REG - Shanta Gold Limited - Q2 2022 Production and Operational Update

Shanta GoldAnnouncement

21/07/2022 07:00

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RNS Number : 2152T  Shanta Gold Limited  21 July 2022

21 July 2022

Shanta Gold Limited

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

Q2 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 30 June 2022 (the "Quarter", "Q2" 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:

"This has been a strong second quarter from the Shanta teams on the ground in
Tanzania and West Kenya and I would like to thank them for the effort they
have contributed in what has been a successful period for the Company. At New
Luika, the initial Crown Pillar mining has been delivered safely resulting in
production being up 54% in Q2 vs Q1, which exceeded our internal expectations.
We continue to make great progress at Singida, with construction on schedule
for first production in Q1 2023. Singida will transform Shanta Gold into a
+100,000 oz/pa producer with a diversified resource base.

We also continue to make material inroads at West Kenya with three drill rigs
in operation across the project, following on from the announcement of the
high-grade, upgraded Mineral Resource Estimate in Q1.

As part of our commitment to leading ESG standards, Shanta has undertaken
several programmes amongst our communities during the last quarter to enhance
their livelihoods. These initiatives include the construction of two primary
schools, which I am delighted to say are close to being finished, and
providing 308 students with learning materials and uniforms.

Shanta continues to go from strength to strength, with a strong balance sheet,
underpinned by our new US$20 million senior debt financing. This has been an
encouraging first six months of the year and we are pleased to reiterate our
full year production guidance of 68-76 Koz."

Highlights

·    Gold production of 17,527 oz (Q1: 11,408 oz), 54% higher than Q1 and
exceeding target of +45% announced in early June.

·    June gold production level of 7,538 oz is the highest monthly
production level achieved in over 12 months;

·    Singida construction is 63% complete at the end of June 2022 (51% at
end of Q1) and on track for first gold production in March 2023;

·    US$20 million senior debt financing announced in June with
disbursement completed on July 15(th). Singida construction is fully funded
through to first production;

·    At the West Kenya Project, three drill rigs continued infill and
expansion drilling including results of 46.7 g/t across a width of 14 metres
at less than 150 metres vertical depth (LCD0336, Bushiangala deposit);

·    Shanta has been awarded a maiden mining licence covering the
Porcupine South resource area of the Lupa Gold Fields, approximately 22
kilometers from the New Luika Gold Mine Processing Plant;

·    Following over 9 million hours of LTI-free operations, one Lost Time
Injury was recorded in Q2 in the cemented rockfill plant at NLGM. At the
Singida operations, a total of 1,037,214 man-hours have now been worked
without Lost Time Injury (LTI).

Financial Summary

·    Cash, and available liquidity(1) of US$14.5 million ("m") at 30 June
2022 (Q1: US$13.4 m);

·    3,843 oz contained within doré available for sale at the end of Q2
(Q1: 3,446 oz);

·    Gross debt of US$5.6 m (Q1: US$6.8 m);

·    Operating costs of US$913 /oz (Q1: US$1,297 /oz) and AISC of US$1,303
/oz (Q1: US$1,760 /oz) in the Quarter, respectively. The decrease in the AISC
is mainly attributed to significantly more ounces being recovered in the
Period;

·    EBITDA (2) of US$11.9 m, excluding operating expenditure at West
Kenya and Singida totalling US$3.6 m;

·    Capital expenditure and investment totalled US$10.9 m including
US$6.1 m for Singida construction, US$3.0 million for NLGM, and US$1.8 m for
West Kenya;

·    VAT receivable of US$27.7 m (Q1: US$25.1 m), of which approximately
US$23 m relates to the historical period July 2017-June 2020. An application
for an Out of Court Settlement is ongoing;

·    US$20 m senior debt facility agreement with the Stanbic Bank of
Tanzania of which funds were dispersed on 15 July 2022.

Operational Summary

New Luika Gold Mine

·    216,184 t milled (Q1: 214,204 t) from underground and open pit
sources;

·    Average head grade of 2.83 g/t (Q1:1.9 g/t) blended from underground,
open pit, and existing ROM stockpile sources;

·    Average recoveries of 88.7% (Q1: 87.2%);

·    Run of Mine ("ROM") stockpile of 182,326 t of ore grading 1.21 g/t
(Q1: 155,233 t grading 1.0 g/t) containing approximately 7,089 oz;

·    Underground ore mined of 174,200 t, up 6% from plan; and

·    Bauhinia Creek Crown Pillar successfully accessed in April with high
grade material being mined consistent with expectations.

Singida

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

·    Installation of the Metso built Crushing Circuit is progressing well
and on schedule being 97.5% completed;

·    Delivery of 80% of the Grinding & Gravity Circuit Mill by NCP in
South Africa with installation beginning in Q3;

·    Ore stockpile levels total 97,918 tonnes grading 2.11 g/t for 6,647
contained ounces at the end of the Quarter; and

·    A total of 114,027 man-hours were worked at Singida in June 2022
resulting in total of 1,037,214 man-hours worked without Lost Time Injury
(LTI). There were no Medical Treated Injuries (MTI) in the Quarter which
resulted to 0.00 TRIFR for the period and 0.00 TRIFR year to date.

