TIDMSHG
RNS Number : 7681M
Shanta Gold Limited
18 October 2016
18 October 2016
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q3 2016 PRODUCTION AND 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 2016 ("Q3", the
"Quarter" or the "Period") for its New Luika Gold Mine ("NLGM"), in
Tanzania.
Highlights
Operational
-- Quarterly gold production of 20,580 ounces ("oz") (Q2 2016: 23,896 oz);
-- Quarterly gold sales of 23,426 oz at an average price of
US$1,301 per oz ("/oz"), compared to average spot price of US$1,335
/oz (Q2 2016: 26,134 oz at an average price of US$1,246 /oz);
-- Cash costs for Q3 of US$387 /oz (Q2 2016: US$429 /oz) and All
in Sustaining Cost ("AISC") of US$621 /oz (Q2 2016: US$664 /oz);
and
-- No lost time injuries for the Quarter.
Financial
-- Cash balance of US$25.8 million ("m") (Q2 2016: US$30.5 m);
-- Pre-payments from cash reserves of US$6.3 m for the Power Plant;
-- Cash generated from operations of US$11.1 m (Q2 2016: US$13.1 m);
-- Capital expenditure of US$14.2 m (Q2 2016: US$7.0 m);
-- Gross debt of US$70.5 m (Q2 2016: US$75.0 m);
-- Net debt of US$38.4 m (Q2 2016: US$44.5 m) after taking
account of pre-payments for the Power Plant;
-- Additional access to Silver Stream funds (US$5.25 m) and
Power Station Funding (US$9.1 m) yet to be drawn down; and
-- Forward sales from October 2016 to February 2017 of 20,000 oz
at an average price of US$1,275 /oz.
Development and Exploration
-- Underground project development on track and within budget
for first production of underground ore in Q2 2017;
-- Works continue on the second Tailings Storage Facility ("TSF2");
-- Updated resources statement published for the Ilunga
satellite deposit for a total Indicated and Inferred resource of
1.7Mt at 4.55g/t for 257,965 oz at 1 g/t cu-off;
-- An additional 184,000oz at Ilunga (165,000oz Indicated) being
evaluated for additional reserves to add to mine life in a high
grade underground operation;
-- First stage drilling results at Singida reveal high grade
intersections in Gold Tree 2 and Gold Tree 3; and
-- Installation of Singida Pilot Mining Project targeting gold production in Q2 2017.
Corporate
-- Options being considered for lower cost debt on the Power Station Financing;
-- The US$5.25 m silver stream to close in Q4 when the final
registration of the security has been effected.
Guidance for 2016
-- Annual production guidance maintained for 2016 of 82,000 - 87,000 oz;
-- Lowered AISC guidance to US$690 - 740 /oz, from US$730 - 780 /oz; and
-- A revised Mine Plan is being generated to incorporate the
Elizabeth Hill Reserve and the recently upgraded Ilunga Resource
which will extend mine life and is targeted for completion in Q1
2017.
Toby Bradbury, Chief Executive Officer, commented:
"Q3 has been another solid quarter for Shanta setting the
Company up to deliver at the top end of production guidance for the
year and once again improving its position on costs with a further
reduction in target AISC to US$690 - 740 /oz, from US$730 - 780
/oz.
On our projects, the underground development progressed well
during the quarter and remains on schedule for first ore production
in Q2 2017. We are also now actively working on the Ilunga reserve
evaluation which we expect to add significant life to New Luika
with its additional high grade resources. Outside of New Luika, our
advanced stage Singida project delivered exciting drilling results
in the quarter and is progressing well towards commissioning the
pilot plant in Q2 2017.
On our financial performance, it is very satisfying to see our
debt reducing whilst we also fund such a significant capital
program. This is reflective of the strong cash generative capacity
of our business."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 18 October 2016, at 09:30 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: 0808 237 0030
UK Toll Number: 0203 139 4830
PIN: 82215216
The presentation will be available for download from the
Company's website: www.shantagold.com or by clicking on the link
below:
http://www.anywhereconference.com?UserAudioMode=DATA&Name=&Conference=131677798&PIN=82215216
A recording of the conference call will subsequently be
available on the Company's website.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Enquiries:
Shanta Gold Limited
Toby Bradbury (CEO) +255 (0)22 2601
Mark Rosslee (CFO) 829
Nominated Adviser and Broker
Peel Hunt LLP
Matthew Armitt / Ross Allister
/ Chris Burrows +44 (0)20 7418 8900
Financial Public Relations
Tavistock
Jos Simson / Emily Fenton
/ Barney Hayward +44 (0)20 7920 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 and Singida projects in Tanzania and holds exploration
licences over a number of additional properties in the country.
