2016
Annual Report and Accounts
Contents
Chairman’s statement
Chief Executive Officer’s review
Director’s report
Corporate governance
Independent auditor’s report to the members of Shanta Gold Limited
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Notice of the Annual General Meeting
Form of proxy
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3
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24
25
26
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56
Nominated advisor and broker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Website
www.shantagold.com
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
CHAIRMAN’S STATEMENT
Chairman’s statement
I am pleased to report that Shanta Gold
(“Shanta” or the “Company”) has had another
successful year building on the platform
established in 2015.
Shanta maintained the operational
improvement achieved in 2015 from its flagship
asset, the New Luika Gold Mine (“New Luika”
or “NLGM”), located in southwest Tanzania. The
philosophy of the Company is to continuously
optimise its planning and execution of the
mining operations across all disciplines. In
2016, this resulted in Shanta again exceeding
its production and cost guidance for the year.
Shanta achieved a record gold production
for FY2016 of 87,713 oz, beating guidance
of 82,000-87,000 oz and All In Sustaining
Cost (“AISC”) for 2016 of US$661/oz against
guidance that reduced twice during the year
from US$750-800/oz to US$690-740/oz
generating operating cash flows before
working capital of US$50.1 million from a
revenue of US$107.1 million and an EBITDA of
US$50.2 million.
At New Luika, the Base Case Mine Plan
presented in September 2015 was
progressively delivered through the year as
anticipated, with all major projects achieving
milestones that ensure continuity of operations.
Of particular importance was the start of
the underground development in late June
which delivered its first development ore in
December, as scheduled. This, together with
key infrastructure projects provide New Luika
with power, water and tailings deposition
facilities for many years to come. Shanta is
aptly demonstrating its ability to develop and
operate mines and is actively seeking to build
on this capability.
During the year, a pilot mining project was
initiated for the Singida Project, formerly the
principal asset for Shanta. The development
of the 2012 Singida mining licence had
been delayed due to resettlement and
land compensation issues. The Company
successfully assisted the community to resolve
the issues resulting in independent valuations
being concluded for all land packages, in
particular for the three families that needed
to be relocated for the pilot mining project.
Although orders were placed for the pilot
process plant, in 2017 the project was put
on hold pending the return of VAT from the
government of Tanzania, with the priority on
available cash placed on completing the capital
projects at NLGM. The project remains ready to
be restarted subject to funds availability.
The Company had a very successful year with
its exploration programme, more than replacing
its mined ounces with new resources. At
NLGM, the results of exploration in 2015
at Elizabeth Hill and in 2016 at Ilunga were
incorporated into a Revised Mine Plan (“RMP”)
in March 2017 which increased reserves to
515,000 oz (2015: 506,000 oz), even after
depletion of 104,000 oz. Resources sitting
outside the RMP also increased to 683,000 oz
(2015: 514,000 oz) demonstrating the true
prospectivity of New Luika and Shanta’s
holding in the Lupa Goldfield. An exploration
program was also commenced at Singida on
the Gold Tree deposits as part of the strategy
to better define the resources as a precursor to
a full mining feasibility study.
Shanta continues to contribute significantly
to the national and local economy within
Tanzania. At 31 December 2016, Shanta and
“The Company had a
very successful year
with it’s exploration
programme, more
than replacing it’s
mined ounces with
new resources.”
1
Annual Report 2016 its contractors employed 1,285 (2015: 1,045)
people. Of the Shanta workforce, 95% are
Tanzanian, 49% of whom come from the
local communities. During the year, Shanta
generated US$107.1 million in foreign exchange
for Tanzania and paid US$15.4 million in
royalties, direct and indirect taxes (excluding
VAT) to the Tanzanian Government.
At the end of April 2017, Shanta had
US$12.5 million in VAT refunds outstanding
and is engaged in top level discussions with
the Government, with the aim to release the
outstanding VAT refunds and is hopeful that
this matter will be resolved in the near future.
Shanta also notes the Tanzanian export ban on
gold/copper concentrate that was made by the
President of the United Republic of Tanzania,
in March 2017. As Shanta has clarified, the
Company does not produce or export any
concentrate from its operations. Shanta only
produces and exports gold doré and as such
there is no impact to the Company. Further
to a recent mineral licensing proclamation
in Tanzania, Shanta does not hold a Special
Mining Licence on its licences and is thus not
subject to recent requirements to list on the
Tanzanian Stock Exchange.
Compared to recent years of price decline,
the gold market remained relatively stable as
a whole, taking into account the volatility that
we have come to expect. Gold prices started
2016 at around US$1,070 per ounce finishing at
around US$1,150/oz. Within the year, the gold
price rose above US$1,300/oz for over three
months; a price maintained until October when
prices retreated. Shanta’s hedging assisted
in delivering an average gold price for gold
sold over the year of US$1,223/oz at a time of
critical investment in the future of the Company.
As part of its risk management and long-term
closure planning, Shanta is actively catalysing
alternative economic activity in the districts and
regions in which it operates. This has been
evidenced in the year with the development
of agriculture projects with scalable and
commercial potential. In 2016, over 1,000
local farmers received training to enhance
productivity and efficiency. Our understanding
of and approach to the inter-relationships
we have with the local communities are key
differentiators for Shanta and a platform for our
future growth. Relations between the Company
and the community remain strong.
In June 2016, John Rickus, a member of your
Board for the last three years, sadly passed
away. He brought enviable mining expertise
to our Board deliberations and his wide
experience of all types of mining in Africa and
other emerging markets was most valuable.
He was also a man of great personality
and humour.
We are fortunate to have another very
experienced mining executive join our Board
in Keith Marshall whose appointment was
approved today and I would like to take this
opportunity to welcome him to the Company.
We believe Keith’s experience in mining and
within Africa will bring further expertise to the
Board and be of considerable value as the
Company develops its portfolio of underground
and surface mining operations.
On behalf of the Board, I would like to, once
again, sincerely thank the entire Shanta team
for their support and commitment in delivering
a strong performance. During FY2016 we have
continued to demonstrate and deliver on the
potential of NLGM’s true value. We remain fully
confident of delivering a sustainable, strongly
cash generative business and I look forward to
reporting on our future progress.
A P W Durrant
Chairman
12 June 2017
CHAIRMAN’S STATEMENT
2
CHIEF EXECUTIVE OFFICER’S REVIEW
Chief Executive
Officer’s review
I am pleased to report on another successful
operational and financial performance
for FY2016. Shanta Gold has delivered a
record year in terms of its health and safety
practices, gold production and operating
cost. The Company generated an EBITDA of
US$50.2 million on US$107.1 million of revenue.
Operations were centred around Shanta’s
flagship producing asset, New Luika, located
in south west Tanzania, and its development
project, Singida, located in central Tanzania.
Business Sustainability
As embodied in our Vision and Values,
protecting our people, the environment and
the community from harm is a pre-requisite
to being a “Respected Mining Company that
makes a Meaningful Difference”. Across the
business, the cumulative Total Injury Frequency
Rate (“TIFR”) for 2016 was 4.60 representing
a 33% reduction over 2015 (6.09), and an
excellent achievement for the year. I am
pleased to report that the injuries that were
sustained throughout the year were minor
and resulted in no Lost Time (“LTI”) Injuries
for the Year. This included a six-month period
where operations transitioned from open pit to
underground which always adds an additional
dimension of risk.
Similarly, on the Environmental side, there were
no significant reportable incidents for 2016,
a continuation from 2015. Internal programs
such as the solar power project and waste
segregation initiatives have resulted in the
Company establishing best practice across
the operations.
For 2016, Shanta produced a separate detailed
Sustainability Report, in line with the Global
Reporting Initiatives. This report provided the
detail behind our initiatives in Safety, Health,
Environment, Asset Protection, and Community
and is a standard that Shanta aims to improve
each and every year.
New Luika Gold Mine Operations
Tonnes ore mined
529,85 0
478,144
615,43 2
Tonnes ore milled
580,664
563,619
597,583
Grade (g/t)
5.18
4.96
5.08
Recovery (%)
87.8
89.6
89.9
Gold production (oz)
84,028
81,873
87,713
Gold sales (oz)
87,758
Silver production (oz)
80,622
86,3 32
101,347
121,682
126,572
Realised gold price (US$/oz)
1,289
1,163
1,220
FY2014
FY2015
FY201 6
“… protecting
our people, the
environment and the
community from harm
is a pre-requisite to
being a “Respected
Mining Company that
makes a Meaningful
Difference”
3
Annual Report 2016 CHIEF EXECUTIVE OFFICER’S REVIEW
New Luika Gold Mine —quarterley breakdown
Tonnes ore mined
615,43 2
192,262
266,68 6
93,507
62,978
57,285
89,3 68
147,324
184,167
Tonnes ore milled
597,583
149,128
151,698
144, 930
151,827
137,924
119,857
150,216
155,62 2
478,144
563,619
Grade (g/t)
5.69
5.48
4.90
4.26
5.08
3.38
4.27
5.68
6.50
4.96
90.2
90.8
89.9
90.1
89.3
89.5
89.5
89.6
Recovery (%)
89.3
89.5
Gold production (ounces)
24,34 12
3,896
20,5801
8,89 7
Gold sales (ounces)
87,713
86,332
13,516
14,686
24,532
29,139
21,486
26,1342
3,426
15,285
13,551
11,590
26,254
29,22 8
Silver production (ounces)
126,572
35,144
36,316
30,381
24,731
24,278
22,145
36,107
39,153
81,873
80,622
121,682
Realised gold price (US$/oz)
1,132
1,246
1,301
1,187
1,220
1,252
1,222
1,175
1,087
1,163
Q1
Q2
Q3
Q4
FY2016
Q1
Q2
Q3
Q4
FY2015
4
CHIEF EXECUTIVE OFFICER’S REVIEW
In line with the BCMP delivered in September
2015, New Luika maintained a consistent mill
feed through 2016 from its surface mining
activity together with a sound Run of Mine
(“ROM”) stockpile strategy. Total mill feed
was 598,000 tonnes at an average grade of
5.08 grams per tonne (“g/t”) for the production
of 87,713 oz of gold. Significantly, this is a
new gold production record for New Luika
and reflects the high quality of the mineral
resources as well as the skills and efficiencies
that Shanta has endeavoured to bring to the
operation. AISC for the year were US$661/oz
rounding off a successful financial year that
delivered quarter-after-quarter of reliable
performance enabling a red-letter day for
the Company, as it beat its guidance on both
production and cost.
