REG - Shanta Gold Limited - Q3 2022 Production and Operational Update

Shanta GoldAnnouncement

26/10/2022 07:00

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RNS Number : 0955E  Shanta Gold Limited  26 October 2022

26 October 2022

Shanta Gold Limited

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

Q3 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 September 2022 (the "Quarter", "Q3" 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:

"The team has once again delivered a very strong operational performance, with
production up 11% on the previous quarter. In addition to this, drilling at
West Kenya and construction work at Singida are both progressing well, and we
remain on track for first gold pour at Singida in March 2023. This operational
excellence continues to be underpinned by our first-rate health and safety
standards, as shown by the total of over one million man-hours worked at New
Luika without a Lost Time Injury.

We continue to maintain a healthy cash position, boosted by the drawdown of
the US$20 million loan facility, and we are using this to accelerate growth in
Shanta's portfolio. As we soon transform into a +100,000oz producer in Q1
2023, with a diversified asset base and an enhanced balance sheet, I am
confident in the growth opportunities available to Shanta. I would like to
thank all our employees for their continued efforts, and I look forward to
updating the market further in due course."

Highlights

·    Gold production of 19,532 oz (Q2: 17,527 oz), up 11% from Q2
production with full year 2022 production expected to achieve the low end of
the 68,000 - 76,000 oz guidance range;

·    Singida construction is 78% complete at the end of September 2022
(63% at end of Q2) and remains on track and on budget for first gold pour in
March 2023;

·    Phase 2 drilling programme continued at the West Kenya Project where
drilling took place across 29 holes with further occurrences of visible gold
identified in drilling intersections, bringing the total number of visible
gold identifications to 53 intersections across 142 holes drilled since
January 2021;

·    Updated Mineral Resource Estimate, targeting conversion from Inferred
to Indicated resource category at both Isulu/Bushiangala and Ramula, expected
in Q1 2023;

·    Completion and drawdown of the US$20 million loan facility agreement
with Stanbic Bank Tanzania, which is being used to accelerate the growth in
Shanta's portfolio; and,

·    At New Luika, a total of 1,018,906 man-hours has been worked without
a Lost Time Injury (LTI).

Financial Summary

·    Cash, and available liquidity(1) of US$14.0 million ("m") at 30
September 2022 (Q2: US$14.3 m) which includes 3,851 oz contained within doré
available for sale at the end of the period (Q2: 3,843 oz);

·    An additional US$4.0 m remains undrawn from a working capital
facility as at the end of the Period;

·    Gross debt of US$21.3 m (Q2: US$5.6 m), following the US$20.0 m
senior debt financing drawdown in the Quarter;

·    Operating costs of US$918 /oz (Q2: US$913 /oz) and AISC of US$1,207
/oz (Q2: US$1,142 /oz) in the Quarter, respectively.

·    EBITDA (2) of US$10.9 m (Q2: US$11.9 m), excluding operating
expenditure at West Kenya and Singida totalling US$1.7 m (US$3.6 m);

·    Capital expenditure and investment totalled US$13.4 m including
US$7.0 m for Singida construction, US$4.4 million for NLGM, and US$2.0 m for
West Kenya; and,

·    VAT receivable of US$27.1 m (Q2: US$27.7 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. Separately, VAT cash refunds
totalling US$2.3 m were received in the Quarter and offsets were applied
against the Company's tax liabilities to the value of US$2.7 m. Ongoing
dialogue with the TRA has indicated that further cash refunds/off-sets will be
granted in Q4, with a cash VAT refund of US$0.7 m expected in the next few
weeks.

Operational Summary

New Luika Gold Mine

·    217,108 t milled (Q2: 216,184 t) from underground and open pit
sources;

·    Average head grade of 3.18 g/t (Q2: 2.83 g/t) blended from
underground, open pit, and existing ROM stockpile sources;

·    Average recoveries of 88.0% (Q2: 88.7%); and,

·    Run of Mine ("ROM") stockpile of 186,631 t of ore grading 0.92 g/t
(Q2: 155,233 t grading 1.21 g/t) containing approximately 5,529 oz.

Singida

·    Singida remains on track for first gold pour in March 2023
transforming Shanta Gold into a +100,000 oz/pa producer and diversifying group
cash flow;

·    Construction remains on time and on budget, with a total of US$27 m
invested since the start of construction in 2021, and approximately US$12 m
remaining as at the end of September 2022, predominantly in open pit mining
activities;

·    No material cost inflation has been incurred in the construction
costs owing to orders for major capital items being placed in early 2021 prior
to inflationary pressures and excellent supervision from the Singida team in
Tanzania;

·    The installation of the crusher and its components was completed in
the Quarter with a cold commission being successfully completed;

·    Manufacture of the thickener is 90% completed with shipment from
India to start in November 2022; and

·    Ore stockpile level at Singida is 127,767 t grading an average of
2.34g/t for 9,613 contained ounces at the end of the Quarter;

West Kenya

·    During Q3, drilling continued at the Isulu and Bushiangala deposits
across 29 holes;

·    Shanta has now completed 65% of total planned drilling over three
phases which began at the start of 2021; and,

·    The West Kenya Project Feasibility Study workstream is currently
underway and led by a Shanta owners team, with the development of a Ramula
Mine conceptual model expected to be completed in Q4.

