This year's gold price rally has, somewhat obviously, resulted in big gains for gold mining stocks. But in the case of Aim-listed miner Shanta Gold (SHG), that upside has been tempered by uncertainty over its near-term future, which involves juggling exploration plans, significant capital expenditure and a major debt repayment due next year. Getting this right will be tricky and will rely on a supportive gold price and good timing, which makes Shanta a risky bet. But we think the challenges look surmountable, but have masked a strong run of exploration and production updates, which means there could prove to be considerable potential share price upside from the current level.
- Q4 2015 record production
- Reserves upgrade
- Low rating
- Cost profile and gold price
- Large capital expenditure
- $25m bond repayment due in 2017
Full-year results are set for publication on 25 April, although the numbers should contain few surprises. Shanta sold 80,622 ounces (oz) of gold last year, and expects production of between 82,000 and 87,000 oz in 2016, at an average all-in sustaining cost - which includes capital expenditure, interests, royalties and corporate costs - of $750-$800. That cost also covers exploration, which recently brought encouraging news from the Askari deposit and the Elizabeth Hill prospect at its key asset, the New Luika mine.