SHG.L Regulatory News (SHG)

01 September 2015

Shanta Gold Limited

("Shanta Gold" or the "Company")

Interim results for the six months ended 30 June 2015

Shanta Gold (AIM: SHG), the East Africa-focused gold producer, developer and explorer, announces its unaudited results for the six months ended 30 June 2015 (the "Period").

Highlights

Operational

· Bauhinia Creek ("BC") and Luika Pits re-designed and re-optimised, significantly reducing strip ratios and future mining costs;

· Ore production significantly lower due to limited ore access during redevelopment of the pits;

· Gold production of 28,180 ounces ("oz") (H1 2014: 42,194 oz); 

· Cash and all in sustaining costs ("AISC") of US$993 /oz and US$1,310 /oz respectively (H1 2014: US$759 /oz and US$965 /oz respectively);

· 25,142 oz of gold sold at an average price of US$1,238/oz;

· June production back to budget levels and on track to meet full year guidance of 72,000 - 77,000 oz;

· Costs anticipated to reduce significantly in the second half of the year to below US$700 / oz to achieve AISC of US$850-900 /oz for the year;

· 3,784 metre drilling programme completed at Elizabeth Hill Mineralised Prospect ("Elizabeth Hill") post period end and may provide an additional source of ore for NLGM in the future; and

· Repairs to new crushing circuit fire damage completed with no production loss.

Financial

· Revenue of US$31.9 million (H1 2014: US$58.3 million);

· Loss before and after tax of US$10.3 million and US$8.3 million respectively (H1 2014: Profit before and after tax: US$7.7 million and US$4.1 million respectively);

· Cash generated from operations of US$4.4 million reflecting lower production during redevelopment (H1 2014: US$16.7 million);

· Capital expenditure of US$14.7 million (H1 2014: US$10.9 million);

· Lower cost and longer tenure US$40 million loan facility finalised with Investec Bank;

· US$20 million FBN bank loan refinanced and US$10 million standby facility drawn;

· Cash balance of US$5.9 million reflecting redevelopment costs and lower production (31 December 2014: US$14.9 million); and

· Net debt of US$54.5 million (31 December 2014: US$40.7 million).

Corporate

· Prudent hedging policy remains in place with 24,642 oz sold in the period under forward sales contracts;

· A further 26,000 oz hedged as at 30 June 2015 to December 2015 at an average price of US$1,222 /oz; and

· Peet Prinsloo re-joined Shanta Mining Company Limited ("SMCL") as Head of Exploration, managing Shanta's renewed exploration focus.

Toby Bradbury, Chief Executive Officer, commented:

"Shanta's H1 2015 production reflects the major redevelopment of the mine from January to May. While doing so invariably impacts year-on-year production and cash at hand, production was restored to budget levels from June.  Shanta has grown its resource base in H1 with a (Post Period) New Luika Mine JORC Resource and Reserves Update and a resource definition drilling update from Elizabeth Hill. The optionality and scalability of the operational improvements established in H1 will offer material reductions to future mining costs, and we remain on track to deliver full year 2015 production of 72-77,000 oz at an AISC of US$850-900 /oz."

Enquiries:

About Shanta Gold

Shanta Gold is an East Africa-focused gold producer, developer and explorer. It currently has defined ore resources on the New Luika and Singida projects in Tanzania and holds exploration licences over a number of additional properties in the country. Shanta's flagship New Luika Gold Mine commenced production in 2012 and, produced 84,000 ounces in 2014. The Company is admitted to trading on London's AIM and has approximately 468 million shares in issue. For further information please visit: www.shantagold.com.

Income Statement

Revenue for the Period, of US$31.9 million was generated from the sale of 25,142 oz of gold at an average price of US$1,238 /oz. This was 45% lower than for H1 2014 reflecting the lower volume of sales and lower gold price. The low sales volume mirrored the low gold production due to limited ore access during the development of both BC and Luika Pits in the first five months of 2015. Sales volume and average gold price for H1 2014 were 44,459 oz and US$1,302/oz respectively.

The volume of sales for the Period was 43% lower than H1 2014. Cost of sales for the Period amounted to US$32.7 million, down 21% from H1 2014 reflecting the lower volume of sales, the impact of fixed costs on a lower sales volume base and the processing of lower grade ore. The combination of reduced sales volume and lower gold price resulted in a gross loss for the Period of US$0.8 million compared to a gross profit of US$16.9 million for H1 2014.

