REG - Shanta Gold Limited - Q4 2023 Production and Operational Update

Shanta GoldAnnouncement

22/01/2024 07:00

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RNS Number : 4311A  Shanta Gold Limited  22 January 2024

22 January 2024

Shanta Gold Limited

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

Q4 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 December 2023 (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:

"We are pleased to have surpassed our production guidance for the year -
despite a moderate slowdown at New Luika - enabling us to benefit from a
strong gold price environment with healthy returns to investors.

Our newest project to come onstream, Singida, has performed well in its first
phase of commercial production and the new five-year plan shows potential for
expansion but will require the necessary investment to deliver it.

It's exciting to see the hard work from the team come to life over the past
few years, culminating in us reaching a milestone annual production target of
100,000 ounces. Our 2024 focus is to ensure long-term sustainable production
meaning further investment into the assets through exploration. This work
programme along with higher royalties and elevated normalised costs at Singida
will mean a lift in AISC in 2024."

FY 2023 Highlights:

·    TRIFR of 0.52 across NLGM and Singida in 2023;

·    Group: 100,571 ounces ("oz"), 2.6% ahead of the upper end of 2023
guidance of 98,000 oz

o  Singida: 29,323 oz

o  NLGM: 71,248 oz

·    Group adjusted Operating Cash costs of US$857/oz and an AISC of
US$1,138/oz, compared with AISC guidance of US$1,200 - 1,300 /oz;

·    Commercial production declared at Singida, Tanzania's first new
medium-scale gold mine in a decade;

·    New five-year plan announced for Singida forecasting 169,000 oz
production over 2023-2027 with potential for expansion;

·    US$39 m in payments to Government of Tanzania (FY22: US$24.6 m)
including corporate income taxes, royalties and selling fees, and other taxes;

·    Dividend paid in July 2023 and interim dividend paid in November
2023, totalling approximately US$2.7 m during 2023, totalling shareholder
returns of US$8.0 m cash since 2021; and,

·    £141.95 m (approximately US$180 m) recommended all cash takeover
offer from Saturn Resources Ltd ("Saturn") at 13.5 pence per Shanta ordinary
share;

o  In addition, the terms of the takeover offer include a permitted dividend
of up to 0.15 pence for the period 1 July 2023 - 31 March 2024, at the
determination of the Shanta Gold Board of Directors.

 

Q4 2023 Highlights:

·    Gold production in line with Q3 2023;

o  Group: 27,865 oz (Q3: 27,935 oz)

o  NLGM: 18,322 oz (Q3: 18,271 oz)

o  Singida: 9,543 oz (Q3: 9,664 oz)

·    Balance sheet deleveraging with net debt of US$2.3 m, down from
US$4.9 m in Q3;

·    Adjusted EBITDA(3) of US$21.8 m (Q3: US$19.0 m),

·    Cash Operating Costs and AISC(2):

o  Group: US$849 /oz and US$1,219 /oz

o  NLGM: US$974 /oz and US$1,359 /oz

o  Singida: US$768 /oz and US$1,120 /oz

·    Cash, and available liquidity(1) of US$27.2 m at 31 December 2023
(Q3: US$26.5 m), including US$10.0 m undrawn (Q3: US$10.0 m) from the Stanbic
Revolving Credit facility.

2024 Guidance and Outlook

·    Group: 100-106 Koz at AISC(2) of US$1,300- 1,350 /oz

o  Consistent with the 5-year plan announced in July 2023 of 105.6 Koz in
2024

o  NLGM: 70-74 Koz at AISC(2) of US$1,300- 1,350 /oz

o  Singida: 30-32 Koz at AISC(2) of US$1,275- 1,325 /oz (4)

·    The increase in 2024 AISC is driven by approximately US$50 /oz of
additional on-mine exploration at NLGM and Singida, higher royalties derived
from forecasted higher selling prices, and a non-cash inventory adjustment as
explained below in Note 4;

·    Approximately 15,000 meters of drilling has been planned for each of
NLGM and Singida in 2024.

(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,
exploration expenditure at the West Kenya Project totalling US$2.2m million,
and other extraordinary non-recurring items.)

(Note 4: Singida AISC reflects a non-cash inventory adjustment of +$129/oz
driven by processed ore that was mined and stockpiled in 2022 and Q1 2023,
ahead of first gold pour. This ore was mined pre-commercial production where
costs were lower (as the ore was mined at shallow depths, free digging without
use of explosives, an easier to extract), waste material was used for TSF
& airstrip construction, and the contractor at the time had a lower rate
for equipment than current. By 2024 the costs attached to ore in the Singida
stockpile are expected to have normalised which will result in a higher AISC,
although cash mining costs will be consistent with 2023.)

