Shanta Gold’s (SHG) hedge on the gold price last year knocked it out of profitability in the first half of 2019. The Tanzania-focused miner took a $5.5m (£4.6m) non-cash hit from 45,000 ounces (oz) in hedged sales that could no longer be pushed back; an arrangement put in place at $1,230 an oz last year to make sure $13m in debt repayments could be maintained if the gold price crashed. This saw its operating profit fall from $11.8m a year ago to a loss of $1.6m in the first half of 2019.
Shanta had a stable six months of production at the New Luika gold mine and kept the all-in sustaining cost (AISC) $10 an oz below the low-end full-year guidance of $740 an oz. Full-year production guidance is still 80,000-84,000 oz. The company has also cut its net debt by 15 per cent since the year-end, taking it to $26.9m.
Exploration costs were flat year on year at $800,000. Shanta said it would comfortably replace the 80,000 oz forecast to be taken out of the ground in 2019 by converting inferred resources to indicated resources, which can be included in the mine plan. While Shanta has avoided the difficulties Acacia Mining (ACA) has had in Tanzania, its $25.3m VAT refund figure is a reminder that it’s not the easiest jurisdiction to operate in. It is almost two years since Shanta received its last refund from the government.
Analyst consensus collated by Bloomberg is for full-year adjusted EPS and cash profits (Ebitda) of 1.2¢ and $42m, respectively, rising to 1.9¢ and $49m in 2020.
| SHANTA GOLD (SHG) | ||||
| ORD PRICE: | 9p | MARKET VALUE: | £72.4m | |
| TOUCH: | 9-9.4p | 12-MONTH HIGH: | 10p | 4p |
| DIVIDEND YIELD: | na | PE RATIO: | na | |
| NET ASSET VALUE: | 12.6¢* | NET DEBT: | 63% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢)* |
| 2018 | 49.2 | 8.4 | 0.92 | nil |
| 2019 | 53.6 | -4.1 | -0.73 | nil |
| % change | +9 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=$1.21 *Includes intangible assets of $23m, or 3¢ a share | ||||
