TIDMSHG
RNS Number : 5581W
Shanta Gold Limited
18 April 2019
18 April 2019
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q1 2019 PRODUCTION & 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 31 March 2019 (the "Quarter", "Q1" or
the "Period") for its New Luika Gold Mine ("NLGM" or "New Luika"),
in South Western Tanzania.
Q1 Highlights
-- Gold production of 22,374 ounces ("oz"), comfortably on track
to meet annual guidance of 80,000-84,000 oz;
-- All In Sustaining Costs ("AISC")(1) of US$701 /oz,
significantly ahead of annual guidance of US$740-780 /oz;
-- Cash operating costs of US$500 /oz;
-- Net debt, excluding bullion available for sale, down to
US$30.3 million ("m") (Q4 2018: US$31.5 m), the strongest position
in NLGM's producing history;
-- Projected to be in a net cash position by mid-2020;
-- Healthy cash balance of US$8.4 m and total liquidity,
excluding bullion available for sale, of US$10.9 m;
-- Bullion available for sale of US$2.5 m, up from US$1.5 m at the end of Q4 2018;
-- Tonnes ("t") milled of 172,644 t, an all-time daily
throughput record during the Quarter, continuing from significant
step-up in plant throughput during Q4 2018;
-- EBITDA of US$11.4 m;
-- Underground exploration drilling underway at Bauhinia Creek
("BC") Deep Central with high-grade mineralisation intersected
under the existing reserves; results due in May;
-- Ilunga underground development ore intersected and mined from
March 2019, three months ahead of schedule;
-- 5,753 t development ore mined at Ilunga to date, at an average grade of 6.02 g/t;
-- Exceptional safety record with zero Lost Time Injuries ("LTI's"); and,
-- Singida to proceed with an Initial Public Offering ("IPO") on
the Dar es Salaam Stock Exchange ("DSE") targeting a US$20 m
minimum equity offering.
Financial
-- Unrestricted cash balance of US$8.4 m (Q4 2018: US$9.0 m);
-- Gross debt down four per cent ("%") at US$38.7 m (Q4 2018: US$40.5 m);
-- Net debt of US$30.3 m (Q4 2018: US$31.5 m);
-- EBITDA of US$11.4 m (Q4 2018: US$9.9 m);
-- AISC(1) of US$701 /oz (Q4 2018: US$696 /oz);
-- US$1.9 m drawn down from Exim Bank loan facility taking total drawn amount to US$7.5 m; and,
-- VAT receivable increased to US$23.6 m (Q4 2018: US$21.8 m).
Operational
-- Gold production of 22,374 oz in Q1, with high grade ore at BC
underground continuing strong momentum from 2018;
-- 172,644 t milled in Q1, an all-time daily throughput record
during the Quarter and closely aligned with the all-time quarterly
record 172,902 t milled in Q4 2018;
-- Average head grade of 4.5 g/t for the quarter, 3% higher than
average grades processed during 2018;
-- ROM stockpile reduced to 139,000 t of ore grading 1.47 g/t
following decision to stand-down higher cost open pit mining (Q4
2018: 163,194 t grading 1.48 g/t);
-- First development ore from Ilunga reached on 10 March 2019
with first production stope expected in July 2019; and,
-- Cost improvements continuing across the business including
partial NLGM connection to state-operated ("TANESCO") power grid to
be commissioned at the end of 2019 and expected to provide US$7 /oz
cost saving.
Exploration
-- Phase 1 drilling underway at BC Deep Central with over 350
metres planned for initial phase and completed in Q1, with assay
results expected in May;
-- Sampling and trenching underway at BC East and BC North
targeting surface extensions at BC with results expected in
May;
-- Phase 2 drilling at BC Central scheduled for completion
during Q2 in addition to further trenching at Lambo and Porcupine
South targets; and,
-- Engagements ongoing with independent consultants to review
the Company's substantial regional exploration portfolio.
