TIDMSHG
RNS Number : 5497U
Shanta Gold Limited
19 January 2017
19 January 2017
Shanta Gold Limited
("Shanta Gold", "Shanta" or the "Company")
Q4 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 31 December 2016 ("Q4", the "Quarter"
or the "Period") for its New Luika Gold Mine ("NLGM"), in Southwest
Tanzania.
Highlights
Operational
-- Quarterly gold production of 18,897 ounces ("oz") (Q3: 20,580 oz);
-- Record annual gold production for 2016 of 87,713 oz, beating
guidance of 82,000 - 87,000 oz (2015: 81,873 oz);
-- Quarterly gold sales of 15,285 oz at an average price of
US$1,187 per oz ("/oz"), compared to average spot price of
US$1,217, closing at US$ 1,148 /oz;
-- Gold sales for 2016 of 86,331 oz (2015: 80,622 oz) at an
average price of US$1,232 /oz, compared to average spot price of
US$1,249 /oz;
-- Cash costs for Q4 of US$486 /oz (Q3: US$387 /oz) and All in
Sustaining Cost ("AISC") of US$747 /oz (Q3: US$621 /oz);
-- AISC for 2016 of US$661 /oz against guidance of US$690-740 /oz (2015: US$845 /oz); and
-- No lost time injuries for the Quarter.
Financial
-- Cash balance of US$15.0 million ("m") (Q3: US$25.8 m);
-- Cash used in operating activities of US$0.1 m in Q4, compared
to US$11.1 m of cash generated from operating activities in Q3,
reflecting lower gold price on lower sales at higher cost but also
with increased working capital in supplier prepayments and VAT on
all capital and operating expenditure;
-- Cash generated in operations of US$45.9 m in FY 2016 (2015: US$31.8 m);
-- Capital expenditure of US$12.9 m (Q3: US$14.2 m);
-- Retirement of US$9.1 m Letter of Credit with all payments
(for the ISI power station) made from cashflow;
-- Gross debt of US$57.9 m (Q3: US$70.5 m) and net debt of US$42.9 m (Q3: US$38.4 m);
-- US$5.25 m proceeds for silver stream was received in the quarter; and
-- Forward sales from January to August 2017 of 21,000 oz at an average price of US$1,318 /oz.
Development and Exploration
-- New Luika Underground project is on time and within budget,
with 1,260 metres of tunnel development completed at year end.
First development ore was delivered in December as scheduled and
the first raise bore ventilation shaft was 97% complete;
-- Underground high grade ore production on target for Q2 2017;
-- Feasibility study underway for New Luika's Ilunga deposit as
a new high grade underground operation (utilising existing NLGM
infrastructure) with an updated Mine Plan incorporating this and
Elizabeth Hill to be completed at the end of Q1 2017;
-- Infill drilling program completed at Singida's Gold Tree 2 and Gold Tree 3 deposits; and
-- Singida Pilot Mining Project scheduled to start operations in Q2 2017.
Guidance for 2017
-- Annual guidance for 2017 of 80,000 - 85,000 oz at AISC of US$800 - US$850 /oz;
-- The transition from surface to underground operations will
require processing of lower grade ores during H1 2017 as access to
higher grade underground ore is established. This will result in
production being weighted to the second half of the year;
-- 2016 costs benefited significantly from an accelerated mining
program for the remaining lives of both the Luika and Bauhinia
Creek open pits. This innovative approach significantly reduced the
mining costs but is confined to the 2016 year. It should be noted
that the initial guidance for AISC in 2016 was US$750 - US$800/ oz;
and
-- The Base Case Mine Plan 2016 - 2020 guidance is for five year
average production of 84,000 oz with a life of mine average AISC of
US$695 /oz.
Note 1: Cash Cost - Back of mine operating and administrative
costs excluding royalty.
Note 2: AISC - Cash cost plus royalty, stay in business capital
expenditure, interest and G&A.
