SHANTA Gold is to buy gold exploration properties in Kenya from Barrick Gold for $14.5m in cash and shares in an effort to introduce geographical diversity to its asset base.
The company, listed on London’s Alternative Investment Market (AIM), currently mines at the New Luika gold mine in Tanzania. The deal increases Shanta’s gold resource inventory to over three million ounces of contained gold with the prospect of future growth, it said.
In terms of its agreement with Barrick, Shanta Gold will pay $7m in cash and $7.5m in new shares. This will make Barrick Shanta’s fifth largest shareholder with a 6.4% stake. Shanta has also agreed to a 2% life of mine net smelter return royalty over a section of the exploration properties – including the Rosterman mine – from which 259,000 ounces of gold was mined in the past at a grade of 12.3 grams per ton.
“The West Kenya acquisition is significant for Shanta Gold, creating an East African gold mining champion with realisable growth prospects and high asset quality across three attractive gold projects,” said Eric Zurrin, CEO of Shanta Gold in a statement today. Shares in the company had increased 1.4% by midday.
The West Kenya properties were previously owned by Acacia Mining, formerly listed in London, until Barrick bought shares it didn’t own in the company. Acacia Mining had spent $55m drilling the Kenya properties.
“One of Shanta’s competitive advantages is being able to operate long hole open stoping operations more efficiently than its peers which lends itself well to the advancement of the West Kenya Project,” said Zurrin.
The project contains an inferred mineral resource estimate of 1,182 million oz of gold grading 12.6 g/t. The properties are believed to be one of the highest grading one million oz plus gold deposits in Africa, said Shanta in an announcement.
Exploration drilling totalling 221,000 metres had been undertaken involving approximately 80,000 soil samples, said Shanta.
Shanta said in January it anticipated moving into a net cash position in the current financial year following a strong showing in the 12 months ended December 31.
Production last year totalled 84,506 oz which just about exceeded guidance of between 80,000 to 84,000 oz. Guidance for this year is the similar with an upper end of 85,000 oz targeted but all-in sustaining costs (AISC) of $830 to $880/oz were likely compared to AISC of $779/oz in the 2019 financial year.
Net debt was cut by about $6m in the quarter, largely owing to a VAT refund, to $14.3m which excludes $21.8m in VAT refunds still outstanding.
“The company is well-positioned for another strong year and we anticipate entering a net cash position during 2020 as our deleveraging strategy enters its final phase,” said Zurrin. Shanta had also replaced its reserves at New Luika. The company was hoping to upgrade resources and identify new ones at the mine, Zurrin said.
