TIDMSHG
RNS Number : 1288Q
Shanta Gold Limited
17 October 2019
17 October 2019
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q3 2019 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 2019 (the "Quarter",
"Q3" or the "Period") for its New Luika Gold Mine ("NLGM" or "New
Luika"), in South Western Tanzania.
Q3 Highlights
-- Gold production of 22,726 ounces ("oz") in Q3 (Q2: 19,856 oz);
-- Year-to-date ("YTD") production of 64,956 oz;
-- The Company remains on track to meet annual guidance
reiterated for 2019 of 80,000-84,000 oz at All In Sustaining Costs
("AISC")(1) of US$740-780 /oz;
-- 126,787 oz of Inferred Resources grading 3.15 g/t was
converted into 83,543 oz of Indicated Resources grading 7.85
g/t;
-- Net debt decreased 23% to US$20.7 million ("m") (Q2: US$26.9 m);
-- Gross debt decreased 15% to US$25.7 m (Q2: US$30.1 m);
-- Forward sales reduced to 43,000 oz (Q2: 45,000 oz);
-- Adjusted EBITDA(2) of US$16.5 m (Q2: US$10.5 m);
-- AISC(1) of US$723 /oz (Q2: US$773 /oz);
-- Cash operating costs of US$474 /oz (Q2: US$564 /oz);
-- Cash, and available liquidity(3) of US$11.6 m (Q2: US$9.3 m); and,
-- Zero Lost Time Injuries ("LTI's"), with no LTI's since Q4 2017.
Operational
-- Gold production of 22,726 oz (Q2: 19,856 oz);
-- 174,132 t milled (Q2: 177,647 t); processing plant is
consistently performing at a premium to its nameplate capacity;
-- Average head grade of 4.5 g/t for the quarter (Q2: 3.9 g/t);
-- Run of Mine ("ROM") stockpile of 151,177 t of ore grading
1.67 g/t (Q2: 142,213 t grading 1.37 g/t); and,
-- Construction of infrastructure to connect to the state power
grid has commenced with completion expected by early 2020.
Exploration
-- 126,787 oz of Inferred Resources grading 3.15 g/t was
converted into 83,543 oz of Indicated Resources grading 7.85
g/t;
-- 58,553 oz of new Inferred Resources grading 4.79 g/t added to
the Mineral Resource at New Luika; and,
-- New orebodies discovered, including the high-potential
Bauhinia Creek ("BC") North and Elizabeth Hill ("EH") North
deposits.
Financial
-- Net debt excluding VAT receivable of US$20.7 m (Q2: US$26.9 m);
-- Gross debt of US$25.7 m (Q2: US$30.1 m);
-- Unrestricted cash balance of US$5.0 m (Q2: US$3.1 m);
-- Bullion available for sale at the end of the Period of US$4.1 m (Q2: US$3.3 m);
-- Liquidity available for draw down from Exim working capital
facility of US$2.5 m (Q2: US$2.5 m);
-- AISC(1) of US$723 /oz (Q2: US$773 /oz); and,
-- VAT receivable increased to US$27.4 m (Q2: US$25.3 m).
Ilunga
-- Commenced commercial production at Ilunga during the Period, on schedule and on budget; and,
-- Ilunga is now the third source of high-grade underground feed
at New Luika alongside BC and Luika underground deposits.
Singida Project (the "Project")
-- Singida Resources Plc ("Singida") entered into a non-binding
term sheet during the Period with a privately-held, East African,
multinational conglomerate, for an unsecured, non-recourse loan
facility of US$10 m;
-- The Project's Environmental Impact Assessment ("EIA")
Certificate has now been approved and received; and,
-- During the Quarter, the Singida IPO prospectus underwent its
second formal submission to the Capital Markets Securities Agency
("CMSA") with feedback expected in Q4.
Corporate Social Responsibility ("CSR")
-- Enrolment for sesame farming under the Company's alternative
livelihood programme has increased by 168% in 2019;
-- Preparations for the coming season are underway, including
the provision of financial management training for enrolled farmers
in collaboration with NMB Bank;
-- Two water boreholes were built during the Period, one of
which will service a recently resettled family with over 5,000
litres of water per day;
-- A second borehole, which is 80 metres deep, will provide a
new source of fresh water for Patamela village, situated in the
immediate vicinity of New Luika;
-- The Company purchased a Charcoal Briquette Plant for use in a
local project for youth groups in Songwe, targeting creation of new
employment opportunities in the region;
-- "Into-Africa Partnership" with Hazelwood School (charity
number 312081 in the UK) continues with the inauguration of a
maiden ICT laboratory in Q4 in the Songwe region; and,
-- Eton College donated over 500 kg of sports equipment to Shanta's communities.
