Shanta Gold PLC (LON:SHG) has started to adjust to recent changes to the finance and mining laws in Tanzania and continues to make good progress at its New Luika mine.
Eric Zurrin, currently chief financial officer, has taken over as chief executive and the focus going forward will be on cost control.
Toby Bradbury, chief executive for the past two and half years, stepped down in August.
Regulatory overhaul in Tanzania puts miners on back foot
Shanta operates the New Luika gold mine in Tanzania, where the government recently passed laws giving it the power to renegotiate contracts, demanded more local ownership, upped royalty payments and imposed a 1% clearing charge on mineral shipments out of the country.
Shanta expects that its next gold shipment will see royalty rates increase to 6% from 4% in addition to the clearing charge.
Production not affected
The changes have not affected production. The miner produced 40,073 ounces (oz) of gold in the first half of 2017 at an all-in sustaining cost of US$755/oz.
Production in July has been maintained at those levels, Shanta said, and it remains on track to meet full year guidance of 80,000-85,000 oz at sustainable costs of US$800-US$850/oz.
In the six months, the firm sold 41,234 ounces of the yellow metal an average price of US$1,257 per ounce, compared to average spot price of US$1,239 per ounce.
Revenue for the first half came in at US$52.7mln (2016: US$55.7 mln).
The loss before tax narrowed to US$649,000 versus a loss of around US$3mln in the same period last year.
The firm has cash of US$13.8mln and forward sales agreed for July to December this year, of 37,000 ounces at an average price of US$1,278 per ounce.
Helio acquisition off the table
The Tanzania uncertainty has come at time when Shanta was poised for a major expansion drive.
Shanta has already started to ramp-up production from a new underground section at New Luika.
In June, it unveiled a series of transactions that seemed set to transform the long term future.
This included the acquisition of Vancouver-based Helio Resource Corp (which owns a huge tract of land next to New Luika for US$5.6mln; a US$14mln fund raise and a debt restructuring deal to boost its facility to US$50mln.
That Helio deal has now been terminated as a result of the legal changes.
What the broker said
John Meyer, analyst at SP Angel, said that the good operational results of the first half had been weighed down by legislative changes and challenges with claiming back VAT receipts putting pressure on free-cash-flow (FCF) generation.
The second half, however, is expected to be much better as capital investments are due to come down significantly while production is forecast to benefit from increased share of high grade underground ores, he added.
Shares on August 18 advanced 7.69% to stand at 3.50p.