Shanta Gold ends fourth quarter in line with guidance

East Africa-focussed gold producer Shanta Gold updated the market on operations in its fourth quarter on Monday, reporting gold production of 20,622 ounces, up from 19,973 ounces in the third quarter.

The AIM-traded firm said it had cash and available liquidity of $53.5m (£39.1m) at period end on 31 December, rising from $13.7m at the end of the third quarter, as it swung to net cash of $37.3m from net debt of $5.1m.

Shanta said it was now unhedged and fully exposed to the gold price.

Adjusted EBITDA came in at $15.6m for the quarter, including the settlement of 15,000 ounces of forward-sale commitments.

Cash costs were $559 per ounce, while all-in sustaining costs totalled $870 per ounce for the period.

Shanta said mine construction at Singida was now underway, while infill drilling was also taking place at West Kenya, drawing on the $40.1m cash it had raised in the period in a successful equity placing to progress the project to a construction decision.

An independent scoping study had been announced for West Kenya, including a post-tax net present value at an 8% discount of $340m, and an unlevered internal rate of return of 110%, at a price of $1,700 per ounce.

The maiden resource of 64,000 ounces, grading at 2.08 grams per tonne, was declared at the newly-identified open-pit deposit Porcupine South, adding a 12th known deposit at the New Luika Gold Mine.

For the full-year, Shanta reported gold production of 82,978 ounces, in line with its 2020 guidance for between 80,000 and 85,000 ounces.

Adjusted EBITDA totalled $63.8m, up from $47.7m in 2019, with 40,000 ounces of forward-sale commitments settled at an average price of $1,240 per ounce during the year.

Cash costs for 2020 came in at $579 per ounce, while its all-in sustaining costs were $841 per ounce, at the lower end of its guidance for between $830 and $880 per ounce.

Gross debt totalled $11.4m, narrowing from $22m at the end of the prior year, as the board reported a new all-time record throughput of 712,945 tonnes milled.

Looking at 2021, Shanta said its annual guidance was for about 80,000 ounces at an all-in sustaining cost of between $900 and $950 per ounce on a like-for-like basis, and $1,050 to $1,100 per ounce including development costs, in line with the World Gold Council ("WGC") definition.

Forecast gold production would increase through the year, the board said, following the ramp-up of the third mill, resulting in production being weighted towards the second half of 2021.

It said its all-in sustaining cost guidance included the assumption of higher royalties driven by the higher gold price, supplementary open pit mining from Elizabeth Hill and increased on-mine exploration spend in 2021.

The company’s 2021 exploration budget in Tanzania would increase by around 50% to $8m.

“The company is operating drilling campaigns at each of its three projects and expects to increase group reserves during the course of the year. Exploration is likely to be the primary driver for creating shareholder value in the coming years,” said chief executive officer Eric Zurrin.

“Shanta achieved its core objectives for 2020, with gold production and costs in line with guidance, and produced another industry-leading safety performance.”

At 0901 GMT, shares in Shanta Gold were down 0.55% at 18.2p.