Of the open pits within NLGM’s licence area,
Luika was completed in June 2016 and
Bauhinia Creek in September 2016. A large
stockpile of high grade ore was established
at the ROM pad as a key strategic component
of the transition to underground. This will
allow for a consistent level of ore to be fed
through the plant as the underground mining
program develops. The final grades achieved
at the base of Bauhinia Creek pit were
exceptional and bode well for the future of the
underground extraction.
The Ilunga Pit was opened up in July 2016 and
will complete in 2017. Operations at Jamhuri Pit,
which had been suspended in January 2016, were
resumed in the last quarter to source low-cost
waste material for the starter walls of the new
Tailings Storage Facility (“TSF”). Jamhuri remains
available as a back source of open pit ore.
Total NLGM reserves—31 December 2016
Deposit and classification
Bauhinia Creek —Probable Reserve
Luika—Probable Reserve
Ilunga—Probable Reserve
Total Ore Reserve—Underground
Ilunga OP—Probable Reserve
Elizabeth Hill OP—Probable Reserve
Jamhuri OP—Probable Reserve
Shamba OP—Probable Reserve
Total Ore Reserve—Open Pits
Total Ore Reserve—Open Pits + Underground1
Deposit and classification
Total Ore Reserve—Underground
Total Ore Reserve—Open Pits
Total Ore Reserve—Open Pits + Underground1
1. Rounding
Ore tonnes
(kt)
Ore grade
(g/t Au)
Contained
metal (koz)
1,263
466
660
2,389
188
734
101
232
1,255
3,644
2,389
1,255
3,645
6.24
4.88
5.56
5.79
2.75
1.34
2.05
2.17
1.76
4.40
5.79
1.76
4.40
253
73
118
445
17
32
7
16
71
515
445
71
515
5
With the change in emphasis of mining from
surface to underground and the completion of
the two major open pits, the mining contract
at NLGM was replaced with a plant hire
agreement on a portion of the existing mobile
fleet. The mining fleet is now provided on an
operate-and-maintain basis and all activities
from front line supervisor up, planning and pit
services are under the direct control of the
Shanta management team. These changes
were a significant contributor to cost savings
achieved in this 2016 financial year.
New Luika Underground Project
A major development focus for NLGM has
been the establishment of an underground
mine to extract the high-grade extensions
of the Bauhinia Creek and Luika deposits.
Highwall preparations for the portal on the 960
RL bench were started in 2015 and completed
in the first quarter of 2016, on time and on
budget. In parallel, key infrastructure projects
to provide service water, electrical power, mine
pumping, workshops, offices, a rescue room
and change house facilities were established
through the course of the year. All water
from underground is recycled, thus reducing
abstraction from the Luika River.
Environmental approval was received on
23 June 2016 and the first round in the portal
was taken on 24 June 2016. New Luika
purchased new mining equipment through the
course of the year from Sandvik, received on a
schedule, to meet the development demands
of the project. The new owner-operated fleet
has high availability and provides a source of
reasonable cost finance to the Company.
During the year, recruitment and training of
an in-house team, again to suit the project
delivery, was put into effect. After the decline
advanced only around 130 metres, the turn-out
to the Luika deposit was established providing
multiple working places from early on in the
program. By the end of 2016, 1,234 metres had
been developed, beating the plan by 3% and
also delivering in December 2016 its first ore
on the 915 level; a key deliverable as set out in
the BCMP. The ore intersection was importantly
two weeks ahead of schedule with a total of
29 meters ore development completed in the
year, containing 2,044 tonnes at an average
grade of 9.93 g/t gold.
New Luika’s underground development has
been achieved with an in-house team, with
every major milestone to the end of the year,
and to date, delivered on time and on budget.
This is an enormous testament to the high
calibre and dedication of the people engaged
Annual Report 2016 CHIEF EXECUTIVE OFFICER’S REVIEW
in this project. As well as employing our own
team of experienced engineers, managers,
supervisors and operators, Shanta is training
employees from the local community, some of
whom were previously artisanal miners.
Notwithstanding, contractors are brought in
for specialised tasks as required and at the
end of 2016, Master Drilling had commenced
the raise boring of the first of four ventilation
shafts, two each to serve Bauhinia Creek and
Luika respectively. At the time of writing, all four
shafts are nearing completion and the main fan
for Bauhinia Creek commissioned.
A key feature of the underground mine at
Bauhinia Creek and part of the rationale for
the shift from surface to underground was
to access the plunging orebody in the west
that had been cut out of the open pit plan.
This meant that only 45 metres of vertical
development was required to access the
Bauhinia Creek orebody in its western
extension, despite the fact that the open pit
went down to 870 RL, 90 metres below the
portal elevation. The western plunge of the
Bauhinia Creek orebody was switched from
the open pit design to underground in Q1 2015,
substantially reducing the strip ratio of the
open pit from 21:1 down to 9:1 while at the same
time increasing reserves for the underground.
A clear win for both operations that has been
reflected in the AISC since Q3 of 2015.
Quarter on quarter AISC
1,333
1,165
834
653 664 633
712
661
651
589
Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2016
At the time of writing, the cross drive to
Luika was complete with the Luika decline
in progress and the first ore access level in
development at 937 RL. At Bauhinia Creek, the
turn-out has been established on the 845 level,
orebody development on-going on the 865
level and the orebody fully developed, east
and west on the 915, 900 and 880 levels. The
first stope has been established between 880
and 990 level which has delivered first stope
ore production in Q2 2017 as committed in the
BCMP in Q2 2017.
New Luika Revised Mine Plan
As mentioned previously Shanta presented its
BCMP in September 2015. This was the first
time Shanta had prepared a detailed plan for
NLGM that incorporated all of its reserves, and
highlighted the additional known resources
that would be made available to incorporate in
the future.
Post the year end, in March 2017, Shanta
presented New Luika’s RMP. The RMP
incorporated the results of the exploration
programme conducted within the mining
licence in 2015 at Elizabeth Hill and in
2016 at Ilunga. The RMP highlights the true
prospectivity and future long life of NLGM. The
RMP provides for a longer mine life, increased
production and most importantly, greater
returns for all stakeholders. It also showcases
the value and potential that exists by virtue of
the Company’s holding of prospecting licences
in close proximity to the mine.
With the benefit of the increased resources
through exploration and also reduced
operating costs, reserves were increased
from 2.66 Million tonnes (“Mt”) at 5.93 g/t
for 506,000 oz to 3.64 Mt at 4.40 g/t for
515,000 oz Importantly, this increase is after
accounting for depletion of 615,000 tonnes
at 5.27 g/t for 104,000 oz contained since the
previous resource and reserve statement in
September 2015.
The RMP delivers 500,000 oz at US$736/oz
after depletion compared to 443,000 oz at
US$695/oz in the BCMP. Production since the
BCMP accounts for 117,000 oz at US$645/oz.
Production going forward under the BCMP
would have been 326,000 oz at an AISC of
US$713/oz. After accounting for additional
reserves and depletion, the RMP has added
174,000 oz of production at an AISC of
US$779/oz.
Additional resources of 9.47 Mt at 2.24 g/t for
683,000 oz sit outside the RMP, increased
from 6.64 Mt at 2.41 g/t for 514,000 oz in the
BCMP, (1 g/t cut-off for open pit; 3.0 g/t cut-off
for underground). The RMP also provides a
four-year extension of the maximum utilisation
of NLGM plant based on current reserves.
Further work on these resources is on-going
and is expected to deliver additional reserves
in the future to further extend the life of mine.
This cycle of ounce replenishment is the future
story for NLGM.
“The Revised Mine
Plan highlights the true
prospectivity and future
long life of NLGM”
6
Portal entry
CHIEF EXECUTIVE OFFICER’S REVIEW
New Luika Major Projects
In parallel with delivering a successful year
operationally, NLGM started, and substantially
completed, a number of major projects that
will support the business for many years to
come and help maintain its low production cost
status, something Shanta prides itself on.
In a region of seasonal and sometimes
unpredictable rainfall, a mass gravity dam
was built on the Luika River upstream of
NLGM with a capacity of 350 million litres.
This dam supplements existing on-mine
storage of 150 million litres which together
provides sufficient water to see the operation
through a typical dry season of five to seven
months when the Luika River stops flowing.
The capacity of the dam can be increased
should there be an opportunity for a process
plant expansion.
is an expanded facility necessary to power
the new underground mine and to replace
the aging rental plant that preceded it. The
efficiency of the purpose-built HFO engines is
much higher than the replaced HFO-converted
diesel units operating previously and will
help reduce power costs by 20%. Also on the
power side, NLGM has committed to a five year
power purchase agreement from a 700 Kw
solar plant that will be commissioned at NLGM
in Q2 2017.
The final large scale infrastructure project is
a new Tailings Storage Facility 2 (“TSF 2”) for
NLGM that will support operations at current
production for a further eight years. The project
had a delayed start for approvals in 2016 but
was approximately 50% complete at the end of
the year with commissioning expected in the
second quarter of 2017.
A project started in 2015, developed right
through 2016 and commissioned in February
2017 is the new 7.5 MW Heavy Fuel Oil (“HFO”)
Power Plant at a cost of US$16 million. This
A plant upgrade incorporating a 1,000m3 pre-
leach tank was completed in Q3 2016 which
has helped increase recoveries by between 1%
and 2%.
Luika River dam
8
CHIEF EXECUTIVE OFFICER’S REVIEW
Lake
Victoria
Singida
Dodoma
Lake
Tanganyika
Lake
Rukwa
New Luika
Gold Mine
Dar es Salaam
Indian
Ocean
Lupa Gold field
Chunya district Mbeya region
Songea
Shanta Gold operations in Tanzania
Singida
With a stable operating base at NLGM,
attention was drawn once again to the Singida
Project, formerly the base on which Shanta
was listed on the AIM. A mining licence had
been awarded in 2012 but challenges with
resettlement delayed the start of the project.
In April 2016, Shanta re-engaged with the local
community and helped it find the resolution to
its issues. Subsequently, plans were launched
to establish a small-scale pilot plant at Singida
to treat 10 tonnes per hour of surface and near
surface material. It is envisaged that the pilot
plant would operate for at least two years while
additional drilling and feasibility study work
be done to update the understanding and
potential for a full-scale mining operation. The
exploration camp has been upgraded and core
storage yards relocated in preparation for the
operations. Three families have been relocated
to new accommodation nearby.
