Shanta Gold Limited – Shanta Gold set to generate around $1bn in revenue over the next five years, as gold production ramps up
Record second quarter production from Shanta Gold Limited’s Tanzanian mining operations generated more than $23mln of quarterly earnings and set the company well on the road to wiping out the last of its legacy debt from construction.
At the end of the quarter to end June 2023 Shanta had net debt of just US$8.7mln, down more than 50% quarter-on-quarter, and surely set for eradication by the time 2024 rolls around.
The market’s reaction to Shanta’s strengthening financial position has so far been somewhat muted. But it’s unlikely to be muted for long.
That’s because the company is now producing gold at an annualized rate of over 100,000 ounces per year, a rate which looks set to be sustained, at the very least, for five years, and very probably for much longer.
With the gold price hovering at close to the US$2,000 per ounce mark, as it has been for much of this year, it’s not hard to make the obvious calculation: Shanta’s annual revenues will amount to the amount of gold it produces multiplied by the gold price.
On current trends that works out at a cool US$200mln per year for the next five years.
Or, if you want to look at it another way, between now and 2028, Shanta is likely to book a total of around US$1bn in revenues.
All of this is based around the two mines that the company already has up and running – New Luika, which has been going for 11 years, and Singida, which came on stream earlier this year.
New Luika has another five years of official life left, but in recent years Shanta has managed to push out New Luika’s mine life still further every year. This isn’t that uncommon in the mining industry, but be that as it may, the simple fact is that the gold keeps coming, and that gold in turn means dollars into the company.
Singida, for its part, boasts an official mine life of seven years, but as Shanta’s chief executive Eric Zurrin notes, it sits in an area “that’s completely underexplored.”
Would it be any surprise if the Singida mine life also got pushed out consistently as the years rolled by? – it would not.
“Singida’s been very under-drilled,” says Zurrin.
“It’s likely to get either (a) an extended minelife, (b) a bigger throughput, or (c) both.”
As it stands, the official projection for average production from both mines combined over the next five years is 103,000 ounces, although there will be some variation within that timeframe.
All-in sustaining costs are currently allowing for a US$700 margin per ounce of gold production, which nets out at EBITDA of around US$350mln over the next five years.
That’s a big enough number by anyone’s standards, and worth noting too that with the paying off of the debt, the “I” in EBITDA becomes largely immaterial.
Hardly surprising then that a major Chinese company ran the rule over Shanta last year, and that many in the market think that the company may shortly go into play again.