2015
Annual Report
and Accounts
Country of incorporation
Guernsey
Nature of business
Gold exploration and mining in Tanzania
Company registration number
43133
Registered office
Suite A, St Peter Port House
Sausmarez Street
St Peter Port
Guernsey GY1 2PU
Secretary
William Hunter
Suite A, St Peter Port House
Sausmarez Street
St Peter Port
Guernsey GY1 2PU
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Nominated advisor and broker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Website
www.shantagold.com
Contents
Chairman’s statement
Chief Executive Officer’s review
Annual sustainability report
Director’s report
Corporate governance
Independent auditor’s report
Financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Annual General Meeting
Notice of meeting
1
3
10
16
19
21
23
24
25
26
27
53
A gold pour at New Luika Gold Mine
Shanta Gold Limited Annual Report and Accounts 2015 CHAIRMAN’S STATEMENT
A positive and transitional year
Dear Shareholder,
I am pleased to report that Shanta Gold (“Shanta Gold”,
“Shanta” or the “Company”) has had a positive and
transitional year, despite financial year 2015 (“FY2015”)
being a challenging year for all gold mining companies.
Gold prices started 2015 above US$1,200 per ounce
(“/oz”), falling to six-year lows of US$1,051/oz in
November 2015 before rebounding to current levels back
above US$1,200/oz. Valuation metrics for junior and mid-
tier companies fell to historic lows before staging a slight
recovery. Shanta continues to follow a prudent hedging
policy to protect its cash flows and balance sheet in a
changeable gold market whilst maintaining exposure to
price increases.
Against this volatile backdrop Shanta achieved
sustainable improvement at its flagship asset, the New
Luika Gold Mine (“NLGM”), located in south west Tanzania.
During the first half of the year, the Company identified
and redesigned the operations which enabled delivery
of an improved operational and financial performance in
the second half of the year. Furthermore, in September
2015 the Company published an underground feasibility
study, the Base Case Mine Plan (“BCMP”) and an updated
reserves statement for NLGM. This provides clarity on
the NLGM production profile from January 2016 to late
2022 and clearly demonstrates the investment thesis for
developing the underground resources.
Shanta today sits in the lowest quartile cost of gold
producers and exceeded its production and cost guidance
set in April 2015, producing more ounces at a greater
margin. Shanta achieved gold production for FY2015
of 81,873 ounces (“oz”), beating guidance of 72,000–
77,000oz and All in Sustaining Costs (“AISC”) for 2015
of US$834/oz against guidance of US$850–900/oz
generating cash of US$35.0 million for FY2015, revenue
of US$95.7 million and an EBITDA of US$31.9 million.
Although the profitability was impacted by a non-cash
amortisation charge of US$21 million resulting in a loss
before tax for the year of US$18.1 million, this does not
detract from a very robust performance. In April 2015,
Shanta also strengthened its financial position with a new
US$40 million loan facility with Investec Bank and at the
date of this report had been fully drawn down.
These achievements have been secured with
a strengthened team under the leadership of
Dr Toby Bradbury who was appointed as Chief Executive
Officer (“CEO”) from 1 April 2015. Patrick Maseva-
Shayawabaya, who joined the Company on 1 July 2013 as
Chief Financial Officer (“CFO”) was also appointed to the
Board on 1 April 2015. Mike Houston retired as CEO on
31 March 2015 and from the Board at the annual general
meeting (“AGM”) in May 2015. I would like to extend
the Board’s appreciation for Mike’s service and also that
of Patrick who subsequently left the Company and the
Board on 31 October 2015. Shanta was also fortunate
to engage Eric Zurrin as CFO on an interim basis whilst
a permanent replacement was found and I’m pleased to
announce that Mark Rosslee, who joined the Company in
January 2016, assumed the role of CFO on 1 May 2016.
Mark is a qualified Chartered Accountant and a graduate
of the University of Witwatersrand, South Africa. He has a
graduate diploma in Mining Engineering and has served
on the boards of multiple public junior minor companies
that have operated across Africa.
NLGM continues to be strongly cash generative, despite
the recent gold price volatility. The healthy operating
margins demonstrate both the good geological
endowment in the Lupa Goldfields and the rigorous cost
control by the Shanta team. Strong operational cash flows
will help to deliver the extended mine life at the NLGM
as it transitions to underground which is a major focus
for financial year 2016 (“FY2016”). A renewed emphasis
has also been placed on Shanta’s exploration programme
to define additional resources and reserves within an
economic radius of the NLGM plant.
At Singida, Shanta’s exploration and development gold
asset located in central Tanzania, the relocation exercise
should be brought to a close in the first half of 2016. The
Company aims to renew its focus on this important asset
through the course of the year.
1
CHAIRMAN’S STATEMENT
Importantly, the Company has contributed significantly
to the national and local economy within Tanzania. At
31 December 2015, Shanta and its contractors employed
1,045 people, a 29% increase compared to 2014, 93%
of whom are Tanzanian and 40% of whom come from the
local communities. Since the start of 2015, Shanta has
appointed 10 Tanzanians to senior management roles and
has established a graduate development program with
four mining graduates currently engaged. The Luika River
Dam was started in the year which ultimately will become
part of the regional infrastructure providing year round
water security for the local communities. During the year,
Shanta generated US$96 million in foreign exchange for
Tanzania and paid US$11.6 million in royalties, direct
and indirect taxes (excluding VAT) to the Tanzanian
Government. Relations between the Company and the
community remain strong.
Post period end, the Company further strengthened its
balance sheet by reaching agreement with over 75%
of the holders of the US$25.0 million senior unsecured
subordinated convertible loan notes (the “Notes”) to
buyback US$10.0 million of the Notes and to extend the
term of the remaining Notes by two years to April 2019
with a concurrent increase to the coupon from 8.5% to
13.5% Refer to note 30.3.
Additionally post period end the Company has entered
into a Silver Streaming Agreement (“SSA”) with Silverback
Limited (“Silverback”), a privately held Guernsey-based
investment company, under which Silverback will pay
the Company an advanced payment of US$5.25 million
on closing. Silverback will also pay the Company an
ongoing payment of 10% of the value of silver sold at the
prevailing silver price at the time of deliveries which will
be made annually. The SSA relates solely to silver by-
product production from the NLGM with minimum silver
delivery obligations totalling 608,970oz Ag over a 6.75
year period. The term of the SSA expires after 10 years
and the Company has no minimum ounce obligations
after 2022.
We are pleased to also confirm the Company has received
firm commitments from investors to raise gross proceeds
of approximately US$10.5 million (£7.2 million) through
the Placing of 111,442,800 shares at a price of 6.5 pence
per share.
On behalf of the Board, I would like to sincerely thank the
entire Shanta team for their support and commitment
in delivering a strong performance in a challenging
market environment. During FY2015 we have clearly
demonstrated NLGM’s true value and its potential is
becoming clear. We remain fully confident of delivering a
sustainable, strongly cash generative business and I look
forward to reporting on the future progress.
A P W Durrant
Chairman
9 May 2016
2
Shanta Gold Limited Annual Report and Accounts 2015 CHIEF EXECUTIVE OFFICER’S REVIEW
A successful year of operational and
financial performance
I am pleased to report on a successful operational and
financial performance for FY2015.
Operations
Tonnes ore mined
Tonnes ore milled
Grade (g/t)
Recovery (%)
2015
2014 % change
480,825
529,850
563,613
580,664
4.73
89.5
5.18
87.8
Gold produced (oz)
81,873
84,028
Silver produced (oz)
121,682
101,347
Gold sold (oz)
80,622
87,758
Average price achieved (US$/oz)
1,163
1,289
Cash cost (US$)
All in sustaining cost (US$)
757
834
742
941
(9)
(3)
(9)
2
(3)
20
(8)
(10)
2
(11)
At the Company’s flagship asset, the NLGM, located
in south west Tanzania, gold output was 81,873oz,
which marks the second consecutive year of production
in excess of 80,000oz for the Company. Importantly,
recovery rates improved to 89.5%, even while gold
grades fell from 5.2 grammes per tonne (“g/t”) to 4.7g/t
demonstrating continued process plant efficiencies
through the year.
The FY2015 figures however do not reflect that it was a
year of two halves for the Company.
While the process plant operated well throughout the
year, as was reported in last year’s annual report, the start
of 2015 was challenging due to a deficit in ore supply
and the need to complete a significant amount of waste
development in the Bauhinia Creek and Luika Pits.
In the second half of 2015, for the first time, NLGM mined
ore at a rate that matched the upgraded mill capacity and
at a grade that enabled budgeted gold production to be
realised. This was achieved with a fundamental redesign
of both the Bauhinia Creek and Luika open pits with a
strong mining team engaged to complete and implement
this work. Scott Yelland joined as General Manager for
NLGM in March 2015 followed by Honest Mrema as
Technical Services Manager in April 2015, together with a
number of qualified and trainee mining engineers.
At Bauhinia Creek, a review of strip ratios was conducted
with an area of the reserve identified that was significantly
above the average. The pit design was revised to exclude
that portion of the reserve and in the process reduced
the life of pit strip ratio from 21:1 to 9:1. The reserves
that would no longer be mined from surface (67,000oz)
became part of the underground reserve base. In
the process, the surface mining cost of ore reduced
substantially and the viability of a future underground
mine was significantly enhanced.
At the Luika Pit, serious geotechnical challenges required
a redesign of pit slopes that negatively impacted the pit
economics. Additionally, previous underground mining
from colonial times was causing dilution of ore. As a
consequence, the north east section of the Luika Pit was
closed and the void space refilled to achieve the original
topography. The Luika Pit operation thus benefited from
shorter hauls for waste removal and, as in the case of
Bauhinia Creek, reserves were not lost but rather deferred
to underground from which better control of the strata can
be achieved and dilution will not be the same issue.
These fundamental redesigns facilitated access back into
high grade ore in Bauhinia Creek from May 2015, and a
consistent flow of ore and a well-managed grade profile
saw gold production in excess of 8,000oz per month for
the second half of 2015. Importantly, the mine design
and schedule provides for sustainable and reliable ore
production going forward and budgeted production has
continued into 2016.
As part of a risk mitigation strategy and to ensure that
there was an ore supply in excess of mill consumption,
a new open pit was established at the Jamhuri deposit
3
CHIEF EXECUTIVE OFFICER’S REVIEW
in July 2015. A key advantage of this satellite deposit,
as for all the satellites at New Luika Gold Mine, is that it
sits within the mining licence. Consequently, from start
of design to breaking ground took only three months. At
the end of the year, stocks at the run of mine (“ROM”) had
been built to 45,000 tonnes to withstand the onset of
the rainy season. Given the level of stockpiles, operations
were suspended at Jamhuri in January 2016 but the pit
remains a standby source of ore in the event of challenges
in either of the primary pits.
NLGM relies on the perennial Luika River for sourcing
its process water. During the dry season, the mine
utilised on-site water storage facilities and, from August,
implemented a program to source water from Lake Rukwa.
The program worked exceptionally well and, while its cost
would be prohibitive as a permanent solution, it was well
proven as viable fall back mechanism were a situation to
ever arise where there was no alternative water available.
As part of the long term water security arrangements for
NLGM, the Company started construction of the first phase
of a dam on the Luika River which will hold sufficient
water, together with existing storage facilities, to see the
mine through any year except a drought year, for which
the Lake Rukwa management plan is in place.
Base case mine plan
Providing the Company with a clear long-term business
plan was a key objective for 2015. In the first quarter,
nine directional diamond drill holes were drilled to
target specific intersections in the Bauhinia Creek and
Luika orebodies. These holes provided supplementary
data to the resource models to better understand the
underground potential. In the process, the drilling
increased the resource base of New Luika lifting the
average grade for all resources to 3.2g/t at a 1g/t cut-off
(previously 3.0g/t).
Specifically for Bauhinia Creek, total resources (Indicated
and Inferred) increased to 3.6 million tonnes (“Mt”) at
5.3g/t gold (1.0g/t cut-off) for approximately 626,000oz
of gold (previously 3.8 Mt at 4.9g/t for 607,000oz)
providing an additional gold content of 28,000oz taking
into account mining depletion to the end of March
2015. Bauhinia Creek is a cornerstone to the high grade
resource at New Luika around which the BCMP has
been developed.
As open pit mining at Bauhinia Creek and Luika Pits
comes to an end in the course of 2016, the plan is to
transition these high grade operations into underground
while continuing to supplement mill feed with lower
grade, 2–3g/t ore, from the satellite deposits within the
existing mining licence. To this end, AMC Consultants (UK)
Limited conducted a Feasibility Study for an underground
operation in Bauhinia Creek and Luika Deposits. The
Feasibility Study presented a plan to mine 1.57Mt over
4
six years at a grade of 6.5g/t. The underground mine
will produce 310,000oz with a project Net Present
Value (“NPV”) at an 8% discount rate and gold price of
US$1,200/oz of US$72 million, with a pre-tax Internal
Rate of Return of 56%. The Feasibility Study delivers
an underground life of mine average Cash Cost and
AISC to be US$499/oz and US$640/oz respectively
with a pre-production capital cost of US$38.4 million
including contingency.
The Underground Feasibility Study was incorporated into
New Luika’s mine plan which includes on-going mining
from surface operations and a tailings retreatment project.
This was presented on 29 September 2015 as the BCMP.
The BCMP maintains an average NLGM production of
84,000oz per annum for five years from 2016 with
potential to further optimise the schedule.
One part of the optimisation will address the fact that the
BCMP currently has 362,000 tonnes of spare mill capacity
from 2018 to 2020. The on-going exploration work is
expected to continue to provide options that will ensure
this capacity is fully utilised and value is maximised.
An additional benefit that NLGM has is that its satellite
deposits sit within the mining licence, as referenced above
in the case of Jamhuri.
The BCMP provides for extraction from mining of 2.79Mt
for the production of 443,000oz from January 2016 to
2022 (133,000oz from open pit and 310,000oz from
underground) with a separate tailings recovery project to
produce a further 19,000oz. The reserves included in the
BCMP amount to 506,000oz with a further 514,000oz
of indicated and inferred resources sitting outside the
mine plan as the subject of further exploration and
economic evaluation.
The BCMP’s average Cash Cost and AISC are
US$532/oz and US$695/oz respectively with a post-tax
NPV for the BCMP from January 2016 of US$110.4 million
at an 8% discount rate and a gold price of US$1,200/oz.
There remains upside in further optimisation, cost
reduction, and inclusion of additional resources and this
work is ongoing.
Exploration
Aside from the robust BCMP, it is recognised that there is
substantial further value in the resources at and around
New Luika that still remain outside the BCMP. None of the
nine mineralised prospects within the Mining Licences at
NLGM were ever drilled off. All are open at depth and in
some cases are open on strike. Additionally, Shanta holds
prospecting licences to the west, north and south east of
NLGM which may hold sources of mill feed that lie within
an economic radius of the efficient and operating gold
processing plant at the mine.
Shanta Gold Limited Annual Report and Accounts 2015 CHIEF EXECUTIVE OFFICER’S REVIEW
In May 2015, Peet Prinsloo returned to Shanta as its Head
of Exploration and a renewed emphasis was placed on
delivering the potential value that lies within and around
NLGM. Opportunities were prioritised and work was
quickly under way to conduct in-fill drilling of the Elizabeth
Hill mineralised prospect with an updated resource
announced in September 2015 increasing total resources
to 2.3Mt at 1.7g/t for 128,000oz from 1.8Mt at 1.6g/t for
88,000oz. This is a good example of the opportunity that
exists at NLGM to prove up additional resources to the
mine plan to extend mine life and add further value. These
results came in too late to be incorporated in the BCMP
but Elizabeth Hill reserves were subsequently updated in
January 2016.
A further drilling program was conducted at Black Tree
Hill to test underground extensions of that ore body and,
in Q1 2016, a drilling program at the Ilunga prospect
produced some very encouraging results which were
presented to the market on 12 April 2016.
The benefit of the satellite deposits is that they sit
within the existing mining licence and an upgrade to the
resources and reserves has the potential to be exploited
in the near term. The prospecting licences around NLGM
offer more medium term prospects to source ore to the
mill and therefore to extend the NLGM life of mine. They
are the focus of grass roots exploration work including
structural mapping, soil sampling and trenching as a
target generation process for the motivation of drilling
capital. Results of the Askari drilling campaign on
23 February 2016 are an example of this work and
demonstrate the highly prospective ground that Shanta
Gold has within its portfolio.
Major projects
The strategic focus for 2015 was the completion of the
Underground Feasibility and its incorporation into the
BCMP for New Luika. Key components of that BCMP are
the development of the underground mine, provision of
new and expanded power facility, development of a new
Tailings Storage Facility (“TSF”) and the construction of a
dam on the Luika River.
While a critical project for Shanta, the scale of the
underground mine is small. The level of oversight on
such a small project, should contractors be used would
have resulted in substantial duplication of effort and a
disproportionate allocation of contractor overhead. Given
the state of the industry, the high calibre people available
and the attraction of a robust low cost project, the
decision was made to do the mining in-house. Following
Board approval of the project, orders were placed for long
lead time (mining equipment and power station) items.
The underground project manager, who had started in
May 2015, as part of the Feasibility Study team, oversaw
the integration of the portal access and ventilation shaft
areas into the design of the Bauhinia Creek open pit.
