Shanta’s new Luika delivers record Q3 gold output

JOHANNESBURG (miningweekly.com) – East Africa-focused Shanta Gold has delivered record quarterly production of 24 522 oz of gold for the three months to September 30, benefiting from a 33% quarter-on-quarter lift in gold ore grade efficiencies and a 25% increase in tons milled over the quarter at is Tanzania-based New Luika gold mine.

Shanta sold 26 254 oz of gold at an average price of $1 175/oz over the three months, with 12 858 oz sold under forward-sales contracts at an average price of $1 242/oz.

Strong unit cost performance for the quarter – which saw cash costs come in at $453/oz and all-in sustaining costs (AISC) at $608/oz – were derived mainly from the lower strip ratios arising from the optimisation of both pits, as well as the higher level of gold production.

Despite lower prevailing gold prices, cash generated from operations was $13.2-million, reflecting higher quarterly gold production, while capital expenditure over the quarter reached $7.3-million.

Shanta closed the quarter with a cash balance of $11.2-million and gross debt of $60.3-million, while its net debt fell to $49.1-million.

CEO Tony Bradbury believed the company’s quarterly production and cost performance further derisked the company’s AISC and production guidance for the year.

“The operating platform we have established at New Luika underpins the value-accretive base case mine plan, the underground feasibility study and updated reserves statement released to the market last month.

“This quarter reported marks an important point at which our initiatives targeting operational efficiencies, senior operational appointments and value improvement programmes are taking measurable effect. Our costs have reduced, production has stabilised and our base case mine plan clearly maps out the future of the operations,” he commented.

Bradbury remained confident that Shanta would achieve its 2015 yearly production and AISC guidance of between 72 000 oz and 77 000 oz at between $850/oz and $900/oz, respectively.

EXPLORATION AND DEVELOPMENT
In September, Shanta announced its underground feasibility study, base case mine plan and updated reserves statement for New Luika, which provided for the extraction of 1.57-million tons over six years at a grade of 6.5 g/t gold.

It would produce 310 000 oz with a $72-million net present value (NPV) at a gold price of $1 200/oz and a pretax internal rate of return of 56%.

The underground feasibility study, meanwhile, presented life-of-mine average cash costs and an AISC of $499/oz and $640/oz respectively.

“The underground feasibility study is incorporated into the plan, which also includes ongoing surface mining and a tailings recovery project.

“In combination, the plan provides for the extraction from mining of 2.79-million tons for the production of 443 000 oz from January 2016 to 2022. It provides a post-tax NPV from January 2016 of $110.4-million at a gold price of $1 200/oz, delivering average cash cost and an AISC of $532/oz and $695/oz respectively,” said Bradbury.

As part of the new exploration strategy devised in May, a successful drill optimisation of near-surface resources at the company’s Elizabeth Hill prospect was completed in the quarter, which increased the total resources of that prospect by 46% to 2.3-million tons at 1.7 g/t for 128 000 oz.

Shanta had subsequently extended its on-mine resource optimisation programme to other known mineralised prospects within the permitted New Luika area.

Drilling equipment was deployed at the end of September to carry out down-dip upgrade drilling at the Black Tree Hill prospect, which currently had a total resource of 1.67-million tons at 1.8 g/t for 95 000 oz.

The programme was aimed at testing mineralisation below available drilling data, to a vertical depth of between 170 m and 200 m.

In addition to the Elizabeth Hill and Black Tree Hill satellite prospects, the company was considering optimisation work at the Luika South and Ilunga mineralised prospects, all within the mining licence and in close proximity to the processing facility.

Concurrent with the above on-mine optimisation drilling, the exploration team had progressed regional exploration on the extensive portfolio of tenements within a 20 km radius of the central processing hub.

Large areas had been targeted with regional soil geochemistry grids, geological mapping and grab-and-chip sampling of identified targets.

Exploration of the wider mineral licences was, meanwhile, ongoing and the company planned to drill-test the Nkuluwisi and Hatari prospects in the fourth quarter.