TIDMSHG
RNS Number : 5308E
Shanta Gold Limited
19 July 2016
19 July 2016
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q2 2016 PRODUCTION AND OPERATIONAL UPDATE
Shanta Gold (AIM: SHG), the East Africa-focused gold producer,
developer and explorer, announces its production and operational
results for the quarter ended 30 June 2016 ("Q2", the "Quarter" or
the "Period") for its New Luika Gold Mine ("NLGM"), in Southwest
Tanzania.
Highlights
Operational
-- Quarterly gold production of 23,896 ounces ("oz") (Q1 2016: 24,341 oz);
-- Quarterly gold sales of 26,134 oz at an average price of
US$1,246 per oz ("/oz"), compared to average spot price of US$1,222
/oz (Q1 2016: 21,486 oz at an average price of US$1,132 /oz);
-- Cash costs for Q2 of US$429 /oz (Q1 2016: US$445 /oz) and All
in Sustaining Cost ("AISC") of US$664 /oz (Q1 2016: US$600 /oz);
and
-- No lost time injuries for the Quarter.
Financial
-- Cash balance of US$30.5 million ("m") (Q1 2016: US$16.3 m);
-- Cash generated from operations of US$13.1 m (Q1 2016: US$2.8 m);
-- Capital expenditure of US$7.0 m (Q1 2016: US$5.6 m);
-- Gross debt of US$75.0 m (Q1 2016: US$74.7 m) and net debt of
US$44.5 m (Q1 2016: US$58.4 m) following US$10.75 m equity
placement during the period; and
-- Forward sales from July to December 2016 of 39,000 oz at an average price of US$1,222 /oz.
Development and Exploration
-- Underground project development started in June 2016 and
remains on track and within budget to produce first production of
underground ore in Q2 2017;
-- The Luika River dam to provide low cost water security has been completed;
-- Works have begun on the second Tailings Storage Facility ("TSF2");
-- Exploration drilling in the second phase program in Q2 2016
delivered excellent intersections at the Ilunga prospect at depth
and along strike;
-- An updated Resources and Reserves statement is expected at
the end of Q3 2016 to be incorporated into an updated mine plan;
and
-- Further progress in the development of the Singida Project
with a planned pilot mining operation.
Corporate
-- Convertible Loan Note restructuring with US$10 m repaid and
an extension of the maturity date of the remaining US$15 m to April
2019;
-- Well-supported equity placement with US$10.75 m raised from
over 50% of existing, and new institutional shareholders; and
-- US$5.25 m silver stream for seven years (minimum) and 10
years (maximum) mine life at current mill capacity. Closure of the
deal is imminent with funds still to be received.
Guidance for 2016
-- Annual production guidance maintained for 2016 of 82,000 - 87,000 oz; and
-- Lowered AISC guidance to US$730 - 780 /oz, from US$750 - 800 /oz; and
-- The Base Case Mine Plan produces gold at an average AISC of
US$695 /oz with an average production for the next 5 years (2016 -
2020) of 84,000 oz.
-- More than 500k oz of resources sit outside the mine plan and
further drilling for incremental oz is planned for potential
extensions at Bauhinia Creek, Luika and Ilunga in addition to
drilling in surrounding Prospecting Licences held by the
Company.
Toby Bradbury, Chief Executive Officer, commented:
"Q2 has been another excellent period for Shanta, benefiting
from the accelerated and reduced cost operations in the first half
year alongside the higher gold price. With the transition to
underground mining at the New Luika Gold Mine, the second half will
sustain mill throughput of slightly lower grade ore as planned
ensuring full year production guidance is maintained. Importantly,
this will be achieved at the favourable end in the case of both
ounces and cost. Our objective continues to focus on dependable low
cost and sustainable production and delivery of gold at an AISC of
below $780 /oz which results in exceptional cash generation."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 19 July 2016, at 09:30 BST. Participants can
access the call by dialling one of the following numbers below
approximately 10 minutes prior to the start of the call.
From UK (toll free): 080 8237 0030
From the rest of the world: +44 (0) 20 3139 4830
Participant PIN code: 42960093#
The presentation will be available for download from the
Company's website: www.shantagold.com or by clicking on the link
below:
http://www.anywhereconference.com?UserAudioMode=DATA&Name=&Conference=131674649&PIN=42960093
A recording of the conference call will subsequently be
available on the Company's website.
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Enquiries:
Shanta Gold Limited
Toby Bradbury (CEO) +255 (0)22 2601
Mark Rosslee (CFO) 829
Nominated Adviser and Broker
Peel Hunt LLP
Matthew Armitt / Ross Allister
/ Chris Burrows +44 (0)20 7418 8900
Financial Public Relations
Tavistock
Jos Simson / Barney Hayward +44 (0)20 7920 3150
About Shanta Gold
Shanta is an East Africa-focused gold producer, developer and
explorer. It currently has defined ore resources on the New Luika
and Singida projects in Tanzania and holds exploration licences
over a number of additional properties in the country. Shanta's
flagship New Luika Gold Mine commenced production in 2012 and
produced 81,873 ounces in 2015. For further information please
visit: www.shantagold.com.
