Shanta Gold Share Discussion Threads

[risa5] 20/7/2020 13:49

Shanta Gold shares register new all-time high after firm posts first ever net cash quarter

SHANTA Gold had undertaken “enormous deleveraging”, according to CEO Eric Zurrin in notes to the UK-listed firm’s second quarter results.

The firm was $2.1m net cash (excluding $3.6m held in gold doré at period end) – the first time in its history – after paying down $17.2m in gross debt, a reduction of 34% to $13.4m gross debt during the period.

“Shanta enters a new chapter with a net cash position, completing a period of enormous deleveraging,” said Zurrin. Shanta’s net debt was $38m two years ago.


Shares in Shanta were 9.4% higher on the London Stock Exchange’s AIM market in mid-morning trade, representing a fresh all-time high for the company.

The improvement in the firm’s balance sheet is partly attributable to the higher gold price. During the second quarter, Shanta reported an average dollar gold price of $1,633/oz, some 15% higher than the first quarter’s average and 18.5% higher than the average gold price in Shanta’s 2019 financial year. It is hedged, however: the company hopes to close out the remainder of its hedge structure – worth some 23,048 ounces – by year-end.

Shanta also has some $23.2m in VAT refunds owed by the Tanzanian government. The remaining VAT receivable is subject to an audit by the country’s revenue authorities before becoming available for further offsets.

Shanta produces gold from a single asset, the New Luika gold mine in Tanzania’s south-western border. It is also building two projects – Singida, a seven-year life operation in the central part of the country, and in Kenya, the West Kenya project which was bought from Barrick in February for $14.5m in cash and shares.

Production in the second quarter from New Luika totalled 22,216 oz, slightly higher than the 20,167 oz produced in the first quarter. After all-in sustaining costs of $771/oz (Q1: $883/oz), second quarter earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $19.4m for the three months.

“Annualised Q2 EBITDA at spot gold is just under $100m per annum from the New Luika mine with margins expanded from lower costs and a rising gold price,” said Zurrin in notes to the numbers. He added that production at Singida was expected to “… significantly increase the company’s cashflow”.

“Shanta’s near-term focus is on replacing reserves at New Luika, financing and commencing Singida’s construction, and expanding the resource base at the West Kenya Project,” said Zurrin. Full-year production guidance of between 80,000 and 85,000 oz at an AISC of $830 to $880/oz was reiterated for 2020.

[chipperfrd] 20/7/2020 13:29

Way too high IMO Lowtrawler!

HUM managed Yanfolila startup with c. $70m of debt.

I would have thought Kenya might be similar but with higher grades.

[32campomar] 20/7/2020 13:25

Gold performing strongly today $1818 August contract

[redhill] 20/7/2020 13:16

Lowtrawler

That sounds very high to me but all i can really go on is the cost of the New Luika Mine at the beginning.

Lets wait and see what we have.

[lowtrawler] 20/7/2020 12:37

RedhillThe costs of exploration, PFS and DFS all tend to surprise even before you build a mine, open cast or not. Even relatively straightforward PFS and DFS reports are likely to cost around 100m given the resources in Kenya. Once you add on mine construction, you are into several hundred. I had been hoping that with the money Barrick have already spent, no further exploration would be needed and the PFS would be largely complete. It doesn't sound that way but we will need to wait for the deal to be concluded and plans produced.

[fsawatcher] 20/7/2020 12:17

it q3 alreadies

so the block that sayin singa and barrakc next quarter aint right is it

shanta sayin that news comin this quarta

[imnotspartacus] 20/7/2020 11:12

hxxp://shantagold.com/_resources/Q2%20Production%20and%20Operational%20Update%20Analyst%20Call.mp4

[amazoner] 20/7/2020 10:49

just wait some people will switch from sng to shg ;)

[qs99] 20/7/2020 10:45

Given this step change RNS (IMO), will be very interesting whether new instis try and get on board.....that should IMO really help squeeze that share price higher....DYOR

[imnotspartacus] 20/7/2020 10:30

And lets not forget some of the open pit grade @ 43gms/t

I tried to listen but you couldn't hear Eric so I gave up.

[redhill] 20/7/2020 10:26

Anyone listening to the Conference call ?

[redhill] 20/7/2020 10:22

Lowtrawler

You just mentioned a very large sum to develop Kenya.
I'm wondering how you have made this assumption bearing in mind that a lot of the mining will be open pit.

[jasper2712] 20/7/2020 10:18

All looks good, in the rose garden, except for the VAT which still accumulated by 0.3m. Getting some back now and again is a bit like saying I won the lottery when I bought a £5 ticket and got back £3.20 in winnings!
The figures look better than they should as they only offloaded a small proportion of the hedge. The 20000+ oz have to be sold by end of year at what looks like a loss of $600/oz. The hedge fund managers must be planning their early retirements thanks to the CFO.
The only thorns I can see might be they are looking forward to a placing to fund the Kenya development.

[qs99] 20/7/2020 09:54

not me 338, AISC I mentioned earlier! Hurrah! EBITDA drop through with the extra 1,000+ of price in Q3 should be v. material IMO....DYOR

[338] 20/7/2020 09:46

Lowtrawler,
I think it's more about working culture... the approach to achieve good efficiency can be replicated in Singida and Kenya... I think

[lowtrawler] 20/7/2020 09:37

338, can't help thinking our costs in the quarter were probably helped by Covid. Although, we still have additional energy cost efficiencies to come.

[juju44] 20/7/2020 09:33

338 - yes its all a good story when we get rid of the hedge and fix the VAT

[338] 20/7/2020 09:28

Most of you have missed one of the biggest achievements... COST EFFICIENCY... has been excellent... Other operators / producers must be very jealous with Shanta

[juju44] 20/7/2020 09:22

Hazl , wise up . I have been here since 5p days

[hazl] 20/7/2020 09:18

oh I see juju missed the rise ....chuckle.

[juju44] 20/7/2020 09:12

The noose of the hedge isnt going away . Why tf didn't they just crush it and get it over with . Then maybe this could get a decent rise with what is otherwise a good story ( apart from tha VAT )

[amazoner] 20/7/2020 09:12

yes looks silly willy

[glennborthwick] 20/7/2020 09:10

Just joined the party at 16p should benefit at an 1800 gold price.

[lowtrawler] 20/7/2020 09:09

There are more positives here than negatives and so don't want to appear negative but worth pointing out:

1. They have effectively run the quarter as if they don't have a hedge and so the results will be much better than the next 2 quarters. This is compounded by them processing at above capacity and including stock processing.
2. The costs of developing Kenya are not yet known and could be a nasty surprise with exploration, PFS and DFS not coming cheap, even before you build the mine.
3. Depending on the tax authorities, our VAT recovery could dry up.

On a more positive note:

1. We have net cash rather than net borrowings.
2. Our Annualised EBITDA is 100m (as per point 1 above, not over the next 12 months but potentially months 7-18)
3. We can expect positive news on Singida in the next quarter.
4. We can expect a positive announcement on Kenya in the next quarter with hopefully more information on their expected costs to develop.
5. We may get a positive announcement on other drilling campaigns in the next quarter.

If New Luika had a longer proven life, we would easily be 3x the current price and possibly more. Once additional reserves are proven and more is known about Kenya, the current price will look silly.