TIDMSHG
RNS Number : 0152U
Shanta Gold Limited
19 October 2017
19 October 2017
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q3 2017 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 2017 (the "Quarter",
"Q3" or the "Period") for its New Luika Gold Mine ("NLGM"), in
Southwest Tanzania.
Highlights
Corporate and strategic
-- On 5 September 2017, the Company announced a change of
strategy to improve profitability and reduce debt;
-- The new strategy will right-size the business, reducing
headcount at New Luika by an estimated 40% by 31 December 2017,
compared to the start of 2017;
-- The Company has commenced a cost reduction programme
targeting US$5.0 m of annual savings and is targeting operational
improvement across the business including working capital
management and equipment productivity;
-- Eric Zurrin appointed Chief Executive Officer ("CEO") and joined the Board of Directors;
-- Luke Leslie, a Non-Executive Director, appointed as Interim Chief Financial Officer ("CFO");
-- Scott Yelland promoted to Chief Operating Officer ("COO"); from General Manager ("GM");
-- Promotion of senior Tanzanians to key leadership roles in the
Company and to the Executive Committee;
-- Senior management of the Company ("Executive Committee")
agreed to an average 15% reduction in gross cash salaries and to
replace cash bonuses with discretionary share awards to increase
alignment with shareholders; and,
-- The Company delivered notice to Helio Resource Corp.
("Helio") (TSXV: HRC) on 18 August 2017, terminating the
arrangement agreement relating to the proposed acquisition of
Helio, dated 19 June 2017.
Operational
-- No lost time injuries for the Quarter;
-- Quarterly gold production of 18,225 ounces ("oz") (Q2 2017: 19,657 oz);
-- Q3 2017 production impacted marginally by grade variability
in isolated western section of Bauhinia Creek along the nose fault.
Q4 2017 grade expected to improve with the Company now operating
from two stopes;
-- Total ore mined during the Period from underground production
of 75,996 tonnes (Q2 2017: 41,096 tonnes);
-- Quarterly gold sales of 18,487 oz at an average price of
US$1,267 per oz ("/oz"), compared to average spot price of US$1,279
/oz;
-- Q3 cash costs of US$558 /oz (Q2 2017: US$559 /oz);
-- Q3 All in Sustaining Cost ("AISC") of US$822 /oz (Q2 2017:
US$735 /oz) which includes US$39 /oz for higher royalties and a new
clearing fee; and,
-- FY2017 full year guidance expected to be approximately 80,000
oz at an AISC of US$800 /oz. Shanta previously guided to the lower
end of 80,000 - 85,000 oz with an AISC between US$800 - US$850 /oz
for FY2017.
Financial
-- Total liquidity of US$13.6 m including a cash balance of
US$8.0 m (Q2 2017: US$13.8 m) and access to the remaining undrawn
unrestricted Exim Bank facility of US$5.6 m as at 30 September
2017;
-- Gross debt of US$53.5 m (Q2 2017: US$57.1 m) and net debt of US$45.5 m (Q2 2017: US$43.3 m);
-- Capital expenditure of US$9.5 m (Q2 2017: US$10.7 m) relating
to legacy issues and which is expected to reduce in Q4 2017;
and,
-- Forward sales from September to March 2018 of 29,909 oz at an
average price of US$1,274 /oz, down from 37,000 at the end of Q2
2017.
Tanzania Legislation
-- New Natural Resources legislation approved by the Tanzanian
Parliament with three legislative Bills promulgated in July 2017;
and,
-- An increase in royalty rates from 4% to 6%. This is in
addition to the 1% clearing fee already in place.
VAT Repayments
-- At the end of Q3, the Company had accumulated US$15.8 m of
VAT receivables (Q2 2017: US$14 m). As part of the new strategy,
Shanta has increased its representation in Dodoma (Tanzania's
capital city) and Senior Tanzanians are now leading ongoing
discussions with the Government of Tanzania. Shanta is working
constructively with the Government to have the outstanding balance
repaid.