Guidance
-- Annual guidance reiterated for 2019 of 80,000-84,000 oz at AISC(1) of US$740-780 /oz.
Post Period
-- Following a detailed review of the exploration portfolio, new
targets within the existing mining licences at NLGM were identified
including BC North and EH North;
-- Exploration drilling at these targets has intersected
encouraging mineralisation with sizeable widths, suggesting
significant potential for additional resources to add to the mine
plan;
-- Exploration drilling at these targets intersected
mineralisation with sizeable widths, including the following
encouraging results;
o 6.00 metres grading 8.62 g/t Au (BC North);
o 4.00 metres grading 8.38 g/t Au (BC North);
o 4.00 metres grading 8.94 g/t Au (BC North);
o 9.00 metres grading 6.62 g/t Au (EH North);
o 9.00 metres grading 5.56 g/t Au (EH North);
-- Strike lengths of the BC North and EH North mineralised
structures are estimated to be 150 metres and 350 metres
respectively and remain open at depth.Drilling is continuing at
depth and along strike at both targets, with additional results
expected in Q4 2019; and,
-- The results of this drilling campaign and the second drilling
campaign in Q4 2019 will be combined and analysed, with an updated
Mineral Resource Estimate and resultant life of mine extension
expected in the coming months.
Note: 1. Development costs at the BC, Luika and Ilunga
underground operations are not included in AISC.
Note: 2. EBITDA is earnings before interest, tax, depreciation
and amortisation which has been derived as operating profit
exclusive of pre-production revenue, depreciation/depletion of
tangible assets and amortisation of intangible assets. Adjusted
EBITDA has been derived as EBITDA before non-cash loss on unsettled
forward contracts.
Note: 3. Available liquidity has been derived as unrestricted
cash, restricted cash and the sale value of bullion available for
sale at the end of the Period (net of royalties and expected
selling costs).
Eric Zurrin, Chief Executive Officer, commented:
"As we rapidly pay down our debt and improve our financial
position, New Luika Gold Mine continues to perform operationally.
This quarter has seen us produce over 22,000 oz of gold and
positions the Company on track to again meet our guidance for the
year. Net debt at US$20.7 m is now the lowest it has been in over
six years and has decreased by over 50% since the same period two
years ago.
"Our recent exploration results are encouraging as we look to
add more ounces to the New Luika mine plan. Key to our current
exploration targets is the close proximity to both the existing
sources of high-grade ore and the processing plant. We plan to
announce a new resource update shortly which will highlight how we
can add low cost gold ounces to our future production and extend
the mine life of New Luika."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 17 October 2019, at 10:00 BST. Participants can
access the call by dialling one of the following numbers below
approximately 10 minutes prior to the start of the call.
UK Toll-Free Number: 08003589473
UK Toll Number: +44 3333000804
PIN: 71803848#
The presentation will be available for download from the
Company's website: www.shantagold.com or by clicking on the link
below:
https://www.anywhereconference.com?Conference=301302161&PIN=71803848&UserAudioMode=DATA
A recording of the conference call will subsequently be
available on the Company's website.
Enquiries:
Shanta Gold Limited
+255 (0) 22 292
Eric Zurrin (CEO) 5148
Luke Leslie (CFO)
Nominated Adviser and Broker
Numis Securities Limited
+ 44 (0)20 7260
Paul Gillam / Alamgir Ahmed 0000
Financial Public Relations
Tavistock
Charles Vivian / Barnaby Hayward / +44 (0)20 7920
Gareth Tredway 3150
About Shanta Gold
Shanta Gold is an East Africa-focused gold producer, developer
and explorer. It currently has defined ore resources on the New
Luika project in Tanzania and holds exploration licenses covering
approximately 1,500km(2) in the country. Shanta's flagship New
Luika Gold Mine commenced production in 2012 and produced 81,872
ounces in 2018. The Company has been admitted to trading on
London's AIM and has approximately 787 m shares in issue. For
further information please visit: www.shantagold.com.