Ilunga development update
-- Ilunga underground development ore intersected in March 2019,
three months ahead of schedule;
-- Ilunga is now the third active source of high-grade ore at NLGM;
-- 5,753 t development ore mined at 6.02 g/t for 1,115 oz contained gold;
-- Installation of primary ventilation fan completed post
period, with installation works carried out exclusively by 100%
owner-managed team;
-- Further 641 metres of development completed during Q1, with
1,259 m of development since portal blast; and,
-- US$1.9 m spent on development in Q1; totalling US$5.2 m capex at Ilunga to date.
Singida
-- Singida to proceed with a targeted US$20 m minimum equity
offering via an IPO on the DSE subject to regulatory approval;
-- The Company will retain at least 51% ownership of Singida and will operate the Project; and,
-- Proposed IPO proceeds would finance the upfront capital
required to bring the Project into production and provide
additional funds for exploration.
Corporate Social Responsibility ("CSR")
-- Excellent progress made in local schools by "Into Africa -
Partners in Learning", the Company's partnership providing teacher
training in the Songwe region;
-- Record exam results achieved by two participating schools within NLGM's locality;
-- Farmers enrolled in the Company's agricultural collaboration
with ETG Foundation have commenced first sesame harvests of 2019;
over 800 farmers now enrolled; and,
-- Public praise for Shanta garnered from newly appointed
Minister for Minerals, encouraging industry peers to adopt Shanta's
practises.
2019 Guidance
-- Annual guidance reiterated for 2018 of 80,000-84,000 oz at AISC(1) of US$740-780 /oz.
Post Period
-- The Company announced on 10 April 2019 that it is proceeding
with the buyback of approximately 33.33% of the outstanding
convertible loan notes held by third parties. Following this the
Company expects to have reduced the outstanding convertible loan
note balance to US$9.8 m.
Note: 1. Development costs at the BC, Luika and Ilunga
underground operations are not included in AISC.
Eric Zurrin, Chief Executive Officer, commented:
"I'm pleased to report on an exceptionally strong start to 2019.
In terms of production we have had our best opening quarter in
three years, achieved at costs well below our full year guidance
whilst also remaining focused on our exploration objectives at New
Luika to increase mine life."
"Several milestones were achieved by the Company in the last
three months. We produced our first development ore from Ilunga and
are now mining from three active high-grade sources at New Luika.
We also announced our intention to fund development of our second
asset, Singida, through an IPO on the DSE. We have received
encouraging initial feedback from institutional investors across
East Africa to fund development of our second project and are
confident in this strategy to bring the Project into production and
provide additional funds for exploration."
"This strong start to the year puts us in an excellent position
to achieve full year guidance on both costs and production as well
as to be in a net cash position midway through next year."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 18 April 2019, at 09:30 GMT. Participants can
access the call by dialling one of the following numbers below
approximately 10 minutes prior to the start of the call.
UK Toll-Free Number: 08003589473
UK Toll Number: +44 3333000804
PIN: 27912935#
The presentation will be available for download from the
Company's website: www.shantagold.com or by clicking on the link
below:
https://www.anywhereconference.com?Conference=301285209&PIN=27912935&UserAudioMode=DATA
A recording of the conference call will subsequently be
available on the Company's website.
Enquiries:
Shanta Gold Limited
+255 (0) 22 292
Eric Zurrin (CEO) 5148
Luke Leslie (CFO)
Nominated Adviser and Broker
Numis Securities Limited
+ 44 (0)20 7260
Paul Gillam / John Prior / James Black 0000
Financial Public Relations
Tavistock
Charles Vivian / Barnaby Hayward / Gareth
Tredway +44 (0)20 7920 3150
About Shanta Gold
Shanta Gold is an East Africa-focused gold producer, developer
and explorer. It currently has defined ore resources on the New
Luika project in Tanzania and holds exploration licenses covering
approximately 1,500km(2) in the country. Shanta's flagship New
Luika Gold Mine commenced production in 2012 and produced 81,872
ounces in 2018. The Company has been admitted to trading on
London's AIM and has approximately 787 m shares in issue. For
further information please visit: www.shantagold.com.
