commenced in the Quarter with the aim of the program
being to carry out a detailed geotechnical logging on the Ramula drilling
holes. A total of 794 m have been completed.

Initial Feasibility Study workstreams continued with conceptual mine designs
being created for the Ramula and Isulu-Bushiangala sites. Further workshops
are planned to gain clearer consensus regarding advancement of the project
into its FS stage.

Corporate Social Responsibility ("CSR")

During the Quarter, Shanta continued its construction of two classrooms and
one teachers' office at the Mbangala secondary school and one teachers' house
at the Miembeni primary school. Both projects are expected to be completed in
April 2023.

Following the completion of the five classrooms at Saza and Patamela primary
schools in 2022, Shanta donated 125 desks in the Quarter.

Further highlighting Shanta's commitment to improving the education prospects
of the youth in the surrounding community, Shanta committed to an
Underprivileged Students' Sponsorship Program, which will provide a total of
316 students with uniforms, shoes, and stationary for the 2023 school year.

Lastly, at Singida, the Mwau primary school toilets & maternity ward at
the Mang'onyi dispensary were completed with official handover occurring in
April 2023. These initiatives will greatly improve the quality of life for the
students and women of the Ikungi region.

Country Overview

In September 2022, the Government of Tanzania revoked the 2020 Mining (State
Participation) Regulations and reissued new regulations governing Section 10
of the Mining Act that had been amended in 2017. In April 2023, the Government
of Tanzania signed agreements worth approximately US$650 m with various
international mining companies to enable foreign investment. As disclosed by
the Company in October 2022, discussions between the Ministry of Minerals and
Shanta are expected to take place in 2023 and commence shortly.

Post Period

Shortly after the Period end, Shanta Gold published its 2022 Sustainability
Report, which covers its activities for the year ended 31 December 2022 both
at a corporate level and on the ground at the New Luika Gold Mine, the Singida
Gold Project in Tanzania, and the West Kenya Project in Kenya.

ENDS

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