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
Q3 2019 PRODUCTION & OPERATIONAL UPDATE
Safety, Health and Environment
There were no Lost Time Injuries during the Quarter and the
Company has now reached 3.4 million man-hours without Lost Time
Injury. Shanta maintains its track record of operating among the
safest gold mining operations of its peers and had a Total
Recordable Injury Frequency Rate ("TRIFR") (per 1 million hours
worked) of 0.00 for Q3 (Q2: 0.00), significantly below the industry
average.
Operational
Production Summary
Q3 2019 Q2 2019 Q1 2019 Q4 2018
Tonnes ore milled 174,132 177,647 172,644 172,902
-------- --------------------- ------------------- --------------
Grade (g/t) 4.54 3.91 4.49 4.74
-------- --------------------- ------------------- --------------
Recovery (%) 89.3 89.4 89.9 90.9
-------- --------------------- ------------------- --------------
Gold (oz)
-------- --------------------- ------------------- --------------
Production 22,726 19,856 22,374 23,942
-------- --------------------- ------------------- --------------
Sales 22,477 19,760 21,190 24,893
-------- --------------------- ------------------- --------------
Silver production (oz) 24,744 23,461 23,851 26,916
-------- --------------------- ------------------- --------------
Realised gold price
(US$/oz) 1,462 1,303 1,309 1,225
-------- --------------------- ------------------- --------------
Gold production during the period was 22,726 oz. Overall, a
total of 166,772 t of ore grading 5.31 g/t was mined in Q3 compared
with 155,779 t of ore grading 4.53 g/t in Q2. 174,132 t of ore was
milled during the period (Q2: 177,647 t). The ROM stockpile at the
end of Q3 was 151,177 t of ore grading 1.67 g/t (up from 142,213 t
grading 1.37 g/t at the end of Q2). Average recoveries of 89.3%
were achieved in the plant during the period (Q2: 89.4%).
Construction of infrastructure required to support a connection
to the low-cost state ("TANESCO") power grid began at New Luika
during the Period and is expected to be ready by early 2020. Once
the connection has been commissioned, an initial 10% of New Luika's
power requirement is expected to be drawn from the TANESCO grid,
with potential for this to increase to 25%. Power supply represents
one of the Company's most significant cost inputs and so presents
an opportunity to potentially access lower grade ounces by lowering
costs.
Exploration
In early Q3 the Company announced a Mine Resource Upgrade
following the drilling results from BC Central during the Period.
The drilling activities have converted 126,787 oz of Inferred
Resources grading 3.15 g/t into 83,543 oz of Indicated Resources
grading 7.85 g/t, a suitable level of confidence for these ounces
to be incorporated into the Mine Plan.
During the Period, the company continued exploration drilling at
selected high priority targets, BC North and EH North, that have
been identified on the mining licences at New Luika Gold Mine.
Encouraging drilling results were announced following the end of
the Quarter. A maiden resource estimate is expected at both targets
to a depth of only the first 70 metres below surface, and which
will continue to be upgraded through additional drilling which is
ongoing.
Financial
During the Quarter, a total of 22,477 oz of gold was sold at an
average price of US$1,462 /oz against the average spot price for
the quarter of US$1,474 /oz. As of 30 September 2019, the Company
had sold forward 43,000 oz to June 2020 at an average price of
US$1,235 /oz. The Company has the flexibility to defer settlement
of forward sales and, with the exception of delivering into forward
sales for 2,000 oz, had full exposure to the spot gold price during
the Quarter.
Cash operating costs and AISC for Q3 of US$474 /oz (Q2: US$564
/oz) and US$723 /oz (Q2: US$773 /oz), respectively, were achieved
in the Quarter. Of note, development costs at the BC, Luika and
Ilunga underground operations are not included in AISC.
Working capital in the Quarter increased by US$4.3 m, accounted
for by a decrease in trade and other payables (US$1.1 m), an
increase in inventories (US$1.2 m) and an increase in trade and
other receivables (US$2.0 m). The increase in inventories includes
ROM stockpile which increased by US$0.7m. The increase in trade and
other receivables includes the VAT receivable which increased by
US$2.1 m to US$27.4 m.
Capital expenditure was US$5.0 m (Q2: US$5.4 m) for the Quarter,
which was predominantly related to underground development.
