29th Sep 2015 07:30
LONDON (Alliance News) - Shanta Gold Ltd Tuesday said it has received the feasibility study, the base case mine plan and an updated reserves report for the underground operation at the New Luika gold mine in South-West Tanzania which will significantly boost production over the next five to six years.
The miner said the underground feasibility study has shown the underground operation at the project can extract 1.6 million tonnes of ore over six years at a grade of 6.5 grammes of gold per tonne. That means the underground mine will yield 310,000 ounces over the six years.
"We are pleased to announce the base case mine plan which gives clarity on the production profile at our flagship operation, the New Luika Gold Mine, from January 2016 to late 2022," said Chief Executive Toby Bradbury.
Based on a gold price of USD1,200 per ounce, the net present value of the underground operation stands at USD72.0 million with a pretax internal rate of return of 56%. Gold was trading at around USD1,127 per ounce on Tuesday.
"The mine plan clearly demonstrates a significant upward revision of the reserve figures and the positive economics of the underground feasibility study it includes. The economics of the updated mine plan remain robust despite the recent gold price environment and demonstrate the quality of the geological endowment at New Luika," said Bradbury.
The underground mine is estimated to have cash costs of around USD499 per ounce and an all-in-sustaining cash cost of USD640 per ounce, giving it a very healthy margin even at current gold prices.
The underground mine will cost USD38.4 million to take into production, which does include some contingency funds. Options are being reviewed to finance the underground mobile equipment and power plant with the balance of funding to come from internal cashflows and from the Investec standby facility, it said.
The base case mine plan, which lays out how the operation will function, has shown the underground operations will provide an extension of high grade ore supply to maintain an average production of 84,000 ounces of gold per year over the next five years.
Shanta will also construct a separate tailings recovery project to produce a further 19,000 ounces of gold per year. That tailings project has a net present value of around USD5.1 million and a pretax internal rate of return of 49%.
The updated underground reserve report has increased the amount of gold in place to 329,000 from 298,000 ounces of gold. That increase is not being caused by increased tonnage, but a higher grade which now averages 6.5 grammes of gold per tonne. Probable reserves stand at 2.65 million tonnes of ore at 5.9 grammes of gold per tonne for 506,000 ounces.
That updated underground reserve excludes the project's existing 6.64 million tonnes of ore at 2.41 grammes of gold per tonne to produce 514,000 ounces of gold.
"We will continue to explore on-mine and surrounding mineralisation, and bring indicated and inferred resources into future mine plan reserves," said Bradbury.
Shanta shares were up 0.8% to 4.91 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
SHG.L