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An underground extension to Shanta Gold’s (LON:SHG) New Luika mine will produce 310,000 ounces and add US$72mln to the value of the project, a new study has concluded.
A new mine plan to include underground mining as well as the ongoing surface mining and tailings recovery project envisages enough high grade reserves to maintain average production at 84,000 oz annually over the next five years.
Over the period 2016-2022 New Luika, in Tanzania, will produce 443,000 oz in total, 310,000 from underground, 133,000 from open pit and 19,000 from the tailings project.
Up-front costs of the underground development are estimated at US$38mln, with life of mine average cash cost and All In Sustaining Cost of US$499 /oz and US$640 /oz respectively.
There are another potential 510,000 ounces in resources outside of the mine plan, while the study assumed a gold price of US$1,200,
Toby Bradbury, chief executive, said the new plan gives clarity for New Luika until 2022.
"The mine plan clearly demonstrates a significant upward revision of the reserve figures and the positive economics of the underground feasibility study it includes.
“We are confident that subsequent upgrades will be provided through an active review of costs and the substantial resources that remain outside this mine plan.
Shanta maintained its 2015 production and cost guidance of 72-77,000oz at a cost in the range $850-900/oz on an all-in sustaining cost basis.
Peel Hunt added the plan will see the open pit run until 2018 and run in conjunction with the underground operation for a short while.
While the life of mine is the first quarter 2022, conversion of extensive resources and additional exploration could see this extended even further said the broker.
Shares rose 5% to 5.1p.
