Shanta Gold Limited (AIM:SHG, OTC:SAAGF) has received a buy rating with a target price of 17p from house broker Liberum following the mining group’s latest update.
Liberum noted that the New Luika gold mine in Tanzania continues to offset reserve depletion with additions and has extended the mine life by at least another year to 2028, at a cost of only US$2.1mln.
Despite slashing exploration costs by half in 2022 against 2021 levels, the company still managed to add 93koz of reserves at New Luika at an implied cost of US$22/oz.
“In our model, we conservatively assume that 60% of the existing resource will be converted to reserves, and that the mine life will extend out to 2031,” said Liberum.
Combined with the new resource additions in Kenya, the company now has a group resource of 3.7 million troy ounces at 3.28 grams per metric tonne.
At a publication price of 10.5p, Shanta shares are trading at an enterprise value to ounce (EV/oz) ratio of US$39/oz compared to African developers & explorers of US$47/oz and small producers of US$69/oz, according to Liberum’s analysis.