Toby Bradbury, Chief Executive Officer, commented:
"I'm pleased to report that Shanta's Q4 2016 performance has
rounded off an excellent year for the Company. We achieved record
gold production of 87,713 oz at a very competitive, and Company
record, AISC of US$661/oz. Shanta has beaten full year guidance on
both cost and volume. This is a fantastic accomplishment and I
would like to extend my thanks and appreciation to all of our
hardworking and dedicated employees and contractors who have made
this success possible."
"In 2017, Shanta will continue to deliver high margin ounces and
to generate strong operational cash flows. Shanta is now 15 months
into New Luika's Base Case Mine Plan, as presented in September
2015, and since then the Company has consistently delivered to meet
its annual guidance, both in 2015 and 2016. The underground project
is significantly de-risked with initial access already developed
within the Bauhinia Creek orebody. High grade ore production from
underground operations is scheduled to start within six months and
I look forward to keeping the market updated on our progress."
"Shanta's improved financial position is particularly satisfying
with a reduction in gross debt from a peak at the end of H1 2016 of
US$75 m to US$57.9 m at year end. Debt is projected to continue to
reduce in 2017 despite the scheduled completion of the underground
development program in the first half of 2017."
Analyst conference call and presentation
Shanta Gold will host an analyst conference call and
presentation today, 19 January 2017, 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: 0808 2370030
UK Toll Number: +44 (0) 2031394830
PIN: 63802503#
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=131682118&PIN=63802503
A recording of the conference call will subsequently be
available on the Company's website.
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 / Emily Fenton
/ Barney Hayward +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 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 87,713 ounces in 2016. The Company is admitted to
trading on London's AIM and has approximately 583 million shares in
issue.
For further information please visit: www.shantagold.com.
Operational
Production Summary
Q4 2016 Q3 2016 Q2 2016 Q1 2016
----------------------- -------- ---------- ---------- --------
Tonnes ore
milled 151,827 144,930 151,698 149,128
Grade (g/t) 4.26 4.90 5.48 5.69
Recovery (%) 90.8 90.2 89.5 89.3
Gold (oz)
Production 18,897 20,580 23,896 24,341
Sales 15,285 23,426 26,134 21,486
Silver production(oz) 24,731 30,381 36,316 35,144
Realised gold
price (US$) 1,187 1,301 1,246 1,132
----------------------- -------- ---------- ---------- --------
Note: quarterly production figures reconciled at year end
Production from the quarter maintained the reducing trend for
the year which was planned as a key element of maintaining
consistent production during the transition into the underground
operations. Importantly, annual guidance for production was beaten
and a new annual record for production at 87,713 oz was achieved.
The year-end ROM stocks were 90,000 tonnes at an average grade of
4.6 g/t for a contained 13,000 oz which, with on-going surface
mining and a contribution of high grade underground development
ore, will ensure continuity of ore supply to the mills into 2017.
The first half of 2017 anticipates lower average grade until
high-grade ore is accessed from the Bauhinia Creek underground.
Gold production, consequently, will be biased to the second
half.
Plant efficiencies have improved through the year with record
recoveries of 90.8% achieved in Q4 2016. Q4 2016 was the first full
quarter to benefit from the completion of the new 1,000 m(3) leach
tank increasing leach residence times in circuit. Recovery rates of
90% are expected to be maintained.
Safety, Health and Environment
Safety, Health and Environment issues remain a constant priority
for Shanta. The Company is pleased to report that were zero lost
time injuries or environmental incidents in the Quarter. More
information on the safety reporting and protocols will be included
in the full year results announcement.
Financial
A total of 15,285 oz of gold was sold at an average price of
US$1,187 /oz against an average spot price over the period of
US$1,217 /oz. The Company has sold forward 21,000 oz to August 2017
at an average price of US$1,318 /oz.
The strong unit cost performance was maintained for the Quarter
delivering a cash cost per ounce of US$486 /oz (Q3: US$387 /oz) and
AISC of US$747 /oz (Q3: US$621 /oz). AISC finished the year at
US$661 /oz against a twice-improved guidance for 2016 of US$690 /oz
to US$740 /oz.
