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Shanta Gold Limited: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Shanta Gold says fourth quarter looks set to be strongest period yet

Shanta expects production to top 100,000 ounces of gold a year once its Singida project in Tanzania comes on stream in 2020
Shanta Gold
INVESTMENT OVERVIEW: SHG The Big Picture
October and November were the strongest two months in terms of production

The fourth quarter is shaping up to be the strongest period yet for Shanta Gold Ltd (LON:SHG), according to chief executive Eric Zurrin.

October and November were the strongest two months in terms of production, including 584 ounces (oz) of gold in one day at the New Luika mine in Tanzania - the company's flagship asset.

That leaves it on track to meet its target of 80,000oz of gold production and all-in sustaining costs (AISC) of US$750 per ounce for the year.

“Hopefully we can do better than that but we’ll have to see,” Zurrin said. 

Singida project expected to boost production to over 100,000oz a year

Shanta expects to be producing more than 100,000oz of gold each year once its Singida project in Tanzania comes on stream in 2020.

Newly published project economics suggest production will average 26,000oz per annum for an initial six-year period.

Singida will cost US$16mln to get up and running and a further US$3mln in working capital but the investment is expected to pay off as the project has a net present value of US$31mln and an internal rate of return of 67%.

A life project cash cost of US$794/oz is well below the price of gold, which currently sits just above US$1,200/oz.

Financing is expected to be completed at the Singida asset level, with various options being considered.

Shanta sees “significant further upside” for the project with substantial resources – around 344,000oz – currently sitting outside the project economics and work is ongoing to boost that figure.

Most of the key infrastructure requirements are in place, including Tanesco grid power, resettlement and an operating camp.

An environmental and social impact assessment is expected in the first quarter of 2019, which would complete the permitting process at Singida.

“Singida has always been an exciting project for the company and has the potential to propel Shanta to a gold producer with over 100,000 oz per year by 2020. The development of Singida unlocks value for us, with very attractive economics including an IRR of 67%,” Zurrin said. 

"We are making steady progress with the Singida funding plan, which as we have stated previously, will be completed at the asset level and not through Shanta Gold shareholders. I look forward to providing a more detailed update in Q1 2019, with a target to complete the funding during the course of 2019.”

Strong performance at New Luika 

The New Luika mine has also continued to make strong progress. 

In the third quarter, the mine delivered gold production of 19,723oz at an AISC of US$553/oz.  A total of 19,737oz of gold was sold at an average price of US$1,218, compared to an average spot price of US$1,212.

Drilling at Bauhinia Creek (BC) East added 21,081oz of indicated resources to the life of New Luika mine plan at 3.43 grams per tonne.

The miner started Phase 1 of drilling at BC West in September, targeting a small conversion of inferred resources, which has intersected mineralisation. Further exploration was being carried out in the fourth quarter.

 “We’re exclusively in Bauhinia Creek right now, which has always been the one that has pleased to the upside…we are seeing healthy grades, particularly in October, and in November its so far so good,” Zurrin said.

Shanta aims to double exploration budget next year

Elsewhere, Shanta has identified new targets including Lambo, which is 6.6km northwest of the New Luika plant, and Quartzberg, located 45km from the flagship gold mine.

Zurrin said trenching at Lambo target has yielded "excellent grades" and warrants further exploration while drilling at Quartzberg is underway. 

He said the company is going to have a “really good push” to the end of the year.

In 2019, the group aims to double its exploration budget from the US$1.5mln it spent this year with a focus on putting more money into the ground.

Tanzanian government pleased with Shanta's local support

Zurrin recently met with the Tanzanian government in the country's capital, Dodoma, about the company’s projects in the nation. He said the feedback he received from the government was encouraging.

“They are applauding our efforts, we are now a 99% Tanzanian workforce, we have eight expats in the entire company," he said.

"They are really happy about how we operate, the way we behave, the way we co-operate with local suppliers in the country, we’re a taxpayer, we pay our royalties, we contribute PAYE to the government and we’re well regarded in their eyes so it’s been really good to get their support."

Regarding the VAT repayments Shanta Gold is owed by the government, Zurrin added: “We were told that there’s an ongoing process with a short-listed group of companies that are being reviewed, hopefully for a final time by the TRA (Tanzania Revenue Authority) so that doesn’t mean we know when we’re going to receive the money but it certainly shows that there’s intent from the government to go through with what they are saying.”

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Shanta Gold Limited Timeline

Newswire
October 18 2018

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