REG - Shanta Gold Limited - Q1 2024 Production & Operational Update

Shanta GoldAnnouncement

25/04/2024 07:00

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RNS Number : 9403L  Shanta Gold Limited  25 April 2024

25 April 2024

Shanta Gold Limited

("Shanta Gold", "Shanta", "Company", "Group")

Q1 2024 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 2024 (the "Quarter", "Q4" or the "Period") for its East African
assets, comprising New Luika Gold Mine ("NLGM" or "New Luika") and Singida
Gold Mine ("Singida") in Tanzania and West Kenya Project ("West Kenya") in
Kenya.

Eric Zurrin, Chief Executive Officer, commented:

"Our diversified asset base across two mines helped mitigate the production
loss during the Quarter that was caused by exceptionally wet weather in South
Western Tanzania. Mine plan sequencing, equipment availability and gold
recoveries at NLGM were all impacted during the Quarter. Since the end of
March, the unusually heavy seasonal rains have subsided and we expect the
impact of the new pre-leach thickener at NLGM in Q2 to drive an improvement in
gold recoveries.

Meanwhile, Singida continued to demonstrate strong performance, which helped
to offset the impact at NLGM, and drilling continued across all three assets
as we continue to invest in the promise of adding new reserves and extending
the mine lives.

Over the last few weeks, we have obtained all of the necessary in-country
regulatory and governmental approvals relating to the acquisition of Shanta
Gold by Saturn Resources and the transaction is on track to complete in May
2024."

 

Highlights:

·    Gold production;

o  Group: 21,676 oz (Q4: 27,865 oz)

o  NLGM: 13,022 oz (Q4: 18,322 oz)

o  Singida: 8,654 oz (Q4: 9,543 oz)

·    Outstanding safety record extended: TRIFR of 0.97 in Q1 and zero
LTIs;

·    Adjusted EBITDA(1) of US$16.1 m (Q4: US$21.8 m),

·    Cash Operating Costs and AISC(2):

o  Group: US$1,083 /oz and US$1,422 /oz

o  NLGM: US$1,304 /oz and US$1,696 /oz

o  Singida: US$835 /oz and US$1,173 /oz

·    Cash, and available liquidity(3) of US$22.9 m at 31 March 2024 (Q4:
US$27.2 m), including US$10.0 m undrawn (Q3: US$10.0 m) from the Stanbic
Revolving Credit facility;

·    Full year guidance of 100-106 koz at AISC of US$1,300-1,350 /oz
reiterated:

o  NLGM: 70-74 koz at AISC of US$1,300-1,350 /oz

o  Singida: 30-32 koz at AISC of US$1,275-1,325 /oz

( )

(Note 1: 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,
exploration expenditure at the West Kenya Project totalling US$0.9 million,
and other extraordinary non-recurring items.)

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

(Note 3: 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).)

Enquiries:

 

 Shanta Gold Limited
 Eric Zurrin (CEO)                        +44 (0) 14 8172 6034
 Michal Devine (CFO)

 Nominated Adviser and Broker
 Liberum Capital Limited
 Scott Mathieson Nikhil Varghese          +44 (0) 20 3100 2000

 Public Relations
 FTI Consulting
 Sara Powell / Nick Hennis / Lucy Wigney  +44 (0) 20 3727 1426

 

Rule 26.1 disclosure

 

In accordance with Rule 26.1 of the Takeover Code, a copy of this announcement
will be available, subject to certain restrictions relating to persons
resident in restricted jurisdictions, on Shanta Gold's website at
www.shantagold.com
(https://protect-eu.mimecast.com/s/og-kC9QW8sRornLfQOL8p?domain=shantagold.com)
 by no later than 12 noon (London time) on the business day following the
date of this announcement. The content of the website referred to in this
announcement is not incorporated into and does not form part of this
announcement.

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 500 koz grading 2.78 g/t Au, and exploration licences covering
approximately 600 km(2) in the country. Alongside New Luika and Singida,
Shanta also owns the West Kenya Project in Kenya and licences with resources
of 1,755 koz including 722 koz in the Indicated category grading 11.45 g/t Au.
Shanta is quoted on London's AIM market (AIM: SHG) and has approximately 1,051
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 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
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 Reserve'' 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).

 

Q1 2024 PRODUCTION & OPERATIONAL UPDATE

Operational Summary

Safety, Health and Environment

There were no Lost Time Injuries ("LTIs") in the Quarter across the Group's
mining operations with a total of 4,595,044 man-hours now worked at New Luika
and 2,475,223 man-hours worked at Singida since the last LTI. Shanta continues
its track record of operating among the safest gold mining operations of its
peers with a Total Recordable Injury Frequency Rate ("TRIFR") (per 1 million
hours worked) of 0.97 (Q4: 0.00).