As at 30 September 2019 the Company had an unrestricted cash
balance of US$5.0 m (Q2: US$3.1 m). This follows a 15% reduction in
gross debt from US$30.1 m to US$25.7 m at the end of the Quarter.
Net debt decreased by US$6.2 m to US$20.7 m (Q2: US$26.9 m), its
lowest in Shanta's producing history. This reduction in net debt
was predominantly driven by strong quarterly gold production,
prudent cost containment and a strong quarterly gold price.
Ilunga
The Company achieved commercial production at Ilunga during the
Period, on schedule and on budget. Commercial production was
achieved following gross pre-production capital investment of only
US$7.9 million (US$5.0 million after netting off pre-production
revenue) and less than 12 months after the underground portal blast
at Ilunga was carried out in August 2018.
Ilunga is now the third source of high-grade underground feed at
New Luika alongside the BC and Luika underground deposits.
Year to date, the Company has benefited from positive reserve
reconciliation at Bauhinia Creek of 3,745 oz which partly offset
negative reserve reconciliation at Ilunga of 6,617 oz. The average
orebody widths and gold grades at the Ilunga underground deposit in
the first three sublevels were lower than estimated in the ore
reserves. Year to date, reserve reconciliation of mined ore from
stopes and development at Bauhinia Creek and Ilunga is negative
2,872 ounces on a consolidated basis. An updated reserve and
resource statement is expected over the coming months following
ongoing grade control drilling.
Singida Project (the "Project")
In connection with the planned Initial Public Offering ("IPO")
on the Dar es Salaam Stock Exchange ("DSE") previously announced on
29 March 2019, Singida has entered into a non-binding term sheet
with a privately-held, East African, multinational conglomerate,
for an unsecured, non-recourse loan facility of US$10 m
("Facility"). The Facility is conditional on a minimum equity raise
of US$15 million at the IPO. The Facility will be repaid over a
period of three years from cash flows generated by the Project and
bears an annual interest rate of 10%.
The Project's EIA Certificate was received from the Minister of
State in the Vice President's Office for Union Affairs and
Environment during the Period, marking an important milestone for
the future construction and operation of the Project.
During the Quarter, the Singida IPO prospectus underwent its
second formal submission to the Capital Markets Securities Agency
("CMSA") which regulates the DSE. Feedback is expected in Q4 ahead
of the planned IPO in 2020.
Corporate Social Responsibility ("CSR")
The number of sesame farmers enrolled in the Company's
agricultural collaboration with ETG has now grown by 168% since
2018, in readiness for the forthcoming harvest season. During the
previous harvest participants generated US$0.5 m of income from
almost half a tonne of this crop and these figures are expected to
grow significantly.
The Company has been working to ensure that participants in the
scheme are suitably equipped with the skills required to continue
this work independently. This work has included a recent
collaboration with NMB Bank to provide training to enrolled farmers
on financial management.
Ensuring ready access to fresh water for the communities around
New Luika remains a core focus of the Company's CSR strategy. Two
new water boreholes were constructed during the Period, including
one in the nearby Patamela village which extends 80 metres below
ground level. This is in addition to a shallow borehole installed
in the Period for a family recently resettled from the Elizabeth
Hill area, which can produce over 5,000 litres of water per day to
ensure that the family's needs are met.
During the Period, the Company purchased a Charcoal Briquette
Plant for use in a local project for youth groups in Songwe. This
will be commissioned shortly and will assist the project in
creating new employment opportunities across the region.
During the Period, the Company completed construction of one of
the first ever primary school Information and Communication
Technology ("ICT") laboratories in the Songwe region, in
partnership with the primary school at Mbangala village. Teaching
professionals from the "Into Africa - Partners in Learning"
programme with UK-based Hazelwood School (charity number 312081)
will inaugurate the ICT laboratory in Q4, which marks a
transformational long-term outcome for the Company's stakeholders
in Mbangala village and Songwe region.
Post period
Exploration drilling at BC North and EH North has intersected
encouraging mineralisation with sizeable widths, suggesting
significant potential for additional resources to add to the mine
plan. Drilling is continuing at depth and along strike at both
targets and additional results are expected in Q4 2019.
The results of this drilling campaign and the second drilling
campaign in Q4 2019 will be combined and analysed, with an updated
Mineral Resource Estimate and resultant life of mine extension
expected by Q1 2020.
S
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END
UPDUNASRKBARAAA
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October 17, 2019 02:00 ET (06:00 GMT)
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