SHANTA Gold had undertaken “enormous deleveraging”, according to CEO Eric Zurrin in notes to the UK-listed firm’s second quarter results.
The firm was $2.1m net cash (excluding $3.6m held in gold doré at period end) – the first time in its history – after paying down $17.2m in gross debt, a reduction of 34% to $13.4m gross debt during the period.
“Shanta enters a new chapter with a net cash position, completing a period of enormous deleveraging,” said Zurrin. Shanta’s net debt was $38m two years ago.
Shares in Shanta were 9.4% higher on the London Stock Exchange’s AIM market in mid-morning trade, representing a fresh all-time high for the company.
The improvement in the firm’s balance sheet is partly attributable to the higher gold price. During the second quarter, Shanta reported an average dollar gold price of $1,633/oz, some 15% higher than the first quarter’s average and 18.5% higher than the average gold price in Shanta’s 2019 financial year. It is hedged, however: the company hopes to close out the remainder of its hedge structure – worth some 23,048 ounces – by year-end.
Shanta also has some $23.2m in VAT refunds owed by the Tanzanian government. The remaining VAT receivable is subject to an audit by the country’s revenue authorities before becoming available for further offsets.
Shanta produces gold from a single asset, the New Luika gold mine in Tanzania’s south-western border. It is also building two projects – Singida, a seven-year life operation in the central part of the country, and in Kenya, the West Kenya project which was bought from Barrick in February for $14.5m in cash and shares.
Production in the second quarter from New Luika totalled 22,216 oz, slightly higher than the 20,167 oz produced in the first quarter. After all-in sustaining costs of $771/oz (Q1: $883/oz), second quarter earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $19.4m for the three months.
“Annualised Q2 EBITDA at spot gold is just under $100m per annum from the New Luika mine with margins expanded from lower costs and a rising gold price,” said Zurrin in notes to the numbers. He added that production at Singida was expected to “… significantly increase the company’s cashflow”.
“Shanta’s near-term focus is on replacing reserves at New Luika, financing and commencing Singida’s construction, and expanding the resource base at the West Kenya Project,” said Zurrin. Full-year production guidance of between 80,000 and 85,000 oz at an AISC of $830 to $880/oz was reiterated for 2020.
