Significant Corporate and Operational Changes

RNS Number : 8678O

Shanta Gold Limited

17 October 2012

 



17 October 2012

Shanta Gold Limited

("Shanta Gold" or the "Company")

Significant Corporate and Operational Changes

Shanta Gold, the East African focused gold mining company, is pleased to announce significant corporate and operating changes at the Company.

Highlights

Operational:

·      Initial New Luika gold plant ramp up operational issues identified and in process of being resolved

·      October production to 14 October of 570oz vs 199oz total September production

·      Potential to increase 2013 gold production beyond the current forecast of 70,000oz at c.$620/oz cash costs

·      First three years' total gold production expected to exceed 225,000oz

·      Upgraded New Luika mine plan expected by the end of Q4 2012

·      Growth potential identified from early stage exploration on satellite deposits

Board of Directors and Senior Adviser:

·      Appointment of experienced mining industry executive Jonathan Leslie as Strategic Adviser to the board

·      Appointment of mining corporate financier Luke Leslie as Non-Executive Director

·      Appointment of Shanta Gold CFO Edward Johnstone as Finance Director

·      Walton Imrie has decided to step down once a new Chairman candidate has been identified

·      Technical Director and former CEO Gareth Taylor has stepped down

Financing:

·      $40 million FBN debt facility deferred until New Luika reaches commercial production levels

·      Minimum $30 million equity placing to address short term financing requirements to be launched today

·      Alternative sources of financing available subject to production ramp up

·      Financial flexibility to take advantage of potential value enhancing corporate opportunities

Mike Houston, CEO of Shanta Gold, commented:

"In my first two weeks as CEO of Shanta Gold I have worked closely with the operating team to assess the Company's short to medium term requirements.  I am very positive about the prospects of the Company but the key objective is to achieve steady state production at the New Luika Gold Mine.  Initial production from New Luika has been lower than anticipated, principally as a result of constrained crushing capacity and issues, now largely resolved, with the CIL plant. The plant processing issues have been largely addressed and remedies are beginning to bear fruit. We expect to be able to ramp up the processing plant into the first half of 2013 and importantly we now believe that 2013 production could exceed 70,000oz. The production increase has been driven by the significantly improved Indicated resource and higher grades at the Bauhinia Creek pit as announced on 30 July 2012.  I am encouraged by the potential additional upside from surrounding exploration targets within the New Luika mining licence as well as within the exploration joint venture with Great Basin Gold, all of which are in close proximity to the processing plant.  I look forward to working with the new board and Mr. Leslie who will add considerable expertise and experience to the team."

Walton Imrie, Non-Executive Chairman of Shanta Gold, commented:

"The appointments of Luke Leslie as a non-Executive Director and Jonathan Leslie as Strategic Adviser with board observation rights gives Shanta Gold great experience of both mining itself and mining transactions.  I also welcome Edward Johnstone's appointment as Finance Director. Edward has worked tirelessly as Chief Financial Officer since his arrival at Shanta Gold earlier this year and it is appropriate that the finance function is represented at the Board level. Finally, I would like to thank Gareth Taylor for his energy and efforts over the past few years as Chief Operating Officer, Chief Executive Officer and Technical Director. I look forward to being involved in the next stage of the Company's development."

New Luika Ramp Up

Production commenced at New Luika in late August and was expected to ramp up to approximately 6,000oz per month during Q4.  However, initial production has been lower than anticipated principally as a result of reduced crushing capacity, as well as issues with the grinding levels, cyanide consumption and assay controls, which has resulted in reduced recoveries and a "lock up" of the gold in the plant.  Processing and metallurgical experts have been on site and potential areas of improvement have been identified. 

The crushing circuit will be upgraded to achieve name plate milling capacity. The Company is reviewing options with regards to the crusher upgrade, both in and out of country, and anticipates commissioning of the additional unit by the end of Q4 2012.  Until the commissioning of the new crusher, the Company expects to feed the plant at a rate of approximately 20,000 tonnes per month  of ore. 

The grinding levels of the ball mills have not been achieving optimum levels of grind, hindering the full liberation of gold.  The Company continues to adjust the configuration and size of the steel balls with new grinding media expected on site by mid-November. 

Cyanide consumption was initially lower than the test work design which may have hindered the efficiency of gold on to carbon.  Cyanide usage has been increased, which has resulted in a significant improvement of gold on carbon.

As of 14 October 2012, 25 thousand tonnes ("Kt") with estimated grade of 4.98 g/t has been fed through the plant.  September production was 18Kt of ore milled with only 199oz of gold produced.  Recoverable gold production in the month to date has improved significantly with 570oz from 7Kt milled. Since first gold pour, approximately 2,800oz of gold has been locked up in the plant due to processing issues; however, the improvements implemented by management have resulted in successfully transferring approximately 2,000oz of the locked up gold to gold on carbon. As a result of the reduced crushing capacity and lower mill grinding efficiency, the Company has reduced its Q4 2012 production guidance to c.6,000oz and expects to reach run-rate production of 6,000 ounces per month in the first half of 2013.

New Mine Plan and Increased Production

The updated New Luika resource announced in July 2012 has resulted in improvements in the overall mine plan, details of which are expected to be published in the new mine plan by the end of Q4.  Initial indications suggest potential to increase 2013 forecast gold production beyond 70,000oz and total forecast gold production over the first three years beyond 225,000oz (previously 175,000-190,000oz).  2013 New Luika operating cash costs are expected to be approximately $620/oz and will be confirmed in the new mine plan.