Administration and exploration expenditure amounted to US$5.8 million, similar to H1 2014 with the increase in administration costs offset by the decrease in exploration expenditure which remained low for the Period. As a result, an operating loss of US$6.6 million was recorded. Net finance costs amounted to US$3.8 million, resulting in a loss before tax of US$10.3 million down from a profit before tax of US$7.7 million for H1 2014.

The loss before tax for the Period resulted in a deferred tax credit of US$2.0 million. Consequently, loss after tax for the Period amounted to US$8.3 million, down from a profit after tax of US$4.1 million for H1 2014, giving a loss per share of US$1.8 cents.

Costs

While focus on cost management and reduction remained strong and total costs were in line with expectations, unit cost performance was affected by low production. Cash and All in Sustaining costs for the Period thus amounted to US$993 /oz and US$1,310 /oz respectively, up from US$759 /oz and US$965 /oz for H1 2014.

Cash cost - Mining, processing and mine administration costs

All in Sustaining cost - Cash cost plus royalty, interest, general administration & corporate costs and stay in business capital expenditure

Financial Position

Group assets excluding cash balances increased from US$154.3 million at 31 December 2014 to US$158.8 million, due mainly to capital expenditure relating to the BC pit pushback, offset by depreciation. At Period end, Inventories amounted to US$10.1million, down from US$12,7 million at 31 December 2014. Total liabilities increased by US$3.5 million. Borrowings increased by US$4.9 million and trade creditors by US$0.3 million offset by a decrease in the deferred tax liability of US$2 million.

Cash flow

The low production and gold price adversely impacted cash generation which was US$4.4 million, compared to US$16.7 million for H1 2014. Capital expenditure amounted to US$14.7 million, US$10.4 million of which was on the BC pit push back. Two new loan facilities totalling US$40 million with a five year tenure and bearing interest at LIBOR + 4.9% were signed with Investec Bank. US$20 million of the facilities was used to refinance the FBN Bank loan. Total loan repayments including the refinancing amounted to US$25 million. US$10 million of the Investec facilities was drawn to fund working capital requirements during a period when cash generation was low. Interest payments on the bank loans and Convertible Loan Notes amounted to US$2.1 million. As a result of the low cash generated from operations, the cash balance at 30 June was US$5.9 million, down from US$14.9 million at 31 December 2014. Net debt at Period end thus amounted to US$54.5 million, up from US$40.7 million at 31 December 2014.

Corporate

The Company has maintained a prudent hedging policy and was able to realise an average price of US$1,238/oz from 24,642 oz sold under hedging contracts. As at 30 June 2015, 26,000 oz had been sold forward to 31 December 2015 at an average price of US$1,222/oz.

Peet Prinsloo re-joined Shanta as Head of Exploration. Peet is responsible for managing Shanta's renewed exploration focus. He has overseen the rapid recommencement of drilling to extend the understanding of value-adding resources within and surrounding the NLGM mining lease.

Outlook

The gold price is forecast to remain volatile for the remainder of 2015. However, the Company has already sold forward at least 60% of the forecast production for the remainder of the year at an average price of US$1,222/oz. The re-optimisation of the pits has resulted in reduced Life of Pit strip ratios with consequent reduction in mining costs. A significant improvement in cash generation and profitability is therefore forecast for H2 2015. The company remains on track to deliver full year guidance of 72,000 - 77,000 oz at an AISC of $850/oz - $900/oz.

Consolidated statement of changes in equity

SHANTA GOLD LIMITED

Notes to the Consolidated Financial Statements

for the six months ended 30 June 2015

1. General information

Shanta Gold Limited (the "Company") is a limited company incorporated in Guernsey. The Company is listed on the London Stock Exchange's AIM market. The address of its registered office is Suite A, St Peter Port House, St Peter Port, Guernsey.

The interim consolidated financial statements were approved by the board and authorised for issue on 28 August 2015.

2. Basis of preparation

The consolidated interim financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. The consolidated interim financial statements have been prepared using the accounting policies which will be applied in the Group's financial statements for the year ended 31 December 2015.