A significant part of the recruitment was completed in
Q4 2015 for the start of preparation and development
operations in 2016. The project is now well resourced with
an excellent team in place and importantly is on time and
on budget.
The underground mine effectively doubles the power
demand for the mine from 3MW to 6MW. In 2014, NLGM
converted its diesel fuelled power station to Heavy Fuel
Oil (“HFO”) for a fuel cost saving of around 40%. The
current power station is owned and operated by Aggreko
who advised that, as a global policy initiative, it will no
longer support HFO fuelled units. Shanta therefore sought
alternative options that would enable a continued use
of HFO in a replacement and expanded power facility.
Through a tender process, Shanta selected Inglett Stubbs
International to install on an EPC basis then operate and
maintain six 1.25MW generator sets with purpose-built
medium speed HFO fuelled engines. This project will be
constructed in 2016 and commissioned in Q1 2017. It
has been financed by Shanta at a cost of US$15 million.
To provide an eight year capacity at current production,
NLGM plans to construct a new TSF which will be
developed to the east of the Jamhuri Pit. The approval for
this project, now granted, took longer than anticipated
and some of the expenditure may defer into 2017. In the
meanwhile, NLGM has secured the right to continue using
the existing facility for at least the remainder of 2016. As
a result, the tailings retreatment project which will relocate
tailings from the present facility to the new facility has also
been deferred.
The final major project is the construction of a mass
gravity dam on the Luika River to provide water storage to
secure process water supply through the dry season. This
is a labour intensive project that has intentionally engaged
around 100 local people for the construction, many of
them artisanal miners. The expectation is that the first
phase of this project will be completed before the river
stops flowing in around July 2016.
Singida
As advised last year, the relocation exercise has continued
through 2015 with independent valuations completed
for all the landholders that may be potentially impacted
by the operation of a mine. The situation at the time of
writing is that the matter is with the community to accept
the independent valuations. These are the values that the
Company will only have to pay should there be a need to
take control of the land. There is an expectation that this
should be resolved satisfactorily in H1 2016 and Shanta
is extending its presence on the ground in preparation for
work on an updated study of the project. In anticipation
of progress on this project, a general manager has
been engaged.
5
CHIEF EXECUTIVE OFFICER’S REVIEW
Capital expenditure
Capital expenditure for the year amounted to
US$29.5 million, of which US$18.9 million was on
capitalised waste stripping in Bauhinia Creek and Luika
Pits. Of the remaining US$10.6 million, US$0.5 million
was stay in business capital, US$1.1 million on
exploration and geotechnical drilling, US$1.0 million
capitalised costs at Singida and US$7.8 million
on projects.
Key projects undertaken in the year were the Underground
Feasibility Study (US$1.2 million), the start of Phase 1
of the Luika River Dam (US$1.3 million) and process
plant upgrade (US$1.8 million). The process plant
upgrade included the addition of a 1,000m3 pre leach
tank to increase residence time in circuit. At the time of
writing, the improved recoveries anticipated from this
facility are still to be achieved. The suppliers are dealing
with a design issue that is expected to be resolved for
the second half of 2016 with current lower recoveries
provided for in the plan in the interim.
Finance
Gold sales for the year totalled 80,622oz (2014:
87,758oz) down by 8% on the sales compared to 2014
due to lower gold production due to lower ore availability
in the first half of the year. Silver sales were 125,580oz
(2014: 98,013oz). The Company continued with its
prudent hedging program and the average gold price
realized for the year was US$1,163/oz compared to the
average price for the previous year of US$1,289/oz.
Turnover for the year thus amounted to US$95.7 million,
compared to US$114.9 million, the drop due roughly
equally to the lower gold price and lower gold sales
in 2015.
Cost of sales for the year amounted to US$96.4 million
(2014: US$80.1 million), including an additional
amortisation charge of US$21 million, and without
these charges would have had a gross margin of 24%
(2014: 30%). The higher depreciation charge included
in the cost of sales is US$43.0 million (2014: US$10.9
million), up 294% on the prior year as a result of a an
additional adjustment comprising US$21 million of which
US$9.6 million related to waste stripping amortisation
and a further depreciation charge of US$11.4 million
to cater for the future development expenditure post
2015 to be incurred in developing the underground
mining operations. This latter charge will provide more
representative amortisation charges in future years as
these underground operations reach full production.
based payment charges and exchange loss totalling
US$1.6 million (2014: US$0.4 million).
Exploration expenditure for the year amounted
to US$2.4 million (2014: US$2.9 million), 15%
lower than the previous year, on the back of careful
budgetary control.
An operating loss for the year of US$11.1 million (2014:
operating profit of US$22.9 million) was incurred,
whilst EBITDA amounted to US$31.9 million (2014:
US$33.8 million), mainly due to lower gold revenues
from lower sales at a lower price, an additional non-
cash amortisation charge of US$21 million, offset
by improved cost efficiencies. Net finance expense
amounted to US$7.0 million (2014: US$6.3 million),
up by US$0.7 million for the previous year as a result of
higher borrowings.
As a result of the above, Loss Before Tax of
US$18.1 million (2014: Profit Before Tax of
US$16.6 million) was recorded due to lower gold sales,
lower revenues per ounce, and a non-recurring non-
cash amortisation charge. The Group has accumulated
tax losses brought forward from the mine development
phase and therefore no income tax will be payable
for at least the next five years. There was however
a deferred tax credit amounting to US$1.1 million
(2014: charge of US$7.8 million). Losses after Tax thus
amounted to US$17.3 million (2014: Profit After Tax of
US$8.9 million).
In the statement of financial position non-
current assets dropped to slightly lower levels of
US$114.3 million (2014: US$131.9 million) due to
the higher amortisation charges. Current assets totalled
US$39.1 million (2014: US$37.2 million), similar
levels with that of the prior year but with increased
cash on hand. Overall liabilities increased marginally to
US$76.7 million (2014: US$75.7 million).
Cash generated from operations amounted to
US$35.0 million (2014: US$39.0 million). Repayment
of the restructured FBN loan was refinanced by a
US$40 million facility from Investec at an interest rate
of LIBOR+4.9%. Approximately half of the loan facility
was used to repay the existing FBN loan. Cash balance
at year end amounted to US$19.1 million (2014:
US$14.9 million). Net debt at 31 December 2015
amounted to US$41.5 million (2014: US$40.7 million)
inclusive of the US$25.0 million Convertible Loan Notes.
Administration costs for the year amounted to
US$10.3 million (2014: US$8.9 million), up due to
additional higher exchange rate losses and termination
payments made to senior employees and directors
on resignation. Administration costs include share
The Company reached a conditional agreement with over
75% the holders of the US$25.0 million senior unsecured
subordinated cconvertible loan notes for its subsidiary to
purchase US$10.0 million of the Notes and to extend the
term of the repayment of the remaining notes by two years
6
Shanta Gold Limited Annual Report and Accounts 2015 CHIEF EXECUTIVE OFFICER’S REVIEW
to April 2019 with a concurrent increase to the coupon
from 8.5% to 13.5%. Should the condition be satisfied, it
is envisaged that the buyback will be funded from existing
funds on hand with reduced outflows resulting in the next
12 months, which would further improve the available
financial resources for the Company during its planned
capital development program of over US$48 million
during 2016 and 2017.
The Company has entered into a SSA with Silverback
Limited, a privately held Guernsey-based investment
company, under which Silverback will pay the Company
an advanced payment of US$5.25 million on closing.
Silverback will also pay the Company an ongoing payment
of 10% of the value of silver sold at the prevailing silver
price at the time of deliveries which will be made annually.
The SSA relates solely to silver by-product production
from the NLGM with minimum silver delivery obligations
totalling 608,970oz Ag over a 6.75 year period. The term
of the SSA expires after 10 years and the Company has no
minimum ounce obligations after 2022.
The Company produced 121,682 ounces of silver in
2015 resulting in approximately 2% of annual revenue.
There are currently no defined silver reserves at NLGM.
Furthermore, the SSA entitles the Company to share
20% of future annual silver production above a monthly
threshold minimum of 11,250oz. The Company is also
entitled to clawback future silver deliveries by the pro-
rated increase in tonnage in the event of it installing
additional milling capacity at the NLGM processing plant.
The SSA will be secured against the Singida mining
licences, Shanta’s exploration and development gold asset
located in central Tanzania and the Company is putting
in place the necessary arrangements with Investec to
facilitate this. The security amortises over the 6.75 years
of the silver deliveries and automatically subordinates
should the Company raise a minimum US$6.0 million
of project finance for Singida’s development. Closing is
subject to customary in-country approvals.
The Company has received firm commitments from
investors to raise gross proceeds of approximately
US$10.5 million (£7.2 million) through an upsized
Placing of 111,442,800 Placing Shares at a price of 6.5
pence per share. The Placing Price represents a discount
of approximately 13.3% to the closing mid-market price
per share on 5 May 2016, the latest practicable date prior
to the date of this announcement.
Hedging
As stated above, the Company continued with its prudent
hedging program during the year to protect cash flow.
A total of 40,500oz (2014: 44,000oz) were sold under
the hedge program at an average price of US$1,236/oz
(2014: US$1,318/oz). As at end of December 2015, the
Company had sold forward 20,000oz at an average price
US$1,148/oz and post year end, a further 12,000oz were
sold forward, at an average price of US$1,172 for a total
of 32,000oz.
Outlook
The focus of 2015 was to rebase the NLGM operation
with production and costs that reflect the high quality of
the resources at our disposal. This continued into 2016
with production guidance of 82,000–87,000oz at a very
competitive AISC of US$750–800/oz. The low cost of
operation (the BCMP average of US$695/oz) provides a
robust margin in what may continue to be a volatile gold
market. Following a review of the Q1 results Shanta is
confident that it will achieve the higher end of its annual
2016 production guidance of 82,000–87,000oz, and
the Company is currently updating its mine plan and AISC
guidance for the year.
The focus in 2016 will be the development of the
underground operation to transition high grade
production from the open pits in the second half of
2017. This involves the delivery of a new and expanded
7.5MW power station, underground portal and decline
development from within the Bauhinia Creek Pit and all
associated infrastructure.
Other major projects include the construction of a new
TSF, the design of which is sufficient for eight years
operation at current production, and completion of the
Phase 1 of the Luika River Dam to provide lowest cost
process water security.
On exploration, the team is focused on on-mine and near
mine exploration opportunities that have the potential
to add to reserves and thus progressively increase the
life of a very successful mining operation. The BCMP will
be updated accordingly to capture and demonstrate
that value.
At Singida, after a protracted relocation process, the
Company is taking steps to bring the process to a
satisfactory conclusion to enable value to be generated
from this asset.
Following completion of the Placing, the Company
intends to undertake an open offer for up to €5.0
million to enable existing shareholders not participating
in the Placing to participate in the fundraising on the
same terms.
Shanta is always looking for ways to improve the way it
operates. While this works across all disciplines, in 2016
the Company expects to see material benefits flowing
through in Finance and Administration and Sustainability
with improved systems and processes in place.
7
CHIEF EXECUTIVE OFFICER’S REVIEW
Acknowledgement
I would like to thank the Shanta team for their efforts and
support in what has been a year of considerable change. I
would also like to thank the Chairman and members of the
Board for their support and guidance during the past year.
Lastly, I would like to thank our shareholders for their
continued interest and support. I have enjoyed immensely
the privilege of working with the Shanta team on
their behalf.
Toby J Bradbury
Chief Executive Officer
9 May 2016
8
Shanta Gold Limited Annual Report and Accounts 2015 CHIEF EXECUTIVE OFFICER’S REVIEW
9
ANNUAL SUSTAINABILITY REPORT
Annual sustainability report
Occupational safety
In line with the Company’s Values, Safety and
Environmental Management are the first priorities in
Shanta’s business activities. Safety performance is a key
measure of the Company’s duty of care; its ability to mine
efficiently and safely and furthermore, demonstrates
Shanta’s approach to productivity. The low injury and
absentee rates are generally linked to positive trends in
staff morale, overall ownership in the Company’s success
and the care that employees have for one another. Shanta
would like every employee to return home safely and
unharmed each day.
Key achievements for FY2015 include:
ཛྷ Development of an integrated safety
management system;
ཛྷ Improved hazard identification and reporting;
ཛྷ Compliance to legal requirements (i.e. Audits by the
Occupational Safety Health Administration and the Fire
and Rescue Force);
ཛྷ Installation of a radio communication system in all
mine vehicles;
ཛྷ Introduction of quarterly employee and contractor
safety awards;
ཛྷ On-going senior manager safety walkthroughs;
ཛྷ Formation of a trained and formalised Emergency
Rescue Team;
ཛྷ Development of the underground safety protocols and
training programme; and
ཛྷ Establishment of a Health and Safety Representative
Committee (“HSRC”), that comprises all Heads
of Departments and representatives from every
functional level.
This report has been developed to establish incremental
adherence to the Global Reporting Initiative (“GRI”), G4
Sustainability Reporting Guidelines.
Shanta Gold supports the GRI as it provides a globally
applicable standard for demonstrating transparent
sustainability impacts and evaluating controls to
mitigate risks.
This Sustainability Report covers:
ཛྷ Employee Numbers;
ཛྷ Occupational Safety;
ཛྷ Health;
ཛྷ Employee Benefits;
ཛྷ Community;
ཛྷ Environment;
ཛྷ Energy;
ཛྷ Sustainable Development; and
ཛྷ Engagement.
During FY2015, Shanta has undertaken significant
measures to understand and improve the operational
and strategic management of sustainability related risks
and opportunities. This work created the foundation for
better management of sustainability issues throughout
the business.
Employee numbers
New Luika Gold Mine’s total number of employees
and contractors grew from 808 in FY2014 to 1,045 in
FY2015, an increase of 29%. This substantial increase
was due to several labour intensive, but cost effective
projects, like the Luika River Dam construction and
site demarcation clearing. Of Shanta’s workforce,
93% is Tanzanian and approximately 40% live in the
local villages. There were 19 terminations and eight
resignations during FY2015. This resulted in a low
turnover ratio of 2.6%.
10
Shanta Gold Limited Annual Report and Accounts 2015 ANNUAL SUSTAINABILITY REPORT
Frequency rates
The Injury Frequency Rate (“IFR”) used for establishing the
Incident Frequency Rates is internationally recognised and
is outlined below:
Cumulative IFR =
Total number of injuries x 1,000,000
Number of man hours worked
Total injuries include all first aid incidents, dressing cases,
medical injuries, and Lost Time Injuries (“LTI”). During
FY2015, there was one LTI resulting in a LTI frequency
rate of 0.39. Prior to this incident, the mine achieved
5,940,627 hours, 942 days without a LTI, with the
previous LTI being recorded on 15 March 2013.
Total injuries summary
Days since last LTI
Total man hours 2015
Lost time injury frequency rate
Medical treatment injury frequency rate
Total injury frequency rate
131
2,791,927
0.39
1.57
6.09
Figure 1: Cumulative total injury frequency rate year on year (TIFR)
Health
Key achievements for FY2015 include:
ཛྷ Implementation of an employee wellness programme
that has encouraged fitness and a work life balance.
This also included an introduction of after-work
volleyball and bicycles for commuting in the non-
production areas of the site;
ཛྷ Occupational health surveillance and fitness
assessments conducted for mine employees
and contractors;
ཛྷ 430 employees and contractors trained on HIV/AIDS
awareness and prevention;
ཛྷ 480 employees and contractors voluntarily tested
for HIV;
ཛྷ Ongoing support with local community health: support
for clinic facilities and medical services;
ཛྷ New clinic infrastructure which caters to key
occupational health issues; and
ཛྷ Given an increase in reported malaria cases, the
Company is investigating options to mitigate further
cases going forward.
Occupational health and illness
Total number of employees and contractors
Total medical visits due to illness
Total medical visits for fit for work examinations
Total days lost due to illnesses
Malaria cases
2015
1,045
1,258
1,045
688
82
2014
808
1,425
808
725
36
Employee benefits
Employees of Shanta receive the following benefits in
addition to their monthly salary:
Benefit
Life insurance
On-site medical treatment
Disability/invalidity
Parental leave
Retirement
Meals
Accommodation
Transport
Bonus
Employees 1
Full time
Part time
●
●
●
●
●
●
●
● 3
●
●
●
●
●
●
● 2
● 2
● 2
●
1. These benefits are for Shanta employees and do not include contractors.
2. Employees that live in the local villages return home after work.
3. Transport provided to facilitate breaks after 6:3 rotations, and for transportation
to and from local villages.
11
9.54.94.94.94.74.64.55.16.05.76.06.14.56.77.56.76.36.25.26.16.97.68.17.90246810JanFebMarAprMayJunJulAugSepOctNovDec2014 YTD TIFR2015 YTD TIFR ANNUAL SUSTAINABILITY REPORT
Community
Highlights of FY2015 include:
ཛྷ Regular monthly meetings between the NLGM General
Manager and key stakeholder village councils;
ཛྷ Resettlement scoping (NLGM) and Valuations
(Singida), in accordance with the International Finance
Corporation’s Performance Standards. The relocation
exercise at Singida has continued through FY2015
with independent valuations completed for all the
landholders that may potentially be impacted by the
operation. The situation at the time of writing is that
the community has yet to accept the independent
valuations. There is an expectation that this could
be resolved satisfactorily in H1 2016 and Shanta is
extending its presence on the ground in preparation for
work on an updated study of the project;
ཛྷ Support for building of school classrooms, maternity
ward, dispensary and provision of scholarships; and
ཛྷ Community water support during the dry season.