West Kenya

·    Drilling continues across three rigs following a successful drilling
campaign at Isulu and Bushiangala where 378,000 oz grading 11.7 g/t were
converted to Indicated Resources in late March 2022;

·    Phase 2 of the ongoing diamond drilling campaign continues with the
Project seeking to infill 20 modelled zones at Isulu and 23 modelled zones at
Bushiangala. This drilling phase amounts to 65-75,000 m of planned drilling
and is due to be completed in Q4 2022;

·    The West Kenya Project Feasibility Study workstream is currently
underway with the commencement of a Study Manager in Q2.

Corporate Social Responsibility ("CSR")

·    Shanta is pleased to announce that in the Period, 308 students
received learning materials and uniforms as part of its Student Sponsorship
program in the surrounding NLGM communities;

·    In May 2022 Shanta and a local internet services provider agreed to
partner in supporting the Saza Secondary School with internet facilities, PCs
and tablets;

·    Construction of various classrooms at the Patemela Primary School are
90% completed. Construction of three classrooms at Saza Falls Primary School
are 80% completed;

·    Shanta's 2,100 farmers who are enrolled in Shanta's Mining
Agriculture Improvement Program ("SMAP") are reaping the benefits of high
sesame and sunflower seed prices being achieved for their harvested crops from
the previous season.

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: 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

 

Analyst conference call and presentation

Shanta Gold will host an analyst conference call and presentation today, 21
July 2022, at 09:30am 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: 525453

https://events.globalmeet.com/Public/ClickToJoin/ZW5jPURoWmtGOHRYTVREZmZuaE5jWko5Rk5zaHl1NW5jVGVodEtGUTJ0WFZJNjVnTG9TSUM1eVVyUT09
(https://events.globalmeet.com/Public/ClickToJoin/ZW5jPURoWmtGOHRYTVREZmZuaE5jWko5Rk5zaHl1NW5jVGVodEtGUTJ0WFZJNjVnTG9TSUM1eVVyUT09)

 

Participant Passcode: 525453

 

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, 21 July 2022, 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
 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 800 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.

Q2 2022 PRODUCTION & OPERATIONAL UPDATE

Operational Summary - NLGM

Production Summary

                               Q2 2022  Q1 2022  Q4 2021  Q3 2021
 Tonnes ore milled             216,184  214,204  218,991  223,338
 Grade (g/t)                   2.83     1.90     2.00     2.23
 Recovery (%)                  88.7     87.2     87.1     88.6
 Gold (oz)
 Production                    17,527   11,408   12,244   14,194
 Sales                         17,225   10,527   13,538   12,001
 Silver production (oz)        26,536   14,615   14,270   17,748
 Realised gold price (US$/oz)  1,866    1,883    1,796    1,790

 

Gold production during the period was 17,527 oz, 15% higher than planned for
the Quarter. Overall, a total of 174,202 t of ore grading 4.20 g/t was mined
from underground in Q2 compared with 173,652 t of ore grading 2.46 g/t in Q1
2022. A further 50,436 t ore grading 1.10 g/t was mined from open pits in Q2
compared with 41,062 t of ore grading 1.17 g/t in Q1 2022. The ROM stockpile
at the end of Q2 was 182,326 t of ore grading 1.21 g/t (Q1: 155,233 t grading
1.00 g/t). Average recoveries of 89.0% were achieved in the plant during the
period (Q1: 87.2%).

The Bauhinia Creek Crown Pillar was successfully accessed one month ahead of
schedule and mining 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 216,184 tonnes, in line
with plan (Q1: 214,205 t). The average head grade of 2.80 g/t (Q1: 1.9 g/t)
included a blend of material from underground, open pit, and existing ROM ore
stockpile sources.

Following over 9 million hours of LTI-free operations, one Lost Time Injury
was recorded in Q2 in the cemented rockfill plant at NLGM.

Financial

EBITDA(1) was US$11.9 m, excluding operating expenditure at West Kenya and
Singida totalling US$3.6 m. Adjusted Operating Costs of US$913 /oz (Q1:
US$1,297 /oz) and AISC of US$1,303 /oz (Q1: US$1,760 /oz) were achieved in the
Quarter, respectively. AISC decreased resulting from additional ounces
produced in the Quarter due to the successful mining of the high-grade
Bauhinia Creek Crown Pillar.

During the first half of 2022, cost inflation has been experienced across key
parts of the cost structure including consumables, steel inputs for ground
support, power and diesel which has contributed around US$70 /oz to AISC
versus budget. Energy price increase is the largest component contribution to
cost inflation.

