To Shanta Gold (SHG) chief executive Eric Zurrin, the abrupt change to Tanzania’s mining laws in 2017 proved to be a “poignant catalyst” for his company. Higher royalties and a new clearing fee might have increased the government take from 4 to 7 per cent, but the owner-operator of the New Luika mine now believes its recurring cost base will be “significantly lower than it has been historically”.
This year, all-in sustaining costs are expected to be between $680 and $730 (£476-£510) per ounce, following the transition to underground operations. That move could yet restore Shanta’s annual production to 88,000 ounces, assuming an upper-end target is reached. It has also meant big changes in two overheads: a 41 per cent drop in headcount at New Luika, and a tapering in capital expenditure. A second tailings storage facility is now “the final large-scale infrastructure project” to complete.
That’s just as well. Although the gold price remains supportive at $1,350 an ounce, $18.1m of Shanta’s $45.2m of borrowings is due to be paid this year, which helps to explain why, on average, analysts only expect 2018 adjusted pre-tax profits and EPS to reach $21.2m and 2.3¢ respectively, against estimates of $13.6m and 1.4¢ last year.
| SHANTA GOLD (SHG) | ||||
| ORD PRICE: | 5.3p | MARKET VALUE: | £41m | |
| TOUCH: | 5.1-5.5p | 12-MONTH HIGH: | 9.1p | LOW: 2.6p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 12 | |
| NET ASSET VALUE: | 12.4¢ | NET DEBT: | 41% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013 | 66 | -4.4 | 0.2 | nil |
| 2014 | 115 | 16.6 | 1.9 | nil |
| 2015 | 95.7 | -18.1 | -3.7 | nil |
| 2016 | 107 | -4.34 | -1.5 | nil |
| 2017 | 103 | 3.55 | 0.6 | nil |
| % change | -4 | - | - | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.43. *Includes intangible assets of $23.3m, or 3¢ a share | ||||
