Shanta reports ‘robust’ H1 financial performance, maintains FY guidance

JOHANNESBURG (miningweekly.com) – Aim-listed Shanta Gold increased its gold production to 48 237 oz in the first half of this year, up from the 28 180 oz produced in first half of 2015.

This enabled Shanta to maintain its production guidance for the full year at 82 000 oz to 87 000 oz, with production expected to be towards the upper end of the guidance, the company noted on Wednesday.

Shanta sold 47 621 oz of gold at an average price of $1 193/oz in the six months to June 30, compared with the 25 142 oz sold at an average price of $1 238/oz in the same period last year.

Revenue increased by 74% year-on-year to $55.7-million, reflecting higher gold production and improved efficiencies within the operations.

Shanta attributed the higher sales volumes to the higher gold production levels as a result of improved ore access after the optimisation of the Bauhinia Creek and Luika pits in the first half of 2015.

Further, the company’s earnings before interest, taxes, depreciation and amortisation (Ebitda) of $33.3-million were a significant improvement from the loss of $1-million recorded in the prior comparable period, providing a “pleasing result” for the six months and comparing favourably against the 2015 full-year Ebitda of $31.3-million, Shanta noted.

Shanta invested capital expenditure of $13.3-million in the six months under review, with $13-million related to underground equipment and infrastructure, alongside additional surface projects to provide power, water security and tailings storage requirements for the future life-of-mine.

Shanta recorded all-in sustaining costs (AISC) of $632/oz for the first half of this year, compared to an AISC of $1 310/oz for the same period in the previous year. It also lowered the AISC guidance for the full year from $750/oz to $800/oz to $730/oz to $780/oz.

“The AISC are expected to remain highly competitive at a reduced $730/oz to $780/oz, enabling the company to generate significant cash flows to meet [its] capital programmes and debt obligations.

“This has been an excellent half-year for Shanta, with a robust financial performance across the board. As we transition into the underground resource, we retain our expectation of meeting the upper levels of our 2016 production guidance . . . which will be an annual record for the New Luika gold mine,” CEO Toby Bradbury said.

He added that the company’s net debt was back below $40-million, even before taking account of the $5.25-million silver stream proceeds that were expected to be received shortly. “Shanta is well funded to deliver on its plans and with an improved gold price environment we can look forward to further cash generation in the second half of the year,” he said.

Shanta noted that, as the New Luika gold mine’s grade was expected to be slightly lower than that achieved in the first half of the year, at an average grade of around 5 g/t in the second half of the year, total gold production for the year was expected to remain within guidance.

Planned ore grades were expected to increase from the second quarter in 2017 as the underground ore reserves at Bauhinia Creek were accessed. The average yearly production from 2016 to 2020, as provided in the base case mine plan in September 2015, was 84 000 oz within the current reserve base, the company reported.

With the completion of Luika pit in June and Bauhinia Creek pit expected to be completed in the third quarter of this year, surface mining will transition to the Ilunga openpit for the remainder of 2016 and into 2017.

The decline/underground development, started at New Luika in June and aimed at bolstering production, remains on track and within budget to produce first underground ore in the second quarter of 2017.

Additionally, exploration drilling in a two-phase programme delivered “excellent” intersections at the Ilunga prospect at depth and along strike, Shanta stated.

“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 New Luika gold mine plan, extending the project's life and further improving the project economics,” the company reported.

Shanta intends to provide an updated resources and reserves statement at the end of the third quarter of this year to be incorporated into an updated mine plan.

The company is also pursuing the Singida project as an active development project and intends to have a pilot mining operation under way by the end of the first quarter of 2017.