TIDMSHG
RNS Number : 3871L
Shanta Gold Limited
19 April 2018
19 April 2018
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q1 2018 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 31 March 2018 (the "Quarter", "Q1" or
the "Period") for its New Luika Gold Mine ("NLGM"), in Southwest
Tanzania.
Highlights
Financial
-- Cash balance of US$11.7 million ("m") (Q4 2017: US$13.6 m);
-- Gross debt of US$49.2 m (Q4 2017: US$53.0 m), down US$3.8 m from Q4;
-- Net debt of US$37.5 m (Q4 2017: US$39.5 m), down US$2.0 m
from Q4 and the lowest level since ramp up of operations in Q4
2012;
-- EBITDA of US$9.1 m and cashflows from operating activities of US$7.1 m;
-- Forward sales from April to June 2018 reduced to 17,600 oz at
an average price of US$1,287 /oz (Q4 2017: 22,500 oz at US$1,271
/oz);
-- Capital expenditure of US$3.3 m (Q4 2017: US$6.3 m); and,
-- At the end of Q1, the Company had a VAT receivable balance of
US$16.2 m (Q4 2017: US$14.5 m).
Operational
-- Quarterly gold production of 17,663 ounces ("oz") (Q4 2017:
21,288 oz), in line with the Company's Revised Mine Plan ("RMP")
and full year guidance of 82,000 - 88,000 oz reiterated;
-- During the period, total ore mined from underground
production of 124,444 tonnes (Q4 2017: 143,092 tonnes) at an
average grade of 4.9 grams per tonne (g/t), as planned with an
additional 18,340 tonnes produced from open pit mining at the
Jamhuri pit;
-- Quarterly gold sales of 17,691 oz at an average price of
US$1,329 /oz, consistent with average spot price of US$1,329
/oz;
-- Cash operating costs of US$599 /oz (Q4 2017: US$591 /oz);
-- All in Sustaining Cost ("AISC") of US$776 /oz (Q4 2017:
US$767 /oz), commensurate with reduced gold production during the
period. The business has continued to respond very well to cost
optimisation initiatives implemented under management's initial
US$5.0 m target, achieved in late 2017;
-- Equipment purchased including the successful commissioning of
our Cemented Rock Fill plant at NLGM at the end of January which
significantly de-risks the underground operation going forward.
Exploration and development
-- Targeted drilling took place at Singida in Q1 with
encouraging results announced in April 2018;
-- Planning completed for geophysics survey and Phase 2 drilling at Singida in Q2;
-- Planning completed for underground exploration drilling at
Bauhinia Creek in Q2. A modest one thousand metre programme is
planned across Q2 and Q3, to test some of the high-grade extensions
which are not currently in the reserve and mine plan; and,
-- Targeted trenching programmes around NLGM have resumed.
CSR and Government engagement
-- Senior management team is dedicating a significant amount of
time in the Tanzanian capital, Dodoma, in discussions with
government;
-- Significant milestone achieved with the final approval by the
Government of Tanzania to use the newly constructed tailings
storage facility ("TSF2"). Commissioning is taking place in Q2
2018;
-- Receipt of TSF2 permit represented a significant milestone in
that all major project work required for the NLGM underground mine
is now complete and operational;
-- A delegation of senior government officials visited NLGM in
February and commended Shanta's approach to Local Content,
Tanzanian employment and sustainability programmes; and,
-- Additional Livelihood Programs have commenced in the period
and several, which were initiated in late 2017, and are now fully
rolled out.
-- Significant progress in core CSR initiatives for Education,
Water, Health and Livelihood during the quarter
Corporate and strategic
-- 2018 priorities set out in January are for low-cost
operational excellence, balance sheet deleveraging, improved
capital allocation and targeted growth;
-- Cost saving target increased in January 2018 from US$5.0 m to
US$7.0 m per annum on an annualised basis (excluding cost saving
from new mining method at Luika), with the additional US$2.0
million expected to be achieved by Q3 2018;
-- Luke Leslie appointed as Chief Financial Officer on a
permanent basis effective 1 January 2018; and,
-- Numis Securities Limited appointed as Nominated Advisor and Sole Broker.
Guidance for 2018
-- Annual guidance reiterated for 2018 of 82,000-88,000 oz at AISC of US$680-730 /oz.
Post Period
-- Singida exploration drilling results announced with encouraging intersections;
-- The Company and Investec Bank plc mutually agreed not to
proceed with the US$50 m refinancing announced in Q2 2017; and,
-- 2017 financial year audited results published.
Eric Zurrin, Chief Executive Officer, commented:
"The reduction in underground tonnes compared with the previous
quarter was in line with the Revised Mine Plan implemented last
year. While this resulted in less ounces being produced in the
period, the Company remains on track to achieve our previously
stated guidance of 82,000 to 88,000 ounces in 2018.