Environment
Key successes during FY2015 dealt with the engagement
with water, environment and mining regulators.
ཛྷ A review and scoping of Water Monitoring Program
was undertaken as well as a Waste Management Plan
scoped and implemented;
ཛྷ Improved Tailings Storage Facility and Waste Rock
Dump Management;
ཛྷ Air Quality, Noise and Vibrations studies completed and
an integrated NLGM Closure Plan in progress; and
ཛྷ Management Standards were developed for: Water,
Waste, Chemical, Air Quality, Noise and Vibration,
Land Use and Biodiversity and Environmental Incident
Reporting improved.
Environmental incidents reported in FY2015 related to
accidental fauna death, minor and contained tailings
discharge, and spillage of oils. The improvement in
incident reporting, incident investigation and mitigation
and general awareness of the importance of incident
reporting, has contributed to the increase in reported
incidents for FY2015. Reflective metal sheeting has been
installed on all fencing to reduce the incidents of wildlife
accidents on site.
Figure 2: Cumulative environmental incidents
35
30
25
20
15
10
5
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2012
2013
2014
2015
Energy
There has been a significant drop in diesel usage for
power generation from FY2014 to FY2015, by almost
one million litres. This was achieved following the
commissioning of Heavy Fuel Oil power generation from
May 2014. A total of 19,811Mwh of power was generated
including 96MW from Solar with 67 Te of CO2 being saved.
NLGM energy supply
Year
2012
2013
2014
2015
Energy from generators
Solar plant
HFO (ltrs)
Diesel (ltrs)
Power generat-
ed (Mwh)
Power generat-
ed (Mwh)
—
—
3,242,396
3,911,389
1,402,910
4,418,247
1,951,744
1,038,603
9,233
18,674
19,727
19,811
0
0
43
96
CO2 saved (Te)
0
0
35
67
12
Shanta Gold Limited Annual Report and Accounts 2015 ANNUAL SUSTAINABILITY REPORT
Sustainable development
Shanta’s long term Sustainable Development objective is
to promote the creation of co-operatives and industries
that increase the resilience and competitiveness of
people in the areas where we operate. The programme is
designed to catalyse the following possible outcomes, but
not limited to:
ཛྷ Integrated Closure and Independent Communities:
– development of processes to create live Closure
Planning; and
– development of the Long-Term Sustainable
Development Plan which positions Shanta as a
Catalyst, and potential development partners as the
implementation agents
ཛྷ Reduced dependency on the mine;
ཛྷ Creation of jobs and increased livelihood security to the
people in areas where we operate;
ཛྷ Environmental rehabilitation through ecosystems
regeneration and connected wild spaces;
ཛྷ Economically viable alternative reuse of mining sites
and infrastructure;
ཛྷ Increased economic activity and participation in
the region;
ཛྷ Reduced impact of artisanal miners, and other
encroachment activities on the operations and
surrounding areas; and
ཛྷ Improved water security.
Shanta is working with the respective districts, authorities
and key agencies to develop integrated plans and
business cases for these objectives.
Highlights of 2015:
ཛྷ Development of the Sustainability and Asset Protection
Management Framework. These enabling areas of
the business have been integrated to create the
environment for mining to occur;
ཛྷ Weekly NLGM and regular CEO newsletters have been
developed and sent to all employees and stakeholders;
ཛྷ Several regulator and stakeholder visits to site for
orientation and to improve their understanding of the
Company’s risk management procedures; and
ཛྷ Implementation of the Voluntary Principles on Security
and Human Rights.
In FY2015 the key work areas included:
ཛྷ Integration of Sustainability Practices;
ཛྷ Mainstreaming and Communication of
the Shanta Values;
ཛྷ Strengthening of Governance Processes,
which included:
– review of risks and training on risk
management processes
– policy and standards update or drafting of new
policies; and
– implementation of the International Cyanide Code,
Equator Principles, IFC Performance Standards and
World Bank Resettlement Guidelines
Engagement
Shanta understands the complexities involved in
sustainable partnership development, and has already
done research into viable options that will benefit,
grow, develop and sustain the region. The Company
has engaged experienced sustainability professionals,
who have worked in various industries, sectors and
geographies where they have supported similar
processes. The Company is working to secure partners
that will assist in the development and implementation
of projects that create longer term sustainability for
communities in which Shanta operates.
In keeping with the Shanta Mine Closure objectives, the
Company’s Sustainable Development Plan has been
developed with a focus on being a key development
catalyst for the districts where Shanta operates.
Together with the District, we have reviewed the District
Development Plan, and engaged the Chunya District on
our long-term objectives. Together, we have formed The
Integrated Mine Closure and Sustainable Development
Committee of the Chunya District (“Closure Committee”).
The purpose of the Closure Committee is to oversee
Sustainable Development and related mine
closure processes.
Furthermore, we have also formed the District Security
Committee (“DSC”) to support the maintenance of a
secure and safe operating environment. The Company’s
first line of defence is to secure strong and enduring
relationships with key stakeholders. This includes
Shanta’s employees, local communities, local, district,
regional and national government, government agencies,
public security forces, private security providers, industry
security teams, foreign embassies and professional
security networks.
The DSC which includes key security representatives from
the District and Shanta, is accountable for maintaining
a peaceful and law-abiding environment within the
Chunya District. As such, the Head of Asset Protection,
along with other key Shanta representatives engages the
DSC on a regular basis to ensure transparent and open
communication regarding the protection of Shanta’s
assets and operations, and also to ensure a stable
operating environment.
13
Process plant at New Luika
14
Shanta Gold Limited Annual Report and Accounts 2015 15
DIRECTOR’S REPORT
Director’s report
The Directors present their annual report and the
financial statements of the Group for the year ended
31 December 2015.
Directors
The Directors who served during the year and to the date
of this report are as follows:
Non-Executive
ཛྷ Anthony Peter Wynn Durrant (Chairman)
ཛྷ Robin Anthony Fryer
ཛྷ Michael John Houston (retired on 29 May 2015)
ཛྷ Ketankumar Vinubhai Patel
ཛྷ Luke Alexander Leslie
ཛྷ John Edward Rickus
Executive
ཛྷ Toby Jonathan Bradbury (appointed on 1 April 2015)
ཛྷ Patrick Maseva-Shayawabaya (appointed on
1 April 2015 and resigned on 31 October 2015)
No Director shall be requested to vacate his office at
any time by reason of the fact that he has attained any
specific age. The Board considers that there is a balance
of skills within the Board and that each of the Directors
contributes effectively.
General
The Company was established in 2005. On 11 July 2005,
its shares were listed on the London Stock Exchange’s AIM
market. The Company is a non-cellular Company limited by
shares incorporated in Guernsey.
Principal activity
The Group’s principal activity is that of investment in gold
exploration and production in Tanzania.
Business review
A review of the business during the year is contained
in the Chairman’s Address on page 1 and in the Chief
Executive Officer’s Review on pages 3 to 8 . The Group’s
business and operations and the results thereof are
reflected in the attached financial statements. It is the
business of the Group and its subsidiaries to explore
for value adding resources, financed by the Company
and to turn commercially viable findings into a mineral
production asset.
The activities for the year have resulted in the Group’s net
loss of US$18.1 million (2014: net profit US$8.9 million).
Except as disclosed in Note 30 to the financial statements,
no other material fact or circumstance has occurred
between the accounting date and the date of this report.
Nominated advisor
The Company’s nominated advisor is Peel Hunt LLP.
Financial results
The results for the year are set out in the consolidated
statement of comprehensive income on page 23. No
dividends were proposed by the Board of Directors
(2014: US$ Nil).
16
Shanta Gold Limited Annual Report and Accounts 2015 DIRECTOR’S REPORT
Director’s remuneration
(US$’000)
Toby Jonathan Bradbury2
Nicholas Davis1
Anthony Peter Wynn Durrant1
Robin Anthony Fryer1
Paul Heber1
Michael John Houston2
Patrick Maseva-Shayawabaya2
Luke Alexander Leslie1
Ketankumar Patel1
John Rickus1
Sub-total
Share based payments
Toby Jonathan Bradbury2
Michael John Houston2
Anthony Peter Wynn Durrant1
Grand Total
1. Non-executive.
2. Executive.
31 December 2015
31 December 2014
Performance
bonus
Fees/salary
Termination
payment
132
405
—
—
—
—
40
—
—
—
—
—
96
65
—
149
262
65
75
65
—
—
—
—
—
97
64
—
—
—
Total
537
—
96
65
—
286
326
65
75
65
Performance
bonus
Fees/salary
Total
—
—
—
—
—
—
43
96
65
43
—
43
96
65
43
186
423
609
—
—
—
—
—
65
65
65
—
65
65
65
172
1,182
161
1,515
186
865
1,051
—
—
—
—
—
—
—
—
—
—
—
—
—
62
—
61
—
—
—
—
—
—
—
—
—
—
79
26
172
1,182
161
1,638
186
865
1,156
Executive Directors are provided with life assurance cover of two times annual salary.
Directors’ responsibilities statement
The Companies (Guernsey) Law, 2008 requires the
Directors to prepare financial statements for each financial
period, which give a true and fair view of the state of
affairs of the Group for that period and of the profit or loss
of the Group for that period. Under that law they have
elected to prepare the financial statements in accordance
with International Financial Reporting Standards as
adopted by the EU and applicable law. In preparing those
financial statements the Directors are required to:
ཛྷ select suitable accounting policies and then apply them
consistently
ཛྷ make judgments and estimates that are reasonable
and prudent
ཛྷ state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the financial
statements; and
ཛྷ prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group will continue in business
The Directors are responsible for keeping proper
accounting records which disclose with reasonable
accuracy at any time the financial position of the
Group and to enable them to ensure that the financial
statements have been properly prepared in accordance
with the Companies (Guernsey) Law, 2008. They are also
responsible for safeguarding the assets of the Group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors confirm that they have complied with the
above requirements in preparing the financial statements.
So far as each of the Directors are aware, there is no
relevant audit information of which the Group’s auditor is
unaware; having taken all the steps the Directors ought
to have taken to make themselves aware of any relevant
audit information and to establish that the Group’s auditor
is aware of that information.
Website publication
The Directors are responsible for ensuring that the annual
report and the financial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with applicable
legislation in Guernsey governing the preparation
and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial
statements contained therein.
17
DIRECTOR’S REPORT
Going concern
As noted earlier in the annual report the Company
announced that it has reached an agreement with
over 75% of the holders of the US$25.0 million senior
unsecured subordinated convertible loan notes to
buyback US$10.0 million of the Notes and to extend the
term of the repayment of the remaining notes by two years
to April 2019 with a concurrent increase to the coupon
from 8.5% to 13.5%. The buyback will be funded from
existing funds on hand and the reduced outflows in the
next 12 months further improves the available financial
resources for the Company during its planned capital
development program of over US$48 million during 2016
and 2017.
As a result of the above refinancing and after making
enquiries, and bearing in mind the nature of the Group’s
business and assets, the Directors consider that the
Group has adequate resources to continue its operational
existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing
the financial statements. Refer to note 30.3 where details
of the restructuring of the Convertible Loan Notes which
mature in April 2017.
Auditor
BDO LLP has expressed their willingness to continue
in office as auditors and a resolution to re-appoint
BDO LLP will be proposed at the forthcoming annual
general meeting.
Share options
Share options have been granted to the following current
and past Directors under the Share Option Plan and are all
outstanding at 31 December 2015:
Grant date
No. of share
options
Option
price
Walton Norman Brian Imrie1
7-Sep-09
350,000
6p
Walton Norman Brian Imrie1
16-Nov-10
250,000
28.25p
Walton Norman Brian Imrie1
26-Oct-11
Walton Norman Brian Imrie1
26-Oct-11
250,000
750,000
Walton Norman Brian Imrie1
26-Oct-11
1,000,000
Ketankumar Vinubhai Patel
7-Sep-09
150,000
25p
30p
35p
6p
1. Former Chairman
The share option plan was adopted by the Board of
Directors on 1 July 2005, details of which are available
at the Company’s registered office. 1,330,403 share
options granted to Walter Egmund Vorwerk lapsed on
31 December 2014 whilst 350,000 share options with an
option price of 6p were exercised in January 2015.
Under the share option plan where the option holder
relinquishes his contract of employment with the Group,
any vested options will expire upon 12 months from the
date of termination of their contract, unless otherwise
agreed by the Directors. Further details, including
share options provided to employees of the Group, are
contained in note 24 to the financial statements.
Performance award shares
Performance award shares totalling 2,250,000
previously issued to the previous Chief Executive Officer,
Michael Houston lapsed during the year.
On 1 January 2015, Dr. Toby Bradbury as the Chief
Executive Officer designate was granted two sets of
Performance Award shares totalling 1,000,000 and
Retention shares totalling 500,000.
The First Performance Award shares of 500,000 have a
trigger price of 11.42 pence (being the volume weighted
average price [VWAP] for the period 24 November
to 31 December 2014 of 9.13 pence plus 25%
premium). These shares will vest as follows: 25% on
31 December 2015, 25% on 31 December 2016, and
50% on 31 December 2017. The trigger price on these
shares was achieved in January 2015.
The Second Performance Award shares of 500,000 have
a trigger price of 13.70 pence (being the VWAP for the
period 24 November to 31 December 2014 of 9.13 pence
plus 50% premium). These shares will vest as follows:
25% on 31 December 2015, 25% on 31 December 2016,
and 50% on 31 December 2017. The 500,000 Retention
shares will vest on 31 December 2017.
A further 1,150,000 Retention shares have been
approved and made available in April 2016 for
allocation to senior members of staff. On 15 April
2016, Dr. Toby Bradbury the Chief Executive Officer was
granted a further two sets of Performance Award shares
totalling 1,000,000.
The Third Performance Award shares of 500,000
have a trigger price of 8.83 pence (being the volume
weighted average price [VWAP] for the period 6 March to
15 April 2016 of 7.06 pence plus 25% premium). These
shares will vest as follows: 50% on 31 December 2016
and 50% on 31 December 2017.
The Fourth Performance Award shares of 500,000 have
a trigger price of 10.59 pence (being the VWAP for the
period 6 March to 15 April 2016 of 7.06 pence plus
50% premium). These shares will vest as follows: 50% on
31 December 2016 and 50% on 31 December 2017.
Signed on behalf of the Board of Directors on 9 May 2016.
Toby J Bradbury
Chief Executive Officer
Anthony P W Durrant
Chairman
18
Shanta Gold Limited Annual Report and Accounts 2015 CORPORATE GOVERNANCE
Corporate Governance
Guernsey does not have its own corporate governance
regime. As a Guernsey-registered Company traded on
the AIM Market of the London Stock Exchange, the
Company is not required to comply with the UK Corporate
Governance Code (the ‘Code’) issued by the Financial
Reporting Council. However, the Group aims to comply
with best practice in the industry and has provided details
of its practices below.
Board of directors
The Company has one Executive Director and five Non-
Executive Directors at the year end. All major decisions
relating to the Group are made by the Board as a whole.
Operations are conducted by the subsidiaries of the
Company (principally Shanta Mining Company Limited)
under the direction of the Chairman of each of the
Anthony Peter Wynn Durrant
Ketankumar Vinubhai Patel
Michael John Houston
Toby Jonathan Bradbury
Luke Alexander Leslie
Robin Anthony Fryer
John Edward Rickus
Patrick Maseva-Shayawabaya
Number of meetings held in the year
Non-Executive
Non-Executive
Executive
Executive
Non-Executive
Non-Executive
Non-Executive
Executive
subsidiary companies. The Company is represented on
the board of Shanta Mining Company Limited. The Board
reviews key business risks regularly, including the financial
risks facing the Group in the operation of its business.
The Group operates a share dealing code for Directors on
the basis set out in the AIM Rules.
Board meetings
The Board aims to meet at least quarterly and as required
from time to time to consider specific issues required for
decision by the Board.
The table below shows the attendance at board meetings
during the year to 31 December 2015:
Board
meeting
Audit
committee
Remuneration
committee
Sustainability
committee
4
3
2
3
4
4
4
2
4
—
2
—
—
3
3
—
—
3
—
—
—
—
3
3
3
—
3
1
3
—
—
—
—
3
—
3
Audit Committee
The Group has an Audit Committee, comprised of three
Non-Executive Directors being Robin Fryer (Chairman),
Ketankumar Patel and Luke Leslie. The Audit Committee
aims to meet at least once each year and is responsible for
ensuring that appropriate financial reporting procedures
are properly maintained and reported on, and for meeting
with the Group’s auditor and reviewing their reports and
accounts and the Group’s internal controls. The Audit
Committee met three times in 2015.
Remuneration Committee
The Group has a Remuneration Committee, comprised
of three Non-Executive Directors being John Rickus
(Chairman), Luke Leslie and Robin Fryer. The
Remuneration Committee aims to meet at least once a
year and is responsible for reviewing the performance
of the senior staff, setting their remuneration,
determining the payment of bonuses, considering the
grant of options under any share option plan and, in
particular, the price per share and the application of the
19
CHIEF EXECUTIVE OFFICER’S REVIEW
performance standards which may apply to any grant. The
Remuneration Committee met three times in 2015.