While no VAT refunds or tax set-offs were received in the Quarter, ongoing
dialogue with the TRA has indicated that further refunds/off-sets will be
granted in Q3. The Company's Tanzanian VAT receivable increased from US$25.1 m
to US$27.7 m, of which US$3.7 million for the period November 2021 to February
2022 has now been audited and approved for refund by the TRA.

Capital expenditure at New Luika was US$3.0 m (Q1: US$2.7 m) for the Quarter,
which predominately related to underground development at the Bauhinia Creek
and Luika mines, and Tailings Facilities related costs.

During the quarter, Shanta announced it successfully entered into a US$20 m
loan facility agreement with Stanbic Bank Tanzania which will be used to
accelerate the growth in Shanta's portfolio. The Company will shortly enter
gold price protection covering 16,000 oz of production which is a condition of
the loan agreement. The funds from the loan were disbursed on 15 July 2022.

Note 1: 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.

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

 

Singida

The construction of the Singida Gold Mine continues to proceed on budget with
first gold pour being expected in Q1 2023. As at the end of Q2, the overall
project completion is at 63% (Q1: 51%). US$6.1 m in capital expenditure was
incurred in Q2 2022 (Q1: US$4.8 m).

The installation of the crusher and its components has progressed as planned
and is 98% complete with commissioning expected in July. The majority of the
mill equipment is now on site with 80% of the mill components having been
delivered in Q2, with construction commencing in Q3. The manufacture of the
Desorption and Smelting Unit is on track and is 40% complete, with an
estimated completion date of November 2022. Bulk Water Supply projects are now
100% completed with all tanks and water pumps installed. Lastly, the Bulk
Power Supply civil works are 80% complete with power installation planned for
July 2022.

Open pit mining continued to perform well during the Period with operations
focused on Gold Tree and Vivian pits. Overall production for Gold Tree pit was
above the forecast by 22%.   Overall ore stockpile level at Singida is
97,918 t grading an average of 2.11g/t for 6,674 contained ounces.  (Q1:
59,470 t grading an average of 1.72g/t for 3,291 contained ounces).

The construction and operation of the Singida Gold Project continues to be run
with the highest safety standards in place with the operation reaching a
milestone of 1 million LTI free hours, since commencement of construction in
October 2020 which resulted in a 0.00 TRIFR year to date.

West Kenya

During Q2, Shanta received results from its latest drilling campaign at the
West Kenya Project which produced consistent high-grade results. These
encouraging results included visible gold at three of the five holes reported,
and one showcasing grades of 46.7 g/t across a width of 14 metres at less than
150 metres vertical depth.

The objective of the drilling campaign was to upgrade the Mineral Resource
Model at Isulu and Bushiangala, which was achieved, with 378,000 oz grading
11.7 g/t being upgraded to the Indicated Resources category. Further drilling
results are to be announced in Q3.

Additional drilling re-started at the Ramula target on 23 June 2022, with the
aim to convert the recently declared 433,900 oz grading 2.08g/t Au Inferred
resource into Indicated Category. To date, all five infill diamond drill holes
have intercepted mineralised zones at the expected depth returning visible
gold in the seven previously identified zones and in one new zone. The assays
are pending with results expected to be announced in Q3. Approximately 25% of
planned drilling has been completed to date, with the aim to complete the
drill programme in Q3 2022.

The Feasibility Study workstream for the West Kenya project is now underway
which involves a trade-off analysis of upgrading the existing Scoping Study
for new areas including Ramula and Kimingini versus progressing a Feasibility
Study at the deposits of the Liranda Corridor. In Q3, work planning will
advance, including establishing a directional schedule and budget, starting to
onboard key resources, and initiating work for the plant and mine
configuration trade-offs.

Corporate Social Responsibility ("CSR")

During the Quarter, Shanta has continued to support the education of children
within the NLGM communities. 308 students have received two pairs of school
uniforms each and stationary to last the entire school year.

Continuing to bolster the local education prospects, the Company has also
entered into an agreement with a local internet services provider to partner
in supporting the Saza Secondary School, whereby an internet network, fifty
(50) tablets and PCs along with all teaching materials required, will be
supplied to Form I to Form IV students in the newly constructed classroom
built by the Company. This program will significantly change and improve the
teaching capabilities of the school.

Shanta's 2,100 farmers who are enrolled in the Companies Mining Agriculture
Improvement Program ("SMAP") are reaping the benefits of high sesame and
sunflower seed prices being achieved for their harvested crops from the
previous season, this along with the Company's Honey Harvesting Program is
significantly improving the livelihoods of the local communities.

Local communities surrounding the Singida Project are also benefiting from
various community upliftment projects, including the commencement of the
construction of a maternity ward, water boreholes and solar pumps, and toilet
facilities at local schools.

Post Period

The US$20 million loan disbursement from Stanbic Bank Tanzania was received on
15 July 2022.

ENDS

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