New Luika has now operated for six quarters with AISC below
US$750 /oz reflecting the high quality of its mineral resources and
efficient, continually improving operations. The anticipated
increase in costs for 2017 is the result of expected lower gold
production due to the lower average grade for the year. However,
Shanta's 2017 production guidance of 80,000-85,000 oz is in line
with the projections contained in the 2015 Base Case Mine Plan,
released in September 2015.
Cash used in operations was US$0.1 m compared to cash generated
from operations of US$11.1 m in Q3, reflecting lower gold price on
lower sales at higher cost but also with increased working capital
in supplier prepayments (US$2m) and VAT on all capital and
operating expenditure (US$3m). Capital expenditure was US$12.9 m
(Q3: US$14.2 m), which was predominantly on the New Luika
underground development and TSF 2 construction.
Cash generated for the year was US$45.9m (2015: US$31.8m)
reflecting higher sales and lower costs overall.
The Company's cash balance at the Quarter end was US$15.0 m (Q3:
US$25.8 m). This lower cash balance is due predominantly to the
capital spend on the underground and surface development (US$ 8.1
m), and capitalised waste development at Ilunga - (US$ 4.8 m). In
the case of the Ilunga waste development, the full benefit of this
will be realised in 2017. There were further scheduled repayments
of the long term debt to [interest on Convertible Loan Note holders
(US$1.0 m),] Sandvik for mobile equipment (US$ 0.5 m) and Investec
Bank Limited (US$ 1.7 m). There was also payment to suppliers of
VAT which the Company awaits reimbursement from the Tanzanian
Revenue Authority ("TRA") of approximately US$3 m in Q4 2016. It is
anticipated that the prepayment requirements to suppliers will
reduce as the Company builds up a steady track record and also move
to consignment stock in 2017. Shanta continues to engage with the
TRA on the refund of its outstanding VAT claims. Gross debt
amounted to US$57.9 m reflecting the repayment of debt facilities
(Q3: US$70.5 m), while net debt increased slightly to US$42.9 m
(Q3: US$38.4 m) due to the lower cash balances as the power station
has now been fully funded from internal cash in 2016.
Of real significance and benefit for Shanta was the retirement
of US$9.1 m Letter of Credit for the new power plant which has been
funded and paid for entirely from cash available within the
business. The Letter of Credit was to have been converted to a
US$9.1 m term loan. Shanta believes it may no longer require this
finance but is in the final stages of securing a Line of Credit
(overdraft) facility which can be drawn down if the need arises.
This has been the major impact on the gross debt reduction in the
Quarter and will assist in reducing one of the more expensive debt
servicing obligations going forward.
The Company maintains a continual program of efficiency
improvement initiatives that have again contributed to an improved
performance for the year. These initiatives are constantly updated
and on-going improvements can be expected throughout 2017 and
beyond. The initiatives form part of the Company-wide risk-managed
approach to value creation. In addition, capital programmes are
continuously reviewed to test for on-going requirement, potential
alternatives and efficiency opportunities.
Exploration and Development
Further exploration work was conducted at Singida with in-fill
drilling at Singida's Gold Tree 2 and Gold Tree 3 deposits and a
targeted reverse circulation ("RC") drilling programme at
Nkuluwisi, a prospect in the Lupa Gold field close to the New Luika
mining licence. Further exploration will be performed throughout
2017 with ongoing announcements and resource updates in due
course.
The Singida Pilot Mining Project development continues with
commissioning scheduled to commence towards the end of Q2 2017.
An update to the New Luika Gold Mine Base Case Mine Plan is also
anticipated before the end of Q1 2017 and will incorporate the
updated Ilunga underground resource from the feasibility study
which is underway and the upgraded Elizabeth Hill reserve which are
expected to add a tangible extension to New Luika's mine life.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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