Join our community of smart investors

Shanta adds a million-ounce project for $15.5m

Kenya project bought from Barrick Gold is first foray across the border
February 12, 2020

Shanta Gold (SHG) has bought a million-ounce gold project in Kenya from Barrick Gold (CN:ABX) for $15.5m (£12m) in cash and shares.

IC TIP: Buy at 12p

The company has been focused on expansion through exploration at its New Luika mine and getting the Singida project to production, as well as paying down debt. 

The former Acacia Mining, now part of Barrick, got the West Kenya project to the resource stage, with 1.2m ounces at 12.6 grams per tonne discovered across two deposits. The $7m (£5.39m) cash price will come from existing reserves, Shanta said, and the $7.5m in shares will hand Barrick 6.4 per cent of the company. 

Shanta has given itself up to three years to reach a final investment decision on the West Kenya project, first doing a scoping study and then moving to infill drilling. A scoping study comes before a company commits to the more detailed planning work required for feasibility studies. A construction decision will take place within three years, Shanta said. 

The company had been working towards a local initial public offering to fund the construction of Singida, with chief executive Eric Zurrin previously telling us the usual ways of funding projects – equity raises and debt – were not available because of the worry about Tanzania as a jurisdiction. An updated mine plan for Singida is expected by the end of March. 

The miner’s balance sheet was boosted late last year when the Tanzanian government paid back some of the $20m-plus owed in VAT refunds. Shanta’s share price rose 5 per cent on the news.