Sustainability Committee
The Group has a Sustainability Committee, comprised
of Non-Executive Directors being Ketankumar Patel
(Chairman), John Rickus and Tony Durrant. The
Sustainability Committee aims to meet at least once a
year and is responsible for reviewing the Group’s safety,
occupational health, environmental as well as community
and social responsibility practices. The Sustainability
Committee met three times in 2015.
Signed on behalf of the Board of Directors on 9 May 2016.
Toby J Bradbury
Chief Executive Officer
Anthony P W Durrant
Chairman
20
Shanta Gold Limited Annual Report and Accounts 2015 INDEPENDENT AUDITOR’S REPORT
Independent auditor’s report to the
members of Shanta Gold Limited
We have audited the consolidated financial
statements of Shanta Gold Limited for the year ended
31 December 2015 which comprise the consolidated
statement of comprehensive income, the consolidated
statement of financial position, the consolidated
statement of changes in equity, the consolidated
statement of cash flows and the related notes. The
financial reporting framework that has been applied in
their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union.
This report is made solely to the Parent Company’s
members, as a body, in accordance with Section 262
of the Companies (Guernsey) Law, 2008. Our audit
work is undertaken so that we might state to the Parent
Company’s members those matters we are required to
state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the
Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of the Directors
and auditor
As explained more fully in the Directors’ responsibilities
statement within the Directors’ Report, the Directors
are responsible for the preparation of the consolidated
financial statements and for being satisfied that they give
a true and fair view.
Our responsibility is to audit and express an opinion on
the consolidated financial statements in accordance with
applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply
with the Financial Reporting Council’s Ethical Standards
for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the Group’s
circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the
overall presentation of the financial statements. In
addition, we read all the financial and non financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements, and
to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent misstatements
or inconsistencies we consider the implications for
our report.
Opinion on the financial statements
In our opinion the consolidated financial statements:
ཛྷ give a true and fair view of the state of the Group’s
affairs as at 31 December 2015 and of the Group’s loss
for the year then ended
ཛྷ have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
ཛྷ have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008
21
INDEPENDENT AUDITOR’S REPORT
Matters on which we are required to report
by exception
We have nothing to report in respect of the following
matters where the Companies (Guernsey) Law, 2008
requires us to report to you if, in our opinion:
ཛྷ proper accounting records have not been kept by the
Parent Company; or
ཛྷ the consolidated financial statements are not in
agreement with the accounting records; or
ཛྷ we have failed to obtain all the information and
explanations, which, to the best of our knowledge and
belief, are necessary for the purposes of our audit
BDO LLP
Chartered Accountants
London, United Kingdom
9 May 2016
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
22
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
Consolidated statement of
comprehensive income
(US$’000)
Revenue
Notes
31 Dec 2015
95,705
31 Dec 2014
114,857
Gain on non-hedge derivatives and other commodity contracts
4
Other cost of sales
Amortisation
Total cost of sales
Gross Profit
Administration expenses
Exploration and evaluation costs
Operating (loss)/profit
Finance income
Finance expense
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year attributable to the equity
holders of the parent Company
(Loss)/profit per share attributable to the equity holders
of the parent Company
Basic (loss)/profit per share (US$ cents)
Diluted (loss)/profit per share (US$ cents)
(Loss)/profit after taxation
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign entities which
can subsequently be reclassified to profit or loss
Total comprehensive (loss)/profit attributable to the equity
shareholders of the parent
5
6
7
8
9
9
9
2,253
(54,075)
(42,319)
(96,394)
1,564
(10,255)
(2,434)
(11,125)
112
(7,097)
(18,110)
804
(17,306)
—
(69,999)
(10,218)
(80,106)
34,751
(8,956)
(2,862)
22,933
509
(6,872)
16,570
(7,715)
8,855
(3.727)
(3.727)
1.907
1.890
(17,306)
8,855
100
(17,206)
(26)
8,829
The loss (2014: profit) for the year and the total comprehensive loss (2014: profit) for the year are attributable to the
equity holders of the Parent Company. There are no non-controlling interests. The items in the above statement are derived
from continuing operations.
The accompanying notes on pages 27 to 50 form an integral part of these financial statements.
23
FINANCIAL STATEMENTS
Consolidated statement of
financial position
(US$’000)
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total current assets
TOTAL ASSETS
CAPITAL AND RESERVES
Equity
Share capital and premium
Share option reserve
Convertible loan note reserve
Shares to be issued
Translation reserve
Retained deficit
TOTAL EQUITY
LIABILITIES
Non-current liabilities
Loans and other borrowings
Convertible loan notes
Provision for decommissioning
Provision for deferred taxation
Total non-current liabilities
Current liabilities
Loans payable to related parties
Trade and other payables
Loans and other borrowings
Total current liabilities
TOTAL EQUITY AND LIABILITIES
Notes
31 Dec 2015
31 Dec 2014
10
11
15
14
16
22
24
19
20
21
8
17
18
19
23,201
91,093
114,294
10,737
8,717
500
19,117
39,071
153,365
133,842
3,202
5,374
82
881
(66,712)
76,669
30,630
23,446
5,979
6,696
66,751
—
5,883
4,062
9,945
153,365
23,208
108,724
131,932
12,707
9,123
500
14,878
37,208
169,140
132,941
4,067
5,374
416
781
(50,228)
93,351
16,592
21,843
8,970
7,787
55,192
337
6,143
14,117
20,597
169,140
The financial statements were approved and authorised for issue by the board of Directors on 9 May 2016 and signed on
its behalf by:
Toby J Bradbury
Chief Executive Officer
Anthony P W Durrant
Chairman
The accompanying notes on pages 27 to 50 form an integral part of these financial statements.
24
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
Consolidated statement of
changes in equity
(US$’000)
Total equity
31 December 2013
Profit for the year
Other comprehensive loss for the year
Total comprehensive profit for year
Share based payments
Shares issued
Lapsed options
Share
capital
Share
premium
Share
option
reserve
Convertible
loan note
reserve
Translation
reserve
Shares to
be issued
Retained
deficit
Total
equity
76 132,797
4,286
5,374
807
(60,192)
83,148
(26)
(26)
416
8,855
8,855
(26)
8,855
8,829
1,306
68
1,109
68
890
(1,109)
Total equity 31 December 2014
76 132,865
4,067
5,374
781
416
(50,228)
93,351
Loss for the year
Other comprehensive income for
the year
Total comprehensive loss for year
Share based payments
Shares issued
Exercise of options
Lapsed options
100
100
(334)
(17,306)
(17,306)
100
(17,306)
(17,206)
367
157
822
491
410
367
(410)
(822)
Total equity 31 December 2015
76 133,766
3,202
5,374
881
82
(66,712)
76,669
The nature and purpose of each reserve within Shareholders’ equity is described as follows:
Reserve
Share capital
Description and purpose
Amount subscribed for share capital at nominal value
Share premium
Amount subscribed for share capital in excess of nominal value
Share option reserve
Cumulative fair value of options charged to the statement of comprehensive income net of transfers to
the profit and loss reserve on exercised and cancelled/lapsed options
Convertible loan note reserve
Equity element of convertible loan note
Translation reserve
Cumulative gains and losses on translating the net assets of overseas operations to the
presentation currency
Share to be issued
Nominal value of share capital and premium on shares to be issued
Retained deficit
Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
The accompanying notes on pages 27 to 50 form an integral part of these financial statements.
25
FINANCIAL STATEMENTS
Consolidated statement of
cash flows
(US$’000)
Net cash flows generated from operating activities
Notes
25
31 Dec 2015
35,017
31 Dec 2014
39,042
Investing activities
Purchase of intangible assets
Purchase of plant and equipment
Asset under construction
Open pit development expenditure
Proceeds from disposal of asset
Net cash flows used in investing activities
Financing activities
Loans repaid
Equipment loan repaid
Finance lease payments
Loan interest paid
Net refund of restricted cash
Loans received (net of loan arrangement fees)
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(71)
(2,048)
(8,509)
(18,904)
—
(29,532)
(25,237)
(579)
(165)
(4,398)
—
29,133
(1,246)
4,239
14,878
19,117
(31)
(11,026)
(1,936)
(9,976)
6
(22,963)
(11,250)
(288)
—
(4,401)
100
—
(15,839)
240
14,638
14,878
The accompanying notes on pages 27 to 50 form an integral part of these financial statements.
26
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
Notes to the
financial statements
1. General information
Shanta Gold Limited (the Company) is a limited
company incorporated in Guernsey. The address of
its registered office is Suite A, St Peter Port House,
Sausmarez Street, St Peter Port, Guernsey. The
nature of the Group’s operations and its principal
activities are set out in the Chairman’s address to
shareholders, the Sustainability Report, the Chief
Executive Officer’s review (pages 3–8) and the
Directors’ report (pages 16–18).
These financial statements were approved
and authorised for issue on 9 May 2016 by
Toby J Bradbury and Anthony W P Durrant on behalf
of the Board.
The Company has reached an agreement with the
holders of over 75% of the US$25.0 million senior
unsecured subordinated convertible loan notes to
buyback US$10.0 million of the Notes and to extend
the term of the repayment of the remaining notes by
two years to April 2019 with a concurrent increase
to the coupon from 8.5% to 13.5%. The buyback
will be funded from existing funds on hand and the
reduced outflows in the next 12 months further
improves the available financial resources for the
Company during its planned capital development
program of over US$48 million during 2016
and 2017.
As a result of the above refinancing and after making
enquiries, and bearing in mind the nature of the
Group’s business and assets, the Directors consider
that the Group has adequate resources to continue
its operational existence for the foreseeable future.
For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
Refer to note 30.3 where details of the restructuring
of the Convertible Loan Notes which mature in April
2017 are referenced.
2.
Accounting policies
The principal accounting policies adopted in
the preparation of the consolidated financial
statements are set out below. The policies have
been consistently applied to all the years presented,
unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements have been
prepared under the historical cost convention except
for certain financial instruments which are carried
at fair value, as explained in the accounting policies
below. They are presented in US Dollars, which is
also the Company’s functional currency. Amounts
are rounded to the nearest thousand, unless
otherwise stated.
The financial statements have been prepared in
accordance with International Financial Reporting
Standards (IFRS and IFRIC Interpretations) issued
by the International Accounting Standards Board
(“IASB”), as adopted by the European Union (“IFRS”).
The preparation of financial statements in
compliance with adopted IFRS requires the use
of certain critical accounting estimates. It also
requires Group management to exercise judgment in
applying the Group’s accounting policies. The areas
where significant judgments and estimates have
been made in preparing the financial statements
and their effect are disclosed in note 3.
We are still assessing the impact of IFRS 15 and it is
not anticipated that the adoption in the future of the
other new revised standards and interpretations that
have been issued by the International Accounting
Standards Board but are not yet effective will
have a material impact in the Group’s earnings or
shareholders’ funds. The Company has not adopted
any new standards in advance of the effective date.
27
FINANCIAL STATEMENTS
The principal accounting policies adopted are set
out below.
in other comprehensive income and accumulated in
the foreign exchange translation reserve.
2.2 Basis of consolidation
2.4 Transactions and balances
Subsidiaries
Subsidiaries are all entities (including structured
entities) over which the group has control. The
group controls an entity when the group is
exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability
to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the group.
They are de-consolidated from the date that control
ceases. Where necessary, adjustments are made
to the financial statements of subsidiaries to bring
their accounting policies into line with those used
by other members of the Group. All intra-Group
transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
The acquisition method of accounting is used to
account for business combinations by the Group.
The consideration transferred for the acquisition of
a business is the fair value of the assets transferred,
liabilities incurred and the equity interests issued by
the Group. The consideration transferred includes
the fair value of any asset or liability resulting from a
contingent consideration arrangement. Acquisition
related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in a business combination
are measured initially at their fair values at the
acquisition date.
2.3 Foreign currencies
Functional and Presentation Currency
The individual financial statements of each Group
Company are prepared in the currency of the
primary economic environment in which it operates
(its functional currency). For the purpose of the
consolidated financial statements, the results and
financial position of each Group Company are
expressed in US dollars, which is the functional
currency of the Company and the presentation
currency for the consolidated financial statements.
Assets and liabilities of foreign entities (i.e. those
with a functional currency other than US$) are
translated at rates of exchange ruling at the financial
year end and the results at rates approximating
to those ruling when the transactions took place.
Exchange differences arising on translating the
opening net assets at opening rate and the results
of overseas operations at actual rate are recognised
In preparing the financial statements of the
individual companies, transactions in currencies
other than the entity’s functional currency (foreign
currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each
reporting date, monetary assets and liabilities that
are denominated in foreign currencies are re-
translated at the rates prevailing on the reporting
date. Non-monetary items carried at fair value that
are denominated in foreign currencies are translated
at the rates prevailing at the date when the fair
value was determined. Non-monetary items that
are measured in terms of historical cost in a foreign
currency are not re-translated.
Exchange differences arising on the settlement
of monetary items, and on the re-translation of
monetary items, are included in profit or loss for
the period. Exchange differences arising on the
re-translation of non-monetary items carried at fair
value are included in profit or loss for the period
except for differences arising on the re-translation of
non-monetary items in respect of which gains and
losses are recognised directly in equity. For such
non-monetary items, any exchange component of
that gain or loss is also recognised directly in equity.
2.5 Revenue recognition
The Group enters into contracts for the sale of
refined gold and silver. Revenue arising from sales
under these contracts is recognised when the
price is agreed, the product has been delivered
in accordance with the terms of the contract, the
significant risks and rewards have been transferred
to the customer.
The Group enters into forward sales contracts for the
sale and delivery of gold at a pre-determined and
agreed price. Revenue arising from forward sales
contracts is recognised upon delivery of product in
terms of the contract.
2.6
Inventory
Stores and consumables are stated at the lower
of cost and net realisable value. The cost of stores
and consumables includes expenditure incurred in
acquiring the inventories and bringing them to their
existing location and condition.
Gold ore stockpiles are valued at the lower
of weighted average cost, including related
overheads and net realisable value, using assay
28
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
data to determine the amount of gold contained
in the stockpiles, adjusted for expected gold
recovery rates.
Gold bullion and gold in process are stated at the
lower of weighted average cost and net realisable
value. Cost includes direct materials, direct
labour costs and production overheads, including
depreciation of relevant mining properties.
Net realisable value is the estimated selling price
less all expected costs to completion and costs to be
incurred in selling.
2.7 Exploration and evaluation assets
and expenditure
Exploration and evaluation expenditure, which is
defined as expenses incurred until an ore body
is considered commercially recoverable, is, with
the exception of costs of acquiring tenement
rights, expensed. The costs of acquiring mining
and prospecting licenses, which are reflected in
the financial statements as intangible assets, are
capitalised and will be amortised when mining
operations commence over the mine life or unit of
production method. Costs of entering into option
agreements to explore and evaluate other license
holders’ rights, with the option of converting these
licenses are also capitalised and treated on the
same basis.
Subsequent to initial recognition, tenement rights
are assessed for impairment annually and when
facts and circumstances indicate they may be no
longer viable, or where licenses have expired with
no intention of renewal, an impairment loss is
recognised as exploration costs in the statement
of comprehensive income. Where expiring licenses
are in the renewal process they are not considered
impaired until a decision is reached by the Licencing
Authority, unless there are circumstances which
suggest that the renewal will not be granted.
2.8 Property, plant and equipment
Items of property, plant and equipment are recorded
at purchase cost less accumulated depreciation and
impairment losses. Gains or losses on disposal of
property, plant and equipment are determined by
reference to their carrying amount and estimated
useful life. Depreciation is charged on a straight-line
basis at rates calculated to write down the cost of
each asset to its residual value over its expected
useful life. The applicable rates are as follows:
Description within mining and
other equipment
Mine equipment and vehicles
Power Generation and Office equipment
Computer equipment
Motor vehicles
Furniture and fittings
Rates (%)
25.0
12.5
33.3
25.0
16.7
Mining related assets (mining assets, mine
development, gold processing plant, decommission
and deferred stripping assets) depreciation is by
the unit of production method. The useful lives and
residual values are re-assessed annually.
2.9 Assets under construction
Pre-production expenditure, including evaluation
costs, incurred to establish or expand productive
capacity, to support and maintain that productive
capacity incurred on mines is capitalised to property,
plant and equipment. The recognition of costs in the
carrying amount of an asset ceases when the item is
in the location and condition necessary to operate
as intended by management. Any net income earned
while the item is not yet capable of operating as
intended, reduces the capitalised amount. Interest
on borrowings, incurred for the purpose of the
establishment of mining assets, is capitalised during
the construction phase.
2.10 Deferred stripping
Production stripping costs in the open pit mines
are capitalised to non-current assets if all of the
following criteria are met:
ཛྷ it is probable that the future economic benefit
associated with the stripping activity will flow to
the entity;
ཛྷ the entity can identify the component of the ore
body for which access has been improved;
ཛྷ the costs relating to the stripping activity
associated with that component can be measured
If the above criteria are not met, stripping costs are
recognised directly in profit or loss.
The Group initially measures the stripping activity
asset at cost, this being the accumulation of costs
directly incurred to perform the stripping activity that
improves access to the identified component ore.