Post Period
-- Extension of the Investec UK US$50 m financing due diligence
period to 31 March 2018, originally announced on 20 June 2017;
-- The Company drew down US$1.9 m from the US$7.5 m 4-year
facility with Exim Bank, taking the total amount drawn down to
US$3.8 m. Exim Bank is one of the largest commercial banks in
Tanzania; and,
-- One-off restructuring costs totalling US$3.0 m paid for
severance, termination and retrenchment costs which will lead to
reduced operating costs in the future.
Eric Zurrin, Chief Executive Officer, commented:
"Shanta's new strategy of focussing closely on cost control,
operational improvements and shareholder returns was implemented in
September 2017, accelerated by the recent legislative changes in
Tanzania. The senior management team and I are confident that we
are positioning the Company in a much stronger direction for the
future and all our staff are committed to achieving the goals we've
set.
"Not only are we are targeting annual savings of US$5 m, we are
also adjusting our capital expenditure priorities. These priorities
include a reduction in capital expenditure as the Company moves
past legacy capital-intensive projects at New Luika, and the ramp
up of the underground operation reaches its completion. Pleasingly
the ramp up continues to proceed as planned, indeed the total ore
mined underground almost doubled from that of the previous
quarter.
"I look forward to reporting solid operational and financial
performance to shareholders in the coming quarters as our new
strategy is implemented and refined."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 19 October 2017, 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: 08003589473
UK Toll Number: +44 3333000804
PIN: 40446235#
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=301206060&PIN=40446235&UserAudioMode=DATA
A recording of the conference call will subsequently be
available on the Company's website.
Enquiries:
Shanta Gold Limited
+255 (0) 22
Eric Zurrin (CEO) 292 5148
Luke Leslie (CFO)
Nominated Adviser and
Broker
Peel Hunt LLP
Ross Allister / Richard +44 (0) 20
Crichton / Chris Burrows 7418 8900
Financial Public Relations
Tavistock
Jos Simson / Emily +44 (0) 20
Fenton / Barnaby Hayward 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 project in Tanzania and holds exploration licences covering
approximately 1,500km(2) in the country. Shanta's flagship New
Luika Gold Mine commenced production in 2012 and produced 87,714
ounces in 2016. The Company has been admitted to trading on
London's AIM and has approximately 769 m shares in issue. For
further information please visit: www.shantagold.com.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Corporate
The Company announced a change of strategy which included a cost
reduction programme targeting US$5.0 m of annual savings and is
making excellent progress on delivering improvements to its cost
structure. The Company has reallocated resources away from
non-critical ancillary support functions in favour of the
underground mine operation which will account for 100 per cent. of
ore production in Q4 2017. In addition, the Company is working with
suppliers to reduce the cost of major contracts. Management looks
forward to providing an update to shareholders in Q4 2017.
Eric Zurrin was appointed as CEO and a Director of Shanta in
August 2017 having been previously re-appointed to the Company as
CFO on 13 March 2017. Eric has previously worked across a range of
roles within the Company over the last four years including as
interim CFO in 2015/2016, leading the financial restructuring in
May 2016 and as an adviser to the CEO in 2013 leading an
operational restructuring of the business as New Luika ramped up
production. Eric holds a Bachelor of Commerce (Accounting) degree
and has 15 years' experience in investment banking and mining,
previously with UBS Investment Bank in London.
Luke Leslie was appointed as Interim CFO on 11 September 2017
having served as a Non-Executive Director of the Company since
2012. Luke has been a member of the Company's audit committee since
2013 and was previously Chairman of the Audit Committee of Canadian
listed copper-gold exploration company Kincora Copper, where he
currently serves as Chairman of the Board of Directors. Luke was
previously the Co-Head of Trafigura-Origo, a member of UBS
Investment Bank's Corporate Finance team and a management
consultant with Accenture, where he specialised in post-acquisition
integration and cost reduction strategies. Luke remains as a
director of Shanta Gold Limited and has stepped down from his
membership on the Audit and Remuneration Committees.
