We interviewed a remarkably sanguine Shanta Gold (SHG) CEO Eric Zurrin, who talked us through the geological fault problems at their New Luika gold mine in Tanzania which led to lower production guidance for 2021, and reiterated his positive five year production plan for the group, the first in four years.
"Included in the plan is 500,000 ounces of gold production, on a Reserve base from two different assets. That's a good plan in my view, which has a lot of value and it is the fundamental story for Shanta, which is cashflow. On top of that plan is upside from additional exploration at both our assets".
SHG have been operating the New Luika gold mine in Tanzania for 9 years now, with Singita gold mine in Tanzania coming on stream in 2023 and plans for a construction decision for the West Kenya Project in Kenya to be be taken in 2023.
"Also on Monday we announced our Q2 results, including an update to our 2021 production. We had geological information from underground mining in the second quarter which led to a fault about 375 meters below surface at our main Behinia Creek asset. This is the deepest it has ever been and this fault caught us by surprise. It displaced the ore and when we were mining there in Q2 we found low grade ore. Faults and geological disturbances are not new to mining - these things happen. We expected to be able to mine from another high grade source, BC East, 4.5/5 grammes, it was in the plan for Q4 and when we did our planning BC East could not make it into production this year. We are down by about 16,000 ounces. We are looking at ways of making this up, but Monday's guidance is the one to use for this year."
Eric went in to say, "It's worth pointing out we had a VAT refund, which I would also say is unexpected. We had $31M owed to us by the Tanzanian Government, we owed $6M in Corporation Tax in June, and we received a $4.2M dollar offset against that. This was for the period of the second half of 2020, and now the Government has already started the audit process on the first half of 2021, which would be another $4M dollars. So we see this as the beginning of regular refunds going forward. The bigger story is the $23M dollars which is locked up, and we've had indications that the Government is working on that - we are meeting senior Government Ministers next week in Tanzania."
Given the share price is 25% down on Monday's news, might this be a buying opportunity? "We have had a handful of inbounds already from financial investors seeking calls to understand the story and expressing interest in the shares." said Eric.