A reboot of its finances by Tanzania-based gold miner Shanta Gold (LON:SHG) has left it well funded to shift production underground at its New Luika mine, says Peel Hunt.
The gold miner raised US$10.5m through a placing, a US$5.25m silver stream deal and paid off US$10mln worth of convertible loans.
As a result, Peel Hunt has re-calculated its estimate of net asset value to 8.2p (8.8p), though this becomes 10.3p at current spot gold prices of $1,250/oz.
“The added cash headroom comes from having reduced the peak net debt by US$9m-10m. This significantly de-risks the balance sheet through this key investment phase.
“With the gold price sustaining at a higher level than we conservatively forecast, the cash headroom is likely to be even higher than expected, which in itself should create an opportunity for the group to add value.”
Last week, another broker finncap tweaked its numbers to give a target price of 12p.
Like Peel Hunt, it said the financing, critically, removed the risk of having to repay the US$25m convertible loan note in April 2017.
The operational improvements at New Luika were also highlighted by finncap.
Some 66% of the 81,873 ounces of gold recovered in 2015 came in the second half.
“New Luika is now operating at nameplate capacity, and work has started on the transition to underground mining from 2017 onwards.”
‘Buy’ is its recommendation with the miner expected to become strongly cash positive (US$14.4mln, US$27.5mln) in 2017-2018.
Shares rose 2% to 6.25p.