JOHANNESBURG (miningweekly.com) – East Africa-focused gold producer Shanta Gold has hit record quarterly production of 21 940 oz at its Tanzania-based New Luika gold mine for the three months ended June 30, representing an 8% uptick on the 20 254 oz produced in the first quarter of the year.

This included the recovery of around 2 500 oz from the crushing and screening circuit following the dismantling of the incineration equipment and the reduction in gold in the carbon-in-leach (CIL) circuit with the introduction of the elution and electrowinning plant in May.

“I am pleased with both our production and cost performance for the quarter. The benefits of the elution and electrowinning plant are already apparent even at this early stage and, with the commissioning of the new crushing and screening circuit by the end of August, the company will have a robust plant that can cope with future throughput increases.

“This will enable us to change our guidance for gold production to between 80 000 oz and 83 000 oz for the full year,” CEO Mike Houston said in an operational update on Monday.

While quarterly output improved, gold grade for the period declined from 5.4 g/t in the prior quarter to 5.03 g/t, which Shanta attributed to the mix of ore and the use of lower-grade ore from the stockpile.

Moreover, plant recovery was largely affected by higher milled volumes, creating shorter leach residence time.

“With the commissioning of the elution plant, we saw [gold recovery improve] to 86% and silver production triple to 10 733 oz in June. Going into the second half of the year, we expect further improvements in the recovery of both gold and silver but, at the higher milled volumes, it will be necessary to also increase CIL capacity if we are to achieve the targeted 89% recovery,” the company stated.

Shanta meanwhile continued to look at alternative power options and of “immediate interest” was the use of more efficient low-speed heavy fuel oil generators, which could have a material impact on power costs.

The company had, on a rental basis, installed a small solar power plant to fully test the potential of this process under local conditions.

NEW LUIKA
Shanta reiterated that its New Luika mine remained the company's priority project, with a drilling programme to further upgrade the underground resource progressing well. Some 2 906 m was drilled in June and the first half of July.

“Encouraging sections of mineralisation have been encountered at Luika and the Bauhinia Creek orebody with assay results expected to be published during the third quarter,” the company noted.

It added that the early indications were “encouraging”, with the potential of lifting gold output by between 20% and 25% and increasing the life-of-mine from the original five years to in excess of eight years.

“With New Luika centered in what is highly prospective ground, we are confident that we will continue to discover resources both in the current mining licence or within an economic trucking distance from the processing plant,” Shanta said.

SINGIDA
The gold producer continued to progress the feasibility study at its nearby Singida project, noting that the mine footprint had been approved and the company was now entering into negotiations with the authorities on the movement of 15 households.

The company was also in the process of making the Singida resource compliant with the 2012 edition of the Joint Ore Reserves Committee code.

The plant design had been completed and was being reviewed.

FORWARD SALES
Looking to the company’s financial performance for the quarter, Shanta sold a total of 22 400 oz of gold, including the fulfilment of forward sales commitments, at an average price of $1 307/oz.

By the end of June, it had sold forward to March 2015, 30 000 oz of gold at an average price of $1 319/oz.

Meanwhile, cost control remained a key focus over the three months, helped by the higher production and, consequently, cash costs of $755/oz, and all-in sustaining costs of $959/oz were both marginally lower than the prior quarter.

Cash generation in the quarter was “satisfactory”, with $8-million generated from operations. This was applied to fund capital expenditure of $3.1-million, loan repayments of $2.8-million and interest payments of $1.6-million.

Net debt at the end of the quarter was $46-million, including the $25-million convertible loan notes redeemable in 2017. During the first half of the year, Shanta paid off $5.6-million of its primary loan.

The company’s cash balance at the end of the quarter was $15.5-million.