JOHANNESBURG (miningweekly.com) – East Africa-focused emerging gold producer Shanta Gold has improved second-quarter gold production by 22% to 14 448 oz, chiefly on the back of improved plant throughput.

Mill throughput for the three months ended June 30, totalled 88 966 t at an average grade of 5.75 g/t and mill recoveries of 85.2%, which represented a 24% improvement on tonnes milled in the prior quarter.

These efficiencies came in spite of premature coupling failures, which hindered production in April and May, leading to the loss of seven operating days and about 1 000 oz of production.

Cash costs of $920/oz were in line with the Aim-listed company’s forecast for a progressive improvement as volumes increased.

Shanta said in a production report on Monday that the achieved grade reflected the increased use of lower-grade stockpile ore as part of an ongoing focus to maximise returns at its flagship New Luika mine.

“An opportunity exists to improve recovery rates and management is looking at optimising the feed size distribution and linear design and usage,” the company noted, adding that the second phase of planned plant improvements had been successfully completed, with the commissioning of the upgraded crushing circuit carried out in early July.

As the circuit was operating satisfactorily, with a progressive improvement in throughput since the start of the year, CEO Mike Houston said he expected the plant to meet its second-half target of 1 200 t/d.

“The second half of 2013, although still a period of stabilisation, has significant upside potential, as we now have increased crushing capacity in place, while further improvements, notably around the incinerating process, are ongoing.

“The confirmation that we will have both the new crusher and incinerator commissioned in the first quarter of 2014 will allow growth and see the New Luika gold mine progress towards being a steady-state, low-cost gold producer,” he commented.

While improvements had been achieved in reducing bottlenecks in various areas of the plant, Shanta noted that the incinerating process, as highlighted in earlier reports to shareholders, remained a constraint to substantially lifting production.

As a result of the uncertainty of increasing the volume through the incinerator without further upgrades, the company expects to achieve the lower end of its previous guidance of between 63 000 oz and 70 000 oz for the full year.

GOLD SALES

Meanwhile, total gold sales for the second quarter amounted to 10 418 oz at an average price of $1 408/oz, which excluded a shipment of 3 232 oz in early April which had, in conjunction with the associated costs, been capitalised in the first quarter.

This came as the company instituted a progressive hedging programme over the quarter to protect margins and reduce exposure to recent gold-price volatility in a key period of capital investment and debt management.

As a result, Shanta has entered into forward-sale contracts for gold delivery for July 2013 to March 2014, and said it would continue to look at protecting its position in 2014 through prudent hedging.

EXPLORATION DELAY

Meanwhile, in the context of the increased volatility and decline of the gold price, the company had delayed all nonessential exploration activity scheduled for the second half of the year – estimated to cost $1.5-million – indefinitely.

“We have a conservative exploration programme in place, focused on increasing the indicated resource at the current operations through a drilling programme to establish the depth and strike extent of mineralisation,” the company said.

This included the low-cost evaluation of targets in the Lupa goldfields exploration licences, of which the company recently took full control.

In addition, 12 diamond drill holes had been drilled at the high-grade Bauhinia Creek deposit, with eight diamond holes drilled at the adjacent Luika deposit.

The company defined a significant extension of the Bauhinia Creek orebody to the west, with evidence of robust mineralisation at a vertical depth of some 250 m at the adjacent Luika deposit.

“I am excited about the initial drill results at Bauhinia Creek, which are confirming that the orebody is open at depth and extends to the west. The improved strike length further enhances the potential of a high-grade underground mine. Obviously, the assay results are critical to justify the commercial viability and we look forward to reporting to shareholders on the outcome later this year,” Houston said.

The company would continue to advance the feasibility study for its Singida project, mindful of cash constraints.

At June 30, Shanta’s cash and cash equivalent stood at $16.6-million.