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The latest resource update for Shanta Gold's (LON:SHG) flagship New Luika mine in Tanzania, has increased the miner's confidence in its long term future, it said.
Infill drilling in January this year across nine holes at both the Bauhinia Creek (BC) pit and Luika has increased confidence in underground mining at both of these deposits.
The indicated underground resources for both BC and Luika now stand at a total of 2.2 million tonnes (Mt) at 6.5 grams per tonne (g/t) for around 475,000 oz of gold.
BC hosts 1.403 Mt at 7.26 g/t (2.5 g/t cutoff) for around 327,000 oz of gold, while Luika has 0.868 Mt at 5.30 g/t (3.0 g/t cut-off) for approximately 148,000 oz of the yellow metal.
The total JORC-compliant resource (indicated and inferred) for the New Luika mine, including BC, Luika and satellite deposits within four sq km of the processing plant, now contains 12.9 million tonnes (Mt) at 3.2 grams per tonne gold for around 1.3 million ounces.
The firm added that its underground feasibility study for BC and Luika was on track for completion in late third quarter of 2015.
Toby Bradbury, chief executive of Shanta, said: "Today's resource and reserves update for our flagship New Luika Gold Mine increases the level of confidence we have in the long term future of the operation.
"The Bauhinia Creek and Luika resources remain open at depth and we are confident that further on-going exploration during the course of a future underground mining operation has good potential to further upgrade and extend the resource base."
He added: "This is a win-win for New Luika as the surface mine benefits from a substantial reduction in operating cost while a potential underground operation gets additional high grade resource."
Following the update, City firm Investec said it was an "encouraging" result giving confidence in New Luika potential.
"We look toward regional exploration work to give confidence in further extending the mine life of the asset beyond 6-7 years. Today’s news also follows last week’s positive production update," it noted.
The miner boosted gold production and cut costs during the second quarter to the end of June 2015.
It produced 14,664 ounces of gold, up from the 13,516 ounces produced in the first quarter.
All-in sustaining costs rang in at US$1,157 per ounce, down from US$1,451 per ounce.
However, in this new pricing environment with gold looking set to test the US$1,000 mark soon, the company plans to drive costs down still further.
During the second half, Shanta expects all-in costs to drop dramatically to between US$650 and US$680 per ounce, leading to average full year costs of between US$850 and US$900.
Full year production is expected to come in at between 72,000 and 77,000 ounces.
Shares today added 4.44% to 5.875p.