As a consequence of a temporary
withholding of VAT refunds which amounted
to US$12.5 million end of April 2017, by the
government of Tanzania, the completion of this
project has been put on hold.
Exploration
Shanta has successfully produced strong
results from its on-going exploration
programme throughout FY2016. The Company
has more than replaced its mined ounces
with new resources and in March 2017, it
announced its Revised Mine Plan, which
9
incorporated the strong results previously
reported from Elizabeth Hill and Ilunga, which
increased New Luika’s reserves significantly.
New Luika On-Mine Exploration
Following the upgraded resource at Elizabeth
Hill announced in September 2015, reserves
increased from 70,000 tonnes at 2.3 g/t
for 5,000 oz to 667,000 tonnes at 1.33 g/t
for 28,000 oz. Using the lower achieved
mining costs, this has since been upgraded
to 734,000 tonnes at 1.34 g/t for 32,000 oz
making a valuable contribution to the recently
announced RMP.
A promising first phase drilling program at
the Ilunga deposit in April 2016 was followed
with a second phase in July 2016. The results,
released in September 2016, upgraded
the resource from 74,000 oz at 3.51 g/t to
258,000 oz at 4.55 g/t. This high grade
resource was made the subject of a mine
planning exercise through the rest of 2016
culminating in a new underground reserve
of 660,000 tonnes at 5.56 g/t for 118,000 oz
announced in March 2017. Potential extensions
of Ilunga on strike are being assessed and the
deposit, importantly, remains open at depth.
New Luika—Economic Circle Exploration
Shanta has the rights to 1,500 km2 of
prospecting permits in the Lupa Goldfield in the
areas surrounding NLGM. This ground is highly
prospective and has been the location of many
colonial and artisanal mine activities.
The first drilling program in 2016 was at a
prospect called Askari approximately 14
kilometres west-northwest of NLGM. While the
drill intersections were exciting, the overall
scale of the deposit was small. Askari may
feature in conjunction with other mining in
the proximity.
One such deposit could be the Nkuluwisi
prospect located approximately 12 kilometres
northwest of NLGM for which drilling was
conducted in the final quarter of 2016. Drill
results were released in March 2017 and a
maiden resource was announced in May 2017.
There are 20 targets which have been
prioritised for further study in close proximity
to NLGM’s mining licence area. During the
course of 2016, the understanding of these
opportunities was enhanced with the flying of
700km2 of Lidar survey providing up to date
Digital Terrain Model (“DTM”) and hyperspectral
data to assist with structural interpretation and
anomaly identification.
Annual Report 2016TanzaniaKenyaMozambiqueMalawiZambiaBurundi CHIEF EXECUTIVE OFFICER’S REVIEW
Singida Exploration
Drilling announced in October 2016 was
undertaken at Singida to better define the
deposits of Gold Tree 2 and Gold Tree 3 that
were incidentally intersected during early
exploration of Gold Tree 1. This work is part
of a program to increase the understanding
of the Singida prospects which, as part of a
greenstone formation, have the potential to
extend substantially at depth.
An operating profit for the year of
US$3.0 million (2015: operating loss of
US$11.1 million) was generated, whilst
EBITDA amounted to US$50.2 million (2015:
US$31.9 million), mainly due to higher gold
revenues from higher sales at a higher price,
together with significantly improved cost
efficiencies. Net finance expense amounted to
US$7.4 million (2015: US$7.0 million), at a similar
level to 2015.
Capital Expenditure
The capital program presented as part of
the BCMP in 2015 has been substantially
delivered, overall on time and on budget.
Over-expenditure on the TSF 2 has
been more than offset by savings on the
underground operation.
Capital expenditure for the year amounted
to US$54.6 million. 2016 was a year of
major investment at NLGM with commercial
production from the underground and
completion of all the major infrastructure
projects scheduled in the first half of
2017 following which the capital intensity
reduces substantially.
Finance
Turnover for the year amounted to
US$107.1 million, compared to US$95.7 million,
the increase of 12% due the higher gold
price and increased gold sales in 2016.
The Company continued with its prudent
hedging program and the average gold
price realized for the year was US$1,220/oz
compared to the average price for the previous
year of US$1,163/oz. Cost of sales for the
year amounted to US$88.3million (2015:
US$96.4 million) representing a gross margin
of 14% (2015: 2%).
(Oz)
Gold sales
Silver sales (including
Silver Stream
2016
86,332
100,647
2015
80,622
125,580
Administration costs for the year amounted
to US$7.1 million (2015: US$10.3 million), lower
due to the non-recurring charges incurred
in 2015 on remuneration and statutory
deductions, exchange rate gains and improved
cost containment..
Exploration expenditure for the year amounted
to US$4.7 million (2015: US$2.4 million), higher
due to the increased activities that have
resulted in the increased reserve and resource
bases as well as additional charges arising
from non-refundable VAT.
As a result of the above, loss before tax
of US$4.4 million (2015: loss before tax of
US$18.1 million) was recorded. A tax charge
amounting to US$3.6 million (2015: credit of
US$0.8 million) resulted in losses after tax of
US$8.0 million (2015: US$17.3 million).
In the statement of financial position, non-
current assets increased to US$122.8 million
(2015: US$114.3 million), after a reduction of
US$47.1 million depreciation charge inclusive
of the write off deferred stripping for BC and
Luika pits that have now been mined out, and
an increase with the capital development
on the underground. Current assets totalled
US$49.2 million (2015: US$39.1 million), a
higher level than that of the prior year due to
delays in VAT refunds, additional Run of Mine
stock material as well as Gold in Process but
offset by lower cash on hand. Net working
capital was lower at US$22.2 million (2015:
US$29.1 million) due to the increased short
term portion of debt as well as increased
accounts payable balances as mining activities
increase, which have been offset by the
increased investment in Inventory. Overall
liabilities increased to US$93.6 million (2015:
US$76.7 million) due to the draw down on the
Investec facility, the additional Sandvik mobile
fleet financing and advance on silver stream. A
further US$10 million of the Investec facility was
drawn down in 2016 and has subsequent to
year end been converted to a term loan.
US$m
50.1
US$m
31.8
2016
2015
Cash generated from operations before
working capital amounted to US$50.1 million
(2015: US$31.8 million), an increase on the
prior year due to higher gold sales and lower
10
CHIEF EXECUTIVE OFFICER’S REVIEW
operating cost. The cash, the additional
Investec debt and further sources detailed
below made it possible to fund the extensive
capital program at New Luika as it progresses
with the underground development of
these high grade reserves and extends
the life of mine. Cash balance at year end
was slightly lower at US$14.9 million (2015:
US$19.1 million). Net debt at 31 December
2016 amounted to US$44.2 million (2015:
US$41.5 million) inclusive of the US$15.0 million
Convertible Loan Notes. Repayment of the first
US$20 million Investec Facility A commenced
in June 2016.
Hedging
As stated above, the Company continued with
its prudent hedging program during the year
to protect cash flow at a time of substantial
capital commitment. A total of 38,978 oz (2015:
40,500 oz) were sold under the hedging
program at an average price of US$1,223/oz
(2015: US$1,236/oz). As at end of December
2016, the Company had sold forward 21,000 oz
at an average price US$1,318/oz. Post year the
total forward sales commitments at June 2017
was 36,000 oz (2015: 32,000 oz) at an average
price of $1,281/oz (2015 US$1,172 oz).
Financings
In 2016, a number of important financings
were completed relating to the funding of the
BCMP and smoothing the debt servicing for
the Company.
The Company raised gross proceeds of
US$10.4 million (£7.2 million) through a
placing of 111,442,800 new shares at a price
of 6.5 pence per share. An Open Offer
resulting in 2,702,918 shares for proceeds
of US$0.25 million (£0.18 million) was also
completed at 6.5 pence per share following
the Placing. The proceeds were used to help
fund the development of the BCMP at NLGM.
The Company 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% Despite the coupon
increase, the overall interest payable on the
notes reduced and there was no change in
the conversion price. The buyback was funded
from existing cash reserves and smooths
the debt servicing for the Company in 2017
and 2018, and particularly during the capital
development program.
The Company also entered into €4.6 million
of underground equipment financings with
Nordea Bank Plc for purchases from Sandvik
Mining and Construction Oy at a fixed rate
of 7.0% over three years. The equipment
purchases were part of Shanta’s capital
programme outlined in the BCMP.
The Company entered into a Silver Stream
Agreement (SSA) with Silverback Limited, a
privately held Guernsey-based investment
company, under which Silverback paid
the Company an advanced payment
of US$5.25 million. Silverback also pays 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 NLGM with minimum
silver delivery obligations totalling 608,970 oz
gold over a 6.75 year period. The term of the
SSA is 10 years during which time the Company
will sell silver to SSA and receive ongoing
payments of 10% of the silver sold at the
prevailing silver price. However, the Company
has no minimum ounce obligations after 2022.
These have been included under Borrowings
in the financial statements as prescribed by IAS
32 and adjusted for fair value as well included
in interest paid due to the imputed interest
charges arising on this advance sale.
Lastly, the Company entered into a
US$9.1 million Letter of Credit with Bank
M in Tanzania in March 2016 to fund the
construction of the New Luika power
plant. Shanta subsequently retired from
the US$9.1 million Letter of Credit and the
construction of the New Luika power plant was
funded and paid for from cash available within
the business.
People
Shanta has worked hard to attract and retain
high calibre Tanzanian staff for the business.
The proportion of Tanzanian employees
increased through the year and now stands
at 95%.
In the meanwhile, the Company is committed
to the development of it’s employees to assist
them to reach their full potential. The Company
has a policy of advertising all roles internally
providing all employees with the opportunity to
grow within.
Four graduate mining engineers completed
a structured two year development program
that was initiated in 2015. Ten undergraduate
engineers were given vacation work
experience at NLGM. We aim to have
… the Company is
committed to the
development of it’s
employees to assist
them to reach their
full potential. The
Company has a policy
of advertising all roles
internally, providing
all employees with
the opportunity to
grow within.”
11
Annual Report 2016 CHIEF EXECUTIVE OFFICER’S REVIEW
graduates in training in all the major disciplines
of the business as a key platform for growth of
the business.
Additionally, the Company supports four
apprentices in full time learning at the Moshi
Technical College and sponsors a number of
students and employees through their courses
of study.
