REG - Shanta Gold Limited - Q2 2023 Production & Operation Update

Shanta GoldAnnouncement

20/07/2023 07:15

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RNS Number : 6410G  Shanta Gold Limited  20 July 2023

20 July 2023

Shanta Gold Limited

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

SHANTA DELIVERS RECORD QUARTERLY PRODUCTION RESULTS

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 2023 (the "Quarter", "Q2" or the "Period") for its East African
assets, comprising of New Luika Gold Mine ("NLGM" or "New Luika") and Singida
Gold Mine ("Singida") in Tanzania and West Kenya Project ("West Kenya") in
Kenya.

Q2 2023 Highlights:

·    Record gold production:

o  Group: 29,403 ounces ("oz"), up 92% from Q1

o  NLGM: 19,338 oz, up 26% from Q1

o  Singida: 10,065 oz, first gold pour on 30 March 2023

·    Net debt of US$8.7 million ("m"), down 54% from US$19.0 m in Q1;

·    Adjusted EBITDA(3) of US$23.2 m, up 209% from US$7.5 m in Q1;

·    Better than expected Operating Costs and All in Sustaining Costs
("AISC")(2):

o  NLGM: US$904 /oz and US$1,181 /oz

o  Singida: US$579 /oz and US$736 /oz

·    No gold hedging - 100% exposed to spot gold price;

·    Cash, and available liquidity(1) of US$25.0 m at 30 June 2023 (Q1:
US$11.5 m), including US$4.0 m undrawn (Q1: US$1.5 m) from the Working Capital
facility;

·    Outstanding safety record: TRIFR rate of 0.00 in Q2 and 0.00 YTD;
zero LTIs;

·    Reiterated 2023 Group production guidance of 90,000 - 98,000 oz gold.

Eric Zurrin, Chief Executive Officer, commented:

"The Group's record performance over the last quarter has been outstanding,
with the 92% increase in production figures alone demonstrating the immediate
clear benefits of having added Singida to our asset portfolio.

With this significant increase in production combined with a better than
expected cost performance, we have been able to deliver the financial results
that we have always said would come with a diversified portfolio. Not only is
adjusted EBITDA up 209% on Q1 at US$23.2m, Singida is now driving an overall
improved liquidity position, adding financial flexibility to the Group.

I am delighted to report that the Group's operations continue to be delivered
on the bedrock of an outstanding safety record, with zero LTIs and a TRIFR
rate of 0.00 year to date. We are confident that this superb operational
performance will continue and as such we have reiterated 2023 Group production
guidance of 90,000 - 98,000 oz gold. The future is exciting for Shanta with
our two producing assets delivering record results, and yet with room for
further growth at Singida and West Kenya, we are confident in the long-term
prospects for shareholders."

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
million. Adjusted EBITDA includes normalised financial contribution from
Singida since 1 April 2023 for purposes of comparability, with commercial
production achieved 1 June 2023.

Analyst conference call and presentation

Shanta Gold will host an analyst conference call and presentation today, 20
July 2023, at 12:00pm BST. Participants can access the call by registering via
the link below.

 

https://secure.emincote.com/client/shanta/shanta004/vip_connect
(https://protect-za.mimecast.com/s/oCtQCZ4yOWslr7ltz3uMw)

 

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, 20 July 2023, at 1:00 pm 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 Broker
 Liberum Capital Limited
 Scott Mathieson / Kane Collings / Nikhil Varghese  +44 (0) 20 3100 2000

 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 2.91 g/t Au, and exploration licences covering
approximately 800 km2 in the country. Alongside New Luika and Singida, Shanta
also owns the West Kenya Project in Kenya and licences with resources of 1.7
million ounces including 722 koz in the Indicated category grading 11.45 g/t
Au. 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 1,051 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 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 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).

Q2 2023 PRODUCTION & OPERATIONAL UPDATE

Operational Summary

Safety, Health and Environment

There were no LTI's in the Quarter across the Group's operations with a total
of 2,742,649 man-hours worked at New Luika, and 1,329,137 man-hours worked at
Singida 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 Q1 and Q2 2023.