Pleasingly, with the government's approval of the tailings
storage facility during the period, all major project work required
for the underground mine is now complete and operational. The
facility will be commissioned during the second quarter.
Continued deleveraging of the balance sheet remains a high
priority and, supported by a performing gold price, the production
schedule for the remainder of the year puts us on track to make
significant headway."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 19 April 2018, 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: 08082370030
UK Toll Number: +44 (0)2031394830
PIN: 46241277#
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=131696663&PIN=46241277
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
Numis Securities Limited
Paul Gillam / John Prior + 44 (0)20
/ James Black 7260 0000
Financial Public Relations
Tavistock
Jos Simson / Charles Vivian +44 (0)20
/ 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 79,585
ounces in 2017. The Company has been admitted to trading on
London's AIM and has approximately 778 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.
Financial
During the Quarter a total of 17,691 oz of gold was sold at an
average price of US$1,329 /oz. This was consistent with the average
spot price of US$1,329 /oz over the period. As of 31 March 2018,
the Company had sold forward 17,600 oz to June 2018 at an average
price of US$1,287 /oz, many of which were rolled forward from
previous financial quarters allowing the Company to realise higher
spot prices.
Cash operating costs for Q1 was US$599 /oz (Q4 2017: US$591 /oz)
and AISC was US$776 /oz (Q4 2017: US$767 /oz).
There was a US$1.7 m increase in working capital in the Quarter
accounted for by a decrease in trade and other payables (US$0.7 m),
a decrease in inventories (US$1.7 m) and an increase in trade and
other receivables (US$2.7 m). The increase in trade and other
receivables includes VAT receivable which increased by US$1.5 m to
US$16.2 m.
Capital expenditure was US$3.3 m (Q4 2017: US$6.3 m) which was
predominantly related to underground development and equipment.
Following the permitting of TSF2 all major capital project work at
NLGM required to support the underground operation has now been
completed.
As at 31 March 2018 the Company had a cash balance of US$11.7 m
(Q4 2017: US$13.6 m) and access to the remaining undrawn
unrestricted Exim Bank facility of US$1.9 m.
The Company is continuing with its drive to reduce its debt to
increase financial flexibility and higher free cash flow going
forward. Gross debt decreased to US$49.2 m (Q4 2017: US$53.0 m)
following repayments including US$2.7 m to Investec. Net debt
decreased to US$37.5 m (Q4 2017: US$39.5m).
Operational
Production Summary
Q1 2018 Q4 2017 Q3 2017 Q2 2017
------------------- -------- -------- -------- --------
Tonnes ore milled 149,711 162,233 163,109 155,567
--------
Grade (g/t) 4.14 4.48 3.83 4.28
--------
Recovery (%) 91.2 91.1 90.9 90.9
--------
Gold (oz)
--------
Production 17,663 21,288 18,225 19,657
--------
Sales 17,691 20,217 18,487 17,982
--------
Silver production
(oz) 25,556 30,049 22,915 24,524
--------
Realised gold
price (US$/oz) 1,329 1,271 1,267 1,265
------------------- -------- -------- -------- --------
Gold production during the period amounted to 17,663 oz (from
21,288 oz in Q4 2017) due to a reduction in mining profile in line
with the RMP. Overall, a total of 142,784 tonnes of ore grading 4.4
g/t was mined in Q1 compared with 143,092 tonnes of ore grading 4.7
g/t in Q4 2017.
The Run of Mine ("ROM") stockpile at the end of Q1 was 101,639
tonnes of ore grading 1.5 g/t (down from 108,842 tonnes grading 1.5
g/t at the end of Q4 2017). The ROM stockpile continues to be
blended with high grade ore from the underground.
The business has continued to respond well to cost optimisation
initiatives implemented under management's initial US$5.0 m target,
achieved in late 2017, and this is reflected by AISC delivered in
Q1 of $776 /oz (Q4 2017: $767 /oz).
Several key initiatives relating to the underground operation
have been completed during Q1 which will optimise ongoing
production. These include the successful commissioning of the
Cemented Rock Fill plant at NLGM which eliminates the dependency on
just-in-time cement deliveries for Bauhinia Creek backfilling.
Delivery has also been taken of a Centralised Blasting System that
will increase the production rate by up to two hours per day
(potential for up to 10% improvement).
Steps have been taken to reduce operational risk at NLGM,
including the purchase of an additional underground truck which
will in turn increase productivity. Planned mid-life maintenance of
key underground equipment has also been undertaken. Furthermore,
the restart of open-pit mining in March has taken place as planned
to supplement the underground operation and increase production
flexibility.
