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 2021 (the “Quarter”, “Q1” or the “Period”) for its East African assets.
Including New Luika Gold Mine (“NLGM” or “New Luika”) and Singida Project (“Singida”) in Tanzania and West Kenya Project (“West Kenya”) in Kenya.
Highlights
· Zero Lost Time Injuries (“LTI’s”), with no LTI’s since Q4 2017, surpassing 6.5 million man-hours;
· Precautionary COVID-19 measures at all sites to protect the health and safety of staff and the continuity of operations which remain unaffected;
· Maiden dividend of 0.10 pence per share announced for payment in April and a commitment to ongoing sustainable returns;
· Gross debt of US$11.1 million (“m”) reduced to US$1.4 m post Period following the repurchase of all outstanding convertible loan notes and early repayment of Exim loan facility;
· Cash, and available liquidity1 of US$50.5 m (Q4 2020: US$53.5 m);
· Net cash2 of US$31.0 m (Q4 2020: US$37.3 m);
· Gold production of 14,641 ounces (“oz”) (Q4 2020: 20,622 oz);
o Gold production to increase throughout the year with H1 delivering 45% of production as previously guided;
o Ongoing ramp-up of the new third mill at New Luika targeting monthly throughput of 2,300 tonnes per day during Q3 2021, an increase of 18% compared with daily throughput in 2020;
o 2021 production guidance of approximately 80,000 oz reiterated;
· EBITDA3 of US$ 7.6 m (Q4 2020: US$15.6 m);
· Cash Costs of US$829 /oz and All In Sustaining Costs (“AISC”) of US$1,307 /oz (including US$204 /oz in relation to development costs);
o Q1 AISC higher than 2021 annual guidance, in part due to the profile of increasing quarterly gold production forecasted for the remainder of the year;
· Extensive exploration programme on-going with total planned drilling of up to 80,000 metres in 2021 across the Company’s three projects; and,
· Post period exploration drilling update at Luika deposit has added 76,461 oz of new Indicated resources grading 7.97 g/t (before Q1 depletion).
Operational Summary – NLGM
· 191,767 t milled (Q4 2020: 181,425 t);
· Average tonnes per day of 2,130 forecasted to increase to 2,300 during Q3 2021;
· Average head grade of 2.7 g/t (Q4 2020: 3.9 g/t) due to lower grades achieved compared to forecast in January at the Bauhinia Creek and Ilunga underground mines;
· Average recoveries of 89.1% (Q4 2020: 90.4%);
· Installation of 10 tonne per hour third mill at NLGM completed with throughput expected to increase further after the tailings pipeline upgrade is completed in June 2021;
· Low-cost state (“TANESCO”) grid power contributed 11% of NLGM’s power requirements, expected to increase to 37% by H2 2021, reducing power costs and gradually decarbonising footprint by displacing HFO for largely hydropower and natural gas powered national grid; and,
· Run of Mine (“ROM”) stockpile of 122,032 t of ore grading 1.31 g/t (Q4 2020: 154,577 t grading 1.31 g/t).
Financial Summary
· Unrestricted cash balance of US$41.9 m (Q4 2020: US$41.6 m);
· 4,602 oz contained within doré available for sale at the end of the Period (Q4 2020: 5,063 oz);
· VAT receivable increased to US$29.1 m (Q4 2020: US$27.6 m); and,
· Remaining VAT receivable is subject to verification audit by the Tanzanian Revenue Authority (“TRA”) before being available for further offsets.
Singida
· Project build advancing with tenders for work activities being assessed;
· Onsite works continue with geotechnical drilling, installation of a new radio system and site clearance activities underway;
· US$0.3 m paid towards Crushing Circuit during the Period, with further US$0.6 m paid post Period;
· Recruitment drive ongoing with 61 employees at site by the end of the Period, with 77% of employees at Singida recruited from surrounding villages; and,
· Exploration drilling yielded promising grades some of which significantly exceed the current reserve grade; results are being modelled to estimate the impact on reserves.