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
Q1 2019 PRODUCTION & OPERATIONAL UPDATE
Safety, Health and Environment
There were no Lost Time Injuries during the Quarter and the
Company has now surpassed 2.4 million man-hours without Lost Time
Injury. Shanta maintains its track record of operating among the
safest gold mining operations of its peers and at the end of Q1 had
a Total Recordable Injury Frequency Rate ("TRIFR") (per 1 million
hours worked) of 2.09, significantly below the industry
average.
Financial
During the Quarter, a total of 21,190 oz of gold was sold at an
average price of US$1,305 /oz. As of 31 March 2019, the Company had
sold forward 45,020 oz to August 2019 at an average price of
US$1,223 /oz against the average spot price for the quarter of
US$1,304 /oz. The Company has the flexibility to defer settlement
of forward sales and had full exposure to the spot gold price
during the Quarter having deferred settlement of all forward
contracts in place. The Company has also benefited from the gold
price forward curve during the Quarter, resulting in a slightly
favourable average forward contract price on deferred contracts
versus the position at the end of Q4 2018. Short-term cashflow
remains protected against gold spot price volatility with US$9.7 m
of contractual debt payments falling due during the Q2.
Cash operating costs and AISC for Q1 of US$500 /oz (Q4 2018:
US$514 /oz) and US$701 /oz (Q4 2018: US$696 /oz), respectively,
were achieved in the Quarter. Of note, development costs at the BC,
Luika and Ilunga underground operations are not included in
AISC.
Working capital in the Quarter increased by US$2.5 m, accounted
for by a decrease in trade and other payables (US$0.1 m), a
decrease in inventories (US$0.3 m) and an increase in trade and
other receivables (US$2.7 m). The decrease in inventories includes
Run of Mine ("ROM") stockpile which decreased by US$1.9 m, largely
offset by an increase in gold bullion of US$1.0 m and an increase
in consumable inventories. The increase in trade and other
receivables includes the VAT receivable which increased by US$1.8 m
to US$23.6 m.
Capital expenditure was US$4.0 m (Q4 2018: US$5.1 m) for the
Quarter, which was predominantly related to underground
development, inclusive of Ilunga pre-production capital.
As at 31 March 2019 the Company had an unrestricted cash balance
of US$8.4 m (Q4 2018: US$9.0 m). This follows a 4% reduction in
gross debt from US$40.5 m to US$38.7 m at the end of the Quarter.
Net debt decreased by US$1.2 m to US$30.3 m (Q4 2018: US$31.5 m),
its lowest in Shanta's producing history. During the Quarter the
Company completed a draw down of US$1.9 m from its Exim Bank 4-year
loan facility, taking the total drawn amount back to US$7.5 m.
Operational
Production Summary
Q1 2019 Q4 2018 Q3 2018 Q2 2018
Tonnes ore milled 172,644 172,902 159,640 157,426
------------------- -------------- --------------- ---------------
Grade (g/t) 4.49 4.74 4.26 4.44
------------------- -------------- --------------- ---------------
Recovery (%) 89.9 90.9 90.3 91.5
------------------- -------------- --------------- ---------------
Gold (oz)
------------------- -------------- --------------- ---------------
Production 22,374 23,942 19,723 20,544
------------------- -------------- --------------- ---------------
Sales 21,190 24,893 19,737 19,475
------------------- -------------- --------------- ---------------
Silver production (oz) 23,851 26,916 27,234 27,145
------------------- -------------- --------------- ---------------
Realised gold price
(US$/oz) 1,305 1,225 1,218 1,302
------------------- -------------- --------------- ---------------
Gold production during the period was 22,374 oz. Overall, a
total of 136,616 t of ore grading 5.72 g/t was mined in Q1 compared
with 157,952 t of ore grading 5.55 g/t in Q4 2018. 172,644 t of ore
was milled during the period (Q4 2018: 172,902 t), an all-time
daily throughput record during the Quarter. The ROM stockpile at
the end of Q1 was 139,000 t of ore grading 1.47 g/t (down from
163,194 t grading 1.48 g/t at the end of Q4). No open pit mining
was carried out in Q1 in line with the Company's mine plan.