The Company's near term mine development plan is focused on optimising the Bauhinia Creek and Luika pits.  The flexibility to feed the current plant from both pits allows the project economics to be maximised.  The current optimisation of the Bauhinia Creek mine plan indicates a 150% increase in exploitable gold from 126,000oz to 315,000oz at a grade of 5.58 g/t.

Near-Mine Growth Options

The Company has identified a number of additional deposits located within the mining licence, which could be exploited and these include the Black Tree Hill, Jamhuri, Elizabeth Hill, and Shamba deposits.  Potential also exists to establish underground mining operations at two additional deposits, Ilunga and Luika South, which might be accessible from the Luika pit.  The Company believes the additional deposits could provide a source of additional ore to feed the plant to increase New Luika production and/or extend the life of mine.

The Company also has a joint venture agreement (the "JV") with Great Basin Gold Limited ("GBG") in which Shanta Gold can earn an 80% interest in the joint venture to exploit approximately 2,500km² of exploration assets surrounding the New Luika Gold Mine.  As announced on 5 September 2012, the JV has identified nine new mineralised prospect areas in close proximity to the New Luika Gold Mine.  The key discoveries included the Big Vein 2 prospect, the Mgomba prospect, and Dave's Mile prospect, each of which are located less than 8km from the New Luika processing plant.  GBG has commenced insolvency proceedings which entails an asset sale process.  In the event GBG chooses to dispose of its interest in the JV, Shanta Gold has a pre-emptive right to acquire the remaining 20%.

New Appointments and Board Changes

The Company is pleased to announce a number of senior appointments to better position the Company for its next phase of development. 

Jonathan Leslie will be appointed as a Strategic Adviser with board observation rights.  After graduating in Jurisprudence and qualifying as a barrister, Jonathan spent 26 years with Rio Tinto, including nine years' service on the board. His roles at Rio Tinto included Mining Director and Chief Executive of the Copper and Diamonds & Gold Product Groups. He subsequently was CEO of Sappi and the Executive Chairman of Nikanor.  Jonathan was mostly recently CEO of ASX-listed Extract Resources which was successfully sold to China Guangdong Nuclear Power Corp for A$2.2 billion in April 2012.

Luke Leslie will be appointed as Non-Executive Director of Shanta Gold.  Mr Leslie is the Head of Origo Partners Metals & Mining Private Equity.  Mr Leslie has 10 years of transaction experience in Metals and Mining, including time with the Metals and Mining team at UBS Investment Bank, and with the Natural Resources team at Accenture.  In addition to the Kincora Copper (KCC:TSX) Board of Directors, he is a member of the Board of Directors of Moly World, China Commodities Absolute Return Fund, MSE Liquidity Fund and Resource Investment Capital.

Shanta Gold CFO Edward Johnstone will be appointed as Finance Director of Shanta Gold with immediate effect.  Edward is a Chartered Accountant with over 20 years experience, qualifying with Rawlinson and Hunter and worked for Minorco plc as a Finance Manager based in the UK and Europe. Edward was Senior Manager, Corporate Development for RBS plc from 2002-4 covering the UK, Europe and the USA. Since 2007 Edward has been based in Africa and has set up and run businesses as Head of Finance for GTV and an outsourced finance operation based out of Nairobi, Kenya.

Shanta Gold Technical Director and former CEO Gareth Taylor has resigned from the Board of Shanta Gold with immediate effect.

Financing

The Company has a signed term sheet with FBN Bank (UK) Ltd ("FBN") for a $40m debt facility; however, the debt facility has been deferred until New Luika reaches commercial production levels.  As a result of the delayed debt facility and reduced revenues from initial gold sales, the Company will announce today that it is undertaking an equity placing of a minimum of $30m to address its short term financing requirements.  The Company remains in ongoing discussions with providers of alternate sources of financing, which include commercial debt financing, development bank debt financing, off take related financing and royalty financing.   The equity placing provides the Company with the flexibility to consider the suitability and attractiveness of these alternative sources of non-dilutive financing on an appropriate timeframe as well as provides flexibility to consider value enhancing corporate transactions.

Notes

On appointment, Edward Richard Melville Johnstone holds 205,000 shares in the Company.

A list of Mr Johnstone's current and past directorships held within the last five years is set out below:

Current

Annandale East Africa Limited

Past

Eco Options Limited

No further information is required for disclosure in respect of Rule 17 or Schedule 2 paragraph (g) of the AIM Rules for Companies.

Enquiries:

Shanta Gold Limited	Tel: [phone]
Mike Houston / Edward Johnstone
Nominated Adviser and Broker
Liberum Capital Limited	Tel: + 44 (0)20 3100 2000
Michael Rawlinson / Clayton Bush / Christopher Kololian
Financial Public Relations
FTI Consulting	Tel: [phone]
Billy Clegg / Oliver Winters

About Shanta Gold Limited

Shanta Gold is an East African focused gold mining company. It currently has defined ore resources on the New Luika and Singida projects in Tanzania and holds exploration licences over a number of additional properties. The Company's flagship New Luika Gold Mine commenced production and achieved first gold pour in August 2012. The Company is admitted to trading on AIM and has approximately 334 million shares in issue.

For further information visit the Company's website: www.shantagold.com.

 

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