West Kenya
· Second drill rig now on site and operational as first phase of infill drilling progresses, third rig to arrive shortly;
· Encouraging assay results received from initial diamond drilling (“DD”) holes, with a number showing high grade intersections;
· Highlights included:
o LCD0218 (Isulu) intersected 2.0 m grading 15.9 g/t Au from 233 m, including 0.5 m at 45.4 g/t;
o LCD0223 (Bushiangala) intersected 22.9 m grading 4.81 g/t Au from 124 m;
o *LCD0228 (Bushiangala) intersected 1.8 m grading 20.99 g/t from 187 m;
o *LCD0231 (Bushiangala) intersected 4.9 m grading 14.35 g/t Au from 111 m;
o *LCD0236 (Bushiangala) intersected 15.8 m grading 4.08 g/t Au from 111 m; and,
· Vocational security guard training programme delivered for 50 participants in partnership with a local security company.
* Results announced post period
New Luika Exploration
· Underground drilling at the Luika deposit (“Luika”) generated positive results, including:
o Hole CSD206, which intersected 9.29 m grading 11.27 g/t Au from 441 m, incl. 4.88 m at 20.07 g/t Au;
· Updated Luika resource block model has additional 76,461 oz of new Indicated resources grading 7.97 g/t (before Q1 depletion), post Period; and,
· Further drilling is planned at Luika and Porcupine South for Q2 2021 to target conversion of Inferred resources into Measured and Indicated resources.
Corporate Social Responsibility (“CSR”)
· 175 students in Songwe being sponsored by Shanta for 2021;
· Over 600 textbooks donated to secondary schools in the region;
· 150 iron sheets donated to the Songwe District Commissioner to help with a range of school construction projects;
· 250 acres of sunflower cultivated by local farmers around New Luika with seeds donated by Shanta;
· Shanta continues to adopt several COVID-19 best practices to protect the safety and wellbeing of its employees, and is educating communities in Songwe to uphold its commitment to Health; and,
· Shanta awarded top prize by the Tanzanian Government in respect of its Local Content Compliance for 2019 and 2020.
Post Period
· 76,461 oz Indicated resources added at Luika deposit grading 7.97 g/t (before Q1 depletion);
· All outstanding convertible loan notes have been repurchased from external noteholders;
· Shanta’s debt facility with Exim Bank repaid early and in full; and,
· Group debt now comprises residual balances on specific equipment financing arrangements only.
2021 Guidance
· Annual guidance of approximately 80,000 oz at AISC at US$1,050 – 1,100 /oz including development costs (in line with the World Gold Council (“WGC”) definition) reiterated for 2021.
Note: 1. Available liquidity has been derived as unrestricted cash, restricted cash and the sale value of doré available for sale at the end of the Period (net of royalties and expected selling costs).
Note: 2. Net cash includes liquidity available from 105 oz unsold at the refinery at 31 March 2021.
Note: 3. EBITDA is earnings before interest, tax, depreciation and amortisation which has been derived as operating profit exclusive of depreciation/depletion of tangible assets and amortisation of intangible assets.
Eric Zurrin, Chief Executive Officer, commented:
“2021 continues to be a year of strength for Shanta. Following the announcement of our maiden dividend in March, we remain committed to enhancing our robust fundamentals to protect long-term sustainable returns.
Reducing our debt is a key part of that strategy. The early repayment of the Exim loan facility and the repurchasing of all outstanding convertible loan notes demonstrates our financial discipline and further strengthens our balance sheet.
Beyond the income opportunity for shareholders and the steady gold production at New Luika, our exploration programme continues to unlock further capital growth within the portfolio. We are seeing encouraging drilling results across all three of our assets having completed 19% of the drilling programme so far this year which has already unlocked an additional 76,461 oz of new Indicated resources at Luika. We look forward to providing further updates as our drilling programme advances.”
Underpinning our performance and operational track record in Tanzania is the strength of our relationships with our in-country stakeholders. We are incredibly proud to have been awarded Tanzanian Government’s Local Content award for 2019-20. It reflects the core purpose of our business to create value and opportunity for Shanta and the people of Tanzania through our operations.
About Shanta Gold
Shanta Gold is an East Africa-focused gold producer. It currently has defined ore resources on the New Luika and Singida projects in Tanzania and holds exploration licenses covering approximately 1,100 km2 in the country. Shanta Gold also owns the West Kenya Project in Kenya with defined inferred mineral resources of 1.2 Mt grading 12.6 g/t and continuous exploration licences covering 1,162 km2 . Shanta’s flagship New Luika Gold Mine commenced production in 2012 and produced 82,978 ounces in 2020. The Company has been admitted to trading on London’s AIM market and has approximately 1,048 m shares in issue. For further information please visit www.shantagold.com.