The consolidated interim financial statements for the Period 1 January 2015 to 30 June 2015 are unaudited and incorporate unaudited comparative figures for the interim Period 1 January 2014 to 30 June 2014 and the audited comparative figures for the year to 31 December 2014. It does not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2014 Annual Report.

The same accounting policies, presentation and methods of computation are followed in the interim consolidated financial statements as were applied in the Group's latest annual audited financial statements except that in the current financial year, the Group has adopted a number of revised Standards and Interpretations. However, none of these has had a material impact on the Group's reporting.

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

3. (Loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the Period/year.

There were share incentives outstanding at the end of the Period that could potentially dilute basic earnings per share in the future.

Due to the loss for the Period ended 30 June 2015, the share options would be anti-dilutive and therefore diluted EPS is the same as Basic EPS.

SHANTA GOLD LIMITED

Notes to the Consolidated Financial Statements

for the six months ended 30 June 2015

4. Loans and borrowings

(a) Promissory note relates to Promissory Note 2 of US$3.1 million issued in consideration for the acquisition of Boulder and is repayable on 15 April 2017. The note bears an annual interest of 2.6% and is payable semi-annually in arrears. The promissory note is recognised at fair value and subsequently accounted at amortised cost. The fair value of the note has been determined by discounting the cash flows using a market rate of interest which would be payable on a similar debt instrument obtained from an unconnected third party.

(b) Loan from Investec Bank in South Africa relates to a drawdown of US$ 30 million from two facilities totalling US$40 million obtained in May 2015.The facilities bear an annual interest rate of LIBOR +4.9% and are secured on the bank account which is credited with gold sales, the shares in Shanta Mining Company Limited (SMCL) and a charge over the assets of SMCL.

Facility A is for $20 million and was used to pay the outstanding FBN Bank Ltd loan, accrued interest of $101,000 and loan arrangement fees of $600,000. Capital repayments of US$1.25 million are due every quarter end starting on 30 June 2016.

Facility B of $20 million is a standby facility to be drawn as and when required to meet working capital requirements.$10 million of the faciity was drawn in May 2015. Repayment of the drawn facility amount commences in the quarter ending 30 June 2016.

(c) The loans payable to related parties are interest free, unsecured and repayable on demand. During the Period, there were no changes to the fair value of the loans. The fair value is determined, based on amounts expected by the counter party in settlement of the loan, which is considered to be its face value as the loans are repayable on demand.

(d) Convertible loan notes relate to US$25 million fixed coupon convertible loan notes which are due for repayment on 13 April 2017 and contain a conversion option at a price of US$0.4686 per 1 company share. The notes incur an interest charge of 8.5% per annum and interest is payable half yearly in April and October. They are not secured against any assets of any Group company. The Group has determined them to be a compound financial instrument requiring a proportion of the loan to be classified as equity. The reclassified element represents the difference between the fair value of a similar liability with no equity conversion option and the fair value of the existing convertible notes in current terms. Accreted interest is charged to the statement of comprehensive income over the life of the notes.

(e) Equipment Finance loan is in respect of a crusher/screening plant acquired from Sandvik (Sandvik SRP AB, Sweden). The loan is payable in 20 equal quarterly instalments commencing on 15 August 2014 and bears interest at a rate of 6% per annum.

(f) Finance lease relates to the lease of a Heavy Fuel Oil storage facility from Oryx Oil Ltd for 3 years.

SHANTA GOLD LIMITED

Notes to the Consolidated Financial Statements

for the six months ended 30 June 2015

5. Net Cash flows from Operating activities

6. Finance Income

Included within finance income is a gain of US$48,000 (June 2014 - Nil) arising from the fair value movement of warrants instruments which are accounted as derivative financial liabilities at fair value through profit or loss.

The following warrants remained outstanding at 30 June 2015 and have exercise prices ranging from 17 to 35 pence.

1. Red Kite Mine Finance Trust: 12,368,584 (35p) granted on 21 August 2012 and 9,223,769 (35p) granted on 16 October 2012.

2. Liberum Capital: 6,399,443 (17p) on 17 October 2012.

The fair value at 30 June 2015 is based on the prevailing Company share price of 6.38 pence on the above dates; and has been calculated using the Black-Scholes model which takes into account the historical share price volatility of 85%.

7. Events after the reporting Period

There were no significant transactions after the reporting date.