Scott Yelland (MSc CEng FIMMM) was promoted to the position of
COO with technical oversight of the Company's assets including
exploration. As COO, Scott is responsible for the continued
successful ramp-up of the underground mine at NLGM and the
development of the Singida project which is a key contributor to
the next stage of Shanta's growth. Scott has an intimate
understanding of the Company's assets having been a senior
technical leader at Shanta, including being the GM of NLGM for the
past two and a half years. Scott is a mining engineer with 35
years' experience having previously worked with Rio Tinto, Kinross
and Ashanti Goldfields and was formerly the COO of Berkeley
Resources and Highland Gold. Scott's appointment is a non-board
position.
Toby Bradbury and the Company agreed that he would retire as CEO
in August 2017 and he subsequently stepped down from the Board on 6
October 2017. This decision was made as part of the revised
strategy to deliver the desired long-term value for shareholders,
which is being achieved by focusing on shareholder value and
balance sheet deleveraging.
In September 2017, the Executive Committee members agreed to
reduce gross salaries by an average of 15% and for all
discretionary remuneration to be paid in shares in place of cash,
to better align senior management with shareholders.
The Company announced in August 2017 that it had delivered
notice to Helio Resource Corp. ("Helio") (TSXV: HRC) to terminate
the Arrangement Agreement with Helio dated 19 June 2017, after
having taken professional advice and given due consideration to its
decision.
Operational
Production Summary
Q3 2017 Q2 2017 Q1 2017 Q4 2016
------------------- -------- -------- -------- --------
Tonnes ore milled 163,109 155,567 151,378 151,827
Grade (g/t) 3.83 4.28 4.57 4.26
Recovery (%) 90.9 90.9 92.0 90.8
Gold (oz)
Production 18,225 19,657 20,416 18,897
Sales 18,487 17,982 23,252 15,285
Silver production
(oz) 22,915 24,524 28,750 24,731
Realised gold
price (US$) 1,267 1,249 1,249 1,187
------------------- -------- -------- -------- --------
The Company increased tonnes of ore milled to 163,109 tonnes
from 155,567 tonnes in Q2. Gold production declined during the
period to 18,225 oz (from 19,657 oz in Q2) due to lower mill head
grade of 3.83 g/t (4.28 g/t in Q2). During the Quarter, Shanta
produced from a single stope at any one time. After the Quarter
end, the number of stopes available for production increased to two
and is planned to increase to three on a stable basis, improving
production flexibility.
Underground production ramped-up ahead of plan in the Quarter.
Over 37,000 tonnes of high grade underground ore were mined in
September, a new record. The decline in the Bauhinia Creek deposit
had reached the 810 RL as at the end of September, which is on
plan. Progress at the Luika deposit is on track and the first
production ore was achieved in August. Overall, a total of 76,996
tonnes of underground ore grading 5.83 g/t was mined in Q3 2017
compared with 41,096 tonnes of ore grading 7.41 g/t in Q2.
The Run of Mine ("ROM") stockpile at 30 September 2017 was
123,200 tonnes of ore grading 1.6 g/t (up from 107,000 tonnes
grading 1.9g/t at the end of Q2). The ROM stockpile continues to be
blended with high grade ore from the underground.
Safety, Health and Environment
Safety, Health and the Environment remains the utmost priority
for Shanta. The Company extended its excellent record with no lost
time injuries or environmental incidents during Q3 2017.
Financial
During the Quarter a total of 18,487 oz of gold was sold at an
average price of US$1,267 /oz. This was below the average spot
price of US$1,279 /oz over the Period. As of 30 September 2017, the
Company had sold forward 29,909 oz to March 2018 at an average
price of US$1,274 /oz, down from 37,000 oz at the end of Q2
2017.
