JOHANNESBURG (miningweekly.com) – Despite delivering a record operational and financial performance for the year to December 2014, the first quarter of the new financial year saw East Africa-focused gold producer Shanta Gold falter against operational challenges.
During the 12 months to December 2014, Shanta achieved 31% higher gold production at 84 028 oz, on the back of improved plant throughput and recovery, with sales up 42% from 2013 to 87 758 oz.
“Despite the challenging gold market conditions during 2014, the company consolidated the successes achieved in 2013, with above-forecast production and strong cash generation, which enabled Shanta to record a profitable year, reduce its net debt position by $9-million and fund a critical capital expenditure programme, while maintaining a positive cash position at year-end,” said chairperson Tony Durrant.
During 2014, Shanta, which operated the Luika gold mine in south-west Tanzania, generated revenue of $115-million, up 31% on the prior year, with an average gold price of $1 289/oz realised, down 8.5% from 2013.
Earnings before interest, taxes, depreciation and amortisation increased from $1.6-million in 2013, to $33.8-million in the year under review.
The company’s after-tax profit jumped to $8.9-million, up on the $800 000 reported in the prior year.
Operating profit, at $22.9-million, also bounced back into the red from the loss of $3.2-million reported in the prior year.
However, following the end of the first quarter of 2015, Shanta revised its gold production guidance for the full year from between 82 000 oz and 85 000 oz to between 72 000 oz and 77 000 oz, as output dropped to 8 500 oz lower than planned.
During the three months to March 31, Shanta delivered 13 516 oz of gold, plunging quarter-on-quarter from the 19 114 oz achieved in the fourth quarter 0f 2014.
A production shortfall from the Luika mine’s Bauhinia Creek openpit deposit had been expected in the first quarter, but production was expected to be supplemented with additional ore from the Luika pit section.
However, the ongoing Bauhinia Creek pushback access ramp extension took longer than expected, with no ore being available from the pit. This was exacerbated by a combination of geotechnical issues and the intersection of mining voids from the historical colonial mining, reducing the quantity of ore available, Shanta explained.
Gold sales for the quarter reached 13 551 oz at an average price of $1 252/oz, with the company recording cash costs and all-in sustaining costs (AISC) of $1 143/oz and $1 451/oz respectively, compared with the fourth quarter’s respective cash and AISC of $779/oz and $979/oz.
“While production in the first quarter was below forecast, operations will recover to full potential from May 2015 on a lower cost profile,” Shanta CEO Toby Bradbury commented.
The final pit access ramp was expected to be completed in April, providing permanent access to the higher-grade ore in the Bauhinia Creek pit.
Further, Shanta completed an optimisation plan for the Bauhinia Creek and Luika pits that would result in lower life-of-mine strip ratios and quicker access to the higher-grade ore, which would enable full mill throughput to be achieved from May.
“The optimisation is also expected to have long-term benefits for the company's cost profile. Work is continuing on detailed design but indicative savings are forecast to be in excess of $20-million over the next two years,” he said.
With an uncertain and difficult gold market, in addition to constrained profitability and cash generation and expected lower gold output in 2015, the company would focus on development and growth over the next year.
On the operational side of the business, Shanta would continue to focus on lowering costs driven largely by mining efficiencies, power rationalisation and procurement opportunities, as well as balance mining and process activities and right-size and right-skill the management and operating teams.
It would also move to complete the Bauhinia Creek pushback to enable access to the high-grade ore reserves and install an additional carbon-in-leach tank to increase recoveries of gold and silver.
Other objectives included completing New Luika’s life-of-mine plan, including underground development, finishing the long-term water supply project and the new tailings dam and concluding the review of the Singida project, in central Tanzania, to establish a way forward.