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RNS Number : 8678O
Shanta Gold Limited
17 October 2012
17 October 2012
Shanta Gold Limited
("Shanta Gold" or the "Company")
Significant Corporate and Operational Changes
Shanta Gold, the East African focused gold mining company, is
pleased to announce significant corporate and operating changes at
the Company.
Highlights
Operational:
-- Initial New Luika gold plant ramp up operational issues
identified and in process of being resolved
-- October production to 14 October of 570oz vs 199oz total September production
-- Potential to increase 2013 gold production beyond the current
forecast of 70,000oz at c.$620/oz cash costs
-- First three years' total gold production expected to exceed 225,000oz
-- Upgraded New Luika mine plan expected by the end of Q4 2012
-- Growth potential identified from early stage exploration on satellite deposits
Board of Directors and Senior Adviser:
-- Appointment of experienced mining industry executive Jonathan
Leslie as Strategic Adviser to the board
-- Appointment of mining corporate financier Luke Leslie as Non-Executive Director
-- Appointment of Shanta Gold CFO Edward Johnstone as Finance Director
-- Walton Imrie has decided to step down once a new Chairman candidate has been identified
-- Technical Director and former CEO Gareth Taylor has stepped down
Financing:
-- $40 million FBN debt facility deferred until New Luika reaches commercial production levels
-- Minimum $30 million equity placing to address short term
financing requirements to be launched today
-- Alternative sources of financing available subject to production ramp up
-- Financial flexibility to take advantage of potential value
enhancing corporate opportunities
Mike Houston, CEO of Shanta Gold, commented:
"In my first two weeks as CEO of Shanta Gold I have worked
closely with the operating team to assess the Company's short to
medium term requirements. I am very positive about the prospects of
the Company but the key objective is to achieve steady state
production at the New Luika Gold Mine. Initial production from New
Luika has been lower than anticipated, principally as a result of
constrained crushing capacity and issues, now largely resolved,
with the CIL plant. The plant processing issues have been largely
addressed and remedies are beginning to bear fruit. We expect to be
able to ramp up the processing plant into the first half of 2013
and importantly we now believe that 2013 production could exceed
70,000oz. The production increase has been driven by the
significantly improved Indicated resource and higher grades at the
Bauhinia Creek pit as announced on 30 July 2012. I am encouraged by
the potential additional upside from surrounding exploration
targets within the New Luika mining licence as well as within the
exploration joint venture with Great Basin Gold, all of which are
in close proximity to the processing plant. I look forward to
working with the new board and Mr. Leslie who will add considerable
expertise and experience to the team."
Walton Imrie, Non-Executive Chairman of Shanta Gold,
commented:
"The appointments of Luke Leslie as a non-Executive Director and
Jonathan Leslie as Strategic Adviser with board observation rights
gives Shanta Gold great experience of both mining itself and mining
transactions. I also welcome Edward Johnstone's appointment as
Finance Director. Edward has worked tirelessly as Chief Financial
Officer since his arrival at Shanta Gold earlier this year and it
is appropriate that the finance function is represented at the
Board level. Finally, I would like to thank Gareth Taylor for his
energy and efforts over the past few years as Chief Operating
Officer, Chief Executive Officer and Technical Director. I look
forward to being involved in the next stage of the Company's
development."
New Luika Ramp Up
Production commenced at New Luika in late August and was
expected to ramp up to approximately 6,000oz per month during Q4.
However, initial production has been lower than anticipated
principally as a result of reduced crushing capacity, as well as
issues with the grinding levels, cyanide consumption and assay
controls, which has resulted in reduced recoveries and a "lock up"
of the gold in the plant. Processing and metallurgical experts have
been on site and potential areas of improvement have been
identified.
The crushing circuit will be upgraded to achieve name plate
milling capacity. The Company is reviewing options with regards to
the crusher upgrade, both in and out of country, and anticipates
commissioning of the additional unit by the end of Q4 2012. Until
the commissioning of the new crusher, the Company expects to feed
the plant at a rate of approximately 20,000 tonnes per month of
ore.
The grinding levels of the ball mills have not been achieving
optimum levels of grind, hindering the full liberation of gold. The
Company continues to adjust the configuration and size of the steel
balls with new grinding media expected on site by mid-November.
Cyanide consumption was initially lower than the test work
design which may have hindered the efficiency of gold on to carbon.
Cyanide usage has been increased, which has resulted in a
significant improvement of gold on carbon.
As of 14 October 2012, 25 thousand tonnes ("Kt") with estimated
grade of 4.98 g/t has been fed through the plant. September
production was 18Kt of ore milled with only 199oz of gold produced.
Recoverable gold production in the month to date has improved
significantly with 570oz from 7Kt milled. Since first gold pour,
approximately 2,800oz of gold has been locked up in the plant due
to processing issues; however, the improvements implemented by
management have resulted in successfully transferring approximately
2,000oz of the locked up gold to gold on carbon. As a result of the
reduced crushing capacity and lower mill grinding efficiency, the
Company has reduced its Q4 2012 production guidance to c.6,000oz
and expects to reach run-rate production of 6,000 ounces per month
in the first half of 2013.
New Mine Plan and Increased Production
The updated New Luika resource announced in July 2012 has
resulted in improvements in the overall mine plan, details of which
are expected to be published in the new mine plan by the end of Q4.
Initial indications suggest potential to increase 2013 forecast
gold production beyond 70,000oz and total forecast gold production
over the first three years beyond 225,000oz (previously
175,000-190,000oz). 2013 New Luika operating cash costs are
expected to be approximately $620/oz and will be confirmed in the
new mine plan.
