Debt Financing, exploration and project update

21 December 2011

Shanta Gold Limited

Debt Financing, exploration and project update

Shanta Gold Limited, ("Shanta Gold" or "the Company") (AIM: SHG), the near-term gold producer  with  operations  in  Tanzania,  is  pleased  to announce the following operational update.

Highlights:

·         Securing of US$ 5 million in bridging loan;

·         Second bridging loan of US$ 15-20 million in advanced stage of negotiations;

·         More than 10,000 ounces gold at 4.9 g/t stockpiled at New Luika at 17 December 2011;

·         Deeper drilling at Bauhinia Creek shows extension of ore body down to 200 metres;

·         Mining licence for the Singida mine project received on 19 December 2011.

Bridging loans

Shanta Gold has secured a US$ 5 million loan facility with Export Trading Group, a company in which Ketan Patel, a Director of Shanta Gold, has a beneficial interest. The loan facility was made available on 20 December 2011 and is repayable within six months of a draw down. The loan bears an interest rate of 8 per cent. per annum and Export Trading Group is also entitled to an option over new ordinary shares of Shanta Gold equal to 3 per cent. of the value of any loan draw down amount, such options to be exercisable at the weighted average mid-market closing price of ordinary shares of the Company for the ten days preceding the loan draw down. The share options are exercisable from the date of grant for a period of 36 months. In the event of a default on the loan, Export Trading Group will be entitled to have any capital repayment or interest due repaid from an issue of new ordinary shares of the Company to it, based on the mid-market closing price of the Company's ordinary shares on the date repayment of the loan is due.

The provision of the loan facility from Export Trading Group is a related party transaction under the AIM Rules. Having consulted with the Company's nominated adviser, Fairfax I.S. PLC, the Directors, excluding Mr Ketan Patel and his alternate Director, Mr Maheshkumar Patel, consider that the terms of the loan from Export Trading Group are fair and reasonable insofar as Shareholders are concerned. In giving advice to the Directors, Fairfax has taken into account the Directors' commercial assessments of the loan terms available from third parties and alternative sources of debt financing.

Shanta Gold is at an advanced stage of negotiation for an additional loan facility of US$15-20 million with other parties. The Directors believe the additional loan facility will provide sufficient funds for the Company to achieve commissioning at New Luika by the end of Q1 2012. Significant progress has been made at New Luika and the Company can confirm that as at 17 December 2011, more than 10,000 ounces of gold at 4.9g/t were stockpiled at New Luika.

Bauhinia Creek infill drilling

After highly favourable drill results were achieved and announced on 29 June 2011, Shanta Gold commissioned deeper RC drilling to test the down dip extensions to the ore body.

Current 3D block modelling containers indicate resources to 120 metres depth below surface. Due to the high grades drilled and the robust nature of the mineralised intersections achieved, the entire indicated resource will be mined using open pit methods. RC drill rigs were commissioned on 2 October 2011 to optimise the depth extensions of the ore body.
Thus far four drill holes designed to target mineralisation at 150 metre depth have intersected robust mineralisation. The first two boreholes designed to intersect mineralisation at 200 metres depth have intersected zones of between 10 and 18 metres true width. Assay values for these intersections are expected in early 2012.

Visual inspection of the drill chips from these intersections suggests the Bauhinia Creek indicated resource may be increased, extending the life of the Bauhinia Creek pit and the New Luika mine. The Bauhinia Creek mineralised prospect remains open at depth and to the west.

Shanta plans to commission depth-extension drilling at its Luika mineralised prospect in early 2012, the Luika pit is scheduled to follow Bauhinia Creek as the ore source for the New Luika plant.

Singida project progress

Following the attainment of the Environmental and Social Impact Assessment ('ESIA') for the Singida project the mining licence has been issued and received by Shanta from the Ministry of Energy and Minerals, dated 19 December 2011.

Gareth Taylor, Chief Executive Officer, commented;

"With the first bridging loan now in place and the second at an advanced stage, Shanta is on track to commence  at New Luika by the end of Q1 2012.

Receiving approval of the mining licence for Singida represents another major achievement for the Company and we can look forward with confidence to having two producing mines by the end of 2013. With our excellent exploration team focussed on the opportunities available in the joint venture areas I am very excited about the further growth potential of this company"

Contacts:

Shanta Gold Limited  
Walton Imrie   Tel: [phone]
Gareth Taylor   Tel: [phone]

Nominated Adviser and Broker  
Fairfax I.S. PLC
Tel: [phone]
Ewan Leggat / Laura Littley

Financial Relations
Tavistock Communications
Tel: [phone]
Emily Fenton/Ed Portman

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Source: Shanta Gold Limited via Thomson Reuters ONE

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