Operational
Production Summary
Q2 2016 Q1 2016 Q4 2015 Q3 2015
-------------------------- ---------- -------- -------- --------
Tonnes ore
milled 151,698 149,128 155,622 150,216
Grade (g/t) 5.48 5.69 6.50 5.68
Recovery (%) 89.5 89.3 89.5 89.5
Gold (oz)
Production 23,896 24,341 29,139 24,532
Sales 26,134 21,486 29,228 26,254
Silver production(oz)(1) 36,316 35,144 39,153 36,107
Realised gold
price (US$) 1,246 1,132 1,087 1,175
-------------------------- ---------- -------- -------- --------
1. Note that the full production figures included pending closure of the silver stream.
Shanta has had another strong quarter of operational performance
driven by consistent access to grade and reliable plant performance
at NLGM. As part of the accelerated mining programme in the first
half of the year, reflected in the financial performance below, run
of mine ("ROM") inventories have been increased as strip ratios
have reduced to just below 4:1 as current pits near the end of
their economic life. Satellite open pit and underground activities
will progressively replace the current open pit production
sources.
In June, the Luika Pit was completed with an alternative open
pit ore source having been developed at the Ilunga deposit located
2.5 kilometres north east of the NLGM plant. The Bauhinia Creek
Open Pit will complete at the end of Q3 2016. In the meanwhile,
significant ROM stockpiles have been established representing close
to 4 months plant capacity to see the operation through the
transition into the higher grade underground ore from Bauhinia
Creek in 2017. As at the end of June Shanta's ROM inventory was
190,064 tonnes at a grade of 3.18 g/t.
For the second half of 2016, NLGM's grade is expected to be
slightly lower than that achieved in the first half at an average
grade of around 5 g/t. Consequently, total gold production for the
year is expected to remain within guidance. Planned ore grades are
expected to increase from 2017 as the underground ore reserves in
Bauhinia Creek are accessed. Average annual production from 2016 -
2020 as provided in the Base Case Mine Plan in September 2015 is
maintained at an average of over 84,000 oz over the next 5 years
within the current resource base.
Underground Project
As reported in June 2016, underground development has started
and production of ore from the Bauhinia Creek stopes is anticipated
in Q2 2017.
In order to achieve this milestone, a great deal of work has
been completed since the announcement of the Underground Project as
part of the Base Case Mine Plan in September 2015.
The underground feasibility project team has been expanded to
plan and prepare for the underground development including:
-- Integration of the underground into the Bauhinia Creek Open
Pit design to provide for decline access and ventilation
shafts;
-- Ground support and highwall preparation including
shotcreting, construction of gabion basket retaining walls on upper
level benches, catch fences and cable bolting;
-- Detailed design and scheduling of mine development and
production activities following on from the feasibility study;
-- Delivery and commissioning of key new underground mobile
equipment including twin boom jumbo and load and haul units;
-- Delivery and commissioning of key items of surface and
underground fixed infrastructure including HV overhead line, switch
gear, starter boxes, pumps and fans;
-- Water infrastructure near completion including header tank,
settling ponds, dewatering and supply lines;
-- Surface buildings including workshops, stores, offices and change house largely complete;
-- Appointment of key personnel complete including highly
experienced managerial, supervisory and operating staff;
-- Training programs developed and implemented for all underground personnel; and
-- Finance secured from Sandvik (US$5.25 m) for underground
mining equipment purchases and from Bank M (US$9.1 m) for the
expanded power generation plant.
Also key to the commencement of the underground was a revised
Environmental and Social Impact Assessment (ESIA). The receipt of
the environmental permit was targeted at the end of April 2016 and
although it took longer than had been hoped, it still took
substantially less time than allowed under the law. This was thanks
to the constructive assistance of the Tanzanian Authorities. A
revised schedule has been generated that maintains delivery of the
5 year guidance provided in September 2015 with an average annual
production of 84,000 oz.
In the meantime, the portal entry has been completed and at the
end of June the decline had advanced 10 metres in favourable ground
conditions with all brow support completed. Development remains on
track to commence production in Q2 2017 and the capital cost is
expected to be completed within budget.
Major Projects
Shanta has begun construction of TSF2 in the Quarter which will
be commissioned later in 2016. This gives NLGM a life of eight
years including the retreatment and re-locating of the current
Tailings Storage Facility One ("TSF1") contents. The space vacated
by TSF1 will again become available for tailings placement
providing NLGM with total identified tailings space for
approximately 12 years operation at current production.