Shanta's flagship New Luika Gold Mine commenced production in 2012
and produced 81,873 ounces in 2015. The Company is admitted to
trading on London's AIM and has approximately 583 million shares in
issue.
For further information please visit: www.shantagold.com.
Operational
Production Summary
Q3 2016 Q2 2016 Q1 2016 Q4 2015
-------------------------- ---------- ---------- -------- --------
Tonnes ore
milled 144,930 151,698 149,128 155,622
Grade (g/t) 4.90 5.48 5.69 6.50
Recovery (%) 90.2 89.5 89.3 89.5
Gold (oz)
Production 20,580 23,896 24,341 29,139
Sales 23,426 26,134 21,486 29,228
Silver production(oz)(1) 30,381 36,316 35,144 39,153
Realised gold
price (US$) 1,301 1,246 1,132 1,087
-------------------------- ---------- ---------- -------- --------
1. Note that the full production figures included pending closure of the silver stream.
Shanta has had another robust quarter of operational performance
that places the Company to deliver at the upper end of its
production guidance of 82-87,000 oz for the year. The slight
reduction in gold production was anticipated and as reported at the
end of H1 which had benefited from an acceleration of the mining
program with earlier access to higher grade ore.
Lower production in Q3 also brought into account planned
maintenance on the mills which were stood down for a total of 3.5
days. The ROM stockpile at the end of September stood at 159,000
tonnes at an average grade of 5.41 g/t for a contained 27,600 oz.
The ROM stocks have been established as part of the accelerated
mining program and in anticipation of the transition to underground
production in Q2 2017.
During the quarter, mining was completed in the Bauhinia Creek
Pit following the completion of surface mining at Luika in June. A
new pit was established at the Ilunga satellite deposit and
production commenced in July. Ilunga will provide an average of
20,000 tonnes of ore per month for the next 10 months. Additional
material will be sourced from the established pit at Jamhuri as
required.
Given the change in surface mining that has occurred at New
Luika, the mining contract with BC Mining, centred around the
Bauhinia Creek and Luika Pits, was terminated during the quarter.
This was in favour of a plant hire agreement with BC Mining that
provides greater flexibility as New Luika mines its surface
satellite deposits. BC Mining has been associated with New Luika
since 2009.
Underground Project
The underground development at Bauhinia Creek continues on
budget and on schedule, with production of high grade ore due in Q2
2017.
The surface infrastructure is largely all in place and the focus
is on development of the decline. Development equipment on site now
comprises two twin boom jumbos, two 50 tonne trucks, two loaders
and associated ancillary machines and vehicles. All the equipment
is new which is having a favourable impact on availabilities and
costs. 80 people have now been employed with all the senior roles
filled. There are just three expatriates (Underground Manager,
Electrical Engineer and Drill Rig Operator Trainer) thus reflecting
a 96% local workforce.
As at the end of September, the Bauhinia Creek decline had
advanced 270 metres, the turn out and cross drive to Luika had
advanced 79 metres and there was a further 53 metres of non-decline
development for a total of 402 metres. This is slightly ahead of
the schedule. There are no material issues with ground
conditions.
During Q4, raise boring of the first pair of ventilation shafts
for the Bauhinia Creek underground mine will commence for which the
surface platforms have already been established.
Major Projects
Construction of TSF2 continues with all essential earthworks
scheduled to be completed before the arrival of the rainy season in
November. Commissioning is likely to be in Q1 2017 which has no
bearing on our capacity to continue operations.
The delivery to site of the 6 new HFO powered generator sets is
expected early in Q4 2016 with foundations and bench testing
already completed. Commissioning of these new units is as scheduled
for Q1 2017 and will save around 20% of unit costs for electrical
power.
Safety, Health and Environment
Safety, Health and Environmental issues remain an ongoing
priority for Shanta with zero lost time injuries or environmental
incidents in the Quarter.
