Shanta Gold (LON:SHG) said today it is pressing ahead with a feasibility study on its Singida gold mine in Tanzania and revealed it will apply for a mining licence in final quarter of this year.
Analysts said the surprise decision revealed a new ‘air of urgency’ at Shanta.
“Management is now pushing ahead with the potential development of two new gold mines and this should continue to add value to the group,” said mining veteran John Meyer of equities house Fairfax.
The results of the pre-feasibility analysis should be known by the end of the next month with details with the full report completed in March 2011.
Singida has a JORC compliant gold reserve of 480,546oz and a resource of 1.03moz.
This is considered sufficient for the construction and planning of a new gold mine.
The identification of the precious metal in exploration and workings in the region indicates the resource should expand in scale as exploration progresses, analysts said.
Based on the latest data Meyer has raised his target price for Shanta to 46p a share from 43p.
The current price is 19.57p, down 0.18p on the day.
His previous valuation was based on a conservative $56 per ounce from Singida for 50 per cent of its measured reserve.
He has upgraded to $100 an ounce for 75 per cent of the measured reserve giving the project a valuation of $36m at this stage of its development.
Singida is one of two projects the company owns. The Chunya mine, also in Tanzania, is currently under construction. Shanta chairman, Walton Imrie, said: "The expected robust grades of the Singida orebodies, coupled with the favourable metallurgy, indicate an operation with strong cash flows.
“This, and our recent announcement of the Chunya mine development, should move Shanta from a successful explorer to profitable producer within 24 months."