After initial recognition, the stripping activity asset
is carried at cost less accumulated amortisation and
impairment losses. Amortisation is calculated on the
basis of units of production.
29
FINANCIAL STATEMENTS
2.11 Impairment of property, plant and equipment
The carrying amount of the Group’s non-current
assets is compared to the recoverable amount of the
assets whenever events or changes in circumstances
indicate that the net book value may not be
recoverable. The recoverable amount is the higher of
value in use and the fair value less costs to sell.
Value in use is estimated by reference to the net
present value of expected future cash flows of the
relevant cash generating unit. Individual mining
properties are considered to be separate income
generating units for this purpose, except where
they would be operated together as a single
mining business.
If the recoverable amount is less than the
carrying amount of an asset, an impairment loss
is recognised. The revised carrying amount is
amortised in line with the Group’s accounting policy.
A previously recognised impairment loss is reversed
if the recoverable amount increases as a result of
a reversal of the conditions that originally resulted
in the impairment. The reversal is recognised in
the income statement and is limited to the carrying
amount that would have been determined, net
of depreciation, had no impairment loss been
recognised in the previous reporting period.
2.12 Taxation
From 1 January 2008, the Company is taxed at the
standard rate of income tax for Guernsey companies,
which is 0%.
The Group is liable for Tanzanian tax arising on
activities in the Tanzanian subsidiaries, which are
liable for Tanzanian Corporation Tax at 30%. In
addition, the Group may be liable for withholding
taxes on the repatriation of assets and income
from the Tanzanian subsidiaries to the Company
as there is no double tax treaty between Guernsey
and Tanzania.
Taxation on the profit or loss for the year comprises
both current and deferred taxes. Current taxation is
provided for on the basis of the results for the year
computed in accordance with tax legislation and any
adjustment of the tax payable for the previous year.
statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted
for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax
assets are recognised to the extent it is probable
that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax is calculated at the tax rates that
are expected to apply in the period when the
liability is settled or the asset is realised. Deferred
tax is charged or credited to the statement of
comprehensive income, except when it relates to
items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.
2.13 Provisions
Provisions are recognised when the Group has a
present obligation, legal or constructive, resulting
from past events and it is probable that an outflow
of resources embodying economic benefits will
be required to settle the obligation and a reliable
estimate can be made of the obligation.
2.14 Decommissioning, site rehabilitation and
environmental costs
Group companies are required to restore mine and
processing sites at the end of their producing lives
to a condition acceptable to the relevant authorities
and consistent with the Group’s environmental
policies. The net present value of estimated future
rehabilitation costs is provided for in the financial
statements and capitalised within property, plant
and equipment on initial recognition. The capitalised
cost is amortised over the life of the operation.
Unwinding of the discount is recognised as finance
cost in the statement of comprehensive income as
it occurs. Changes in estimates are dealt with on the
prospective basis as they arise. The costs of on-
going programmes to prevent and control pollution
and to rehabilitate the environment are charged to
profit or loss as incurred.
The Group’s liability for current tax is calculated
using tax rates that have been enacted or
substantively enacted by the reporting date.
2.15 Share-based payment/incentive programmes
The Group has applied the requirements of IFRS 2:
Share-Based Payments.
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying
amounts of the assets and liabilities in the financial
a) The Group grants share options and incentive
share awards to executive directors and certain
employees. Share options and incentive share
30
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
awards are measured at fair value (excludes the
effect of non-market based vesting conditions) at
the date of grant. The fair value is measured using
an option pricing model at the grant date and is
expensed on a straight line basis over the vesting
period. Share based payments are expensed in
the statement of comprehensive income over the
vesting period.
b) Where the Group issues equity instruments to
persons other than employees, the statement of
comprehensive income is charged with the fair value
of goods and services received.
2.16 Warrants
Warrants are separated from the host contract as
their risks and characteristics are not closely related
to those of the host contracts. Due to the exercise
price of the warrants being in a different currency
to the functional currency of the Company, at each
reporting date the warrants are valued at fair value
with changes in fair values recognised through profit
or loss as they arise. The fair values of the warrants
are calculated using the Black-Scholes model.
2.17 Segmental information
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for
allocating resources and assessing performance of
the operating segments, has been identified as the
Board of Directors of the Company.
For management purposes, the Group is organised
into one main operating segment, this being mining,
processing, exploration and related activities. The
Group also operates in one geographical location,
Tanzania. All of the Group’s activities are interrelated
and each activity is dependent on the others.
Accordingly, all significant operating decisions
are based upon analysis of the Group as one
segment. The financial results from this segment are
equivalent to the financial statements of the Group
as a whole.
All the Group’s non-current assets are
located in Tanzania.
(US$’000)
Total revenues
(Loss)/profit before tax
Total non-current assets
Total non-current liabilities
Exploration and mining of minerals
2015
95,705
(18,110)
114,294
66,751
2014
114,857
16,570
131,932
55,192
Non-Current Assets comprises investment in mining
and exploration assets (see notes 10 to 11). All
revenues arise from sales to one customer.
2.18 Financial instruments
Financial assets and financial liabilities are
recognised in the Group statement of financial
position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets and financial liabilities are
only offset and the net amount reported in the
consolidated statement of financial position and
statement of comprehensive income when there
is a currently enforceable legal right to offset
the recognised amounts and the Group intends
to settle on a net basis or realise the asset and
liability simultaneously.
The Group holds derivative financial instruments
to hedge its gold revenue exposure. These are
measured at fair value at the end of each financial
reporting period, and any changes are recognised in
profit or loss.
Financial assets
The classification of financial assets at initial
recognition depends on the purpose for which the
financial asset was acquired and its characteristics.
All financial assets are initially recognised at fair
value. All purchases of financial assets are recorded
at trade date, being the date on which the Group
became party to the contractual requirement of the
financial asset.
The Group has not classified any of the financial
assets as held to maturity or as available for
sale. The Group has designated the non-hedge
commodity derivative asset as fair value through
profit or loss and the respective fair value was
reflected as part of through profit or loss as gains
on non-hedge derivative and other commodity
contracts. The Group’s financial assets comprise of
loans and receivables. Unless otherwise indicated
the carrying amounts of the Group’s financial assets
approximate to their fair values.
Restricted cash are those amounts held by third
parties on behalf of the Group and are not available
for the Group’s use; these are accounted for
separately from cash and cash equivalents.
Loans and receivables
These assets are non-derivative financial assets
with fixed or determinable payments that are
not quoted in an active market. They principally
comprise loans, trade and other receivables, cash
and cash equivalents and restricted cash. They are
31
FINANCIAL STATEMENTS
initially recognised at fair value plus transaction
costs that are directly attributable to the acquisition,
and subsequently carried at amortised cost using
the effective interest rate method, less provision
for impairment. The effect of discounting on
these financial instruments is not considered to
be material.
a) De-recognition of financial assets
A financial asset (in whole or in part) is
de-recognised either:
ཛྷ when the Group has transferred substantially all
the risk and rewards of ownership or,
ཛྷ when it has neither transferred nor retained
substantially all the risk and rewards and when it
no longer has control over the financial asset or a
portion of the asset; or
ཛྷ when the contractual right to receive cash flow
has expired
b) Impairment of financial assets
A financial asset is assessed at each reporting date
to determine whether there is any objective evidence
that it is impaired. A financial asset is considered to
be impaired if objective evidence indicates that one
or more events have had a negative effect on the
estimated future cash flows of that asset.
An impaired loss in respect of a financial asset
measured at amortised cost is calculated as the
difference between its carrying amount and the
present value of the estimated future cash flows
discounted at the original effective interest rate.
Individually significant financial assets are tested for
impairment on an individual basis. The remaining
financial assets are assessed collectively in groups
that share similar credit risk characteristics.
All impairment losses are recognised in the
income statement. An impairment loss is reversed
if the reversal can be related objectively to an event
occurring after the impairment loss was recognised.
c) Cash and cash equivalents
Cash and cash equivalents are carried at cost and
include all highly liquid investments with a maturity
of three months or less.
Financial liabilities
The classification of financial liabilities at initial
recognition depends on the purpose for which the
financial liability was issued and its characteristics.
All purchases of financial liabilities are recorded
on trade date, being the date on which the Group
becomes party to the contractual requirements of
32
the financial liability. Unless otherwise indicated the
carrying amounts of the Group’s financial liabilities
approximate to their fair values.
The Group’s financial liabilities consist of financial
liabilities measured at amortised cost and financial
liabilities at fair value through profit or loss.
d) Financial liabilities measured at amortised cost
All financial liabilities are initially recognised at fair
value net of transaction costs incurred.
Loans, borrowings and trade payables
These include trade payables and other short-term
monetary liabilities, which are initially recognised
at fair value and subsequently carried at amortised
cost using the effective interest rate method.
Convertible loan notes
Convertible loan notes are assessed in accordance
with IAS 32 Financial Instruments: Presentation to
determine whether the conversion element meets
the fixed-for-fixed criterion. Where this is met, the
instrument is accounted for as a compound financial
instrument with appropriate presentation of the
liability and equity components.
Where the fixed-for-fixed criterion is not met, the
conversion element is accounted for separately as
an embedded derivative which is measured at fair
value through profit or loss.
On issue of a convertible borrowing, the fair value of
the liability component is determined by discounting
the contractual future cash flows using a market rate
for a non-convertible instrument with similar terms.
This value is carried as a liability on the amortised
cost basis until extinguished on conversion or
redemption. The remainder of the proceeds
is allocated, net of issue costs, to a separate
component of equity or a separate liability. Issue
costs are apportioned between the components
based on their respective carrying amounts when
the instrument was issued.
On conversion, the liability is reclassified to equity
and no gain or loss is recognised in the profit or
loss. Where the convertible borrowing is redeemed
early or repurchased in a way that does not alter
the original conversion privileges, the consideration
paid is allocated to the respective components and
the amount of gain or loss relating to the liability
element is recognised in interest received or paid.
The finance costs recognised in respect of the
convertible borrowings includes the accretion of
the liability.
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
De-recognition of financial liabilities
A financial liability (in whole or in part) is de-
recognised when the Group has extinguished its
contractual obligations, it expires or is cancelled.
Any gain or loss on de-recognition is taken to the
statement of comprehensive income.
3.
Effective interest rate method
The effective interest method is a method of
calculating the amortised cost of a financial asset/
liability and of allocating interest income/expense
over the relevant period. The effective interest rate
is the rate that discounts estimated future cash
receipts/payments through the expected life of the
financial asset/liability or, where appropriate, a
shorter period.
e) Fair Value measurement hierarchy
IFRS 13 requires certain disclosures which require
the classification of financial assets and financial
liabilities measured at fair value using a fair value
hierarchy that reflects the significance of the input
used in making the fair value measurement.
The fair value hierarchy has the following levels:
a) quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1);
b) input other than quoted prices included within
level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
prices (level 2); and
c) inputs for the asset or liability that are not based
on observable market data (unobservable input)
(level 3).
The level in the fair value hierarchy within which the
financial asset or financial liability is categorised is
determined on the basis of the lowest level input
that is significant to the fair value measurement.
Financial assets and financial liabilities are classified
in their entirety into only one of the three levels.
Capital
Financial instruments issued by the Group are
treated as equity if the holder has only a residual
interest in the assets of the Group after the
deduction of all liabilities. The Company’s ordinary
shares are classified as equity instruments.
For the purpose of disclosure given in note 26 the
Group considers its capital to comprise its ordinary
share capital, share premium and retained losses.
There has been no change in what the Group
considers to be capital since the previous period.
The Group is not subject to any externally imposed
capital requirements.
Accounting judgments and estimation
The preparation of financial statements in
conformity with IFRS requires management to make
judgments, estimates and assumptions that affect
the application of policies and reported amounts
of assets and liabilities, income and expenses.
The estimates and associated assumptions are
based on historical experience and various other
factors that are believed to be reasonable under the
circumstances, the results of which form the basis
of making the judgments about carrying values of
assets and liabilities that are not readily apparent
from other sources. Actual results may differ from
these estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised if the revision affects
both current and future periods.
Key sources of estimation uncertainty and
judgment are:
ཛྷ Mining property policy
Depreciation of the mining properties is by the
unit of production method. Units of production
are significantly affected by resources, exploration
potential and production estimates together
with economic factors, commodity prices, foreign
currency, exchange rates, estimates of costs to
produce reserves and future capital expenditure.
ཛྷ Inventories
Stock is valued at the lower of cost or net
realisable value. Costs that are incurred in or
benefit the production process are accumulated
as ore stockpiles, gold in process and gold
bullion. Although the quantities of recoverable
metal are reconciled by comparing the grades of
ore to the quantities of gold and silver actually
recovered (metallurgical balancing), the nature
of the process inherently limits the ability to
precisely monitor recoverability levels. Net
realisable value tests are performed at least
annually and represent the estimated future sales
value less estimated costs to complete production
and bring the product to sale.
ཛྷ Stripping assumptions of access to ore
Stripping costs incurred in opening up new
ore areas are capitalised as part of the mine
33
FINANCIAL STATEMENTS
development costs and subsequently amortised
over the mining of the ore body that becomes
more accessible as a result of the stripping
activity. The Group is required to estimate at
each period end the quantity of ore that has
become more accessible as a result of the
stripping activity. The estimates made are
supported by technical data. During the year there
was on-going stripping activity that enhanced
future accessibility of the ore body, of which
478,000 tonnes was mined during the year.
ཛྷ Impairment of acquired development and
production assets
The Group tests the carrying value of acquired
exploration and evaluation assets when
circumstances suggest that the carrying amount
may not be recoverable. As part of this review
process the recoverable amount of the asset is
determined using value in use calculations, which
requires estimates of future cash flows and as
such is subject to estimates and assumptions. The
key assumptions are disclosed in note 9.
The Group tests whether mining options and
license acquisition costs have suffered any
impairment when facts and circumstances
suggest that the carrying amount may not be
recoverable. The recoverable amounts are
determined based on an assessment of the
economically recoverable mineral reserves, and
future profitable production or proceeds from
the disposition of recoverable reserves. Actual
outcomes may vary. As at 31 December 2015
the intangibles amounted to US$23,201,000
(2014: US$23,208,000).
The Mining Act 2011, (which replaced the
previous Mining Act 1998), introduced new
procedures on renewal of Prospecting Licences
(PL’s) that involves a tender process. As disclosed
in the accounting policies, licenses which are
viable and within the license renewal processes
are not considered impaired. The Directors have
no reason to believe renewal will not be granted
on the licenses.
Depreciation of plant and equipment
Depreciation is provided in the consolidated
financial statements so as to write down the
respective assets to their residual values over
their estimated useful lives and as such the
selection of the estimated useful lives and the
expected residual values of the assets require
the use of estimates and judgments. The amount
of plant and equipment net of depreciation as
at 31 December 2015 was US$91,093,000
34
(2014: US$108,724,000). A change in the
reserves in the year resulted in an additional
US$9,500,000 depreciation charge. Future
impact has not been assessed as it is impractical
to do so.
Impartment of intangibles
Where potential triggers for impairment are
identified which may indicate that the carrying
value of intangible assets may have been
impaired, a review will be undertaken of the
recoverable amount of that asset. No triggers of
impairment were identified in 2014 or 2015.
ཛྷ Impairment of plant and equipment
Where potential triggers for impairment are
identified which may indicate that the carrying
value of items of plant and equipment may have
been impaired, a review will be undertaken of the
recoverable amount of that asset based on value
in use calculations which will involve estimates
and assumptions to be made by management.
Using a range of discount rates, gold prices and
cash costs, no requirements for impairment were
identified. No impairments were recognised in
2014 and 2015.
ཛྷ Warrants and Share based payments
The Group has not issued any warrants during
the period. The Group operates an equity settled
share based remuneration scheme for key
employees. Employees’ services received and the
corresponding increase in equity are measured by
reference to the fair value of equity instruments at
the date of the grant. In 2015, no share options
were granted, but a total of 1,500,000 share
awards were awarded as part of the Group’s
policy on attraction and retention of skills.
The Group determines the fair value of equity-
settled share based payments, using valuation
techniques and models which are significantly
affected by the assumptions used. The methods
and assumptions applied, and valuations models
used are disclosed in note 24.
ཛྷ Exploration and evaluation expenditure
Exploration and evaluation expenditure such as
costs of acquiring tenement rights, mining and
prospecting licences are capitalised.
The cost of entering into an option agreement
to explore and evaluate other licence holders’
rights, with the option of converting these
licences is also capitalised. The Group has
to apply judgement in determining whether
exploration and evaluation expenditure should
be capitalised or expensed. Management
Shanta Gold Limited Annual Report and Accounts 2015
FINANCIAL STATEMENTS
exercises this judgement based on the results of
economic evaluations, pre-feasibility or feasibility
studies. Costs are capitalised where those
studies conclude that more likely than not the
group will obtain future economic benefit from
the expenditures.
For the year to 31 December 2015 exploration
costs amounting to US$2,434,000 (2014:
US$2,862,000) were expensed.
ཛྷ Decommissioning, site rehabilitation and
environmental costs
The Group’s mining and exploration activities
are subject to various laws and regulations
governing the protection of the environment. The
Group recognises management’s best estimate
of the rehabilitation costs in the period in which
they are incurred. Actual costs incurred in future
periods could differ materially from the estimates.
