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Alliance News


Shanta Gold Swings To Profit In 2017 And Guides Lower Costs In 2018

Mon, 16th Apr 2018 13:20


LONDON (Alliance News) - Shanta Gold Ltd said Monday it made a pretax profit of USD4.2 million in 2017 after posting a loss of USD8.0 million in 2016, benefiting at the pretax level from a reduction in depreciation.

Annual depreciation was reduced after the company moved to underground mining.

At the level of earnings before income, taxation, depreciation and amortisation, the annual result was a positive USD37.7 million, down from USD50.2 million the previous year.

In the final quarter of 2017, Shanta announced cost reductions of USD8.7 million per annum from renegotiated supplier contracts, lower general and administrative expenditure and a change in the mining method. The last item was a USD3.6 million impact from a change in mining method at the Luika deposit.

Also, for the first time since 2016, Shanta received a VAT refund. The refund totalled USD3.4 million, comprising USD1.9 million offset against corporate taxes payable in 2016 and 2017 and a cash payment to Shanta of USD1.5 million.

The East Africa focused gold producer's revenue decreased in 2017 to USD103.4 million from USD107.1 million the year before, but its average realised gold price increased from USD1,263 per ounce from USD1,226 per ounce.

Shanta's cash and cash equivalents dropped to USD13.6 million from USD14.9 million the year before. But it has managed to reduce its debt by USD4.7 million to USD39.5 million from USD44.2 million.

All in sustaining cost of USD743 per ounce was significantly lower than the guidance of USD781 per ounce. In 2016 it was USD659 per ounce.

With focus on its New Luika gold mine in Tanzania, Shanta's gold production fell to 79,585 ounces - marginally missing guidance of about 80,000 - from 87,713 ounces in 2016.

At its Singida asset, planning has been completed for phase two drilling in the second quarter of 2018 in advance of a development decision.

The annual production guidance for 2018 is 82,000 at 88,000 at all-in sustaining costs of USD680 to USD730 per ounce.

CEO Eric Zurrin said: "We are pleased to report a set of full year results that reflect a sustainable transition to underground mining at New Luika, as well as a new management strategy of cost control and optimisation.

"Considerable inroads have been made into reducing the net debt position and the continuation of this is central to plans for restructuring the company's balance sheet. Recording a profit in 2017 for the first time wouldn't have been possible had the underground operation not been transitioned to on time and within budget and our efforts to optimise the company's recurring cost base will be a key driver towards improving future cash flows.

"Our priorities for 2018 remain focussed on continued low-cost operational excellence, balance sheet deleveraging, and targeted growth."

Shares in Shanta were up 9.0% Monday morning to 5.45 pence each.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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