More details are provided in our
Sustainability Report on line at:
http://www.shantagold.com/sustainability
Outlook
The transition to underground commercial
production at NLGM will consolidate through
the second half of 2017 to provide the
cornerstone source of high grade feed into
the plant. The progress achieved to date has
significantly de-risked the project with the
fourth level of ore now being developed in
the high-grade Bauhinia Creek deposit. Major
infrastructure projects of power and water are
in place and the new tailings storage facility
is expected to be commissioned in Q2 2017,
giving NLGM a solid and sustainable operating
platform for the future.
New Luika presents a stable low cost operating
base to which on-going exploration will provide
additional resources that should see the
mine operating consistently for many years to
come. Guidance for 2017 is 80-85,000 oz at
an AISC of US$800-850/oz and the year to
date performance is on track to achieve this.
A feasibility and mine development at Singida
provides the opportunity to supplement
production from NLGM.
At New Luika, exploration will continue to
add resources to strengthen the centralised
process facility concept, and at Singida, a
diamond drilling program is the pre-cursor to
its feasibility study.
Capital expenditure at New Luika reduces
substantially from the second half of 2017,
enabling strong cash generation from Shanta
going forward.
Acknowledgement
I would like to take this opportunity to
congratulate, and express my sincere
appreciation for the hard work put in by all
the dedicated Shanta team, members of the
Board and our partners on a very successful
and exciting 2016. I look forward to reporting
on the future progress and prosperity of
your Company.
Toby Jonathan Bradbury
Chief Executive Officer
12 June 2017
12
CHIEF EXECUTIVE OFFICER’S REVIEW
13
Annual Report 2016 14
DIRECTOR’S REPORT
Director’s report
The Directors present their annual report and
the financial statements of the Group for the
year ended 31 December 2016.
Nominated advisor
The Company’s nominated advisor is
Peel Hunt LLP.
General
The Company was established in 2005. On
11 July 2005, its shares were listed on the
London Stock Exchange’s AIM market. The
Company is a non-cellular Company limited by
shares incorporated in Guernsey.
Financial results
The results for the year are set out in the
consolidated statement of comprehensive
income on page 22. No dividends were
proposed by the Board of Directors (2015:
US$Nil).
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 Report on
page 1 and in the Chief Executive Officer’s
Review on page 3 to 12. 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, and to turn commercially viable
findings into a mineral production asset.
The activities for the year have resulted in the
Group’s net loss before tax of US$4.4 million
(2015: Net loss before tax US$18.1 million)
Except as disclosed in Note 29 to the
financial statements, no other material fact
or circumstance has occurred between the
accounting date and the date of this report.
Directors
The Directors who served during the year and
to the date of this report are as follows:
Non- executive
ཛྷ Anthony Peter Wynn Durrant (Chairman)
ཛྷ Robin Anthony Fryer
ཛྷ Ketankumar Vinubhai Patel
ཛྷ Luke Alexander Leslie
ཛྷ John Edward Rickus
(deceased 24 June 2016)
Executive
ཛྷ Toby Jonathan Bradbury
No Director shall be requested to vacate his
office at any time by reason of the fact that
he has attained any specific age. The Board
considers that there is a balance of skills
within the Board and that each of the Directors
contributes effectively.
15
Annual Report 2016 DIRECTOR’S REPORT
Director’s remuneration
(US$’000)
Fees, salary, bonuses and
related benefits
Toby Jonathan Bradbury2
Anthony Peter Wynn Durrant1
Robin Anthony Fryer1
Michael John Houston2
Patrick Maseva-Shayawabaya2, 3
Luke Alexander Leslie1
Ketankumar Patel1
John Rickus1, 4
Sub-total
Share based payments
Toby Jonathan Bradbury2
Anthony Peter Wynn Durrant1
31-Dec-16
31-Dec-15
Performance
bonus
Fees/salary
Total
Performance
bonus
Fees/salary
Termination
payment
Total
176
-
-
-
-
-
-
-
176
-
-
369
131
76
-
-
146
81
29
832
-
-
545
131
76
-
-
146
81
29
185
-
-
40
-
-
-
-
405
96
65
149
262
65
75
65
-
-
-
97
64
-
-
-
590
96
65
286
326
65
75
65
1,008
225
1,182
161
1,568
79
-
-
-
-
-
-
-
62
61
Total remuneration to directors
176
832
1,087
225
1,182
161
1,691
1. Non-executive
2. Executive
3. Resigned 31 October 2015
4. Deceased 24 June 2016
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.
16
DIRECTOR’S REPORT
Going concern
The Directors have reviewed the Group’s cash
flow forecasts for the period to December
2018 and after taking into account existing
financing facilities, available cash and cash
flow projections from operations, 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.
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
Further details, including share options
provided to employees of the Group,
are contained in note 23 to the
financial statements.
Signed on behalf of the Board of Directors on
12 June 2017.
Toby Jonathan Bradbury
Chief Executive Officer
Anthony Peter Wynn Durrant
Chairman
17
Annual Report 2016 Corporate governance
CORPORATE GOVERNANCE
Guernsey does not have its own corporate
governance regime. As a Guernsey-registered
Company trading 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
four 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 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 2016:
Board meeting attendance
Board
Meeting
Audit
Committee
Remuneration
Committee
Sustainability
Committee
Anthony Peter Wynn Durrant
Ketankumar Vinubhai Patel
Toby Jonathan Bradbury
Luke Alexander Leslie
Robin Anthony Fryer
John Edward Rickus
Non-Executive
Non-Executive
Executive
Non-Executive
Non-Executive
Non-Executive
Number of meetings held in the year
10
9
11
11
10
1
11
-
3
-
4
4
-
4
-
-
-
4
4
-
4
3
3
-
-
-
-
3
18
CORPORATE GOVERNANCE
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 reviewing their reports, reviewing
the Group accounts and the Group’s internal
controls. The Audit Committee met four times
in 2016.
Remuneration Committee
The Group has a Remuneration Committee,
comprised of two Non-Executive Directors
being Luke Leslie (Chairman) and Robin Fryer.
The Remuneration Committee aims to meet
at least once each 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 performance
standards which may apply to any grant. The
Remuneration Committee met four times
in 2016.
Sustainability Committee
The Group has a Sustainability Committee,
comprised of two Non-Executive Directors
being Ketankumar Patel (Chairman) and
Tony Durrant. The Sustainability Committee
aims to meet at least once each 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 2016.
Signed on behalf of the Board of Directors on
12 June 2017.
Toby Jonathan Bradbury
Chief Executive Officer
Anthony Peter Wynn Durrant
Chairman
19
Annual Report 2016 AUDITOR’S REPORT
Independent auditor’s
report to the members
of Shanta Gold Limited
We have audited the financial statements
of Shanta Gold Limited for the year ended
31 December 2016 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 Company’s
members, as a body, in accordance with
Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so
that we might state to the 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 Company and the 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 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 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 material misstatements
or inconsistencies we consider the implications
for our report.
Opinion on the financial statements
In our opinion the financial statements:
ཛྷ Give a true and fair view of the state of the
Group’s affairs as at 31 December 2016 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 prepared in accordance with the
requirements of the Companies (Guernsey)
Law, 2008
20
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 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
12 June 2017
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
21
Annual Report 2016 FINANCIAL STATEMENTS
Consolidated statement of
comprehensive income
(US$’000)
Revenue
(Loss)/gain on non-hedge derivatives and other
commodity contracts
Other cost of sales
Depreciation
Total cost of sales
Gross profit
Administration expenses
Exploration and evaluation costs
Operating profit/(loss)
Finance income
Finance expense
(Loss) before taxation
Taxation
(Loss) for the year attributable to the equity holders of the
parent Company
Notes
31-Dec 2016
31-Dec 2015
4
5
6
7
8
107,142
(4,066)
(41,808)
(46,459)
(88,267)
14,809
(7,075)
(4,697)
3,037
98
(7,474)
(4,339)
(3,634)
(7,973)
95,705
2,253
(54,075)
(42,319)
(96,394)
1,564
(10,255)
(2,434)
(11,125)
112
(7,097)
(18,110)
804
(17,306)
(Loss) after taxation
(7,973)
(17,306)
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign entities which can
subsequently be reclassified to profit or loss
Total comprehensive (loss)/profit attributable to the equity
shareholders of the parent
Loss per share attributable to the equity holders of the
parent Company
(418)
(8,391)
100
(17,206)
Basic and diluted loss per share (US$ cents)
9
(1.473)
(3.727)
The loss for the year and the total comprehensive loss 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 page 26 to 50 form an integral part of these
financial statements.
22
FINANCIAL STATEMENTS
Consolidated statement
of financial position
(US$’000)
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Restricted cash
Cash and cash equivalents
Total current assets
TOTAL ASSETS
CAPITAL AND RESERVES
Equity
Share capital and premium
Share option reserve
Convertible loan note reserve
Shares to be issued
Translation reserve
Accumulated deficit
TOTAL EQUITY
LIABILITIES
Non-current liabilities
Loans and other borrowings
Convertible loan notes
Provision for decommissioning
Provision for deferred taxation
Total non-current liabilities
Current liabilities
Trade and other payables
Loans and other borrowings
Income tax payable
Total current liabilities
TOTAL EQUITY AND LIABILITIES
Notes
31-Dec 2016
31-Dec2015
10
11
15
14
16
21
23
19
23
18
19
20
8
17
18
23,262
99,556
122,818
20,291
13,975
-
14,945
49,211
172,029
143,870
2,248
5,374
60
463
(73,536)
78,479
35,768
14,298
7,471
8,948
66,485
11,148
14,660
1,257
27,065
172,029
23,201
91,093
114,294
10,737
8,717
500
19,117
39,071
153,365
133,842
3,202
5,374
82
881
(66,712)
76,669
30,630
23,446
5,979
6,696
66,751
5,883
4,062
-
9,945
153,365
The financial statements were approved and authorised for issue by the board of Directors on
12 June 2017 and signed on its behalf by:
Toby Jonathan Bradbury
Chief Executive Officer
Anthony Peter Wynn Durrant
Chairman
The accompanying notes on pages 26 to 50 form an integral part of these
financial statements.
