The operational success of the New Luika gold mine in Tanzania means Shanta Gold Limited (LON:SHG) can progress its second Singida project, where pilot production is targeted to start in the first quarter of 2017.
The pilot project required around US$4mln to be developed, which will be funded from company cashflow, it said.
Singida has nine ore bodies - Gold Tree 1, 2, 3, Jem, Vivian, Corn Patch, Corn Patch West, Gustav and Kaiser Chief - which have a combined resource of 858,000 ounces.
Initial mining will begin at Gold Tree, building up to a milling rate of 10 tonnes per hour (tph) for gold production of around 800 ounces per month.
Shanta chief executive Toby Bradbury said: "Shanta is very optimistic about the prospects for Singida.
"Following an extensive consultation programme, the company is now able to progress development at Singida with the full support and enthusiasm from both the local communities and authorities."
He added: "The company looks forward to working with our partners in Tanzania to bring this exciting project to life."
The pilot project is expected to be cashflow positive and will run alongside a new feasibilty study and exploration.
To that end, 5,000 metres of reverse circulation drilling is planned from surface to around 100 metres depth to start in the second half of 2016.
New Luika continues to operate with stable production and robust cashflows and the group intends to update the market on production and operations on or around July 19, it said.
Broker Shore Capital noted that three mining licences were actually issued for Singida four years ago and are valid until 2022, when they can be renewed, however authorisations granted at the time require reviewing and updating.
In particular, the Environmental and Social Impact Assessment (ESIA) is to be “promptly updated” to facilitate the commencement of the pilot mining operation in Q1 2017, which the company believes will help demonstrate its commitment to Singida’s development.
The pilot is expected to run for at least two years, analyst Yuen Low also notes. He makes no recommendation.
Shanta shares are up 6.9% to 7.75p at the time of writing.