While Acacia Mining has been taking all the attention recently, fellow Tanzania-focused miner Shanta Gold (SHG) has been paying down debt and adding ounces to its operation.
In the first half, Shanta produced 42,230 oz of gold at an all-in sustaining cost of $735(£584m) an oz. The production and cost numbers are not a major departure from recent years, with the first half of 2016 beating both figures, but the backdrop is very different, with gold over $1,400 an oz and debt levels far lower.
Chief executive Eric Zurrin told us the miner is now planning to be in a net cash position by next year. "Whether it goes to returning capital to shareholders; there's flexibility and there's options," he said. "It just means we're not nearly as risky as we were say two years ago."
The miner is also planning a Dar es Salaam project-level IPO for the Singida prospect. It is not an expensive project, with $16m in pre-production capital expenditure needed for a plant, tailings facility and open pit that would produce 26,000 oz a year for six years. Shanta puts the internal rate of return at 67 per cent.
These numbers suggest a quick earner for Shanta, but the political situation means funding options are limited, Mr Zurrin said. The idea therefore is to launch a local IPO, leaving Shanta shareholders with 51 per cent of the mine. The chief executive suggested the government would like to see a new mine funded before the election next year, although this seems at odds with its hostility towards Acacia since 2017.
Shanta also has a link to the Acacia drama through its withheld VAT refund (now at $25m) possibly being paid once Barrick Gold and the government agree to be friends again, so there is upside in Barrick completing the takeover. Meanwhile, the smaller company has kept producing gold at good cost levels at New Luika and has this month managed the full replacement of gold set to be mined in 2019 through underground exploration. This saw 83,543 oz of gold added to the mine plan and the operation’s end date extended to 2025. This is an unlikely finish point, however, with the company aiming for a “rolling” 5-8-year mine life through exploration.
Mr Zurrin said Bauhinia Creek, the deposit from which Shanta added the extra ounces, was a “crown jewel” but had not been properly drilled out because of spending restrictions.