Average recoveries of 89.9% were achieved in the plant during
the period (Q4 2018: 90.9%). This reduction is in line with a
strategic decision to prioritise throughput over recoveries,
following a trade-off study concluding this approach will generate
higher value returns and hence be beneficial to project net present
value.
The Company is continuing to identify cost reduction
opportunities. A connection to the state-operated ("TANESCO") power
grid has been approved and scheduled for commissioning in Q4. This
connection is intended to power the mine camp at NLGM and will
generate approximately US$7 /oz ongoing cost savings (US$0.6 m
annualised), with a 12-month payback period on capital expenditure
and no additional operational risk to NLGM's overall power
supply.
Exploration
Phase 1 underground drilling at BC Deep Central commenced during
the period following the completion of underground exploration
drives. Three drill holes totalling 357 metres are planned for
Phase 1 and the second of these was in progress at the end of the
quarter. Assay results are expected during Q2.
Sampling and trenching are underway at BC North and BC East. Ten
trenches representing 817 metres were excavated at the BC North
target, generating 892 samples which are undergoing analysis. A
further 190 samples have been generated from trenching works at BC
East.
Phase 2 underground drilling at BC Central is scheduled to
commence in Q2, with three holes planned totalling 398 metres.
Follow up trenching on the Lambo and Porcupine South targets, both
within NLGM's economic circle, is also planned for Q2 to test
extensions of previous encouraging intersection results.
Ilunga development update
During the quarter the Company intersected Ilunga underground
development ore, three months ahead of schedule, making Ilunga the
third active source of high-grade ore at NLGM. The intersect
occurred as predicted in the geological model and 5,753 t of
development ore has been since been mined from Ilunga, at 6.02 g/t
for 1,115 oz contained gold.
Development progress at Ilunga has now reached 1,259 metres and
since the end of the Quarter, the Company's 100% owner-managed team
have successfully installed a primary ventilation fan for the
underground mine which is now operational. A total of US$1.9 m
development capex was spent at Ilunga in the Quarter, totalling
US$5.2 m since first portal blast in August 2018.
Singida
Singida Resources Plc ("Singida"), a wholly-owned subsidiary of
the Company, is proceeding with a targeted US$20 m minimum equity
offering via an IPO on the DSE. This process is expected to take
6-12 months to complete and is the result of encouraging feedback
from recent investor roadshows by management in Tanzania, Uganda
and Kenya.
An IPO prospectus has been submitted to the Tanzanian Capital
Markets and Securities Authority ("CMSA") and the DSE, and proposed
IPO proceeds would finance the upfront capital required to bring
the Project into production plus provide additional funds for
exploration, targeting resource expansion. IPO submissions have
been prepared on the basis that the Company will retain at least
51% ownership of Singida and will operate the Project.
Corporate Social Responsibility
The Company's partnership with Hazelwood School (charity number
312081), a UK based charity providing teacher training in the
Songwe region, has continued to demonstrate tangible results
amongst participating schools. Two schools have recently achieved
record exam results and significant additional volunteer hours were
spent on the ground during the period. The partnership is focussed
on transferring skills across the English, Maths and Sports
disciplines into four selected schools and has recently included
lessons taught in Swahili.
Farmers enrolled in the Company's agricultural collaboration
with Export Trading Group ("ETG") have commenced the first sesame
harvests of 2019. The programme has grown exponentially since
commencement in late 2017, with over 800 farmers now enrolled and
an abundance of practical skills transferred to these
newly-established farming communities.
The Company is committed to its CSR portfolio and these
initiatives have recently generated public praise from the newly
appointed Minister for Minerals. The Company is encouraged that its
efforts to operate as an exemplary corporate citizen are being
recognised across Tanzania.
Post period
Following the end of the Quarter the Company confirmed that it
is proceeding with the buyback of approximately 33.33% of the
convertible loan notes ("notes") held by third parties (US$4.9
million of the notes). Notes that remain outstanding with third
parties will be redeemable on 10 April 2020.
ENDS
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END
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