Reuters | |
LONDON, May 14 (Reuters) – Shanta Gold will conduct further exploration near its main mine in Tanzania after cutting costs in the past year to cope with tougher mining laws, the chief executive told Reuters.
Shanta’s plans buck a trend among other firms that have scaled back ambitions in Tanzania due to laws that include giving the state a bigger stake in mines, a ban on exporting unprocessed minerals and higher royalties and taxes.
London-listed Shanta, which cut costs by renegotiating contracts with suppliers and changing mining methods, has a programme for “targeted drilling” for gold for the first time in three years near its New Luika mine in northern Tanzania.
“We will be doing more drilling at our flagship asset, it’s our crown jewel,” CEO Eric Zurrin said, adding that the company aimed to lift its reserves and expand production.
New Luika has total reserves of 3.64 million tonnes at an average grade of 4.4 grams per tonne, equating to 515,500 ounces of gold contained.
Shanta cut capital expenditure by about a third in 2017 to $37.9 million and plans to reduce this further to $15.9 million this year. The cuts helped Shanta, which was set up in 2001, to turn its first profit of $4.2 million in 2017.
The company carry out 1,000 metres of exploration drilling at a cost of about $100 per metre, funded by cash flow from New Luika, which produced 80,000 ounces of gold in 2017 at a cost of $743 an ounce.
Spot gold is around $1,320 an ounce.
Zurrin said Shanta was open to finding acquisitions in Tanzania but would focus on its existing New Luika asset.Shanta’s share initially slipped to below 3 pence after Tanzania introduced its new laws in July 2017, but the stock has since recovered to about 6 pence. However, it remains below last year’s high of above 12 pence.
As a small mining firm, Shanta did not have the size to secure a Mineral Development Agreement (MDA) that carries benefits, such as tax breaks. This helped Shanta because it did not have to renegotiate terms when laws changed, Zurrin said.
But the company, which is the sole owner of New Luika mine, is seeking clarity on the law that requires miners to hand over a 16 percent stake in their assets to the government.
“The bit that is missing is how they will apply that 16 percent,” said Chief Financial Officer Luke Leslie.
(Reporting by Zandi Shabalala; Editing by Pratima Desai)