Shanta Gold pleased with first quarter performance

East Africa-focussed gold producer Shanta Gold updated the market on production and operations for the first quarter at the New Luika Gold Mine in south western Tanzania on Monday, reporting gold production of 20,167 ounces, up from 19,550 ounces in the fourth quarter.

The AIM-traded firm said its adjusted EBITDA for the three months ended 31 March totalled $15m, rising from $8.6m in the final quarter of 2019, while its all-in sustaining costs fell to $833 per ounce from $902.

Cash operating costs were $630 per ounce for the period, down slightly from $638.

Shanta Gold said forward sales commitments were down during the quarter to 31,265 ounces, from 40,000 ounces in the previous quarter, and since the period ended to 27,304 ounces, making for a 32% reduction from the end of 2019.

Cash and available liquidity stood at $15.7m at period end, up from $13.7m, while gross debt narrowed 7.3% to $20.4m.

The company recorded nil lost time injuries in the period, with no lost time injuries confirmed since the fourth quarter of 2017.

It announced the acquisition of Barrick Gold Corporation's Kenyan assets during the three months, with closing expected around mid-2020.

Barrick’s West Kenya Project included NI-43101 compliant inferred mineral resource estimates of 1,182,000 ounces of gold grading at 12.6 grams of gold per tonne, which was believed to be one of the highest grading gold deposits of more than one million ounces in Africa.

Looking at its response to the Covid-19 coronavirus pandemic, Shanta Gold said the Songwe region had no reported cases, with the firm putting in place restrictions on all non-critical business travel.

It said it was “an early adopter” of precautionary measures to reduce the risk of infection.

Critical inventory spares and stocks had been “significantly increased”, the board said, to protect against the possibility of supply chain disruptions.

Its team of both employees and contractors were “almost exclusively” Tanzanian nationals, which would lead to minimal impact from the suspension of international travel, as the board confirmed it had “no reliance” on fly-in fly-out operators.

TSH 100m of equipment had been formally pledged to the government of Tanzania to help fight the virus, equivalent to around $43,000, which was in addition to the ongoing deployment of investments in community health, infrastructure, education and livelihood programmes, Shanta said.

The company said its medical team was helping to educate local communities to reduce the potential for transmission of the disease.

“During the quarter, we announced the acquisition of Barrick's Kenya assets,” said chief executive officer Eric Zurrin.

“As a result, Shanta is expected to transform into a multi-asset and geographically diversified company with a portfolio of low-cost gold mines, and the potential to become a significant producer.”

Zurrin said the company was looking forward to publishing the West Kenya Project economics and the Singida economics in the coming months.

“We anticipate low capital costs at both projects driven by the highly attractive grades.

“The company meanwhile continues to make excellent progress in reducing its hedge book and transitioning towards a net cash position.”

At 1211 BST, shares in Shanta Gold were up 1.13% at 11.38p.