Investors are excited by Shanta Gold’s (SHG:AIM) plans to start production on a second mine, albeit just a pilot plant. The small cap miner’s shares jump 15% to 8.35p on the news.

The Tanzania-based miner says it will commence operations in the first quarter of 2017 at the Singida project, targeting 800 ounces of gold production per month.

It will cost $4 million to development the pilot operation, to be funded from company cash flow. The pilot is expected to run for two years.

Shanta already has a mine in commercial production called New Luika. We analysed the investment case for the company purely on the basis of this project in yesterday’s issue of Shares. The addition of Singida to potential near-term revenue generation makes the stock even more attractive, in our opinion.

Three mining licences were obtained for Singida in January 2012. The project took a back seat while Shanta dealt with teething problems at New Luika and subsequently mine rebuild, not forgetting a prolonged battle with financing.

The business is now resolved its problems and is enjoying stable production at New Luika with cash generation helping to pay down debt.

‘Previous exploration at Singida was budget-constrained and as a result the prospect was not drilled to its full potential,’ says the company.

New exploration drilling will be undertaken to help better understand the full potential of the mineralised deposit.


Issue Date: 15 Jul 2016