Cash costs for the Quarter were US$558 /oz (Q2 2017: US$559 /oz)
and AISC were US$822 /oz (Q2 2017: US$735 /oz) including the US$39
/oz impact of higher royalties and a clearing fee in the
Quarter.
There was a US$1.2 m decrease in working capital in the Quarter
accounted for by an increase in payables (US$4.4 m) which includes
US$3 m of one-off restructuring costs, an increase in inventories
(US$2.0 m) and an increase in trade and other receivables (US$1.2
m). The increase in trade and other receivables includes VAT
receivable which increased by US$1.8 m to US$15.8 m. Capital
expenditure was US$9.5 m (Q2: US$10.7 m) which included mobile
equipment for the underground (US$1.4 m) and legacy costs around
completing the Tailings Storage Facility 2 (US$1.1 m) and
outstanding commitments for Singida and the pilot plant (US$0.9
m).
The Company had total liquidity of US$13.6 m including a cash
balance of US$8.0 m (Q2 2017: US$13.8 m) and access to the
remaining undrawn unrestricted Exim Bank facility of US$5.6 m as at
30 September 2017. The lower cash position was driven by debt
repayments (US$3.4 m), capital investment (US$9.5 m) and an
increase in VAT receivables (US$1.8 m).
The Company is reducing its debt and restructuring the business
to deliver improved cash flows going forward. Gross debt decreased
to US$53.5 m (Q2: US$57.1 m) following repayments to Investec
(US$2.7m) and Sandvik (US$0.7 m). Net debt marginally increased to
US$45.5 m (Q2: US$43.3m). Post period end the Company drew down
another US$1.9 m from the facility.
Singida
The Company is completing the final phase of the resettlement at
Singida and continues its Corporate Social Responsibility program
in the district. Management expects to complete an updated JORC
resource estimate for Singida in Q4 2017, in advance of an
investment decision and will provide an update prior to the end of
2017.
Exploration
During the period, the Company relocated its exploration team to
the main camp at New Luika. Previously the Company operated two
camps 12 km apart. The consolidation of the camps will reduce costs
to the Company and refocus exploration on Shanta's mining licences.
Exploration activities have focused on trenching at the triple vein
deposit, located approximately 6 km from the NLGM processing plant
and to the north of the Ilunga deposit. Small pitting and sampling
activities are continuing at near mine targets.
Tanzania country update
As previously announced, a new Finance Act was approved by the
Tanzanian Parliament in June 2017 and new legislative Bills were
enacted as Laws in early July 2017 (Written Laws Act, Sovereignty
Act and Unconscionable Term Act). As a result of the legislative
changes, royalties have increased from 4% to 6%. In addition, a 1%
clearing fee on the value of all minerals exported from the country
became effective from early July 2017. These changes increase
Shanta's costs by approximately US$3 m per annum (US$39 /oz). The
Company's announced target costs savings would more than offset the
impact of these higher costs.
Post Period End
The due diligence period for the Investec UK US$50 m financing
announced on 20 June 2017 was extended to 31 March 2018.
The Company had a US$1.9 m draw down from a US$7.5 m 4-year
facility agreed with Exim Bank, increasing the total amount drawn
down to US$3.8 m. Exim Bank is one of the largest commercial banks
in Tanzania.
One-off restructuring costs totaling US$3.0 m were paid for
severance, termination and retrenchment costs. The restructuring
costs enable the Company to realise short and long-term benefits
for shareholders. No further material restructuring costs are
expected.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
DRLMPBBTMBMBTPR
(END) Dow Jones Newswires
October 19, 2017 02:00 ET (06:00 GMT)
Shanta Gold (LSE:SHG)
Historical Stock Chart
From Apr 2024 to May 2024
Shanta Gold (LSE:SHG)
Historical Stock Chart
From May 2023 to May 2024