The Luika River dam has completed its first stage of
construction providing storage of 350Ml of water. Together with
on-site storage capacity, NLGM has sufficient water storage to see
it though the coming dry season. A subsequent raise of the dam
level in a future phase could provide the mine with water security
in the event of a drought. The dam forms part of the regional
infrastructure and will ultimately revert to the community.
The sum total of all capital projects are expected to be
completed within budget.
Safety, Health and Environment
Safety, Health and Environmental issues remain an ongoing
priority for Shanta with zero lost time injuries or environmental
incidents in the Quarter.
Financial
A total of 26,134 oz of gold was sold at an average price of
US$1,246 /oz. The average realised price was above the average spot
price of US$1,222/oz for the Quarter, reflecting the improved
benefit of the Company's forward sales positions that have taken
advantage of the recent increase in spot gold price. As of 18 July
2016, the Company had sold forward 39,000 oz to December 2016 at an
average price of US$1,222 /oz.
Importantly, Shanta's hedging policy is aimed at securing
cashflow in a year of major capital and debt servicing
commitments.
Shanta produced strong unit cost performance in Q2 as a result
in part to high levels of gold production and continued cost
efficiencies. Cash cost per ounce amounted to US$429 /oz (Q1 2016:
US$445 /oz) and AISC amounted to US$664 /oz (Q1 2016: US$600 /oz).
The first half of 2016 has benefited from an accelerated mining
program in a below average strip ratio environment. This has
reduced the fixed cost component of mining and enabled very
beneficial cash costs to be achieved. With the completion of Luika
Pit in June and Bauhinia Creek Pit expected to complete at the end
of Q3 2016, the Company expects cash costs to be higher in the
second half of the year in comparison to the first half. However,
Shanta is confident of meeting the revised AISC 2016 guidance of
US$730 - 780 /oz.
A considerable investment was made in working capital in the
quarter in the estimated ROM inventory (US$19.3 m), receivables and
prepayments for underground capital items (US$11.2 m). The cashflow
impact of the increased ROM inventory will be contained within the
current financial year and will enable sustainable production
levels in the transition to underground operations in 2016. Whilst
during the Period there was an overall US$13.4 m increase in the
working capital (Q1 2016: US$10 m) importantly cash generated from
operations before working capital for the Period was US$13.1 m (Q1
2016: US$2.8 m). Capital expenditure was US$7.0 m (Q1: US$5.6
m).
The Company's cash balance at the Quarter end was US$30.5 m (Q1:
US$16.3 m). The increase is due primarily to the drawdown of the
remainder of the Investec standby facility (US$10.0 m), an equity
placement (US$10.75 m), operating cashflow (US$13.1 m) whilst
reduced by further capital expenditure (US$7.0 m) and purchase of
Convertible Loan Notes (US$10.0 m). Gross debt increased marginally
to US$75.0 m (Q1 2016: US$74.7 m) while net debt reduced to US$44.5
m (Q1 2016: US$58.4 m).
The Company continues to identify and implement efficiency
improvements across the business as well as improve its performance
management reporting and business process optimisation. These
changes serve two key purposes including cost savings and risk
mitigation against operational or financial inefficiencies.
Separately, capital programmes are continuously reviewed to test
for on-going requirement, potential alternatives and efficiency
opportunities.
Exploration and Development
At New Luika, more than 500k oz of resources sits outside the
mine plan and further drilling for incremental oz is planned at BC
extensions, Luika and Ilunga in addition to drilling in surrounding
Prospecting Licences held by the Company.
Ongoing exploration results from satellite deposits are
encouraging with updates on Ilunga and Black Tree Hill announced on
12 April 2016 and post quarter-end on 6 July 2016.
The exploration commitment continues with on-going priorities
adjusted according to the results of the respective drilling
campaigns. In light of the success at Ilunga, a second stage of
drilling was undertaken during the quarter to extend our
understanding of this exciting resource at depth and along
strike.
The near mine exploration and development campaign is a key
component of the Company's ongoing strategy, as newly proven
reserve ounces will be duly incorporated into the NLGM mine plan
extending the project's life and further improving the project
economics. The Company intends to provide an updated Resources and
Reserves statement at the end of Q3 2016 which will incorporate
newly defined reserves into an updated mine plan.
Given the excellent results at Ilunga, this prospect has become
the top priority for further exploration efforts within the NLGM
mining licence. The new data is being incorporated into an updated
resource model for Ilunga. Meanwhile, potential mineralisation to
the west of a truncating fault is still open and will be tested in
future programmes.
Beyond NLGM, Singida is now being pursued as an active
development project as announced on 15 July 2016. By the end of Q1
2017, the Company intends to have a pilot mining operation
underway.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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