Analyst and investor conference call and presentation

Shanta Gold will host an analyst and investor conference call and presentation
today, 22 January 2024, at 09:00am GMT. Participants can access the call by
registering via the link below. Due to regulatory constraints relating to the
Offer Period (as defined by the City Code on Takeovers and Mergers), no
Q&A will be conducted during this conference call.

https://secure.emincote.com/client/shanta/shanta007/vip_connect
(https://protect-za.mimecast.com/s/fud8C58xnWTz9XxUzQs23)

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.

 

Enquiries:

 

 Shanta Gold Limited
 Eric Zurrin (CEO)                                  +44 (0) 14 8172 6034
 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 / 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 625 koz grading 2.91 g/t Au, and exploration licences covering
approximately 800 km(2) in the country. Alongside New Luika and Singida,
Shanta also owns the West Kenya Project in Kenya and licences with resources
of 1.7 million ounces 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 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).

Q4 2023 PRODUCTION & OPERATIONAL UPDATE

Operational Summary

Safety, Health and Environment

There were no Lost Time Injuries (LTI) in the Quarter across the Group's
mining operations with a total of 3,961,566 man-hours now worked at New Luika
and 2,075,173 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 and has achieved a Total Recordable Injury Frequency Rate ("TRIFR") (per
1 million hours worked) of 0.52 for all four Quarters in 2023.

New Luika Production Summary

                               FY 2023  Q4 2023  Q3 2023  Q2 2023  Q1 2023
 Tonnes ore milled             891,588  227,773  226,358  219,978  217,478
 Grade (g/t)                   2.86     2.89     2.90     3.13     2.52
 Recovery (%)                  86.8     86.5     86.5     87.2     87.1
 Gold (oz)
 Production                    71,248   18,322   18,271   19,338   15,317
 Sales                         72,241   18,064   17,477   20,704   15,995
 Silver production (oz)        111,067  30,001   27,242   30,672   23,152
 Realised gold price (US$/oz)  1,948    1,981    1,930    1,966    1,907

 

During the Quarter, an LTI was recorded by the drilling contractor at West
Kenya. Remedial action has been taken.

Operational and Financial Summary - New Luika Gold Mine

The New Luika Gold mine produced 18,322 oz during the Quarter, slightly under
internal forecasts by 4%, due to low plant feed grades and poor mill grinding
efficiency in October and December. Production was generally stable during the
Quarter, with all months achieving >6,000 oz.

A total of 179,490 t of ore grading 3.96 g/t Au was mined from underground in
Q4 compared with 178,548 t of ore grading 3.48 g/t Au in Q3. In Q4, 53,209 t
ore grading 1.70 g/t Au was mined from open pits compared with 65,448 t of ore
grading 1.62 g/t Au in Q3.

The ROM stockpile at the end of Q4 was 270,067 t of ore grading 0.95 g/t Au
for 8,265 oz contained (Q3: 250,231 t grading 0.93 g/t Au for 7,453 oz
contained). Average recoveries of 86.5% were achieved in the NLGM processing
plant during the Quarter (Q3: 86.5%).

Milled ore during the Quarter totalled 227,773 tonnes, slightly above the
previous Period of 226,357 t. The average head grade of 2.89 g/t Au (Q3: 2.90
g/t Au) included a blend of material from underground, open pit, and existing
ROM ore stockpile sources.

Adjusted Operating Costs of US$974 /oz (Q3: US$970 /oz) and AISC(1) of
US$1,359 /oz (Q3: US$1,279 /oz) were achieved in the Period, respectively. The
change from Q3 is primarily driven by an increase in on-mine exploration
expenditure at NLGM.

Singida Production Summary

                               FY23     Q4 2023  Q3 2023  Q2 2023  Q1 2023(1)
 Tonnes ore milled             271,879  93,310   93,292   79,911   5,366
 Grade (g/t)                   3.5      3.3      3.4      4.0      3.2
 Recovery (%)                  95.8     95.1     97.4     97.9     99.3
 Gold (oz)
 Production                    29,323   9,543    9,664    10,065   51
 Sales                         27,636   11,364   7,569    8,703    -
 Realised gold price (US$/oz)  1,940    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 9,543 oz during the Quarter, exceeding internal Q4
forecast by 5.4%. Production was stable with all three months achieving over
3,000 oz per month. This was due to greater tonnes milled in November and
December, and good feed grades and recoveries throughout the Period. In 2024,
Singida production is expected to normalise toward 2,700 ounces per month
inline with the previously announced 5-year Mine Plan in July 2023.