New Luika Production Summary

                               Q2 2023  Q1 2023  Q4 2022  Q3 2022
 Tonnes ore milled             219,978  217,478  227,207  217,108
 Grade (g/t)                   3.13     2.52     2.60     3.18
 Recovery (%)                  87.2     87.1     88.0     88.0
 Gold (oz)
 Production                    19,338   15,317   16,742   19,532
 Sales                         20,704   15,995   16,621   19,321
 Silver production (oz)        30,672   23,152   19,790   26,856
 Realised gold price (US$/oz)  1,957    1,907    1,731    1,727

 

Operational and Financial Summary - New Luika Gold Mine

The New Luika Gold mine produced 19,338 oz during the Quarter, exceeding
internal Q2 forecasts by 5%. Production was stable with all three months
during the Quarter achieving over 6,000 oz. This was mainly due to improved
equipment availability, better power reliability, consistent grades mined in
the Luika UG stopes as well as consistent ore development grades achieved.

A total of 164,198 t of ore grading 3.81 g/t Au was mined from underground in
Q2 compared with 166,186 t of ore grading 3.30 g/t Au in Q1 2023. 63,308 t ore
grading 1.69 g/t Au was mined from open pits in Q2 compared with 64,308 t of
ore grading 1.44 g/t Au in Q1 2023.

The ROM stockpile at the end of Q2 was 234,300 t of ore grading 0.95 g/t Au
(Q1: 224,426 t grading 0.99 g/t Au). Average recoveries of 87.2% were achieved
in the NLGM processing plant during the Quarter (Q1: 87.1%).

Milled ore during the Quarter totalled 219,978 tonnes, in line with plan (Q1:
217,478 t). The average head grade of 3.13 g/t Au (Q1: 2.52 g/t Au) included a
blend of material from underground, open pit, and existing ROM ore stockpile
sources.

Adjusted Operating Costs of US$904 /oz (Q1: US$1,141 /oz) and AISC(1) of
US$1,181(1) /oz (Q1: US$1,429 /oz) were achieved in the Quarter, respectively.
The improvement from Q1 is largely driven by more ounces produced, improved
equipment reliability and productivity and cost savings seen in both
Underground and Open Pit operations particularly from optimising metres
drilled, and lower maintenance costs driven by onsite component rebuild
initiatives. New Luika Underground mining cash costs were US$9.6 m for Q2,
approximately 9% below budgeted costs of US$10.6 m and Open Pit mining cash
costs were US$2.3 m compared to US$2.8 m budgeted costs.

 

 

 

 

 

Singida Production Summary

                               Q2 2023  Q1 2023
 Tonnes ore milled             82,674   3,989
 Grade (g/t)                   4.00     3.15
 Recovery (%)                  97.9     99.3
 Gold (oz)
 Production                    10,065   51
 Sales                         8,703    -
 Realised gold price (US$/oz)  1,930    -

 

Note: First gold pour on 30 March 2023. Commercial production declared on 1
June 2023

Operational and Financial Summary - Singida Gold Mine

On 1 June 2023, commercial production was declared at Singida based on
achieving 30 consecutive days of mill throughput exceeding 95% of nominal
nameplate capacity of 1,000 tonnes per day ("tpd"), overall plant utilisation
and gold recovery exceeding 95% and plant availability above 90%.

Following this, six months' worth of feed already stockpiled was processed
with 82,674 tonnes being milled in the Quarter. The average head grade
achieved was 4.00 g/t Au, an increase of 26% from budgeted Q2 head grades of
3.14 g/t Au.

Singida production benefited from higher-than-average gold grades on the
stockpile and is expected to normalise to forecasted grades announced in the
Singida 5-year Plan on 3(rd) July 2023.

10,065 oz were produced in the period with 4,036 oz being produced in May
alone. This is an increase of 19% compared to budgeted Q2 production. Higher
than anticipated recoveries, gold purity in ore, and percentage recovered from
gravity, contributed to higher than expected production. Going forward,
management will monitor the pre-production estimates for gold purity, gravity
recoveries, and gold recoveries which may be revised higher in the life of
mine model based on actual results being achieved.