23
Annual Report 2016 FINANCIAL STATEMENTS
Consolidated statement
of changes in equity
Share
capital
Share
premium
Share
option
reserve
Convertible
loan note
reserve
Translation
reserve
Shares to
be issued
Accumulated
deficit
Total
equity
(US$’000)
Total equity
31 December 2014
76
132,865
4,067
5,374
(Loss) for the year
Other comprehensive
profit for the year
Total comprehensive
(loss) for year
Share based payments
Shares issued
Exercise of options
Lapsed options
Total equity
-
-
-
-
-
-
-
-
-
-
-
491
410
-
-
-
-
367
-
(410)
(822)
-
-
-
-
-
-
-
31 December 2015
76
133,766
3,202
5,374
(Loss) for the year
Other comprehensive
(loss) for the year
Total comprehensive
(loss) for year
Share based payments
Shares issued
(net of expenses)
Exercise of options
Lapsed options
Total equity
-
-
-
-
-
-
-
-
17
10,006
-
-
5
-
-
-
-
200
-
(5)
(1,149)
-
-
-
-
-
-
-
781
-
100
100
-
-
-
-
881
-
(418)
(418)
-
-
-
-
416
(50,228)
93,351
-
-
-
-
(334)
-
-
(17,306)
(17,306)
-
100
(17,306)
(17,206)
-
-
-
822
367
157
-
-
82
(66,712)
76,669
-
-
-
(22)
-
-
-
(7,973)
(7,973)
-
(418)
(7,973)
(8,391)
-
-
-
1,149
178
10,023
-
-
31 December 2016
93
143,777
2,248
5,374
463
60
(73,536)
78,479
The nature and purpose of each reserve within Shareholders’ equity is described as follows:
Reserve
Share capital
Share premium
Share option reserve
Description and purpose
Amount subscribed for share capital at nominal value
Amount subscribed for share capital in excess of nominal value
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
Shares to be issued
Accumulated deficit
Cumulative gains and losses on translating the net assets of overseas
operations to the presentation currency
Nominal value of share capital and premium on shares to be issued
Cumulative net gains and losses recognised in the consolidated statement of
comprehensive income
The accompanying notes on pages 26 to 50 form an integral part of these financial statements.
24
Consolidated statement
of cash flows
(US$’000)
Notes
31-Dec 2016
31-Dec 2015
Net cash flows generated from operating activities
Investing activities
Purchase of intangible assets
Purchase of plant and equipment
Asset under construction
Open pit development expenditure
Net cash flows used in investing activities
Financing activities
Ordinary shares issued (net of expenses)
Buy-back of convertible loan notes (net of costs)
Loans repaid (net)
Equipment loan repaid
Finance lease repayments
Silver Stream advance (net of costs and payments)
Loan interest paid
Refund of restricted cash
Loans received (net of loan arrangement fees)
Net cash flows received/(used) in financing activities
24
10
11
11
11
40,330
35,017
(66)
(2,132)
(41,377)
(5,796)
(49,371)
10,023
(9,950)
-
(579)
(1,061)
4,011
(4,546)
500
6,471
4,869
(71)
(2,048)
(8,509)
(18,904)
(29,532)
-
-
(25,237)
(579)
(165)
-
(4,398)
-
29,133
(1,246)
Net (decrease)/increase in cash and cash equivalents
(4,172)
4,239
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
19,117
14,945
14,878
19,117
The accompanying notes on pages 26 to 50 form an integral part of these
financial statements.
FINANCIAL STATEMENTS
25
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
Notes to the financial
statements
General information
1.
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 and the Directors’ report on
page 3 to 12.
These financial statements were approved
and authorised for issue on 12 June 2017 by
Toby J Bradbury and Anthony P W Durrant on
behalf of the Board.
The Directors have reviewed the Group’s cash
flow forecasts for the period to December
2018 and after taking into account existing
financing facilities, available cash and cash
flow projections from operations, 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.
Accounting policies
2.
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.
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
judgements and estimates have been made
in preparing the financial statements and their
effect are disclosed in note 3.
Standards in issue but not yet effective
The following standards and interpretations
which have been recently issued or revised
and are mandatory for the Group’s accounting
periods beginning on or after January 1, 2017 or
later periods have not been adopted early:
Standard Detail
IFRS 9
Financial instruments
IFRS 15
Revenue with contracts with customers
IFRS 16
Leases
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
IAS 12
IAS 7
IFRS 2
Amendment—Recognition of deferred tax assets for
unrealised losses
Amendment—Disclosure initiative
Amendment—Classification and measurement of
share-based payment transactions
Effective date
1 January 2018
1 January 2018
1 January 2019
1 January 2017
1 January 2017
1 January 2018
26
NOTES TO THE FINANCIAL STATEMENTS
IFRS 15 is intended to introduce a single
framework for revenue recognition and
clarify principles of revenue recognition.
Management have assessed the point of
revenue recognition and do not expect there
to be any material impact on the consolidated
financial statements.
IFRS 16 introduces a single lease accounting
model, in which leases are capitalised as
assets with an associated lease liability with
the exception of certain low value leases
and leases with a term under 12 months.
Management are currently assessing the
impact of this standard but there are no
material operating leases in the Group.
IFRS 9 introduces significant changes to the
classification and measurement requirements
for financial instruments. Management are
currently assessing the impact of this standard.
The principal accounting policies adopted are
set out below.
2.2 Basis of consolidation
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
other comprehensive income and accumulated
in the foreign exchange translation reserve.
2.4 Transactions and balances
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
27
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
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.
Inventory
2.6
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 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.
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 Licensing 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 based on proven and probable
reserves. The useful lives and residual values
are re-assessed annually.
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 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.
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 capitalized 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.
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
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:
28
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
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.
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.
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.
The Group’s liability for current tax is calculated
using tax rates that have been enacted or
substantively enacted by the reporting date.
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 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.
29
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
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 on a unit of
production basis. 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.
2.15 Share-based payment/incentive
programmes
The Group has applied the requirements of
IFRS 2: Share-Based Payments.
a) The Group grants share options and
incentive share awards to executive
directors and certain employees. Share
options and incentive share 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) before tax
Total assets
Total liabilities
Non-current assets
additions
Depreciation
Exploration and mining
of minerals
2016
107,142
(4,339)
172,029
93,550
56,657
2015
95,705
(18,110)
153,365
76,696
29,534
47,114
43,015
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 Leases
Determining whether an arrangement is, or
contains, a lease is based on the substance of
the arrangement and requires an assessment
of whether fulfilment of the arrangement is
dependent on the use of a specific asset or
assets and whether the arrangement conveys
a right to use the asset. Leases of plant
and equipment where the group assumes
a significant portion of risks and rewards of
ownership are classified as a finance lease.
Finance leases are capitalised at the estimated
30
NOTES TO THE FINANCIAL STATEMENTS
present value of the underlying lease
payments. Each lease payment is allocated
between the liability and the finance charges
to achieve a constant rate on the balance
outstanding. The plant and equipment acquired
under the finance lease are depreciated over
the useful lives of the assets, or over the lease
term if shorter. Leases in which a significant
portion of the risks and rewards of ownership
are retained by the lessor are classified as
operating leases. Payments made under
operating leases are charged to the statement
of comprehensive income on a straight-line
basis over the period of the lease.
2.19 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 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
Impairment of financial assets
b)
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 impairment 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.
31
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
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 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.
Silver Stream arrangement
If estimates of future payments are revised,
the carrying amount of the financial liability is
adjusted to reflect actual and revised estimated
cash flows. The revised carrying amount is
adjusted by computing the present value of
estimated future cash flows at the financial
liability’s original effective interest rate. The
adjustment is recognised in profit or loss as
income or expense.
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.
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.
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.
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)
input other than quoted prices included
within level 1 that are observable for the
b)
32
NOTES TO THE FINANCIAL STATEMENTS
asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived prices
(level 2); and
inputs for the asset or liability that are
not based on observable market data
(unobservable input) (level 3)
c)
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.
ཛྷ
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
21 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
3.
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 based
on proven and probable reserves. Units
33
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.
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 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
109,000 tonnes was mined.
ཛྷ
Impairment of acquired exploration and
evaluation 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 10.
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
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
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 2016 the intangibles
amounted to US$23,262,000 (2015:
US$23,201,000).
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.
ཛྷ 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 2016 was US$99,556,000
(2015: US$91,093,000).
ཛྷ
ཛྷ
A change in the reserves in the year
resulted in a lower US$1,553,000
depreciation charge. Future impact has not
been assessed as it is impractical to do so
as the future conversion of resources into
reserves is unknown.
Impairment 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
2016 or 2015.
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 2016 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 2016,
no share options were granted, but a total
of 1,950,000 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 23.
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. Exploration
and evaluation costs are expensed as
incurred until a decision is taken that a
mining property is economically feasible,
after which subsequent expenditures are
capitalised as intangible assets.
Management estimates the economic
feasibility of a property using key inputs
such as gold resources, future gold prices,
production levels, production costs and
capital expenditure.
For the year to 31 December 2016
exploration costs amounting to
US$4,697,000 (2015: US$2,434,000)
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
34
NOTES TO THE FINANCIAL STATEMENTS
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$700,000 million (2015: US$500,000)
on the provision for environmental and site
restoration. In the current financial period
these have been reviewed downward
as the Group is engaged in a process to
commence the necessary work programs
required during the current life on
mine operations.
ཛྷ SSA accounting judgement and estimate
The Silver Stream liability is disclosed in
note 18. The carrying amount of the Silver
Stream liability is adjusted at each balance
sheet date to reflect the discounted
estimates of the value of the silver to be
delivered in the future, over the term of
the Silver Stream Agreement. The key
estimates are the quantity of silver expected
to be delivered and future silver prices. The
Group estimates the quantity of silver to be
delivered based on the silver reserves and
the Group’s life of mine plan. Future silver
prices are estimated using market based
estimates of silver price over the short term
and a nominal inflationary increase of 2%
over the longer term.
4.
(Loss)/gain on non-hedge derivatives
and other commodity contracts
(US$’000)
Valuation of open commodity
swap
Commodity swap (expenditure)/
revenue
31-Dec
2016
256
31-Dec
2015
1,312
(4,322)
941
(4,066)
2,253
A mark to market valuation of open swap
deals was done at 31 December 2016 (31
December 2015). This resulted in a gain on
non-hedging instruments of US$1,568,000
(2015: US$1,312,000) as the spot gold price
was below the fixed forward prices of these
instruments. The movement in 2016 is
US$256,000 (2015: US$1,312,000). During the
year losses of US$4,322,000 (2015: revenue
of US$941,000) were realised on settlement
of commodity swaps as the spot gold prices at
the settlement dates were higher than the fixed
forward prices of the instruments.
5.
Finance income
(US$’000)
Decrease in fair value of
warrants
Bank interest
6.