New Luika Production Summary

                               Q1 2024  Q4 2023  Q3 2023  Q2 2023  Q1 2023
 Tonnes ore milled             219,345  227,773  226,358  219,978  217,478
 Grade (g/t)                   2.19     2.89     2.90     3.13     2.52
 Recovery (%)                  84.2     86.5     86.5     87.2     87.1
 Gold (oz)
 Production                    13,022   18,322   18,271   19,338   15,317
 Sales                         14,520   18,064   17,477   20,704   15,995
 Silver production (oz)        20,676   30,001   27,242   30,672   23,152
 Realised gold price (US$/oz)  2,067    1,981    1,930    1,966    1,907

 

Operational and Financial Summary - New Luika Gold Mine

The New Luika Gold mine produced 13,022 oz during the Quarter, below internal
forecasts due to low feed grades, low gold recoveries, and heavy rains
impacting crushing and milling. Production was soft but generally stable
during the Quarter, with all months achieving >4,000 oz.

A total of 176,447 t of ore grading 2.93 g/t Au was mined from underground in
Q1 compared with 179,490 t of ore grading 3.96 g/t Au in Q4. In Q1, 50,352 t
of ore grading 1.49 g/t Au was mined from open pits compared with 53,209 t of
ore grading 1.70 g/t Au in Q4.

The ROM stockpile at the end of Q1 was 298,293 t of ore grading 0.92 g/t Au
for 8,790 oz contained (Q4: 270,067 t grading 0.95 g/t Au for 8,265 oz
contained). Average recoveries of 84.2% were achieved in the NLGM processing
plant during the Quarter (Q4: 86.5%), with recovery impacted by poorer quality
of reagents used in processing and poor grinding efficiency. An review on the
reagents inventory is ongoing and an alternative supplier has been identified.

Milled ore during the Quarter totalled 219,345 tonnes, slightly under the
previous Period of 227,773 t. The average head grade of 2.19 g/t Au (Q4: 2.89
g/t Au) included a blend of material from underground, open pit, and existing
ROM ore stockpile sources.

Adjusted Operating Costs of US$1,304 /oz (Q4: US$974 /oz) and AISC(1) of
US$1,696 /oz (Q4: US$1,359 /oz) were achieved in the Period, respectively. Q1
AISC was higher than budget due to lower than budgeted production and higher
royalty payments owing to a higher than budgeted realised gold price.

Singida Production Summary

                               Q1 2024  Q4 2023  Q3 2023  Q2 2023  Q1 2023(1)
 Tonnes ore milled             89,102   93,310   93,292   79,911   5,366
 Grade (g/t)                   3.2      3.3      3.4      4.0      3.2
 Recovery (%)                  94.3     95.1     97.4     97.9     99.3
 Gold (oz)
 Production                    8,654    9,543    9,664    10,065   51
 Sales                         8,720    11,364   7,569    8,703    -
 Realised gold price (US$/oz)  2,070    1,955    1,928    1,930    -

 

(1. The first gold pour on 30 March 2023. Commercial production declared on 1
June 2023.)

 

Operational and Financial Summary - Singida Gold Mine

The Singida mine produced 8,654 oz during the Quarter, exceeding internal
forecasts. Production was stable with all three months achieving over 2,800 oz
per month. This was due to good feed grades and recoveries. The reduction in
Singida recoveries compared with previous periods is in line with
expectations, and is normalising towards 91% recoveries previously announced
in the 5-year Mine Plan in July 2023.

Open pit mining continued with operations focused on Gold Tree pit. Total ore
of 88,092 t with an average grade of 3.6 g/t Au was mined in the Quarter (Q4:
103,577 t grading 3.3 g/t Au).

Ore stockpile level at Singida excluding gravels at the end of Q1 was 205,401
t grading an average of 1.5 g/t Au for 10,133 contained ounces (Q4: 194,565 t
grading 1.6 g/t Au for 10,039 oz).

Milled ore during the Quarter totalled 89,102 tonnes, broadly consistent with
the previous Quarter (Q4: 93,310 t). The average head grade of 3.2 g/t Au (Q4:
3.3 g/t Au) included a blend of material from open pit, and stockpile sources.

Adjusted Operating Costs of US$835 /oz (Q4: US$768 /oz) and AISC of US$1,173
/oz (Q4: US$1,120 /oz) were achieved in the Quarter, respectively. Operating
costs and AISC were better than budget driven by strong gold production from
the consistency in gold grades, good recovery, and lower than budgeted
drilling, blasting and administrative costs.