Open pit mining continued with operations focused on Gold Tree and Vivian
pits. Total ore of 103,577 t with an average grade of 3.28 g/t Au was mined in
the Quarter (Q3: 108,253 t grading 2.83 g/t Au).

Ore stockpile level at Singida excluding gravels at the end of Q4 was 194,565
t grading an average of 1.60 g/t Au (Q3: 201,256 t grading 1.84 g/t Au) for
10,039 contained ounces.

Milled ore during the Quarter totalled 93,310 tonnes, and consistent with the
previous Quarter (Q3: 93,292 t). The average head grade of 3.3 g/t Au (Q3: 3.4
g/t Au) included a blend of material from open pit, and stockpile sources.

Adjusted Operating Costs of US$768 /oz and AISC of US$1,120 /oz were achieved
in the Quarter, respectively. Operating costs and AISC were better than budget
by 38% and 19% respectively, driven by strong gold production from the
consistency in gold grades, good recovery, and lower than budgeted processing
costs.

 Singida Process Plant metrics  Forecast  Actual      Actual

(Q3 2023)
                                          (Q4 2023)
 Dore bars gold purity          80%       91.2%       91.0%
 Gold recovered from gravity    40%       47.8%       44.7%
 Gold recoveries                91%       95.1%       97.4%

 

Group Financial Summary

During the Quarter, average selling price per ounce of gold increased to
US$1,971 /oz (Q3: US$1,929 /oz). The Company is unhedged, exposed to the spot
gold price and does not intend on adding new gold hedges.

During the Quarter the Group deleveraged, with net debt reducing to US$2.3 m
(Q3: US$4.9 m), with repayments of US$3.3 m made against the long-term Stanbic
facility. The Group also paid its sixth consecutive Period dividend of 0.10
pence per share during the Quarter.

In Q4, capital expenditure at New Luika was US$5.4 m (Q3: US$3.1 m), which
predominately related to Open Pit development at Elizabeth Hill of US$1.6 m,
stay-in-business ("SIB") expenditure of US$1.4 m for generator refurbishments,
Underground development US$1.0 m and expansion Capex of US$0.9 m for TSF 2
lift and pre-leach thickener work. US$2.0 m was spent at Singida (Q3 US$2.8
m), mainly relating to US$0.6 m for a CAT generator and US$0.5 m for SIB. A
total of US$2.2 m was invested in exploration at the West Kenya Project.

EBITDA Bridge Q3 to Q4 2023

 

Adjusted Group EBITDA of US$21.8 m (Q3: US$19.0 m) was achieved in the
Quarter. The movement was primarily driven by an increase in revenue across
NLGM and Singida of US$9.7 m due to more ounces sold at a higher gold price,
offset by an increase in cost of sales of US$7.0 m due to greater royalties
and selling expenses on more ounces sold at a higher price.

During Q4 the Company received a VAT refund of US$5.1 m from the Tanzania
Revenue Authority ("TRA") in respect of the period from April 2023 to July
2023. The TRA offset this refund against the Company's year-end corporate
income tax payment. A further VAT refund application has been made relating to
the period from August 2023 to December 2023 which is awaiting TRA audit. The
expected VAT refund is approximately US$4.5 m which is also expected to be set
off against the Company's year-end corporate income tax liability.

The Company's Tanzanian VAT receivable decreased from US$27.0 m in Q3 to
US$25.5 m in Q4. Approximately US$23.0 m(1) of the total VAT receivable
relates to the legacy period from 2017-2020 which is currently in the first of
three stages of formal proceedings with the Tanzania Revenue Appeals Board.

(Note 1: Unadjusted for foreign exchange movements)

Tanzania Exploration

Exploration drilling restarted at New Luika in July 2023 with the objective to
convert Inferred resources to the Indicated category at various deposits, in
addition to the testing of a maiden target at Jamhuri West close to the NLGM
Processing Plant. As announced on 11 January 2024, drill results covering a
total of 13,325 meters across 106 holes of drilling of the deposits at
Elizabeth Hill and BC North demonstrated encouraging results. Exploration work
remains ongoing at Luika Deep underground to identify the down plunge
continuity and extension of mine life.