Corporate Social Responsibility ("CSR")

·    Shanta and a local service provider, continued to support the Saza
Secondary School by providing a full package of e-learning materials,
including fifty tablets and PCs along with all teaching materials required;

·    The Company has pledged to sponsor advanced medical equipment to
local village dispensaries and maternity wards near the New Luika Gold Mine,
with the aim to deliver the equipment by the end of 2022;

·    Shanta facilitated the registration of 200 farmers to the online
agricultural tool, M-Kulima during September. Key benefits from this
initiative include access to Tanzanian Government subsidized fertilizers and
insurance products.

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, 26
October 2022, at 09:00am BST. Participants must pre-register to join the call
by contacting ShantaGold@fticonsulting.com.

 

 

The presentation will be available for download from the Company's website:
www.shantagold.com (http://www.shantagold.com)

 

Investor Conference Call

Shanta Gold will not be hosting a live investor presentation via the Investor
Meet Company platform due to regulatory constraints relating to the Offer
Period the Company is currently in. A recording of the analyst presentation
will be made available on the Company's website in due course.

 

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.

Q3 2022 PRODUCTION & OPERATIONAL UPDATE

Operational Summary - NLGM

Production Summary

                               Q3 2022  Q2 2022  Q1 2022  Q4 2021
 Tonnes ore milled             217,108  216,184  214,204  218,991
 Grade (g/t)                   3.18     2.83     1.90     2.00
 Recovery (%)                  88.0     88.7     87.2     87.1
 Gold (oz)
 Production                    19,532   17,527   11,408   12,244
 Sales                         19,321   17,225   10,527   13,538
 Silver production (oz)        26,856   26,536   14,615   14,270
 Realised gold price (US$/oz)  1,727    1,866    1,883    1,796

 

Gold production during the period was 19,532 oz, up 11.4 % from Q2 production
of 17,527 oz. Overall, a total of 172,190 t of ore grading 4.40 g/t was mined
from underground in Q3 compared with 174,202 t of ore grading 4.20 g/t in Q2
2022. At the end of Q3, ground instability at the Bauhinia Creek 850 level of
the crown pillar resulted in approximately 11,286 tonnes grading 4.29 g/t
containing 1,557 ounces being made indefinitely unavailable for mining due to
safety and operational reasons. A further 13,497 tonnes grading 9.68 g/t
containing 4,202 oz at the 900 level of the BC crown pillar is planned for Q4
2022 and 3,122 tonnes grading 9.12 g/t containing 918 oz at the 880 level of
the BC crown pillar is planned in Q2 2023.

A further 45,609 t ore grading 1.18 g/t was mined from open pits in Q3
compared with 50,436 t of ore grading 1.10 g/t in Q2 2022. The ROM stockpile
at the end of Q3 was 186,631 t of ore grading 0.92 g/t (Q2: 182,326 t grading
1.21 g/t). Average recoveries of 88.0% were achieved in the plant during the
period (Q2: 89.0%).

Processing of milled ore during the Quarter totalled 217,108 tonnes, in line
with plan (Q2: 216,184 t). The average head grade of 3.18 g/t (Q2: 2.80 g/t)
included a blend of material from underground, open pit, and existing ROM ore
stockpile sources. Gold produced for the period was 12% less than budgeted
mainly attributable to poor grinding efficiency that affected gold recovery.
The decrease in grinding efficiency in Q3 is partly attributable to poor
cyclone classification due to unavailability of the cyclone spares, ore
hardness and increased milling throughput. DRA-South Africa is conducting a
study with recommendations in Q4 on the way forward to be implemented. Shanta
expects 2022 production at the low end of its production guidance of 68,000 -
76,000 oz.

Financial

EBITDA(1) was US$10.9 m, excluding operating expenditure at West Kenya and
Singida totalling US$1.7 m. Adjusted Operating Costs of US$918 /oz (Q2: US$913
/oz) and AISC of US$1,207 /oz (Q2: US$1,142 /oz) were achieved in the Quarter,
respectively. YTD Q3 AISC is US$1,257 /oz. AISC cost guidance of
US$1,150-1,275 /oz is reiterated for 2022.

Inflationary cost pressures observed during H1 continued in Q3, with increases
seen in the price of steel inputs for ground support, consumables, power and
diesel. Energy price continues to be the largest component contribution to
cost inflation. Overall cost inflation contributed around US$110 /oz to AISC
versus budget.

The performance of the gold spot price in the markets proved to be volatile in
the Quarter which resulted in the average selling price achieved per ounce
falling from $1,866 /oz in Q2 to $1,727 /oz in Q3. With the outlook on gold
price remaining unstable, Shanta has made the decision to minimise exploration
expenditure for the next 5 months and prioritise cashflows for the completion
of construction at the Singida Gold Mine, which is expected to total
approximately US$12 m in capex through to the end of March 2023.