 Singida Process Plant metrics  Forecast  Actual

(Q2 2023)
 Gold purity                    80%       90.2%
 Gold recovered from gravity    40%       43.7%
 Gold recoveries                91%       97.9%

Open pit mining continued with operations focused on Gold Tree and Vivian
pits. Total ore of 68,323 t with an average grade of 2.75 g/t Au was mined in
the Quarter (Q1: 33,221 t grading 2.79 g/t Au), 29% higher than budgeted
levels of 52,975 t. For the year-to-date period to June 2023, reconciliation
of mined gold ounces is tracking at +8% variance versus the ore reserve at the
Gold Tree pit. Gold Tree accounts for 60% of Singida's current total JORC gold
reserves in the Life of Mine.

Ore stockpile level at Singida excluding gravels is currently 147,986 t
grading an average of 3.07 g/t Au (Q1: 153, t grading 3.07 g/t Au) for 10,716
contained ounces.

Adjusted Operating Costs of US$579 /oz and AISC(1) of US$736(1) /oz were
achieved in the Quarter, respectively. Operating costs and AISC were around
40% better than budgeted predominantly due to more ounces produced as well as
lower than budgeted Open Pit mining and Processing costs. Q2 2023 represents
the first full quarter of gold production at Singida and management will
monitor actuals versus life of mine forecasts over the next few quarters of
Singida's start as a producing mine to assess the long run steady state cost
structure.

2023 Production and Cost Guidance (1)

Management reiterates NLGM and Singida guidance previously announced:

 

                            Production  Cost (AISC)

(k oz)
US$/oz
 NLGM     FY'23             66 - 72     1200 - 1300
          H1'23 actual      34.7        1268

 Singida  FY'23 (1)         24 - 26     1300 - 1400
          Q2'23 actual      10.0        736

 Group    FY'23 (1)         90 - 98     -
          H1'23 actual (2)  44.7        -

Note 1:    Singida: for the 9-month period April-December 2023

Note 2:    Reflects 3 months of actual Singida production

Group Financial Summary

The Company achieved an average selling price per ounce of gold of US$1,949
/oz, up from US$1,918 /oz in Q1 2023. The impact of the zero-cost collars was
minimal and all hedging related to the Stanbic Bank loan has been completed as
of 30 June 2023. The Company is 100% exposed to the spot gold price and does
not intend on adding new gold hedges.

Throughout the Quarter, the new Singida Gold Mine contributed to Group free
cash generation as it moved from a cost centre to cashflow generator. This
change in the Company's liquidity position allowed for exploration drilling to
recommence at its West Kenya Project and at its New Luika Gold Mine following
suspension of drilling in Q4 2022. Gross repayments of US$5.2 m were made
towards the Working Capital Facility and a dividend of US$1.4 m was declared
in Q2 and paid on 17 July 2023.

Adjusted Group EBITDA(2 ) of US$23.2 m (Q1: US$7.5 m) was achieved in the
Quarter. The increase is a result of the Singida Gold Mine commencing gold
production from the end of March 2023, higher than forecast gold production at
New Luika, a decrease in costs, and a sustained higher gold selling price.

EBTIDA Bridge Q1 to Q2 2023

·    US$9.8 m NLGM revenue increase resulting from 4,709 oz additional
gold sales and improved selling price during Q2;

·    US$16.8 m revenue increase from 8,703 oz new Singida gold sales;

·    US$1.7m reduction from NLGM Cost of Sales ("COS") as more ounces
produced (19,338 oz vs 15,317 oz), offset by a decrease in costs (US$248 /oz)
resulting in improved NLGM contribution to EBITDA;

·    US$8.7 m Singida normalised COS to match June sales and margins to
Apr-May costs.

In Q2, capital expenditure at New Luika was US$3.2 m (Q1: US$2.5 m), which
predominantly related to underground development at the mine, and new
underground equipment, including delivery of an underground truck. US$5.2 m
was spent at Singida, mainly relating to the completion of plant
infrastructure and open pit mine development.