 Singida Process Plant metrics  Forecast  Actual      Actual

(Q4 2023)
                                          (Q1 2024)
 Dore bars gold purity          80%       90.2%       91.2%
 Gold recovered from gravity    40%       50.7%       47.8%
 Gold recoveries                91%       94.3%       95.1%

 

Group Financial Summary

During the Quarter, average selling price per ounce of gold increased to
US$2,068 /oz (Q4: US$1,971 /oz). In March, the company contracted gold price
protection purchasing put options at a strike price of US$2,150 /oz covering a
total of 19,000 oz from April until June 2024.

Net debt increased to US$7.4 m (Q4: US$2.3 m). This was primarily due to a
US$4.2 m lower cash and liquidity balance in Q1 compared with Q4, due to
US$7.6 m corporation tax payments made in the Quarter and fewer ounces in the
gold room in March compared with year-end, decreasing liquidity. In addition,
the latest repayment against the long-term Stanbic facility was made in the
first week of April, meaning gross debt was largely unchanged from Q4.

In Q1, capital expenditure at New Luika was US$3.4 m (Q4: US$5.4 m), which
predominantly related to Open Pit development at Elizabeth Hill of US$0.7 m,
underground development of US$0.9 m, stay-in-business ("SIB") expenditure of
US$0.7 m and expansion capex of US$1.2 m for TSF lift and construction of the
pre-leach thickener.

US$0.9 m was spent at Singida (Q4: US$2.0 m), mainly relating to SIB of US$0.5
m and expansionary projects of US$0.2 m.

A total of US$2.1 m was invested in exploration and technical studies at the
West Kenya Project (Q4: US$2.2 m).

EBITDA Bridge Q4 2023 to Q1 2024 (US$m)

Adjusted Group EBITDA of US$16.1 m (Q4: US$21.8 m) was achieved in the
Quarter. The movement was primarily driven by a US$10.0 m decrease in revenue
across NLGM and Singida due to 6,188 fewer ounces sold in Q1 compared to Q4.
This was offset by a US$4.3 m reduction in costs due to lower royalty and
selling costs and lower head office administrative expenses, resulting in a
net decrease of US$5.7 m compared with Q4.

During the Quarter, a VAT refund application has been made relating to the
period from August 2023 to December 2023 which is awaiting Tanzania Revenue
Authority audit. The expected VAT refund is approximately US$7.7 m.

Tanzania Exploration

The 2024 exploration programme at NLGM is targeting resource conversion
through 29,100 metres of drilling. During Q1 the Company announced a drilling
update covering 5,855 metres of drilling from December 2023 to February 2024.
The programme yielded positive results with mineralisation at Elizabeth Hill,
Black Tree Hill, BCN, Jamhuri West and Jamhuri Main remaining open at depth. A
selection of notable intersections from the drilling update include:

·    Elizabeth Hill (440-metre strike):

o  Hole CSD361 intersected 6.31 m @ 3.49 g/t Au from 221 m

§ Incl. 2.43 m at 6.84 g/t Au

 

·    Jamhuri Main (western extension):

o  Hole CSR753 intersected 5.00 m @ 4.25 g/t Au from 84 m

§ Incl. 1.00 m at 16.78 g/t Au

At Singida the objective for exploration drilling in 2024 is to target
resources outside the existing reserve based mine plan and to convert Inferred
resources into Indicated resources at the deposits, testing lateral extent of
mineralised zones and extending the mine life. During the Period a drilling
update was announced covering 4,008 m of drilling from September 2023 to March
2024. The results demonstrated mineralisation at Jem, Gold Tree, and Vivian
remains open at depth. A selection of notable intersections from the drilling
update include:

·    Jem Deposit (250m strike-length drill tested of 500m mineralised
structure):

o  Hole SDD0011 intersected 2.30 m @ 9.98 g/t Au from 115m

§ Incl. 0.50 m at 30.40 g/t Au

 

·    Gold Tree (200m strike-length drill tested to the west of the 600m
mineralised structure):

o  Hole SDD0017 intersected 8.00 m @ 2.63 g/t Au from 83 m

§ Incl 1.70 m at 5.42 g/t Au

o  Hole SDD0020 intersected 17.50 m @ 2.79 g/t Au from 119 m

§ Incl. 8.50 m at 4.39 g/t Au

Work remains ongoing and will continue throughout Q2 2024.

West Kenya
Project

The Environmental and Social Impact Assessment (ESIA) continues to progress
with the Ramula-Mwibona scoping report submitted to the National Environment
Management Authority (NEMA) and approved during the Period, enabling the next
phase to commence for the detailed ESIA Study. A working group comprised of
Shanta internal specialists and external experts are busy with various
workstreams, including biodiversity and dust sampling which took place in the
Quarter.