Additionally, future changes to environmental
laws and regulations, life of mine estimates and
discount rates could affect the carrying amount
of this provision. Such changes could similarly
impact the useful lives of assets depreciated on a
straight-line-basis, where those lives are limited
to the life of mine. A 1% change in the discount
rate on the Group’s rehabilitation estimates would
result in an impact of US$0.5 (2014: US$0.7)
million on the provision for environmental and
site restoration. In the current financial period
these have been reviewed downward as the
Group is engaged in a process to commence the
necessary work programs required during the
current life on mine operations.
4. Gain on non-hedge derivatives and other
commodity contracts
(US$’000)
31 Dec 15
31 Dec 14
Valuation of open commodity swap
Commodity swap revenue
1,312
941
2,253
A mark to market valuation of open swap deals was
done at 31 December 2015. This resulted in a gain on
non-hedging instruments of US$1,312,000 as the spot
gold price was below the fixed forward prices of these
instruments.
5.
Finance income
(US$’000)
Decrease in fair value of warrants
(Note 23)
Bank interest
The fair value of warrants at 31 December 2015 is based
on the prevailing Company share price of 4.63 pence
on that date; and has been calculated using the Black-
Scholes model which takes into account the historical
share price volatility of 60%.
6.
Finance expenses
(US$’000)
Loan and other Interest
Unwinding of discount on
decommissioning liability
Convertible Loan Note accretion
31 Dec 15
4,877
31 Dec 14
4,905
718
466
1,502
7,097
1,501
6,872
The above finance expense arises on financial liabilities
measured at amortised cost using the effective interest
rate method. No other losses have been recognised in
respect of financial liabilities at cost.
7.
(Loss)/profit before taxation
(US$’000)
(Loss)/profit before tax is arrived at
after charging:
Foreign exchange loss
31 Dec 15
31 Dec 14
1,080
360
Depreciation and depletion of assets
43,015
10,874
Amortisation of intangible assets
Share based payment costs
Impairment and write-off of licences
Loss on disposal of assets
Directors’ remuneration
Auditors’ remuneration
Audit fees of the Company and Group
Audit fees of subsidiaries by associates
of Group auditor
7
527
71
368
22
1,369
296
13
1,638
1,156
85
54
84
54
8.
Taxation
Effective 1 January 2008, the Company is taxed
at the standard rate of income tax for Guernsey
companies which is 0%. Taxation for other
jurisdictions is calculated at the rates prevailing in
the respective jurisdictions.
There are no current tax charges for the year as the
Group has accumulated tax losses.
Tax credit/(charge) for the year relates to:
31 Dec 15
63
31 Dec 14
474
49
112
35
509
(US$’000)
31 Dec 15
31 Dec 14
Current tax charge (Turnover
tax charge)
Deferred tax credit/(charge)
Closing balance
(287)
1,091
804
—
(7,715)
(7,715)
35
Mill in the process plant
36
Shanta Gold Limited Annual Report and Accounts 2015 37
FINANCIAL STATEMENTS
The tax (credit)/charge for the year can be
reconciled to the (loss)/profit per the statement of
comprehensive income as follows:
(Loss)/profit before taxation
(US$’000)
31 Dec 15
31 Dec 14
Deferred Tax Liability movement
Balance at 1 January
Movement for the year (note 8)
Balance at 31 December
36,184
(6,712)
29,472
31,363
4,821
36,184
(US$’000)
31 Dec 15
31 Dec 14
Profit/(Loss) before taxation
(18,110)
16,570
Tax at the standard tax rate
Tanzanian Corporation tax at 30%
Different tax rates applied in
overseas jurisdictions
Reassessment of losses by the TRA
Unrecognised taxable losses
in subsidiaries
Deferred tax credit
Turnover tax charge
Tax (credit)/payable
(5,433)
1,690
2,390
262
(1,091)
287
(804)
4,971
2,179
—
565
—
—
7,715
Included in this year’s tax charge is a “Turnover Tax
Charge” which is applicable should a company incur
tax losses for more than three consecutive years,
and is levied at a rate of 0.3% of turnover.
(Loss)/profit before taxation
(US$’000)
31 Dec 15
31 Dec 14
Deferred Tax Asset movement
Balance at 1 January
Tax losses utilised in the year
Balance at 31 December
28,397
(5,621)
22,776
31,291
(2,894)
28,397
The deferred tax asset has arisen on the unused
tax losses. At year end, the Group has unused tax
losses of US$75,920,792 (2014: US$94,656,030)
available for offset against future profits and can
be carried forward indefinitely. The assessed loss
brought forward was reduced during the audit of
the 2011, 2012 and 2013 taxation returns by the
Tanzanian Revenue Authority. The main reason
for the reduction of the unused losses brought
forward is due to the Provision for Rehabilitation
being disallowed.
Additionally, the Group has accumulated
expenditure of US$13,144,054 (2014:
US$11,672,030) arising on a number of its
exploration projects for off-set against future profits
generated from those projects which can be carried
forward indefinitely. No deferred tax asset has been
recognised on these losses as their utilisation is
uncertain at this stage.
The deferred tax liability has arisen on the temporary
differences between the carrying value of assets
and tax written down value of assets. Included
in the opening balance of 2014 is an amount of
US$5,196,000 relating to deferred tax liability on
Shield and Boulder acquisition. A net deferred tax
liability of US$6,696,000 has been recognised
(2014: US$7,787,000).
9.
(Loss)/profit per share
Basic (loss)/profit per share is computed by
dividing the (loss)/profit attributable to ordinary
shareholders by the weighted average number of
ordinary shares outstanding during the year.
The earnings and weighted average number of
ordinary shares used in the calculation of basic
profit per share is:
(US$’000)
(Loss)/profit for the year attributable
to equity holders of Company
(Loss)/profit used in calculation of
basic profit per share (see below)
31 Dec 15
31 Dec 14
(17,306)
8,855
(17,306)
8,855
Basic (loss)/profit per share (US cents)
(3.727)
1.907
Weighted average number of shares
in issue
464,388,679 464,302,763
There were share incentives outstanding at the
end of the year that could potentially dilute basic
earnings per share in the future, as shown in the
table below:
31 Dec 15
31 Dec 14
The Group has the following instru-
ments which could potentially dilute
basic earnings per share in the future:
Share options
Convertible loan notes
Warrants
7,652,598
4,226,828
—
—
—
—
As the Group is in a loss making position, the
potential ordinary shares are anti-dilutive
and therefore a diluted loss per share has not
been calculated.
10.
Intangible assets
The Group has capitalised exploration and
evaluation assets relating to amounts spent on the
purchase of licences and to acquire rights to explore
and evaluate mineral deposits. These assets have
been classified as intangible assets.
38
Shanta Gold Limited Annual Report and Accounts 2015
FINANCIAL STATEMENTS
All of the licences are held by the subsidiary companies.
All of the intangible assets have a finite life and have been externally generated. These licences will be
amortised when mineral development commences, over the life of the mine or unit of production method.
(US$’000)
At 31 December 2013
Additions
Released to the State
Impaired
Amortisation
At 31 December 2014
Additions
Impaired
Amortisation
At 31 December 2015
Owned
prospecting
licences
116
Third party
primary mining
licences
498
Third party
prospecting
licences
164
Owned
mining
licence
22
Third party
mining
licence
176
Acquired
exploration and
evaluation assets
22,519
—
—
(21)
—
95
—
(71)
—
24
—
(111)
—
—
387
—
—
—
387
—
—
(164)
—
—
—
—
—
—
—
—
—
—
22
71
—
(7)
86
31
—
—
(22)
185
—
—
—
185
—
—
—
—
22,519
—
—
—
22,519
Total
23,495
31
(111)
(185)
(22)
23,208
71
(71)
(7)
23,201
Impairment of licences
Impairments relate to projects which have been
assessed for impairment and found to be no
longer viable or where licences have expired
with no intention of renewal. Licences currently
under renewal but viable are not considered to be
impaired. The Directors have no reason to believe
that renewal will not be granted. The recoverable
amounts are determined based on an assessment of
economically recoverable mineral resources.
The Mining Act 2011, (which replaced the previous
Mining Act 1998), introduced new procedures
on renewal of Prospecting Licences (PL’s) that
involves a tender process. The Group has met its
commitments on its PL’s which have or are due to
expire and has no reason to believe that renewals
will not be granted.
Owned prospecting licences
These licences are acquired from the Ministry
of Minerals and are held in the subsidiary
Company’s name.
Third party prospecting licences
These are prospecting licences held by an unrelated
party, but in terms of which the subsidiary Company
holds the right to explore and evaluate the site.
Under the agreement the subsidiary company
pays the third party for this right. In addition, the
agreement provides for additional payments to
be made which will be linked to certain events, for
example establishment of proven and probable
reserves or future sales.
Third party mining licence
This licence relates to a mining licence held by an
unrelated party but in terms of which the subsidiary
Company holds the right to prospect on the licensed
area and confers upon the subsidiary an exclusive
option to purchase the licence if the Company in its
sole discretion requires it for mining.
Third party primary mining licences
These licences relate to primary mining licences
held by an unrelated party, but in terms of which
the subsidiary Company holds rights to explore
and evaluate with the option to purchase mining
rights at a later stage. Under the agreement the
subsidiary company pays the licence acquisition and
subsequent maintenance costs.
Owned mining licences
These licences are acquired from the Ministry
of Minerals and are held in the subsidiary
Company’s name.
One of the mining licences at Singida is wholly
owned by Shanta Mining Company Ltd (SMCL); while
GL Jossue & JB Joel Limited hold a 10% minority
interest in two of the mining licences. Depending
on the option chosen, the minority holder will have
up to a 10% earned interest or a smaller royalty.
SMCL has over 90% ownership of the Singida
mining licences and 100% ownership of the
prospecting licences.
Acquired exploration and evaluation assets
Included in the book value of intangible assets are
values ascribed to the acquisition of the licences
held by Shield Resources Limited, the full details of
which are contained in the 2014 Annual Report.
39
FINANCIAL STATEMENTS
11. Mining properties and other equipment
At 31 December 2014
4,784
7,988
(US$’000)
Cost
At 1 January 2014
Additions
Asset transfers
Disposals/write off
At 31 December 2014
Accumulated Depreciation
At 1 January 2014
Charge for the year
Disposals/write off
Net book value
At 31 December 2014
Cost
At 1 January 2015
Additions
Asset transfers
Mining costs capitalised
Disposals/write off
At 31 December 2015
Accumulated Depreciation
At 1 January 2015
Charge for the year
At 31 December 2015
Net book value
At 31 December 2015
Gold
processing
plant
Mining
assets
Assets under
construction
Mining
and other
equipment
Decom-
missioning
asset
Deferred
stripping
asset
27,335
56,453
718
11,762
—
1,839
1,286
—
3,832
13,968
(15,864)
—
39,815
59,578
1,936
1,333
3,451
—
2,571
5,417
—
—
—
—
—
Total
96,528
29,180
—
(50)
5,501
2,679
—
—
—
9,976
—
—
8,180
9,976
125,658
268
710
—
978
—
611
—
611
6,091
10,874
(31)
16,934
35,031
51,590
1,936
3,600
7,202
9,365
108,724
6,173
8,180
9,976
125,658
39,815
59,578
423
—
—
(368)
1,501
129
—
—
1,936
8,509
(332)
—
—
39,870
61,208
10,113
6,500
4,784
6,561
11,345
7,988
20,411
28,399
—
—
—
2,573
1,124
3,697
—
—
—
(3,709)
4,471
978
1,347
2,325
—
—
18,904
—
10,557
—
18,904
(4,077)
28,880
151,042
611
13,572
14,183
16,934
43,015
59,949
28,525
32,809
10,113
2,803
2,146
14,697
91,093
3,407
—
2,816
(50)
6,173
1,919
685
(31)
2,573
124
203
—
—
The net carrying amount of property plant and
equipment includes an amount of US$2,574,000
(2014: US$3,178,000) in respect of assets
held under finance lease and equipment loan.
Depreciation charge for these assets in the year
amounted to US$604,000 (2014: US$385,000).
The above assets which are not financed under the
finance lease or equipment loan are encumbered
as detailed further in note 19 in favour of a Security
Agent acting on behalf of Investec Bank Limited.
12. Subsidiary companies
At 31 December 2015, the Group had the following
subsidiary undertakings:
40
Name of company
Holding
Country of
incorporation Principal activity
Boulder Investments
Limited
100%
Cyprus
Shanta Gold Holdings
Limited
Chunya Gold
Holdings Limited
Shanta Mining
Company Limited
Shield Resources
Limited
Mgusu Mining
Limited
Nsimbanguru Mining
Limited
Chunya Resources
Limited
Songea Resources
Limited
100%
Guernsey
Holding Company
100%
Guernsey
Holding Company
100%
Tanzania
100%
Tanzania
100%
Tanzania
100%
Tanzania
Exploration and
mining
Investment
Company
Exploration and
mining
Exploration and
mining
Exploration and
mining
100%
Tanzania
Dormant
100%
Tanzania
Dormant
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
13. Categories of financial assets and liabilities
(US$’000)
31 Dec 15 31 Dec 14
Current assets measured at
amortised cost
Trade and other receivables
excluding prepayments
Restricted cash
Cash and cash equivalents
2,792
8,355
500
500
19,117
14,878
Total financial assets at amortised cost
22,409
23,733
Financial liabilities measured at
amortised cost
Current financial liabilities
Loans and other borrowings (note 19)
Trade and other payables excluding
warrants
Loans payable to related parties
(note 17)
Non-current financial liabilities
Convertible Loan (note 20)
Loans and other borrowings (note 19)
Total financial liabilities measured at
amortised cost
Financial liabilities at fair value through
profit or loss
Current financial assets
Derivative financial assets—commodity
hedge (note 26)
Current financial liabilities
Derivative financial liability—warrants
(note 23)
Total financial assets/( liabilities) at fair
value through profit or loss
4,062
5,883
14,117
6,080
—
337
9,945
20,534
23,446
30,630
54,076
21,843
16,592
38,435
64,021
58,969
1,312
—
1,312
—
63
63
Fair values
The fair values of the Group’s cash trade and other
receivables and trade and other payables are
considered equal to the book value as they are all
short term.
Derivative instruments measured at fair value
through profit or loss have been deemed to be level
2 assets or liabilities under the fair value hierarchy.
The instruments have been valued using forward
gold prices.
Loans payable to related parties are repayable
on demand and their fair value is considered to
approximate their book value (note 17).
Loans and other borrowings and convertible loans
are initially measured at fair value and subsequently
at amortised costs.
Warrant instruments measured at fair value through
profit or loss have been deemed to be level 3
liabilities under the fair value hierarchy as the fair
value measured of these liabilities are not based on
observable market data (unobservable input).
The reconciliation of the opening and closing fair
value balance of level 3 financial instruments is
provided below:
(US$’000)
Level 3
Liabilities
At 1 January
Movement in fair value
At 31 December
31 Dec 15
31 Dec 14
(63)
63
—
(537)
474
(63)
14. Trade and other receivables
(US$’000)
Trade receivables
Prepayment
Derivative financial asset (Note 26)
Other receivables
31 Dec 15
31 Dec 14
—
4,613
1,312
2,792
8,717
5,241
768
—
3,114
9,123
During the year no impairments were recognised
(2014: US$ Nil). The Directors consider that the
carrying amount of trade and other receivables
approximates their fair value.
15.
Inventories
(US$’000)
Plant spares and consumables
Gold in ore stockpile, gold room
and CIL
31 Dec 15
31 Dec 14
4,696
6,041
4,996
7,711
10,737
12,707
The cost of consumable stores consumed during the year and included
in working cost amounted to US$9.1 million (2014: US$10.8 million)
16. Restricted cash
As per IAS 7 (Classification of Restricted Cash), an
amount of US$500,000 (2014: US$500,000)
has been shown separately as it has an external
restriction placed upon it. The amount is being
held by Auramet Trading LLP as collateral fees for
the hedging that is in place with the Company. This
amount is not for use by Auramet.
41
FINANCIAL STATEMENTS
17. Loans from related parties
(US$’000)
Loans from shareholders
31 Dec 15
31 Dec 14
—
337
During the current financial period, these were
repaid in full.
18. Trade and other payables
(US$’000)
Trade payables
Accruals and other payables
Derivative financial liability—warrants
(note 23)
31 Dec 15
31 Dec 14
3,256
2,627
—
2,466
3,614
63
5,883
6,143
Trade payables and accruals primarily comprise
amounts outstanding for trade purchases and
ongoing costs. The Group has financial risk
management policies in place to ensure that the
payables are paid within the credit time frame. The
Directors consider that the carrying amounts of trade
payables approximate their fair value.
