Shanta Gold PLC (LON:SHG) has started to review its cost base in Tanzania after recent changes to the finance and mining laws in the country.
As a result, Shanta expects that its next gold shipment will see royalty rates increase to 6% from 4%, while a 1% clearing fee has already been implemented.
The changes have not affected production. Output from the New Luika mine in the three months to June was 19,657 ounces (Q1 2017: 20,416 oz), which was ahead of budget, and keeps it on track for annual production of between 80,000 - 85,000 oz.
READ:Shanta to seek clarity as Tanzania introduces new 1% clearing fee
Sales totalled 17,982 oz at an average price of US$1,249 per oz, while cash costs were US$559/oz (Q1 2017:US$553/oz) and All-in-Sustaining-Cost of US$735/oz (Q1 2017:US$768 /oz).
Over the quarter, Shanta generated cash of US$13.1mln and closed the period with net debt of US$43.3mln.
Shanta has gradually started to shift operations underground at New Luika and grades so far from the first commercially produced ore have been consistent and high at 7.41 grams per tonne (g/t).
Last month a deal was tied up to take control of the company that owns that acreage next door to New Luika.
Toby Bradbury, chief executive, said:"The Q2 2017 production result has far surpassed our projections whilst the underground mine ramped up.
"Good progress continues to be made at the underground mine which remains on track, with first stope ore and commercial production declared as of 1 June 2017.
"Shanta, as a result, sits on a stronger platform, notwithstanding the latest developments in country in regards to the new Finance Act and the number of legislative Bills recently enacted as Laws by the Tanzanian Parliament.
“As we have mentioned previously, we continue to seek advice on the legislation, as we assess its potential impact and further updates will be provided as appropriate."