1st Sep 2015 07:56
LONDON (Alliance News) - Shanta Gold Ltd Tuesday said it swung to a pretax loss in the first half of 2015 after the company's production significantly fell whilst it redeveloped its mines, but the company is expecting a much stronger second half and said it is on target to hit its full-year production guidance.
The gold miner swung to a USD10.4 million pretax loss in the first six months of 2015 as revenue declined to USD31.9 million from USD58.3 million a year earlier, due to falling gold prices and a significant reduction in production.
The loss was the result of its cost of sales, which totalled USD32.7 million in the period, outstripping its revenue, meaning its operations were uneconomic in the first half as it made a USD831,000 gross loss compared to a USD17.0 million gross profit a year ago.
Production in the period dramatically fell to 28,180 ounces of gold from 42,194 ounces of gold as Shanta redeveloped its mine. That redevelopment not only pushed down production, but also pushed up costs.
"Shanta's first half 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," said Chief Executive Toby Bradbury.
Despite the huge fall in the first half, Shanta reiterated its full-year guidance to produce between 72,000 and 77,000 ounces of gold, which would still be down from the 84,028 ounces of gold produced in the whole of 2014.
The guidance for the current year was previously lowered from 82,000 to 85,000 ounces of gold earlier this year.
Cash costs in the first half averaged USD993 per ounce, up from USD759, and all-in sustaining costs rose to USD1,310 per ounce from USD965. To put that into perspective, Shanta only achieved an average price of USD1,238 per ounce in the period, less than its costs.
On Tuesday, spot gold was trading at around USD1,144 per ounce.
However, Shanta said it expects its costs to "reduce significantly" in the second half, which should result in an all-in sustaining cash cost of between USD850 and USD900 per ounce. Importantly, the company also has 26,000 ounces of gold hedged in the second half of 2015 at USD1,222 per ounce.
Outside of its hedges, Shanta is expecting the gold price to "remain volatile" for the rest of 2015.
At the end of June, the company reported a cash balance of USD5.9 million, falling from USD14.9 million at the end of December and net debt of USD54.5 million, significantly up from USD40.7 million at the end of 2014.
Capital expenditure in the half rose to USD14.7 million compared to USD10.9 million in the first half of 2014.
Shanta shares were down 4.9% to 4.40 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
SHG.L