Financial
A total of 23,426 oz of gold was sold at an average price of
US$1,301 /oz vs an average spot price of US$1,335/oz for the
Quarter. As of 14 October 2016, the Company had sold forward 20,000
oz to February 2017 at an average price of US$1,275 /oz. Shanta's
hedging policy is aimed at securing cashflow in a year of major
capital and debt servicing commitments.
Shanta produced strong unit cost performance in Q3 2016
predominantly as a result of continued cost efficiencies. Cash cost
per ounce amounted to US$387 /oz (Q2 2016: US$429 /oz) and AISC
amounted to US$621 /oz (Q2 2016: US$664 /oz). The first nine months
of 2016 has benefited from an accelerated mining program in a below
average strip ratio environment which has reduced the fixed cost
component of mining and enabled very beneficial cash costs to be
achieved. With the completion of Luika Pit in June and Bauhinia
Creek Pit in September, together with the revised mining contract,
the Company expects cash costs to remain low despite a lower ounce
production profile for the remainder of the year. Consequently,
cost guidance for the year has been revised down to US$690 - 740
/oz.
A further investment was made in working capital in the quarter
receivables and prepayments for underground and power project
capital items (US$5.0 m). During the Period there was an overall
US$0.7 m increase in working capital (Q2 2016: US$13.4 m),
importantly cash generated from operations before working capital
for the Period was US$11.1 m (Q2 2016: US$13.1 m). Capital
expenditure was US$14.2 m (Q2: US$7.0 m). This was made up of: UG
mining equipment (US$7.8 m); capitalised deferred stripping at
Ilunga Pit (US$1.9 m); TSF2 (US$1.3 m); Singida, including
exploration (US$0.9 m); and Luika River Dam (US$0.4 m)
The Company's cash balance at the Quarter end was US$25.8 m (Q2:
US$30.5 m). Gross debt decreased to US$70.5 m (Q2 2016: US$75.0 m)
after commencement of the repayment of the Investec facility while
net debt, after taking account of US$6.34 m cash prepayments for
the power plant, reduced to US$38.4 m (Q2 2016: US$44.5 m).
Importantly, the silver stream proceeds which have yet to be
received (US$5.25 m) are awaiting final registration of security.
The loan for the power plant of US$9.1 m has yet to be drawn down
although it is included in the gross debt. Funding for the power
plant has thus far been made from internal cash resources (as
above) backed up by a letter of credit. The Company is using this
opportunity to source lower cost finance.
The Company continues to identify and implement efficiency
improvements across the entire business as well as improving its
performance management reporting and business process optimisation.
These changes serve two key purposes including cost savings and
risk mitigation against operational or financial inefficiencies.
Separately, capital programmes are continuously reviewed to test
for on-going requirement, potential alternatives and efficiency
opportunities.
Exploration and Development
As advised in the Base Case Mine Plan in September 2015, at New
Luika, 514,000 oz of resources sit outside the mine plan and
further drilling programs are planned to generate replacement and
expansion oz as part of the business strategy. A revised Mine Plan
is being generated to incorporate the Elizabeth Hill Reserve and
the recently upgraded Ilunga Resource which will extend mine life
and is targeted for completion in Q1 2017.
During the quarter, a resource update was announced for the
Ilunga deposit based on drilling conducted in H1 2016 which added a
net increase in total resources of 184,000 oz (at 1 g/t cut off) of
which 165,000 oz is in the indicated category. These are ounces
over and above the 514,000 oz that sit outside the mine plan.
The Ilunga deposit is a high priority opportunity and is now in
the process of mine design to create a reserve which is expected to
significantly extend the life of New Luika with its high grade
resources.
Further work will continue at Luika within the mining licence
and in the surrounding Prospecting Licences held by the Company. To
assist in the process of target generation, the Company arranged
for a Lidar and Hyperspectral survey over 700km(2) of its tenements
in the Lupa gold field for which the data has just been
received.
Singida is now gaining greater traction on the back of stable
operations and cashflow at New Luika. A pilot plant is planned to
take advantage of the existing mining licence at Singida. In
addition, as announced at the end of Q3 2016, an exploration
program has highlighted the potential to extend the resource bases
at Singida in the same manner as at New Luika. Singida has
significant exploration upside potential which will be evaluated in
the coming quarters while an updated full scale feasibility study
is conducted.
.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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