19. Loans and other borrowings
(US$’000)
Current liabilities
Promissory notes1
Loans payable to FBN Bank less than
1 year2
Loans payable to Investec Bank less
than 1 year3
Equipment loan4
Finance lease5
Non-current liabilities
Promissory notes1
Loans payable to FBN Bank after more
than 1 year2
Loans payable to Investec Bank after
more than 1 year3
Equipment loan4
Finance lease5
Total loans and other borrowings
1. Promissory Notes
31 Dec 15
31 Dec 14
—
—
2,376
11,048
3,356
579
127
579
114
4,062
14,117
2,929
—
25,877
1,448
376
30,630
34,692
2,761
11,250
2,027
554
16,592
30,709
Promissory notes relate to Promissory Note 2 of US$3.1 million
issued in consideration for the acquisition of Boulder and are
repayable on 15 April 2017. During the year Promissory Note 1
of US$2.4 million was repaid on 15 April 2015. The notes bear
an annual interest of 2.6% and are payable semi-annually in
arrears. The promissory notes are recognised at fair value and
subsequently accounted at amortised cost. The fair value of the
notes has been determined by discounting the cash flows using a
market rate of interest which would be payable on a similar debt
42
instrument obtained from an unconnected third party. Using a
market interest rate of 9% and a contractual rate of 2.6%, the fair
value of the promissory notes of US$3.1 million was calculated to
be US$2.9 million.
2. Loan from FBN Bank
The Group had a loan facility in August 2013 of US$33.75 million.
The interest rate on this loan was LIBOR + 6.5% and was repaid in
full from the proceeds of the Investec facility, the details of which are
shown below.
3. Loan from Investec Bank in South Africa relates to a drawdown of
US$30 million from two facilities totalling US$40 million obtained in
May 2015. The facilities bear an annual interest rate of 3-month USD
LIBOR +4.9% and are secured on the bank account which is credited
with gold sales, the shares in Shanta Mining Company Limited (SMCL)
and a charge over the assets of SMCL.
Facility A is for US$20 million and was used to pay the outstanding
FBN Bank Ltd loan, accrued interest of US$101,000 and loan
arrangement fees of US$600,000. Capital repayments of
US$1.25 million are due every quarter end starting on 30 June 2016.
Facility B of US$20 million is a standby facility to be drawn as and
when required to meet working capital requirements. US$10 million
of the facility was drawn in May 2015 and a further US$10 million
was drawn down on 1 April 2016. Repayment of the drawn
facility amount commences in the quarter ending 30 June 2016
and can be extended at the option of SMCL to begin repayments
from 30 June 2017.
Both these facilities are secured by means of
ཛྷ A deed of debenture setting out the fixed and floating charge
debenture governed by Tanzanian law over all assets and
undertakings of SMCL and made between the Investec and the
Security Agent, including any immovable property, moveable
property, the Mining Licences, the relevant Prospecting Licences
and surface right lease or access agreements and the assignment/
charge over Investec’s rights under and in terms of all bank
accounts, material documents, insurances and insurance
proceeds and all loans against any other member of the Group
but excluding assets over which a Permitted Security Interest has
been created;
ཛྷ A deed of debenture setting out the fixed and floating charge
debenture governed by Tanzanian law over all assets and
undertakings of Shield Resources Limited and made between
Shield Resources Limited and the Security Agent, including any
immovable property, moveable property, the relevant Prospecting
Licences and surface right lease or access agreements and the
assignment/charge over Shield Resources’ rights under and in
terms of all bank accounts, insurances, insurance proceeds and all
loans and claims of Shield Resources against any other member
of the Group but excluding assets over which a Permitted Security
Interest has been created;
ཛྷ Together there is a registered charge of US$55,000,000
(which includes a margin facility for gold forward sales of up
to US$15,000,000) against the mineral and prospecting
rights of both Shanta Mining Company Limited and Shield
Resources Limited;
ཛྷ Shareholder Pledge which means each each written deed entitled
share pledge governed by Tanzanian law in terms of which each
of Shanta Gold and Shanta Holdings pledges the shares it holds
in the Borrower in favour of the Security Agent and assigns
and charges all its loans and claims against the Borrower and
other members of the Group in favour of the Security Agent and
the Shield Resources Pledge which means each written deed
entitled share pledge governed by Tanzanian law in terms of
which Boulder Investments pledges the shares it holds as Agent
and assigns and charges all its loans and claims against Shield
Resources in favour of the Security Agent;
ཛྷ Guarantees from Shanta Gold Limited, Shanta Gold Holdings
Limited and Shield Resources Limited have been issued in favour
of the Security Agent in respect of the above loan facilities.
Shanta Gold Limited Annual Report and Accounts 2015
FINANCIAL STATEMENTS
4. Equipment Loan
The loan is in respect of a crusher/screening plant acquired from
Sandvik SRP AB, Sweden and is payable in 20 equal quarterly
instalments commencing on 15 August 2014 and bears interest at a
rate of 6% per annum.
5. Finance Lease
This is in respect of a lease to acquire Heavy Fuel Oil (HFO) fuel
storage tanks from Oryx Oil Company Limited for a capital amount of
US$667,591 repayable monthly over sixty months commencing on
1 August 2014.
This is classified as a finance lease because the rentals period
amounts to the estimated useful economic life of the asset and after
five years, the assets will be bought outright by the Company by
paying a nominal amount.
Future lease payments are due as follows:
(US$’000)
Not later than one year
Between one year and five years
At 31 December
Current liability
Non-current liability
Minimum
lease
payment
162
415
577
2015
Interest
Present
value
34
39
73
127
376
503
127
376
Minimum
lease
payment
161
642
803
2014
Interest
47
88
135
Present
value
114
554
668
114
554
20. Convertible Loan Notes
(US$’000)
Balance at 1 January
Cash paid interest
Coupon interest (note 5)
Accreted Interest (note 5)
Amortisation of warrant costs
31 Dec 15
31 Dec 14
21,843
(2,125)
2,125
1,501
102
20,240
(2,125)
2,125
1,501
102
At 31 December
23,446
21,843
The convertible loan notes relate to US$25 million
fixed coupon convertible loan notes which are due
for repayment on 13 April 2017 and contain a
conversion option at a price of US$0.4686 per 1
Company share. The notes incur an interest charge
of 8.5% per annum and interest is payable half
yearly in April and October. They are not secured
against any assets of any Group Company. The
Group has determined them to be a compound
financial instrument requiring a proportion of the
loan to be classified as equity. The equity element
represents the difference between the fair value of
a similar liability with no equity conversion option
and the fair value of the existing convertible notes in
issue. Accreted interest is charged to the statement
of comprehensive income over the life of the notes.
Subsequent to year end, and following consultation
with the convertible loan note holders, the Company
has reached an agreement with a requisite 75%
majority to undertake a buyback of US$10.0 million
of the notes and to extend the repayment term of
the remaining notes by two years to April 2019. As
part of the Restructuring, the coupon applicable to
the notes will increase from 8.5% to 13.5% for the
remainder of the term of the notes.
21. Provision for decommissioning
(US$’000)
Balance at 1 January
(Decrease)/increase in provision
Unwinding of discount (note 6)
At 31 December
31 Dec 15
31 Dec 14
8,970
(3,709)
718
5,979
5,825
2,679
466
8,970
The above provision relates to site restoration at
the New Luika Gold Mine, which is expected to be
utilised by 2022 based on the current mineable
resource. The amount of US$4,471,226 (2014:
US$8,969,677) is included in mining properties
within property, plant and equipment. The reduction
in the expected costs that will be incurred is based
on a revision of the planned work programs taking
cognisance of planned rehabilitation to take place
during the current mining operations. The provision
represents the net present value of the best estimate
of the expenditure required to settle the obligation
to rehabilitate environmental disturbances caused
by mining operations.
43
FINANCIAL STATEMENTS
22. Share capital
Authorised
665,000,000 ordinary
shares of 0.01 pence each
31 Dec 15 31 Dec 14
£66,500
£66,500
Issued and fully paid
Number
(£)
(US$000)
At 1 January 2014
464,163,073
46,415
Issued in year
225,606
23
As at 31 December 2014
464,388,679
46,438
Issued in year
4,388,804
439
As at 31 December 2015
468,777,483
46,877
76
—
76
—
76
All shares issued rank pari passu in all respects
with the existing shares in issue. The Company has
one class of ordinary shares which carry no right to
fixed income.
23. Warrants issued
During the year no warrants were issued. As at
31 December 2015, the total number of warrants in
issue had lapsed.
24. Share-based payments
Equity-settled share option scheme
Options in issue at the year-end are as follows:
Number of
options
Grant date
price Final exercise date
Exercise
43,649
10 August 2006
59p 10 August 2016
450,000
25 April 2008
8.5p 25 April 2018
750,000
8 September 2009
6p 8 September 2019
1,005,000
27 July 2010
18.2p 27 July 2020
250,000
17 November 2010
28.3p 17 November 2020
1,250,000
26 September 2011
25p 26 September 2021
1,500,000
26 September 2011
30p 26 September 2021
1,000,000
26 September 2011
35p 26 September 2021
2,130,000
6 January 2012
23.13p 6 January 2022
250,000
23 August 2012
25p 23 August 2022
500,000
23 August 2012
30p 23 August 2022
500,000
23 August 2012
35p 23 August 2022
There were no market conditions within the terms of
the grant of the options. The main vesting condition
for all the options awarded was that the employee
or Director remained contracted to the Company
at the date of exercise. All such options, subject
to the remuneration committee discretion, lapse
12 months after an employee or Director leaves the
Group before the options vest. All options vest over
a three-year period in tranches of 25%, 25% and
50% respectively.
(US$’000)
Details of the share options outstanding during
the year are:
Outstanding at 1 January
Exercised options
Outstanding at end of year
Exercisable share options at the end of year
31 Dec 2015
31 Dec 2014
Number
Weighted average
exercise price
Number
Weighted average
exercise price
12,283,661
(350,000)
8,878,649
8,878,649
0.238
(0.060)
0.254
0.254
16,374,064
—
12,283,661
12,283,661
0.249
—
0.238
0.238
44
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
The Binomial formula is the option pricing model
applied to the grant of all options in respect
of calculating the fair value of the options. The
following inputs to the Binomial formula were used
in calculating the fair value of options granted
in 2012:
Share price at grant
Option exercise price
Expected life of options
Expected volatility
Expected dividend yield
Risk free rate
Grant date
Fair value per share option
Exchange rate used
Total charge over the vesting period
Number
£0.34
£0.25
10 years
55%
0%
1.70%
23-Aug-12
£0.240
1.585
US$94,989
Share based payments
Long-term incentive plan (LTIP)
Share awards are granted to employees and
Directors on a discretionary basis, and the
remuneration committee decides whether to make
share awards under the LTIP at any time. LTIPs share
awards in issue at year-end are as follows:
Grant
date
Number of
shares
Exercise
price
Final vest-
ing date
Performance shares 1-Apr-13 2,420,000
0p 31-Mar-16
1-Jul-13
400,000
0p 30-Jun-17
1-Apr-14 2,912,000
0p 31-Mar-18
1-Jan-15 1,000,000
0p 31-Dec-17
Retention shares
1-Apr-13
342,000
0p 31-Mar-16
1-Apr-14 1,038,000
0p 31-Mar-17
1-Jan-15
500,000
0p 31-Dec-17
VWEP 8,612,000
0p
VWEP
846,500
Outstanding at end
of year
Exercisable at end
of year
The Company’s mid-market closing share
price at 31 December 2015 was 4.63 pence
(2014: 8.75 pence). The lowest and highest
mid-market closing price during the year was
4.125 pence (2014: 8.63 pence) and 11.25 pence
(2014: 15.88 pence) respectively.
The vesting conditions of the 2,420,000
performance shares awarded on 1 April 2013 are
dependent on meeting certain market conditions.
The fair value at the date of grant was determined
using a probability of meeting the market conditions
using the Monte Carlo method.
31 Dec 2012
Weighted average
exercise price
£0.34
£0.30
10 years
55%
0%
1.70%
23-Aug-12
£0.229
1.585
US$181,336
Number
£0.34
£0.35
10 years
55%
0%
1.70%
23-Aug-12
£0.219
1.585
US$173,645
Weighted average
exercise price
£0.23
£0.231
10 years
55%
0%
1.70%
6-Jan-12
£0.148
1.56
US$700,984
The vesting conditions of the 400,000 performance
shares awarded on 1 July 2013 are dependent on
meeting certain market conditions. The fair value at
the date of grant was determined using a probability
of meeting the market conditions using the Monte
Carlo method.
The vesting conditions of the 2,912,000
performance shares awarded on 1 April 2014 are
dependent on meeting certain market conditions.
The fair value at the date of grant was determined
using a probability of meeting the market conditions
using the Monte Carlo method.
The vesting conditions of 1,000,000 performance
shares awarded on 1 January 2015 are dependent
on meeting certain market conditions. The
trigger price on 500,000 shares was achieved
in January 2015. The fair value at the date of grant
was determined using a probability of meeting the
market conditions using the Monte Carlo method.
The vesting periods for the 342,000 retention
shares awarded on 1 April 2013 were that 25%
would vest on 31 March 2014, another 25% would
vest on 31 March 2015, and then 50% would vest
on 31 March 2016, subject to the recipients being
in the Group’s employment on these dates.
The vesting periods for the 1,038,000 retention
shares awarded on 1 April 2014 were that 25%
would vest on 31 March 2015, another 25% would
vest on 31 March 2016, and then 50% would vest
on 31 March 2017, subject to the recipients being
in the Group’s employment on these dates. A further
500,000 retention shares have been issued and
these vest on 31 December 2017.
45
FINANCIAL STATEMENTS
Monte Carlo inputs for
shares awarded
2015
2014
Share price at grant
£0.875
£0.1475
Option exercise price
£Nil
£Nil
2013
£0.18
£Nil
Expected life of options
3 years
4 years
4 years
those risks or the method used to measure them
from the previous period unless otherwise stated in
this note.
Product
Fixed
price Start date
End date Quantity
Mark to
market
US$’000
Expected volatility
50.54%
55.42%
59.88%
Gold—USD
1,070
8-Dec-15 31-May-16
Expected dividend yield
0%
0%
0%
Gold—USD
1,176
16-Oct-15
29-Apr-16
Risk free rate
Grant date
1.77%
1.77%
1.77%
Gold—USD
1,176
16-Oct-15 31-Mar-16
01-Jan-15
01-Apr-14
01-Apr-13
Gold—USD
1,181
15-Oct-15
29-Apr-16
Fair value per share option
£0.0588
£0.0769
£0.1709
Gold—USD
1,181
15-Oct-15 31-Mar-16
Exchange rate used
1.5332
1.5180
1.5180
Gold—USD
1,140 24-Sep-15 29-Feb-16
The volatility assumption is based on a statistical analysis of daily share
prices over the last three years.
Gold—USD
1,140 24-Sep-15
29-Jan-16
Gold—USD
1,130 28-Aug-15
29-Jan-16
Gold—USD
1,130 28-Aug-15 29-Feb-16
3,000
1,000
1,000
2,000
2,000
1,500
1,500
2,500
2,500
26
115
115
239
239
118
118
171
171
25. Net cash flows from operating activities
Gain on non-hedge derivatives
17,000
1,312
(US$’000)
31 Dec 15
31 Dec 14
(Loss)/profit before taxation for the year
(18,110)
16,570
Adjustments for:
Depreciation/depletion of assets
43,015
10,874
Principal financial instruments
The principal financial instruments used by the
Group, from which financial Instrument risk arises
are as follows:
Amortisation/write off of intagible
assets
Loss on disposal of assets
Prospecting licences surrendered
Share based payment costs
Gain on non-hedge derivatives
Unrealised exchange losses
Finance income (note 5)
Finance expense (note 6)
Operating cash flow before movement
in working capital
Decrease in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Taxation paid
Interest received
78
368
—
527
(1,312)
276
(112)
7,097
22
13
296
1,369
360
(509)
6,872
31,827
35,867
1,970
1,718
(260)
4,242
(1,399)
297
35,255
39,007
(287)
49
—
35
Net cash flow from operating activities
35,017
39,042
26. Financial risk management
In common with other businesses, the Group is
exposed to risks that arise from its use of financial
instruments. This note describes the Group’s
objectives, policies and processes for managing
those risks and the methods used to measure
them. Further quantitative information in respect
of these risks is presented throughout these
financial statements.
There have been no substantive changes in the
Group’s exposure to financial instrument risk nor
its objectives, policies and processes for managing
46
ཛྷ Loans and Trade and other receivables
ཛྷ Cash and cash equivalents
ཛྷ Restricted cash
ཛྷ Trade and other payables
ཛྷ Loans
ཛྷ Convertible Loan Notes
ཛྷ Finance leases and asset loans
ཛྷ Commodity price hedging
The Group held derivative financial instruments
during the years ended 31 December 2015 and
these were in respect of forward sales of gold.
Further details are reflected below as part of
this note.
General objectives, policies and processes
The Board has overall responsibility for the
determination of the Group’s risk management
objectives and policies and, whilst retaining
ultimate responsibility for them, it has delegated
the authority for designing and operating processes
that ensure the effective implementation of the
objectives and policies to the Group’s finance
function. The Board receives quarterly information
from the Group’s management through which it
reviews the effectiveness of the processes put in
place and the appropriateness of the objectives
and policies it sets. The overall objective of the
Board is to set policies that seek to reduce risk as
far as possible without unduly affecting the Group’s
competitiveness and flexibility.
The Group is exposed to commodity price volatility,
interest rate risks, credit risks, liquidity risks and
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
currency risks arising from the financial instruments
it holds.
At 31 December 2015, the following commodity
hedges were in place:
The risk management policies employed by the
Group to manage these risks are set out below.