Finance expense
(US$’000)
Loan and other Interest
Unwinding of discount on
decommissioning liability
Interest on Silver Stream
advance
Value adjustment on
Silver Stream advance
Convertible Loan Note
accretion
31-Dec
2016
31-Dec
2015
-
98
98
63
49
112
31-Dec
2016
31-Dec
2015
4,748
478
924
477
4,877
718
-
-
847
1,502
7,474
7,097
The above finance expense arises on financial
liabilities measured at amortised cost using the
effective interest rate method. No other losses
have been recognised in respect of financial
liabilities at cost.
7.
(Loss)/profit before taxation
(US$’000)
Loss before tax is arrived at
after charging/(crediting)
Foreign exchange (profit) /
losses
Depreciation and amortisation
of assets
Amortisation of intangible
assets
Share based payment costs
Impairment and write-off
of licenses
(Profit) /loss on disposal
of assets
Directors remuneration
Staff costs
Auditors’ remuneration
Audit fees of the Company and
Group
Audit fees of subsidiaries by
associates of Group auditor
31-Dec
2016
31-Dec
2015
(357)
1,080
47,114
43,015
5
200
-
-
7
527
71
368
1,087
16,110
1,638
12,978
83
41
85
54
Taxation
8.
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.
35
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
Tax credit/(charge) for the year relates to:
(US$’000)
Current tax charge (Corporate
and turnover tax charge)
Deferred tax (charge)/credit
Net (charge)/credit
31-Dec
2016
(1,518)
(2,116)
(3,634)
31-Dec
2015
(287)
1,091
804
The tax credit for the year can be reconciled to
the (loss) per the statement of comprehensive
income as follows:
(US$’000)
Loss before taxation
Tax at the standard tax rate
Tanzanian Corporation tax at 30%
Different tax rates applied in
overseas jurisdictions
Reassessment of losses by
the TRA
Permanent adjustments
Unrecognised taxable losses
in subsidiaries
Turnover tax charge—current yr.
Turnover tax charge—prior yr.
31-Dec
2016
31-Dec
2015
(4,339)
(18,110)
(1,302)
1,378
(5,433)
1,690
-
2,390
823
2,548
171
16
-
262
287
-
Tax payable/credit
3,634
(804)
Deferred tax asset movement
Balance at 1 January
Tax losses utilised in the year
Balance at 31 December
22,776
28,397
(10,414)
12,362
(5,621)
22,776
Included in this year’s tax charge is a “Turnover
Tax Charge” which is applicable should a
company incur tax losses for more than 3
consecutive years, and is levied at a rate of
0.3% of Turnover.
The deferred tax asset has arisen on the
unused tax losses. At year end, the Group has
unused tax losses of US$41,205,000 (2015:
US$74,426,000) and further capital allowance
of US$28,393,000 (2015: US$2,612,000)
available for offset against future profits and
can be carried forward indefinitely.
Additionally, the Group has accumulated
expenditure of US$18,413,000 (2015:
US$13,144,000) arising on a number of its
exploration projects for off-set against future
profits generated from those projects which
can be carried forward indefinitely. No deferred
tax asset has been recognised on these losses
as their utilisation is uncertain at this stage.
Deferred tax liability movement
(US$’000)
Balance at 1 January
Movement for the year
Balance at 31 December
31-Dec
2016
29,472
(8,162)
21,310
31-Dec
2015
36,184
(6,712)
29,472
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 2015 is an amount of US$5,197,000
relating to deferred tax liability on Shield
and Boulder acquisition. A net deferred tax
liability of US$8,948,000 has been recognised
(2015: US$6,696,000).
Loss per share
9.
Basic loss per share is computed by dividing
the loss attributable to ordinary shareholders
by the weighted average number of ordinary
shares outstanding during the year.
The earnings and weighted average number of
ordinary shares used in the calculation of basic
loss per share is:
(US$’000)
Loss for the year attributable
to equity holders of
Company
Loss used in calculation
of basic profit per share
(see below)
Basic loss per share
(US cents)
Weighted average number
of shares in issue
31-Dec
2016
(7,973)
31-Dec
2015
(17,306)
(7,973)
(17,306)
(1.473)
(3.727)
541,157,213 464,388,679
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
2016
31-Dec
2015
The Group has the following instruments
which could potentially dilute basic
earnings per share in the future:
Share options
Convertible loan notes
Warrants
3,164,557
-
-
7,652,598
-
-
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.
36
NOTES TO THE FINANCIAL STATEMENTS
Intangible assets
10.
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.
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.
Owned
pros-
pecting
licences
Third party
primary
mining
licences
Owned
Mining
licence
Third party
mining
licence
Acquired
explora-
tion and
evaluation
Assets
Total
95
-
(71)
-
24
-
-
387
-
-
-
387
-
-
24
387
22
71
-
(7)
86
-
(5)
81
185
22,519
23,208
-
-
-
185
66
-
251
-
-
-
71
(71)
(7)
22,519
23,201
-
-
66
(5)
22,519
23,262
(US$’000)
At 31-Dec-14
Additions
Impaired
Amortisation
At 31-Dec-15
Additions
Amortisation
At 31-Dec-16
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 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
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
11. Mining properties, and other equipment
Gold
processing
plant
Mining
assets
Assets under
Construction
Mining
and other
equipment
Decom-
missioning
asset
Deferred
stripping
asset
Total
(US$’000)
Cost
At 1 January 2015
39,815
59,578
Additions
Asset transfers
Mining costs capitalised
Disposals/write off
423
-
-
(368)
1,501
129
-
-
1,936
8,509
(332)
-
-
6,173
8,180
9,976
125,658
124
203
-
-
-
-
-
(3,709)
-
-
18,904
-
10,557
-
18,904
(4,077)
At 31 December 2015
39,870
61,208
10,113
6,500
4,471
28,880
151,042
Accumulated
Depreciation
At 1 January 2015
Charge for the year
Disposals/write off
4,784
6,561
-
7,988
20,411
-
At 31 December 2015
11,345
28,399
Net book value
-
-
-
-
2,573
1,124
-
978
1,347
-
611
16,934
13,572
43,015
-
-
3,697
2,325
14,183
59,949
At 31 December 2015
28,525
32,809
10,113
2,803
2,146
14,697
91,093
Cost
At 1 January 2016
39,870
61,208
Additions
Asset transfers
Mining costs capitalised
Disposals/write off
76
4,856
-
-
-
-
-
-
10,113
41,603
(5,196)
-
-
6,500
2,232
5,196
-
(113)
4,471
1,014
-
-
-
28,880
151,042
-
-
5,796
-
49,781
-
5,796
(113)
At 31 December 2016
39,946
66,064
46,520
13,815
5,485
34,676 206,506
Accumulated
Depreciation
At 1 January 2016
Charge for the year
Disposals/write off
11,345
5,564
-
28,399
23,291
-
At 31 December 2016
16,909
51,690
Net book value
-
-
-
-
3,697
972
(113)
4,556
2,325
14,183
59,949
418
-
16,869
-
47,114
(113)
2,743
31,052 106,950
At 31 December 2016
23,037
14,374
46,520
9,259
2,742
3,624
99,556
The net carrying amount of property plant
and equipment includes an amount of
US$12,151,000 (2015: US$2,574,000) in
respect of assets held under finance lease and
equipment loan. Depreciation charge for these
assets in the year amounted to US$1,076,000
(2015: US$604,000). The above assets which
are not financed under the finance lease or
equipment loan are encumbered as detailed
further in note 18 in favour of a Security Agent
acting on behalf of Investec Bank Limited.
40
NOTES TO THE FINANCIAL STATEMENTS
Subsidiary companies
12.
At 31 December 2016, the Group had the
following subsidiary undertakings:
Name of company
Shanta Gold Holdings Limited
Chunya Gold Holdings Limited
Rukwa Limited
Shanta Mining Company Limited
Boulder Investments Limited
Shield Resources Limited
Mgusu Mining Limited
Nsimbanguru Mining Limited
Chunya Resources Limited
Songea Resources Limited
Holding
Country of
Incorporation
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Guernsey
Guernsey
Guernsey
Tanzania
Cyprus
Tanzania
Tanzania
Tanzania
Tanzania
Tanzania
Principal activity
Holding Company
Holding Company
Investment Company
Exploration and mining
Investment Company
Exploration and mining
Exploration and mining
Exploration and mining
Dormant
Dormant
13. Categories of financial assets
and liabilities
(US$’000)
Current Assets measured at Amortised Cost
Trade and other receivables excluding prepayments
Restricted cash
Cash and cash equivalents
Total financial assets at amortised cost
Financial liabilities measured at amortised cost
Current financial liabilities
Loans and other borrowings (note 18)
Trade and other payables excluding warrants
Non-current financial liabilities
Convertible Loan (note 19)
Loans and other borrowings (note 18)
31-Dec 2016
31-Dec 2015
469
-
14,945
15,414
14,660
11,148
25,808
14,298
35,768
50,066
2,792
500
19,117
22,409
4,062
5,883
9,945
23,446
30,630
54,076
Total financial liabilities measured at amortised cost
75,874
64,021
Financial assets at fair value through profit or loss
Derivative financial assets—commodity hedge (note 25)
Total financial assets at fair value through profit or loss
1,568
1,568
1,312
1,312
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 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).
41
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
17.
Trade and other payables
(US$’000)
Trade payables
Accruals and other payables
31-Dec
2016
4,582
6,566
11,148
31-Dec
2015
3,256
2,627
5,883
Trade payables and accruals primarily comprise
amounts outstanding for trade purchases and
ongoing costs. The Group has financial risk
management policies in place to ensure that
the payables are paid within the credit time
frame. The Directors consider that the carrying
amounts of trade payables approximate their
fair value.
18.
Loans and other borrowings
The reconciliation of the opening and
closing fair value balance of level 3 financial
instruments is provided below:
(US$’000)
Level 3
Liabilities
At 1 January
Movement in fair value
At 31 December
31-Dec
2016
31-Dec
2015
-
-
-
(63)
63
-
During the year no impairments were
recognised (2015: US$ Nil). The Directors
consider that the carrying amount of trade and
other receivables approximates their fair value.
14.
