Shanta Gold bosses sell as gold falls

Gold’s run, and that of gold miners, looks to have paused for now. Shanta Gold (SHG) was one London company to make hay when the precious metal was shining last year. 

The Tanzania-focused company made it to net cash, completed the purchase of new exploration rights from Barrick Gold (Can:ABX) and announced a 0.10p dividend, to be paid next month. 

Like other gold miners, Shanta is trading well below its 2020 high because of the weaker gold price. The gold market is undergoing a shift as exchange traded funds (ETF) buyers look elsewhere, according to BMO Capital Markets analyst Colin Hamilton. “Retail gold demand has so far served to keep gold prices well supported even amid consistent ETF outflows and rising bond yields in recent months,” he said. Buying in India and China has kept gold prices around $1,700 (£1,233) an ounce (oz). 

This is still well above the years leading up to mid-2019, when gold sat around $1,300 an oz. The pull-back is not a surprise, given the continued growth in equities and inflation forecasts. 

Shanta has guided all-in sustaining costs (AISC) of around $1,000 an oz in 2021, in a year where they are funding the “largest exploration campaign in Shanta’s history”, as per the 2020 results announcement. 

The company’s chief executive, Eric Zurrin, and finance chief Luke Leslie saw the recent share price around 13p, down from 18p at the start of the year, as strong enough to cash out some of their holdings.

Zurrin sold 15 per cent of his holding – 2m shares – at 13.3p, for £272,000. Leslie sold just over a quarter of his holding for 13.2p, netting just under £373,000. 

Shanta said both men continue to receive “a significant proportion of executive compensation” in shares, and this was the first sale in four years by either Zurrin or Leslie. 

We think Shanta will have a good year, even if gold prices dip further. Buy at 12p. 

Last IC View: Buy, 16p, 4 Feb 2021