26.1 Interest rate risk
The Group’s exposure to interest rate risk relates to
the Group’s cash and cash equivalents and various
loan facilities. Interest rate risk is the risk that the
value of financial instruments or future cash flows
will fluctuate due to the changes in market interest
rates. All cash deposits as well as loans are at
floating rates and the Group exposes itself to the
fluctuation of the interest rate that is inherent in
such a market.
The current LIBOR rate for US$ (1 month) is 0.42%.
The loans bear interest at LIBOR + 4.9%. Currently,
the interest charge per month is an average of
US$133,000. A 0.1% change in the LIBOR rate
will increase or decrease the interest charge
by US$1,330.
The Group’s cash and cash equivalents are carried at
an effective interest rate of 1% (2014: 1%).
The annualised effect of a 1% (2014: 1%) decrease
in the interest rate at the reporting date on all
variable rate loans and cash deposits carried at that
date with all other variables held constant, would
have resulted in a decrease in a post-tax loss for the
year of US$173,060 (2014: US$88,550). A 1%
(2014: 1%) increase in the interest rate would,
on the same basis, increase post tax loss by the
same amount.
26.2 Credit risk
Credit risk arises when a failure by counter-parties to
discharge their obligations could reduce the amount
of future cash inflows from financial assets on hand
at the reporting date.
The Group’s exposure to credit risk is
explained below:
a) Trade and other receivables
The Group generates revenue from the sale of gold
and silver. In the event of a default by a debtor of
amounts due from other receivables, the Group
will be able to meet those costs. Sales are made
principally to one customer. However, the Group
has no significant credit risk exposure as majority
of the sale is paid for on the same day or soon
after the delivery. The Group did not recognise any
impairment during the year and there were no other
receivables that were past due. As a condition of the
forward sales contracts, an amount of US$500,000
was paid to Auramet Trading LLC as collateral
security for hedged commodity price fluctuations
against spot pricing revaluations.
b) Cash and cash equivalents
The Group has significant concentration of credit
risk arising from its bank holdings of cash and cash
equivalents. To manage this exposure, the Group has
a policy of maintaining its cash and cash equivalents
with counterparties that have a credit listing of at
least A from independent rating agencies. Given
this high credit rating, the Directors do not expect
any counterparty to fail. The Board has reviewed the
maximum exposure on the Group financial assets
and has concluded that the carrying values as at
reporting date are fully recoverable.
c) Restricted cash
The Group has paid to Auramet Trading LLC, an
amount of US$500,000 (2014: US$500,000) as
collateral fees for the forward sales contracts that
it has set up with Auramet. Although the Group has
no control over the money, Auramet cannot use
the money.
26.3 Liquidity risk
Liquidity risk is the risk that arises when the
maturity of assets and liabilities does not match.
An unmatched position potentially enhances
profitability, but can also increase the risk of
losses. The Group has procedures with the object
of minimising such losses such as maintaining
sufficient cash and other highly liquid current assets.
Cash and cash equivalents are placed with financial
institutions on a short-term basis reflecting the
Group’s desire to maintain high levels of liquidity in
order to enable timely completion of transactions. All
financial liabilities have a maturity of less than three
years or have no specific repayment dates.
The maturity of financial liabilities is as follows:
US$(‘000)
On demand
Loans and other borrowings
Equipment loan
Finance lease
Promissory notes
—
—
—
—
Other payables and accruals
(5,883)
31 Dec 2015
Within
1 year
After
1 year
(3,356)
(25,877)
(579)
(127)
—
—
(1,448)
(376)
(2,929)
—
(5,883)
(4,062)
(30,630)
47
FINANCIAL STATEMENTS
US$(‘000)
On demand
Loans from related parties
(337)
31 Dec 2014
Within
1 year
—
After
1 year
—
Loans and other borrowings
Equipment loan
Finance lease
Promissory notes
—
—
—
—
(11 ,048)
(11,250)
(579)
(114)
(2,027)
(554)
(2,376)
(2,761)
Other payables and accruals
(6,080)
—
—
(6,417)
(14,117)
(16,592)
26.4 Currency risk
Currency risk is the risk that the value of financial
instruments will fluctuate due to change in foreign
exchange rates. Currency risk arises when future
commercial transactions and recognised assets and
liabilities are denominated in the currency that is not
the Group’s presentational currency.
The Group is exposed to foreign exchange risk
arising from various currency exposures primarily
with respect to the Tanzanian Shilling and
Sterling, but these are not significant as most
of the transactions are in USD. However, the
Group’s management monitors the exchange
rate fluctuations on a continuous basis
and acts accordingly.
Currency risk
(US$’000)
Trade and other receivables
Derivative financial asset
Cash and cash equivalents
Trade and other payables
Restricted cash
Loans and other borrowings
Convertible loan notes
Net exposure
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Loans payable to related parties
Restricted cash
Loans and other borrowings
Convertible loan notes
Net exposure
USD
7,405
1,312
18,749
(5,846)
500
(34,692)
(23,446)
(36,018)
8,355
14,057
(5,912)
(337)
500
(30,709)
(21,843)
(35,889)
31 Dec 2015
TZS
—
—
353
(1)
—
—
—
352
31 Dec 2014
—
788
(98)
—
—
—
—
1,690
GBP
—
—
15
(36)
—
—
—
(21)
—
33
(70)
—
—
—
—
(37)
Total
7,405
1,312
19,117
(5,883)
500
(34,692)
(23,446)
(35,687)
8,355
14,878
(6,080)
(337)
500
(30,709)
(21,843)
(35,236)
The Group’s policy is, where possible, to allow
Group entities to settle liabilities denominated in
their functional currency. In order to monitor the
continuing effectiveness of this policy, the Board
reviews quarterly the liabilities, analysed by the
major currencies held by the Group of liabilities due
for settlement and expected cash reserves.
48
Shanta Gold Limited Annual Report and Accounts 2015 FINANCIAL STATEMENTS
The following significant exchange rates applied
during the year:
Average rate
Closing rate
2015
0.001
2014
0.001
2015
0.001
2014
0.001
1.5285
1.6484
1.4803
1.5586
TZS1
GBP1
26.5 Capital risk management
The Group’s objectives when managing capital are to
safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders
and benefit for other stakeholders and to maintain
an optimal capital structure to reduce the costs
of capital.
In order to maintain or adjust the capital structure
the Company may return capital to shareholders
and issue new shares, or when profitable, adjust the
amount of dividends paid to shareholders.
The Group has a US$40 million loan facility from
Investec Bank Limited in South Africa, all of which
has been drawn down. In 2015, US$30 million was
drawn down and a further US$10 million was drawn
down subsequent to year end.
27. Related party transactions
Details of the remuneration and share options of
the directors, who are key management personnel
are contained within note 7 and the Directors
Report. Michael Houston, Toby Bradbury, and Patrick
Maseva-Shayawabaya were the only Executive
Directors during the year. Directors are considered
key management.
Details of Directors’ share based payments are
disclosed in the Directors’ Report.
28. Commitments
The Directors confirm that the Group has a
capital commitment of US$28.62 million
(2014: US$11.95 million) relating to plant
equipment, infrastructure projects and
feasibility studies at New Luika Gold Mine. As at
31 December 2015, the Group had forward sales
commitments of 20,000 ounces of gold at an
average price of US$1,148 per oz. Since the year
end, the Group has entered into additional forward
sales contracts for 12,000oz of gold to bring the
total forward sales commitments to 32,000oz at an
average price of US$1,172.
29. Contingent liabilities
Shanta Mining Company Limited (“SMCL”) has
acquired certain prospecting licences and mining
licences under agreements which provide for
payments to be made in certain circumstances to
the party from whom the licence was acquired.
Payments under these agreements are unquantified
at this time but the maximum amount payable
is not considered to be material. Such payments
are linked to the proven and probable reserves
once established.
The Directors confirm that there are
no other contingent liabilities as
at 31 December 2015 (2014: US$ Nil).
30. Events after reporting date
30.1 The Company completed a finance agreement
with Sandvik Mining and Construction OY. The
€4.6 million (US$5.0 million) financing will be used
to purchase underground mobile equipment and is
repayable quarterly in two tranches over 36 months
from June 2016 (tranche 1) with a fixed interest cost
of 7%, and from September 2016 (tranche 2) with a
fixed interest cost derived by the USD base rate and
expected to be approximately 7%.
30.2 The Company received US$9.1 million financing
from Bank M Tanzania plc (“Bank M”) for the
construction of its 7.5MW power station at the New
Luika Gold Mine. Delivery is expected to take place
in early Q12017 and a 12-month letter of credit for
US$9,114,000 at a fixed interest cost of 8% which
will be followed by five year amortising (monthly)
term loan bearing interest at 12-month USD Libor
plus 9% per annum.
In April 2012 Shanta Gold successfully completed
a US$40 million fundraising, comprising of a
US$15 million equity placing and a concurrent
US$25 million underwritten 5-year convertible
loan note offering. The convertible loan note has a
coupon of 8.5% per annum and a conversion price
of 29.53p and matures in April 2017.
30.3 Following consultation with the convertible loan note
holders, the Company has reached an agreement
with a requisite 75% majority to undertake a
buyback of US$10.0 million of the Notes and to
extend the term of the remaining Notes by two years
to April 2019 subject to the passing of a written
resolution by the convertible note holders. As part
of the Restructuring, the coupon applicable to the
notes will increase from 8.5% to 13.5% for the
remainder of the term of the notes.
49
FINANCIAL STATEMENTS
30.4 The Company has entered into a SSA with Silverback
Limited, a privately held Guernsey-based investment
company, under which Silverback will pay the
Company an advanced payment of US$5.25 million
on closing. Silverback will also pay the Company an
ongoing payment of 10% of the value of silver sold
at the prevailing silver price at the time of deliveries
which will be made annually. The SSA relates solely
to silver by-product production from the NLGM
with minimum silver delivery obligations totalling
608,970oz Ag over a 6.75 year period. The term of
the SSA expires after 10 years and the Company has
no minimum ounce obligations after 2022.
The Company produced 121,682 ounces of silver
in 2015 resulting in approximately 2% of annual
revenue. There are currently no defined silver
reserves at NLGM. Furthermore, the SSA entitles
the Company to share 20% of future annual silver
production above a monthly minimum of 11,250oz.
The Company is also entitled to clawback future
silver deliveries by the pro-rated increase in tonnage
in the event of it installing additional milling capacity
at the NLGM processing plant.
The SSA will be secured against the Singida mining
licences, Shanta’s exploration and development gold
asset located in central Tanzania and the Company
is putting in place the necessary arrangements with
Investec to facilitate this. The security amortises
over the 6.75 years of the silver deliveries and
automatically subordinates should the Company
raise a minimum US$6.0 million of project finance
for Singida’s development. Closing is subject to
customary in-country approvals.
30.5The Company has received firm commitments from
investors to raise gross proceeds of approximately
US$10.5 million (£7.2 million) through a
Placing of 111,442,800 shares at a price of
6.5 pence per share. The Placing Price represents
a discount of approximately 13.3% to the closing
mid-market price per share on 5 May 2016,
the latest practicable date prior to the date of
this announcement.
Following Admission, the Placing Shares will
represent approximately 18.5% of the Company’s
Enlarged Share Capital of 580,220,283
Ordinary Shares.
Following completion of the Placing, the Company
intends to undertake an open offer for up to
€5.0 million to enable existing shareholders not
participating in the Placing to participate in the
fundraising on the same terms.
50
Shanta Gold Limited Annual Report and Accounts 2015
FINANCIAL STATEMENTS
51
Process plant
at New Luika
School children at nearby Mbangala Village School, Chunya District
52
Shanta Gold Limited Annual Report and Accounts 2015 Notice of the Annual General Meeting
Shanta Gold Limited
(A non-cellular company limited by shares incorporated under the laws of the
Island of Guernsey with registered number 43133) (the “Company”).
Notice is hereby given that the Eleventh Annual General Meeting of the shareholders of the Company will be held
at Suite A, St Peter Port House, Sausmarez Street, St Peter Port, Guernsey, GY1 2PU on 2 June 2016 at 2:00pm
(the “Meeting”) for the purpose of considering and, if thought fit, passing the following resolutions numbered 1—9 below
as ordinary resolutions:
Ordinary resolutions
1. To receive and consider the profit and loss account and the balance sheet of the Company for the financial year ended
31 December 2015
2. To receive and consider the report of the directors of the Company
3. To receive and consider the report of the auditors of the Company
4. To fix the directors’ remuneration as US$1,638,000
5. To re-appoint BDO LLP as the auditors of the Company
6. To authorise the directors to fix the remuneration of the auditors as the directors see fit
7. To consider and if thought fit re-elect Anthony Durrant as director of the Company who retires by rotation and who
makes himself available for re-election as a director of the Company
8. To consider and if thought fit re-elect Robin Fryer as director of the Company who retires by rotation and who makes
himself available for re-election as a director of the Company
9. Any other business of which due notice has been given and which the Meeting is competent to consider
Dated 9 May 2016
By order of the board
DIRECTOR
Any member entitled to attend and vote at the above Meeting is entitled to appoint one or more proxies, who need not be members of
the Company, to attend the Meeting and vote on his behalf.
53
Form of proxy
Shanta Gold Limited
(A non-cellular company limited by shares incorporated under the laws of the
Island of Guernsey with registered number 43133) (the “Company”).
As a shareholder of the Company you have the right to attend, speak and vote at the Eleventh Annual General Meeting of the Company
(the “Meeting”). If you cannot, or do not want to attend the Meeting, but still want to vote, you can appoint someone to attend the
Meeting and vote on your behalf. That person is known as a ‘proxy’.
I/We
of
being (a) member(s) of the Company entitled to attend and vote at meetings, hereby appoint:
failing whom, the chairman of the Meeting, as my/our proxy to vote for me/us on my/our behalf at the Meeting to be held at
Suite A, St Peter Port House, Sausmarez Street, St Peter Port, Guernsey, GY1 2PU on 2 June 2016 at 2:00pm and at any adjournment
thereof and to attend and vote thereat as indicated below. To allow effective constitution of the Meeting, if it is apparent to the Chairman
that no shareholders will be present in person or by proxy, other than by proxy in the Chairman’s favour, then the Chairman may appoint
a substitute to act as proxy in his stead for any shareholders provided that such substitute proxy shall vote on the same basis as
the Chairman.
Please indicate with an ‘X’ in the appropriate space how you wish your votes to be cast (see Note 4):
Ordinary Resolutions—Ordinary Business
For
Against
Vote withheld
1. Ordinary Resolution to receive and consider the profit and loss account and the
balance sheet of the Company for the financial year ended 31 December 2015.
2. Ordinary Resolution to receive and consider the report of the directors of
the Company.
3. Ordinary Resolution to receive and consider the report of the auditors of
the Company.
4. Ordinary Resolution to fix the directors’ remuneration at US$1,638,000.
5. Ordinary Resolution to re-appoint BDO LLP as the auditors of the Company.
6. Ordinary Resolution to authorise the directors to fix the remuneration of the
auditors as the directors see fit.
7. Ordinary Resolution to consider and if thought fit re-elect Anthony Durrant as
director of the Company who retires by rotation and who makes himself available
for re-election as a director of the Company.
8. Ordinary Resolution to consider and if thought fit re-elect Robin Fryer as director
of the Company who retires by rotation and who makes himself available for re-
election as a director of the Company.
9. Ordinary Resolution to approve any other business of which due notice has been
given and which the Meeting is competent to consider.
Date
Signature(s) or common seal (see Note 3)
Notes to the proxy form
1. A proxy need not be a member of the Company.
2.
If you do not indicate how you wish your proxy to use your vote in a particular
manner, the proxy will exercise his/her discretion as to how he/she votes and as to
whether or not he/she abstains from voting.
3. The Form of Proxy must be in writing under the hand of the appointer or of his/her
attorney duly authorised in writing, or if the appointer is a corporation under its
common seal or under the hand of the officer or attorney duly authorised.
4.
If you wish your proxy to cast all of your votes for or against a resolution you should
insert an “X” in the appropriate box. If you wish your proxy to cast only certain
votes for and certain votes against, insert the relevant number of shares in the
appropriate box.
5. The “Vote Withheld” option is provided to enable you to instruct your proxy to
abstain from voting on a particular resolution. A “Vote Withheld” is not a vote in law
and will not be counted in the calculation of the proportion of the votes “For” or
“Against” a resolution.
6. Forms of Proxy, to be valid, must be lodged, together with the power of attorney
or other authority (if any) under which it is signed, or a notarially certified
copy of such power of authority, at the Company’s registered office by fax
+44 1481 729200 or email to: kelly.regnard@providentfg.com or posting the
original to: PO Box 240, Suite A, St Peter Port House, Sausmarez Street, St Peter Port,
Guernsey, GY1 3PG not less than 48 hours before the time appointed for holding the
meeting or adjourned meeting.
7.
In the case of joint holders, the signature of any one of them will suffice, but if a
holder other than the first-named holder signs, it will help the Registrars if the name
of the first-named holder is given.
8. Any alteration to this Form of Proxy must be initialled.
9. Completion and return of this Form of Proxy does not preclude a member
subsequently attending and voting at the Meeting.
60
Shanta Gold Limited Annual Report and Accounts 2015