Post Period the Company released a drilling update which covered the West
Kenya drilling programme for Q4 2023 and Q1 2024. The primary aim of this
programme was to convert additional near-surface extension at the Ramula
deposit. The results were encouraging, with a selection of notable
intersections from the drilling update including:

·    Hole RMD0062 intersected 2.1 m @ 9.26 g/t Au from 0 m

 

·    Hole RMD0074 intersected 4.5 m @ 4.44 g/t Au from 21.6 m

o  Incl. 1.5 m @ 9.77 g/t Au from 23.1 m

This programme also included the testing of the most prospective
early-mid-stage targets near the Ramula camp, including Miruka and Anomaly 22.
Results from the holes at Miruka returned intercepts with economic range
mineralisation, confirming continuity of the mineralisation to +120 m depth
and +150 m lateral extent, with mineralisation open both at depth and along
strike. Results from the holes at Anomaly 22 returned intercepts with economic
range mineralisation, confirming continuity of the mineralisation that is open
both at depth and along strike. A selection of notable intersections from the
drilling update include:

·    Miruka

o  Hole RMD0094 intersected 7.2 m @ 4.33 g/t Au from 159 m

 

·    Anomaly 22

o  Hole RMD25B intersected 24.6 m @ 2.18 g/t Au from between 30-125 m

§ Incl. 6.2 m @ 4.6 g/t Au

A mineral resource estimate update for Ramula is planned for Q2 2024.

Corporate Social Responsibility ("CSR")

New Luika Community

Work progressed in the Period on Songwe District's English Medium Primary
School, which Shanta is directly funding, and which is expected to provide a
safe learning space for nearly 400 students aged 4-11 years each year when
complete. Phase I included the construction of two pre-primary school
classrooms, and ablution block for staff, toilets for students, and roofing
work. Roofing and plastering were completed in the Period, and Phase I is on
track to be completed by the end of April, with commencement of Phase II
targeted for mid-June.

Shanta is also working on improving the educational prospects of
underprivileged youth in the surrounding Songwe community. During the Period
Shanta contributed to the Education Sponsorship of Underprivileged Students
programme, which will provide a total of 318 students from eight primary
schools and one secondary school with two pairs of uniforms, a pair of shoes,
and stationary to support these students so they have the same opportunities
to learn and succeed as their peers.

Singida Community

Shanta progressed its Livelihood Agriculture Project in advance of the
upcoming harvest, with planting for demo farms cleared and ploughed for the
2023/24 season. Key workstreams across planting, germination, thinning,
seeding, and pesticide application were completed during the period.
Harvesting is planned to commence in Q2, where it is expected the yields will
be approximately 409 tonnes, benefiting 554 farmers with income of nearly
US$0.5 m in the upcoming farming season.

In one of Singida's surrounding communities, Tupendane Village, Shanta is
supporting an education project to construct two classrooms at Mbhogo Primary
School. During the Quarter work progressed and the project is now
approximately 90% complete, with gypsum and skimming completed. In addition, a
borehole will be drilled at the school to provide water for the school. During
the Quarter the geophysical survey report was completed, and the tender
process has commenced with drilling expected to be completed in Q2.

Corporate

On 19 March 2024, Shanta announced that the boards of directors of Saturn
Resources ("Bidco"), a wholly-owned subsidiary of ETC Holdings (Mauritius)
Limited and Shanta had reached an agreement on the terms of a recommended
increased and final cash offer by Bidco for the entire issued, and to be
issued, share capital of Shanta not already owned by any member of the Bidco
Group (the "Acquisition") for 14.85 pence per Shanta ordinary share, valuing
the entire issued share capital of Shanta at approximately £151.1 m.

On 2 April 2024, Shanta announced that Shanta and Bidco received unconditional
approval of the Acquisition from the Competition Authority of Kenya.

On 4 April 2024, Shanta announced that the resolutions in relation to the
Acquisition, were passed by the requisite majorities of Voting Scheme
Shareholders at the Court Meeting, and by the requisite majority of Shanta
Shareholders at the General Meeting,

On 8 April 2024, Shanta announced that Shanta and Bidco received unconditional
approval of the Acquisition from the Tanzania Fair Competition Commission.

On 16 April 2024, Shanta announced that Shanta and Bidco received
unconditional approval of the Acquisition from the Tanzanian Mining
Commission.

On 19 April 2024, Shanta announced that Shanta and Bidco have received
unconditional approval of the Acquisition from the Cabinet Secretary for
Mining, Blue Economy and Maritime Affairs in Kenya.

On 24 April 2024, Shanta announced that it intends to seek the Court's
sanction of the Scheme on 8 May 2024 resulting in the suspension of dealings
in Shanta shares on 10 May 2024.

In addition, each Shanta shareholder holding shares at the relevant record
date of 2 April 2024 will receive and retain an interim dividend of up to 0.15
pence per share which is expected to be paid on 26 April 2024.

ENDS

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