Safety, Health and Environment
Safety, Health and the Environment continue to be the top
priority for Shanta and there were no Lost Time Injuries during the
quarter. Shanta maintains its track record of operating among the
safest gold mining operations among its peers and in Q1 had a total
recordable injury case rate (per 1 million hours worked) of 4.69,
below industry average.
Exploration and Development
Targeted drilling took place at Singida in Q1 focused on the
Gold Tree and Jem deposits in February and March 2018, during which
15 holes representing 1,603 metres were completed. The aim was to
test the down-dip and down plunge continuity of the high grade
mineralized shoots that will facilitate upgrading of resources
immediately below the current designed pits from the Inferred to
the Measured and Indicated (M&I) categories. Assay results for
the 15 holes have been received and are currently being
modelled.
Planning for additional exploration work at Singida has been
completed and implementation is expected in Q2 2018.
Further to activities at Singida, planning is underway for
targeting drilling at NLGM with targeted low-cost trenching
programmes now resumed across the Company's 1,500 km(2)
landholding. Planning has now also been completed for underground
exploration drilling at Bauhinia Creek across Q2 and Q3 2018,
totalling 1,000 metres, to test high grade extensions that are not
currently in reserves or the RMP.
CSR and Government engagement
Senior management understands the importance of engaging with
local and national government and continues to dedicate substantial
time in constructive dialogue. Many of these discussions take place
in Tanzania's capital, Dodoma, particularly in relation to the
reimbursement and/or ongoing offset of the Company's outstanding
VAT receivable.
Following an assessment of the Company's plans for a second
Tailings Storage Facility ("TSF2") alongside the government, the
Company is pleased to announce that TSF2 was approved for use in
mid-March, allowing for TSF1 to be decommissioned in Q2. The
permitting of this facility was a symbolic milestone for Shanta as
it represented the completion of all major project work required
for the NLGM underground mine.
A delegation of senior government officials including the Deputy
Minister of Mines visited NLGM in February who commended Shanta's
approach to Local Content, Tanzanian employment and sustainability
programmes. The Company will continue to respect local expectations
by striving to operate as a model corporate citizen.
Several Livelihood Programs were initiated in the period as the
Company continues to invest in the wellbeing of its local
communities. Beekeeping workshops were conducted in Saza Village,
close to NLGM, and the skills in which attendees were trained are
intended to help provide a reliable income source. Food crops for
resettled families were harvested for the first time. The
construction of a new primary school in Maleza village was
completed and it has since entered into use.
Corporate and strategic
In January, the Company outlined its 2018 priorities as
follows:
Ø Continued low-cost operational excellence
Ø Balance sheet deleveraging
Ø Targeted growth
Performance against these priorities throughout Q1 has been on
track.
To help deliver these targets the Company announced an increased
cost savings target (from supplier contracts, G&A costs and
redundancies unrelated to the underground operation) in January
2018. This target was increased from US$5.0 m achieved in Q4 2017
to US$7.0 m per annum on an annualised basis and is exclusive of
the impact of a new mining method at the Luika orebody. This
increased target is expected to be executed by Q3 2018 and the
Company remains on track to achieve this.
Luke Leslie accepted the appointment as Chief Financial Officer
on a permanent basis effective 1 January 2018 and will remain a
Director of the Company.
Numis Securities Limited have been appointed as Nominated
Advisor and Broker.
Post Period
The Company has announced results from its exploration and
resource infill Reverse Circulation ("RC") drilling, conducted at
Singida during Q1 2018. Highly encouraging assay results for the 15
holes drilled included:
o 10 m @ 20.82 g/t gold from 138 m in hole SC702, including 3 m
@ 57.13 g/t gold from 138 m
o 5 m @ 10.35 g/t gold from 120 m in hole SC713
o 5 m @ 8.06 g/t gold from 62 m in hole SC709
o 8 m @ 5.96 g/t gold from 117 m in hole SC708
o 8 m @ 3.86 g/t gold from 123 m in hole SC705
o 7 m @ 4.69 g/t gold from 124 m in hole SC706
o 4 m @ 5.48 g/t gold from 61 m in hole SC712
These positive results have the potential to enhance the current
project economics at Singida as well as improve the prospects of
expanding the project beyond the current scope of construction.
In Q2 2017 the Company announced an agreement with Investec Bank
plc to implement a new US$50 m facility to replace the current $40
m facility ("New Investec Facility"). Shanta and Investec Bank plc
mutually agreed to not proceed with this refinancing agreement.
The 2017 financial year audited results have been published
which show the initial effect of efforts made by management to
optimise the Company's recurring cost base. Considerable inroads
have been made toward reducing the Company's net debt position. An
annual profit after taxation of US$4.2 million was also recorded
for the first time following a successful transition to underground
mining in the year.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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