The Company's near term mine development plan is focused on
optimising the Bauhinia Creek and Luika pits. The flexibility to
feed the current plant from both pits allows the project economics
to be maximised. The current optimisation of the Bauhinia Creek
mine plan indicates a 150% increase in exploitable gold from
126,000oz to 315,000oz at a grade of 5.58 g/t.
Near-Mine Growth Options
The Company has identified a number of additional deposits
located within the mining licence, which could be exploited and
these include the Black Tree Hill, Jamhuri, Elizabeth Hill, and
Shamba deposits. Potential also exists to establish underground
mining operations at two additional deposits, Ilunga and Luika
South, which might be accessible from the Luika pit. The Company
believes the additional deposits could provide a source of
additional ore to feed the plant to increase New Luika production
and/or extend the life of mine.
The Company also has a joint venture agreement (the "JV") with
Great Basin Gold Limited ("GBG") in which Shanta Gold can earn an
80% interest in the joint venture to exploit approximately
2,500km(2) of exploration assets surrounding the New Luika Gold
Mine. As announced on 5 September 2012, the JV has identified nine
new mineralised prospect areas in close proximity to the New Luika
Gold Mine. The key discoveries included the Big Vein 2 prospect,
the Mgomba prospect, and Dave's Mile prospect, each of which are
located less than 8km from the New Luika processing plant. GBG has
commenced insolvency proceedings which entails an asset sale
process. In the event GBG chooses to dispose of its interest in the
JV, Shanta Gold has a pre-emptive right to acquire the remaining
20%.
New Appointments and Board Changes
The Company is pleased to announce a number of senior
appointments to better position the Company for its next phase of
development.
Jonathan Leslie will be appointed as a Strategic Adviser with
board observation rights. After graduating in Jurisprudence and
qualifying as a barrister, Jonathan spent 26 years with Rio Tinto,
including nine years' service on the board. His roles at Rio Tinto
included Mining Director and Chief Executive of the Copper and
Diamonds & Gold Product Groups. He subsequently was CEO of
Sappi and the Executive Chairman of Nikanor. Jonathan was mostly
recently CEO of ASX-listed Extract Resources which was successfully
sold to China Guangdong Nuclear Power Corp for A$2.2 billion in
April 2012.
Luke Leslie will be appointed as Non-Executive Director of
Shanta Gold. Mr Leslie is the Head of Origo Partners Metals &
Mining Private Equity. Mr Leslie has 10 years of transaction
experience in Metals and Mining, including time with the Metals and
Mining team at UBS Investment Bank, and with the Natural Resources
team at Accenture. In addition to the Kincora Copper (KCC:TSX)
Board of Directors, he is a member of the Board of Directors of
Moly World, China Commodities Absolute Return Fund, MSE Liquidity
Fund and Resource Investment Capital.
Shanta Gold CFO Edward Johnstone will be appointed as Finance
Director of Shanta Gold with immediate effect. Edward is a
Chartered Accountant with over 20 years experience, qualifying with
Rawlinson and Hunter and worked for Minorco plc as a Finance
Manager based in the UK and Europe. Edward was Senior Manager,
Corporate Development for RBS plc from 2002-4 covering the UK,
Europe and the USA. Since 2007 Edward has been based in Africa and
has set up and run businesses as Head of Finance for GTV and an
outsourced finance operation based out of Nairobi, Kenya.
Shanta Gold Technical Director and former CEO Gareth Taylor has
resigned from the Board of Shanta Gold with immediate effect.
Financing
The Company has a signed term sheet with FBN Bank (UK) Ltd
("FBN") for a $40m debt facility; however, the debt facility has
been deferred until New Luika reaches commercial production levels.
As a result of the delayed debt facility and reduced revenues from
initial gold sales, the Company will announce today that it is
undertaking an equity placing of a minimum of $30m to address its
short term financing requirements. The Company remains in ongoing
discussions with providers of alternate sources of financing, which
include commercial debt financing, development bank debt financing,
off take related financing and royalty financing. The equity
placing provides the Company with the flexibility to consider the
suitability and attractiveness of these alternative sources of
non-dilutive financing on an appropriate timeframe as well as
provides flexibility to consider value enhancing corporate
transactions.
Notes
On appointment, Edward Richard Melville Johnstone holds 205,000
shares in the Company.
A list of Mr Johnstone's current and past directorships held
within the last five years is set out below:
Current
Annandale East Africa Limited
Past
Eco Options Limited
No further information is required for disclosure in respect of
Rule 17 or Schedule 2 paragraph (g) of the AIM Rules for
Companies.
Enquiries:
Shanta Gold Limited Tel: +255 (0) 22 2601
829
Mike Houston / Edward Johnstone
Nominated Adviser and Broker
Liberum Capital Limited Tel: + 44 (0)20 3100
2000
Michael Rawlinson / Clayton Bush / Christopher
Kololian
Financial Public Relations
FTI Consulting Tel: +44 (0)20 7269 7100
Billy Clegg / Oliver Winters
About Shanta Gold Limited
Shanta Gold is an East African focused gold mining company. It
currently has defined ore resources on the New Luika and Singida
projects in Tanzania and holds exploration licences over a number
of additional properties. The Company's flagship New Luika Gold
Mine commenced production and achieved first gold pour in August
2012. The Company is admitted to trading on AIM and has
approximately 334 million shares in issue.
For further information visit the Company's website:
www.shantagold.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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