Shanta Gold PLC (LON:SHG) has received a bullish write-up from SP Angel as the Tanzania-based miner switches to underground production at its New Luika mine.
The resource specialist broker believes that the move underground allied to exploration in satellite areas and at new deposits such as Singida in Tanzania will substantially extend the production profile.
In 2016, New Luika produced 88,000oz of gold at an all-in-cost (AISC) cost of $661/oz.
Guidance for 2017 is 80-85,000oz at $800-850/oz AISC.
The latest drilling results at Ilunga, the third biggest gold deposit in the portfolio, saw its resource expand to 258,000oz at 4.6/gt from 74koz at 3.5g/t , which should see a mine plan update later this year.
Singida, a potentially new mine, meanwhile, currently hosts a 0.9moz at 2.8g/t JORC resource.
Including the new commercial underground operations and Ilunga, SP Angel’s sees the total production rising to 610,000 oz from 445,000oz through to 2024.
The broker has assumed gold prices of $1,175/oz and $1,150/oz in 2017/18, and rising US interest rates, but even with these potentially adverse in fluencies Shanta can generate healthy margins as development continues and reduce debt.
Buy with a target price of 13.8p. Shares rose 5% to 10.32p.