Commencement of drilling at the Jem deposit at Singida in September 2023
marked the resumption of exploration drilling at the mine after a few years. A
drilling update will be provided in due course.

West Kenya
Project

Exploration at the West Kenya Project continued during the Period with 9,091
meters of drilling across 32 holes in Q4. Three rigs were active across
multiple targets, including Miruka, Dhene, Akara, Masumbi, Nairobi Hill and
Ramula prospects. The main aim of the drilling completed was to convert
Inferred resources to the Indicated category for the Ramula deposit and test
the mineralization potential for the other regional targets. Assay results for
this drilling are expected to be received later in Q1 2024.

During the Quarter the Company announced assay results from 4,421 meters of
drilling from 12 diamond holes at the Isulu and Bushiangala deposit, and 717
meters from 6 diamond holes at Ramula. Highlights include 5.9 meters grading
3.56 g/t Au at Bushiangala, 3.7 meters grading 27.93 g/t Au at Isulu, and 8.9
meters grading 5.62 g/t at Ramula.

The Company revised the leadership at the West Kenya Project with the
appointment of Jiten Divecha as General Manager. Mr Divecha brings more than
20 years' experience, most recently as General Manager at Singida Gold Mine
during the construction phase where he led the successful development,
permitting and construction of the mine, and previously as Operations Manager
for African Barrick Group in Tanzania. Mr Divecha is a Tanzanian national and
will be responsible for developing the West Kenya Project. Early works toward
permitting have commenced including data collection for the ESIA. Permitting
application is expected to be made in around 12 months with a decision
potentially in mid-2025.

Corporate Social Responsibility ("CSR")

New Luika Community

Shanta is directly funding the Songwe District's construction of an English
Medium Primary School. The project will be staged over three phases, with the
first phase to construct two primary school classrooms and ablution blocks
commencing in October. A project contractor has been engaged and the initial
structure has been fabricated with support beams put in. Roofing work is
expected to commence in early Q1 2024. The school will provide a safe learning
space for nearly 400 children aged 4-11 years each year.

Shanta's NLGM Livelihood Programme continued to benefit local farmers during
the Quarter. NLGM's team procured 3 tonnes of seeds (sesame and sunflower) in
December to support new farmers under the programme. The seeds have been
distributed to farmers in all four villages of Saza, Patamela, Mbangala and
Maleza which surround NLGM. 750 farmers received sesame seeds and 672 farmers
received sunflower seeds, with 1,422 benefitting in total.

Singida Community

In one of Singida's surrounding communities, Tupendane Village, Shanta are
supporting an education project to construct two classrooms at Mbhogo Primary
School. Work progressed during Q4 with the ring beam and toilet pit walling
completed, and the project now at the roofing stage. In addition, the Company
is drilling a borehole nearby which will provide clean and safe water to
nearly 700 students and teachers.

The procurement of desks and other fittings for Mwau Primary School in Mwau
village has now commenced and final fabrications are expected to be completed
in Q1 2024. Desks for 900 students are being provided, who will benefit each
year from improved learning conditions, as currently students have no proper
desks or are sitting on damaged and poor quality desks.

Shanta began distributing sesame seeds to farmers in Ikungi registered under
the Company's Livelihood Programme, with 702 farmers receiving seeds ahead of
the 2023/24 season. The Company also supported clearing, ploughing and
harrowing works at 5 villages near to the mine to preparing for farming. In Q1
planting of seeds will commence, and the Company is working with the community
to form Agriculture Marketing and Cooperative Societies (AMCOS), similar to
those supported by Shanta at NLGM. The Livelihood Programme has the potential
to make a significant difference to the economic prospects of the community
near Singida.

Corporate

On 20 December 2023, Shanta announced that the boards of directors of Saturn,
a wholly-owned subsidiary of ETC Holdings (Mauritius) Limited and Shanta had
reached an agreement on the terms of a recommended cash acquisition by Bidco
of the entire issued and to be issued share capital of Shanta for 13.5 pence
per Shanta ordinary share, valuing the entire issued share capital of Shanta
at approximately £141.95 m.

In addition, each Shanta shareholder holding shares at the relevant record
date will be entitled to receive and retain an interim dividend of up to 0.15
pence per share intended to be declared by the Shanta Board and paid prior to
the closing of the transaction.

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. The Company held an
introductory meeting with the Government Negotiating Team in April 2023. In
November 2023 the Government of Tanzania re-engaged with the Company regarding
state participation and a further meeting has been agreed to take place in Q1
2024.

ENDS

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