Shares advanced as the latest resource and reserve update for Shanta Gold's (LON:SHG) flagship New Luika project in Tanzania lifted the miner's confidence in the mine's long term future.
Infill drilling in January across nine holes at both the Bauhinia Creek (BC) pit and Luika has increased confidence in underground mining at both of these deposits.
The total JORC 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.
Meanwhile, the higher confidence 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.
Proven and probable open pit reserves for New Luika are put at of 1.6 Mt (million tonnes) at 4.8 g/t gold for around 245,000 ounces.
That compares to 2.25 Mt at 5.1 g/t gold for approximately 365,000 ounces in October last year and the reduction is largely accounted for by depletion through mining and displacement and earlier mine design changes.
"A significant proportion of the existing resource which falls outside the BC and Luika final pit limits is expected to be amenable to underground mining," the firm highlighted, adding that the underground feasibility study for BC and Luika was on track for completion in late third quarter of 2015.
City firm Investec said it was an "encouraging" result giving confidence in New Luika's 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.
Meanwhile, 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."
Last week, it emerged that the miner had 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 on Monday added 4.44% to 5.875p.