Trade and other receivables
(US$’000)
Prepayment
Derivative financial asset
(Note 25)
VAT receivable
Other receivables
31-Dec
2016
3,667
1,568
8,272
468
13,975
31-Dec
2015
498
1,312
4,115
2,792
8,717
(US$’000)
Current liabilities
Promissory notes1
Loans payable to Investec
Bank less than 1 year2
Equipment loan3
Finance lease4
Finance lease5
During the year no impairments were
recognised (2015: 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
2016
7,406
31-Dec
2015
4,996
12,885
6,041
20,291
10,737
Non-current liabilities
Promissory notes1
Loans payable to Investec
Bank after more than 1 year2
Equipment loan3
Finance lease4
Finance lease5
Silver Stream6
Total loans and other
borrowings
31-Dec
2016
31-Dec
2015
3,158
9,148
579
143
1,632
14,660
-
26,730
1,013
155
2,337
5,533
35,768
50,428
-
3,356
579
127
-
4,062
2,929
25,877
1,448
376
-
-
30,630
34,692
The cost of consumable stores consumed
during the year and included in cost
of sales amounted to US$11.3 million
(2015: US$9.1 million).
16. Restricted cash
As per IAS 7 (Classification of Restricted Cash),
an amount of US$Nil (2015: 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. At year end the Mark to Market
value of open contracts did not require that the
Company provide additional security and this
was reimbursed.
(1) Promissory Notes: Promissory notes relate to Promissory Note
2 of US$3.1 million issued in consideration for the acquisition
of Boulder and is repayable on 15 April 2017. The notes bear
annual interest of 2.6% and is 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 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$3.1 million.
(2) Loan from Investec Bank in South Africa relates to a drawdown
of US$40 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
42
NOTES TO THE FINANCIAL STATEMENTS
of US$1.17 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.
Subsequent to year end this was termed out and converted
into a term facility of which repayment of the drawn facility
amount commences in the quarter ending 30 June 2017 on
a quarterly basis over 3 years with the capital repayments of
US$1.54 million.
Both these facilities are secured by means of
• 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
• 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
• 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
• Shareholder Pledge which means 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;
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
(3) 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.
(4) 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.
(5) Finance Lease: This is in respect of a lease to acquire mobile
equipment from Sandvik, a capital amount of €4,634,000
(US$5,261,000) repayable monthly over thirty six months
commencing on 12 June 2016 for Tranche 1 and 14 September
2016 for Tranche 2 and payable quarterly. This is classified
as a finance lease because the rentals period amounts to the
estimated useful economic life of the asset and after three
years, the assets will be bought outright by the Company by
paying a nominal amount.
(6) Silver Stream: The Company entered into a silver streaming
agreement (“SSA”) with Silverback Limited (“Silverback”), a
privately held Guernsey-based investment company, under
which Silverback paid the Company an advanced payment
of US$5.25 million on closing. Silverback will also pay the
Company an ongoing payment of 10%. of the value of silver sold
at the prevailing silver price at the time of deliveries which will
be made annually. The SSA relates solely to silver by-product
production from NLGM with minimum silver delivery obligations
totalling 608,970 oz gold over a 6.75 year period. The term
of the SSA is 10 years during which time the Company will sell
silver to SSA and receive ongoing payments of 10% of the silver
sold at the prevailing silver price. However, the Company has no
minimum ounce obligations after 2022.
Silver Stream
(US$’000)
Balance at 1 January
Advance
Value of Silver transferred
Interest at the effective interest rate
Adjustment for value in future estimates
At 31 December
31-Dec 2016
(5,250)
1,660
(924)
(1,019)
(5,533)
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
2,027
2,638
4,665
-
-
2016
Interest
252
146
398
-
-
2015
Minimum
Lease
Payment
Interest
Present
Value
162
415
577
-
-
34
39
73
-
-
127
376
503
127
376
Present
Value
1,775
2,492
4,267
1,775
2,492
43
Annual Report 2016
NOTES TO THE FINANCIAL STATEMENTS
to the additional areas created by the waste
rock dumps associated with the mining at the
Ilunga Pit. The amount of US$5,485,000 (2015:
US$4,471,000) is included in mining properties
within property, plant and equipment. The
increase in the expected costs that will
be incurred is based on a revision of the
planned work programs taking cognisance
of planned rehabilitation to take place during
the current mining operations. The provision
represents the net present value of the best
estimate of the expenditure required to settle
the obligation to rehabilitate environmental
disturbances caused by mining operations.
21.
Share capital
665,000,000
ordinary shares of
0.01 pence each
31-Dec
2016
31-Dec
2015
£66,500 £66,500
Issued and fully paid
Number
£ US$’000
464,388,679
At 1-Jan-2015
4,388,804
Issued in year
468,777,483
As at 31-Dec-2015
Issued in year
114,168,218
As at 31-Dec- 2016 582,945,701
46,438
439
46,877
11,418
58,295
76
-
76
17
93
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.
22. Warrants issued
During the year no warrants were issued. As at
31 December 2016, all of the warrants in issue
had lapsed.
23. Share-based payments
Equity-settled share option scheme
Options in issue are as follows:
Grant date
10 August 2006
25 April 2008
Exercise
price (p)
Final exercise date
59
8.5
10 August 2016
25 April 2018
8 September 2009
6
8 September 2019
27 July 2010
18.2
27 July 2020
17 November 2010
28.3
17 November 2020
19. Convertible Loan notes
(US$’000)
Balance at 1 January
Purchase by group company
Cash paid interest
Coupon interest (note 6)
Accreted Interest (note 6)
Amortisation of warrant
costs
At 31 December
31-Dec
2016
23,446
(9,995)
(2,065)
2,065
847
-
31-Dec
2015
21,843
-
(2,125)
2,125
1,501
102
14,298
23,446
In 2015 the convertible loan notes related
to US$25 million fixed coupon convertible
loan notes which were due for repayment
on 13 April 2017 and contained a conversion
option at a price of US$0.4686 per 1 Company
share. The notes incurred an interest charge
of 8.5% per annum and interest was payable
half yearly in April and October. During the year
the Group repurchased US$10.0 million of the
notes and extended the repayment term of the
remaining notes by two years to April 2019. As
part of the repurchase, the coupon applicable
to the notes increased from 8.5% to 13.5% for
the remainder of the term of the notes.
The convertible loan notes are not secured
against any assets of any Group Company.
The Group has determined them to be a
compound financial instrument requiring a
proportion of the loan to be classified as
equity. The equity element represents the
difference between the fair value of a similar
liability with no equity conversion option and
the fair value of the existing convertible notes
in issue. Accreted interest is charged to the
statement of comprehensive income over the
life of the notes. The Group determined that
the modification of the terms of the outstanding
loan notes was not a significant modification
and therefore the effective interest rate was
recalculated and is being recognised over the
remaining term of the loan notes.
20. Provision for decommissioning
(US$’000)
Balance at 1 January
Increase/(decrease) in
provision
Unwinding of discount
(note 6)
At 31 December
31-Dec
2016
5,979
1,014
31-Dec
2015
8,970
(3,709)
478
718
7,471
5,979
The above provision relates to site restoration
at the New Luika Gold Mine and nearby open
pits, which is expected to be utilised by 2022
based on the current mineable resource. The
additional provision predominately relates
26 September 2011
26 September 2011
26 September 2011
6 January 2012
23 August 2012
23 August 2012
23 August 2012
26 September 2021
500,000
25
30
35
26 September 2021
26 September 2021
23.13
6 January 2022
25
30
35
23 August 2022
23 August 2022
23 August 2022
Number of
options at
31-Dec-16
Number of
options at
31-Dec-15
-
350,000
400,000
955,000
-
-
-
1,770,000
250,000
500,000
500,000
43,649
450,000
750,000
1,005,000
250,000
1,250,000
1,500,000
1,000,000
2,130,000
250,000
500,000
500,000
44
NOTES TO THE FINANCIAL STATEMENTS
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.
31 December 2016
31 December 2015
Weighted
average
exercise price
Number
Weighted
average
exercise price
Number
8,878,649
(3,653,649)
0.254
12,283,661
0.269
-
-
-
(350,000)
5,225,000
5,225,000
0.220
8,878,649
0.220
8,878,649
0.238
-
0.060
0.254
0.254
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:
31 December 2012
Details of the share options
outstanding during the year are:
Outstanding at 1 January
Lapsed share options
Exercised options
Outstanding at end of year
Exercisable share options at the
end of year
Share price at grant
Option exercise price
£0.34
£0.25
£0.34
£0.30
£0.34
£0.35
£0.23
£0.231
Expected life of options
10 years
10 years
10 years
10 years
Expected volatility
Expected dividend yield
Risk free rate
Grant date
Fair value per share option
Exchange rate used
55%
0%
1.70%
55%
0%
1.70%
55%
0%
1.70%
55%
0%
1.70%
23-Aug-12
23-Aug-12
23-Aug-12
6-Jan-12
£0.240
1.585
£0.229
1.585
£0.219
1.585
£0.148
1.560
Total charge over the vesting period
$94,989
$181,336
$173,645
$700,984
Share based payments
Long-term incentive plan (LTIP)
Share awards are granted to employees and
Directors on a discretionary basis, and the
remuneration committee decides whether to
make share awards under the LTIP at any time.
LTIPs share awards in issue at year-end are
as follows:
45
Grant
date
Exercise
price
Final
vesting
date
No. shares at
31-Dec-16
No. shares at
31-Dec-15
01-Apr-13
01-Apr-13
01-Apr-14
01-Apr-14
01-Jan-15
01-Jan-15
15-Apr-16
15-Apr-16
15-Apr-16
WAEP
WAEP
0p 31-Mar-17
598,500
736,500
0p 31-Mar-17
2,493,500
4,125,000
0p 31-Mar-18
504,000
643,500
0p 31-Mar-18
1,270,500
1,606,500
0p 31-Dec-17
1,000,000
1,000,000
0p 31-Dec-17
0p 28-Feb-18
0p 30-Jun-18
500,000
550,000
400,000
0p 21-Dec-19
1,000,000
500,000
-
-
-
0p Outstanding
at end of yr.
0p Exercisable
at end of yr.
8,316,500
8,611,500
1,314,500
846,500
Details of the share options outstanding during
the year are:
(US$’000)
Outstanding at 1 January
Lapsed
New awards at 1 January
Exercised
Outstanding at end of year
31-Dec
2016
31-Dec
2015
8,611,500
(2,222,500)
1,950,000
(22,500)
8,316,500
9,681,000
(1,631,000)
1,500,000
(938,500)
8,611,500
The Company’s mid-market closing share price
at 31 December 2016 was 9.375 pence (2015:
4.63 pence). The lowest and highest mid-
market closing price during the year was 5.000
pence (2015: 4.125 pence) and 12.38 pence
(2015: 11.25 pence) respectively.
The vesting periods for the 598,500 shares
awarded on 1 April 2013 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.
The vesting conditions of the 2,493,500 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.