In the Quarter, the company received notification from the Tanzanian Revenue
Authority that VAT refunds of US$6.7 m for the period up to March 2023 had
been audited with payment to be expected in Q3. The Company's Tanzanian VAT
receivable reduced from US$32.0 m in Q1 to US$31.0 m in Q2. Approximately
US$23.0 m of the total VAT receivable relates to the legacy period from
2017-2020 which is currently undergoing formal proceedings with the Tanzania
Revenue Appeals Board.

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. Adjusted EBITDA includes normalised financial contribution from
Singida since 1 April 2023 for purposes of comparability, with commercial
production achieved 1 June 2023.

 

Note 3: The Singida Gold Mine achieved commercial production on 1 June 2023.
The mine achieved first gold pour on 30 March 2023.

 

 

West Kenya Project

Exploration and infill drilling recommenced during the Quarter. The current
resource of 1.76 Moz grading 5.55 g/t Au is expected to increase to
approximately 2+ million ounces in 2024, with further discoveries in the
prolific greenstone gold belt holding additional potential. During the
Quarter, a decision was taken to allocate capital for up to 26,000 meters of
drilling across 80 holes, centered around the Isulu and Ramula deposits.

In addition capital was allocated to progress technical studies with external
consultants and progress the workstream toward mining licence application and
permitting. A 2023 budget at West Kenya of up to US$10 m, consistent with
previous years, was announced during the Quarter.

Technical study work commenced during the Quarter including appointment of
third party consultants on long lead areas including environmental and social
baseline studies, resettlement studies, metallurgical studies,
geotechnical-hydrogeology studies, and tailings studies. 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.

Group Exploration

Following the successful ramp-up of Singida production, a total of 34,000
meters of drilling recommenced in Q2 at NLGM and West Kenya, summarised below.
Drilling assays are expected to be reported commencing in Q3.

NLGM - Phase 1 Drilling

§ Total of 8,000 meters across 51 holes at surface and underground deposits

§ Programme spans 4 months, with potential for Phase 2

§ Planned exclusively for deposits already permitted within the existing
mining licences

§ Expected cost of US$1.0 m targeting the replacement of mined ore reserves
in 2023

 

West Kenya

§ Up to 26,000 meters drilling across 80 holes

§ Centered around the Isulu and Ramula deposits

§ Targeting both conversion to Indicated category plus resource extensions

 

Singida

§ Only 26% of the total resource is included in the reserve-based mine plan

§ Exploration drilling of US$0.5 m planned for Q3 2023

§ Targeting reserve additions and resource conversion

Corporate Social Responsibility ("CSR")

New Luika Community

At Songwe District Hospital, the construction of walkways is underway. The
project aims to simplify the movement of patients and hospital staff between
different buildings within the hospital. Although there were slight delays due
to material availability, the contractor has completed all roof trusses. The
project is anticipated to finish in July 2023.

In the farming sector, there has been a positive impact on farmers' earnings
in the surrounding communities. The increase in sesame prices, particularly
through cooperative unions founded by Shanta in Songwe District, has
contributed to higher incomes. The average price of sesame rose from TZS
3,260/kg (US$1.4/kg) in May 2023 to TZS 3,847/kg (US$1.7/kg) in June 2023.
Under Shanta's farming project, approximately 3.4 million kilograms (3.4
metric tons) of sesame were produced by 2,500 farmers during the 2022/2023
season.

Singida Community

The implementation of the FY2023 Corporate Social Responsibility ("CSR")
projects in Singida is currently under review with the District Executive
Director's ("DED") office.

The Company is aiming to replicate its successful Livelihood Agriculture
Project implemented within the New Luika communities at Singida. Local
stakeholders acknowledge the tangible benefits of the existing agricultural
project supported by Shanta.

The construction of the Mwau primary school toilets & Maternity ward at
the Mang'onyi dispensary were also completed in the Quarter.

CEO Succession

In April 2023 following the successful construction and commissioning of the
Singida Gold Mine, Shanta announced that Eric Zurrin, Chief Executive Officer,
had informed the board of his decision to step down from his role after six
years with the Company. Mr Zurrin commits to ensure a smooth transition to new
leadership for Shanta Gold. The board initiated a formal search process in Q2
and is currently evaluating potential candidates.

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 were expected to take place in 2023. The Company held an introductory
meeting in April 2023.

ENDS

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