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Shanta Gold predicted to triple in price despite today's reduced production guidance

Published: 14:00 07 Dec 2021 GMT

Shanta Gold Limited - Shanta Gold predicted to triple in price despite today's reduced production guidance

Shanta Gold Limited (AIM:SHG, OTC:SAAGF) is still a ‘buy’ for Liberum Capital Markets despite the broker cutting its price target to reflect lowered guidance from the company.

The new target price is 32p, down from 36p previously. Shanta currently trades at 9.125p, down 2.375p today.

Shanta has cut guidance for the year to 55,000-57,000 ounces (oz) from 60,000-65,000 oz, due to unreliable emulsion products and underground production charging units during the fourth quarter.

“It is disappointing to have a cut of this magnitude so late in the year, but at least it has been rectified. Management see no risk to 2022 guidance. Typically, these sorts of supply chain issues can be rectified in a matter of days, but this technical failure appears to have heavily impacted November production,” the company’s nominated adviser (Nomad) said in a note to Liberum clients.

Liberum noted that this is the second reduction to guidance this year – the first was caused by an unexpected fault zone pinching away the ore body – and that market confidence will be hurt, but the Nomad did note that prior to this year the company had enjoyed a solid track record.

“Outside of the emulsion and charging unit issues, the grades going through the mill over the past six months have been 4% better than expected, which bodes well for 2022. The combination of a solid operating base that includes Singida, and the exception exploration results coming out of West Kenya, should drive a significant share price outperformance over the coming years,” Liberum predicted.

With net cash of US$23.3mln at the end of November, up from US$19.5mln at the end of September, the company can “comfortably keep paying a dividend”.

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on 10/8/23