VAT cash refunds totalling $2.33 m were received in the Quarter and offsets
were applied against the Companies tax liabilities to the value of $2.73 m.
 Ongoing dialogue with the TRA has indicated that further refunds/off-sets
will be granted in Q4, with a cash VAT refund of $0.7m expected in the next
few weeks. The Company's Tanzanian VAT receivable decreased from US$27.7 m in
Q2 to US$27.1 m in Q3.

Capital expenditure at New Luika was US$4.4 m (Q2: US$3.0 m) for the Quarter,
which predominately related to underground development at the Bauhinia Creek
and Luika mines, and Tailings Facilities related costs.

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 Singida team has made excellent progress on the construction of the
Singida Gold Mine during the Quarter with first gold pour planned for March
2023.  As at the end of Q3, overall project completion is 78% (Q2: 63%).
US$7.0 m in capital expenditure was incurred in Q3 2022 (Q2: US$6.1 m).
Construction of the Singida Gold Mine remains on track and on budget.

The installation of the crusher and its components was completed in the
Quarter with a cold commission being completed successfully and a hot
commission planned for Q4. The mill installation continued on plan with the
ball mill being 60% completed and the steel structure installation being 90%
completed, the commissioning of the mill is planned to take place in Q4. The
CIL circuit has been installed with the installation of all six CIL tanks and
one Detox tank now being completed. Manufacture of the thickener is 90%
completed with shipment from India to start in November 2022, with
installation and commissioning planned for January 2023.

Open pit mining continued to perform well during the Period with operations
focused on Gold Tree and Vivian pits. Overall ore stockpile level at Singida
is 127,767 t grading an average of 2.34g/t for 9,613 contained ounces.  (Q2:
97,918 t grading an average of 2.11g/t for 6,674 contained ounces).

West Kenya

In Q3, the latest phase of drilling at West Kenya continued to deliver
consistently high-grade results. The drilling campaign focused on upgrading
existing resources to the Indicated category and resource expansion across
numerous targets. A drilling update is expected to be made in the next 10
days.

At the Isulu and Bushiangala deposits, 8,686 metres ("m") of drilling took
place across 29 holes. Visible gold, including spectacular occurrences, has
been identified in 53 intersections across 142 holes drilled since January
2021.

Shanta has now completed 65% of total planned drilling over three phases which
began at the start of 2021. Year to date 30 September 2022, a total of 30,400
meters has been drilled at the West Kenya Project including at targets Isulu,
Bushiangala, Ramula, and Kimingini. Mineral resource modelling at Ramula,
Isulu and Bushiangala is taking place throughout Q4 and conversion from
Inferred to Indicated resource category is expected to be updated by Q1 2023.

The Feasibility Study workstream for the West Kenya project continues to make
progress currently led by an internal owners' team. In Q3 this involved
establishing a directional schedule and budget, starting to onboard key
resources within the Company, and initiating work for the plant and mine
configuration trade-offs at the Ramula site.

Corporate Social Responsibility ("CSR")

In the Period, Shanta continued to support the local Saza Secondary School by
providing a full package of e-learning materials. This package included fifty
tablets and PCs along with all teaching materials required. With the
assistance of a local service provider, the Company also installed an internet
tower and router. Throughout the month of July, extensive training was
provided to all teachers and students to ensure maximum learning potential is
achieved. The system will allow students in Saza Secondary school to access
online learning materials as well as server-based information.

As part of Shanta's commitment to the health and wellbeing of its local
communities, which includes equipping village dispensaries with laboratory
facilities and improved maternity wards, the procurement process of obtaining
the equipment has been initiated in the Quarter. Shanta has pledged to sponsor
advanced medical equipment, which includes one urine analyser, one centrifuge
machine, one ESR Automated machine, one ESR Fast Detector, one ESR Automated
Tubes P/100, one sterilizer with thermostat, a vaccine storage fridge and 6
hospital beds. The target is to deliver the equipment by the end of 2022.

Shanta conducted a drive to register farmers in Saza, Patamela, Mbangala,
Maleza and Njelenje villages, (all within Songwe District), electronically on
the agricultural tool, M-Kulima during September. This resulted in 200 farmers
being registered. Key benefits from this initiative include access to
Tanzanian Government subsidized fertilizers and insurance. It also provides
easy transactions between buyers and farmers which in turn will lower the cost
and risk involved in transacting with smallholder farmers, as well as
facilitating possible short term Agri-loans.

Country Overview

Country-wide elections in Kenya were held in August resulting in a new
President and government administration. In September, 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. Discussions with the Ministry of Minerals is expected to take
place in 2023.

Post Period

On 18 October 2022, Shanta announced that it had received approaches from
Shandong Gold Group Co., Ltd, Yintai Gold Co., Ltd and Chaarat Gold Holdings
Ltd which may or may not result in an offer for the Company. There can be no
certainty that an offer will be made, nor as to the terms on which any offer
might be made.

ENDS

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