The vesting periods for the 504,000 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.
The vesting conditions of the 1,270,500 shares
awarded on 1 April 2014 are dependent on
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
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 shares
awarded on 1 January 2015 are dependent
on meeting certain market conditions. The
trigger price on 500,000 shares was achieved
in January 2016. A further 500,000 retention
shares have been issued to Toby Bradbury and
these vest on 31 December 2017. The fair value
at the date of grant was determined using a
probability of meeting the market conditions
using the Monte Carlo method.
Monte Carlo inputs for shares awarded
The vesting conditions of the 550,000 and
400,000 shares awarded on 15 April 2016 were
that 100% would vest on 28 February 2016
and 30 June 2018 respectively, subject to the
recipients being in the Group’s employment on
these dates.
The vesting conditions of the 1,000,000 shares
awarded on 15 April 2016 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.
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
2016
£0.07
£Nil
3 years
46.62%
0%
0.42%
05-Apr-16
£0.0707
1.2928
2015
£0.0875
£Nil
3 years
50.54%
0%
1.77%
01-Jan-15
£0.0588
1.5332
2014
£0.1475
£Nil
4 years
55.42%
0%
1.77%
01-Apr-14
£0.0769
1.5180
2013
£0.18
£Nil
4 years
59.88%
0%
1.77%
01-Apr-13
£0.1709
1.5180
The volatility assumption is based on a statistical analysis of daily share
prices over the last three years.
24. Categories of financial assets and liabilities
(US$’000)
(Loss) before taxation for the year
Adjustments for:
Depreciation/depletion of assets
Amortisation/write off of intangible assets
Loss on disposal of assets
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
(Increase) /Decrease in inventories
(Increase) /Decrease in receivables
Increase /(Decrease) in payables
Taxation paid
Interest received
Net cash flow from operating activities
31-Dec 2016
31-Dec 2015
(4,339)
(18,110)
47,114
43,015
5
-
200
(256)
45
(98)
7,474
50,145
(9,553)
(5,503)
5,266
40,354
(122)
98
40,330
78
368
527
(1,312)
276
(112)
7,097
31,827
1,970
1,718
(260)
35,255
(287)
49
35,017
46
NOTES TO THE FINANCIAL STATEMENTS
25. Financial risk management
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 those risks or the method used to
measure them from the previous period unless
otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by
the Group, from which financial Instrument risk
arises are as follows:
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 Silver Stream advance on silver revenues
ཛྷ Finance leases and asset loans
ཛྷ Commodity price hedging
The Group held derivative financial instruments
during the years ended 31 December 2016
and 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 currency risks arising from the
financial instruments it holds.
At 31 December 2016, the following commodity
hedges were in place:
Product
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Product
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Gold - USD
Fixed price Start date
End date
Quantity
Mark to market
US$000s
1,297 2016-11-02
2017-04-28
1,300 2016-11-02
2017-05-31
1,300 2016-11-02
2017-05-31
1,300 2016-11-03
2017-08-31
1,310 2016-11-09
2017-06-30
1,320 2016-11-09
2017-07-31
1,000
1,000
1,000
3,000
2,000
2,000
151
153
153
447
323
341
1,568
Gain on non-hedge derivatives
At 31 December 2015, the following commodity hedges were in place:
Fixed price Start date
End date
Quantity
Mark to market
US$000s
1,070 2015-12-08
2016-05-31
1,176 2015-10-16
2016-04-29
1,176 2015-10-16
2016-03-31
1,181 2015-10-15
2016-04-29
1,181 2015-10-15
2016-03-31
1,140 2015-09-24
2016-02-29
1,140 2015-09-24
2016-01-29
1,130 2015-08-28
2016-01-29
1,130 2015-08-28
2016-02-29
3,000
1,000
1,000
2,000
2,000
1,500
1,500
2,500
2,500
26
115
115
239
239
118
118
171
171
1,312
Gain on non-hedge derivatives
47
Annual Report 2016 The risk management policies employed
by the Group to manage these risks are set
out below.
Interest rate risk
25.1
The Group’s exposure to interest rate
risk relates to the Group’s cash and cash
equivalents and various loan facilities. Interest
rate risk is the risk that the value of financial
instruments or future cash flows will fluctuate
due to the changes in market interest rates. All
cash deposits as well as loans are at floating
rates and the Group exposes itself to the
fluctuation of the interest rate that is inherent in
such a market.
The current 3 month US$ LIBOR rate is
0.995%. The variable rate loans bear interest
at LIBOR + 4.9%. Currently, the interest charge
per month is an average of US$175,000 (2015:
US$133,000). A 1% increase or decrease in
the LIBOR rate will increase or decrease the
monthly interest charge by approximately
US$33,000(US$23,000 after tax) (2015:
US$25,000, US$17,500 after tax).
The Group’s cash and cash equivalents are
carried at an effective interest rate of 1%
(2015: 1%).
25.2 Credit risk
Credit risk arises when a failure by counter-
parties to discharge their obligations could
reduce the amount of future cash inflows from
financial assets on hand at the reporting date.
The Group’s exposure to credit risk is
explained below:
a) Trade and other receivables
The Group generates revenue from the sale of
gold and silver. In the event of a default by a
debtor of amounts due from other receivables,
the Group will be able to meet those costs.
Sales are made principally to one customer.
However, the Group has no significant credit
risk exposure as majority of the sale is paid for
on the same day or soon after the delivery. The
Group did not recognise any impairment during
the year and there were no other receivables
that were past due.
b) Cash and cash equivalents
The Group has significant concentration of
credit risk arising from its bank holdings of cash
and cash equivalents.
To manage this exposure, the Group has
a policy of maintaining its cash and cash
equivalents with counterparties that have a
credit listing of at least A from independent
NOTES TO THE FINANCIAL STATEMENTS
rating agencies. Given this high credit rating,
the Directors do not expect any counterparty
to fail. The Board has reviewed the maximum
exposure on the Group financial assets and
has concluded that the carrying values as at
reporting date are fully recoverable.
c) Restricted cash
The Group has paid to Auramet Trading LLC,
an amount of US$Nil (2015: US$500,000) as
collateral fees for the forward sales contracts
that it has set up with Auramet. Although the
Group has no control over the money, Auramet
cannot use the money.
25.3 Liquidity risk
Liquidity risk is the risk that arises when the
maturity of assets and liabilities does not
match. An unmatched position potentially
enhances profitability, but can also increase
the risk of losses. The Group has procedures
with the object of minimising such losses
such as maintaining sufficient cash and
other highly liquid current assets. Cash and
cash equivalents are placed with financial
institutions on a short-term basis reflecting
the Group’s desire to maintain high levels of
liquidity in order to enable timely completion
of transactions. All financial liabilities have a
maturity of less than three years or have no
specific repayment dates.
The maturity of financial liabilities is as follows:
Other payables and
accruals
(11,148)
(US$’000)
Loans and other
borrowings
Equipment loan
Finance lease
Promissory notes
Silver Stream
(US$’000)
Loans and other
borrowings
Equipment loan
Finance lease
Promissory notes
31 December 2016
On
demand
Within
1 year
After
1 year
(11,322)
(29,383)
(653)
(914)
(2,524)
(3,392)
(3,158)
-
-
-
(5,533)
-
(11,148)
(17,657)
(39,222)
31 December 2015
On
demand
Within
1 year
After
1 year
(5,461)
(30,705)
(689)
(160)
-
-
(1,569)
(308)
(2,929)
-
-
-
-
-
-
-
-
-
-
Other payables and
accruals
(5,883)
(5,883)
(6,310)
(35,511)
48
NOTES TO THE FINANCIAL STATEMENTS
25.4 Currency risk
Currency risk is the risk that the value of
financial instruments will fluctuate due to
change in foreign exchange rates.
Currency risk arises when future commercial
transactions and recognised assets and
liabilities are denominated in the currency that
is not the Group’s presentational currency.
The Group is exposed to foreign exchange
risk arising from various currency exposures
primarily with respect to the Tanzanian Shilling
and Sterling, but these are not significant as
most of the transactions are in USD. However,
the Group’s management monitors the
exchange rate fluctuations on a continuous
basis and acts accordingly.
(US$’000)
Trade and other receivables
Derivative financial asset
Cash and cash equivalents
Trade and other payables
Loans and other borrowings
Convertible loan notes
Net exposure
(US$’000)
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
4,136
1,568
14,224
(9,675)
(46,358)
(14,298)
(50,403)
USD
7,405
1,312
18,749
(5,846)
500
(34,692)
(23,446)
(36,018)
31 December 2016
TZS
-
-
709
(1,272)
-
-
(563)
EUR
-
-
-
(66)
(3,969)
-
(4,035)
31 December 2015
GBP
-
-
12
(136)
-
-
(124)
Total
4,136
1,568
14,945
(11,149)
(50,327)
(14,298)
(55,125)
TZS
-
-
353
(1)
-
-
-
352
EUR
GBP
Total
-
-
-
-
-
-
-
-
-
-
15
(36)
-
-
-
(21)
7,405
1,312
19,117
(5,883)
500
(34,692)
(23,446)
(35,687)
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.
The following significant exchange rates
applied during the year:
Average rate
Closing rate
2016
0.001
1.1066
1.3557
2015
0.001
1,1097
1.5285
2016
0.001
1.0523
1.2332
2015
0.001
1.0867
1.4803
TZS 1
EUR 1
GBP 1
49
25.5 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$36.5 million loan facility
from Investec Bank Limited in South Africa, all
of which has been drawn down. In 2016 the
Facility B was fully drawn down and has post
year end been converted into a term loan. Full
details are included in Note 18.
26. 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. Toby Bradbury is the only
Executive Directors during the year. Executive
Directors are considered key management.
Details of Directors’ share based payments are
disclosed in the Directors’ Report.
27. Commitments
The Directors confirm that the Group has a
capital commitment of US$38.54 million (2015:
US$28.62 million) relating to plant equipment,
infrastructure projects and feasibility studies at
New Luika Gold Mine. As at 31 December 2016,
the Group had forward sales commitments of
21,000 ounces of gold at an average price of
US$1,318 per oz. Since the year end, the Group
has entered into additional forward sales
contracts for 22,000 oz (2015: 12,000 oz). The
total forward sales commitments at June 2017
was 36,000 oz (2015 32,000 oz) at an average
price of $1,281/oz (2015 US$1,172 oz).
28. Contingent liabilities
Shanta Mining Company Limited (“SMCL”) has
acquired certain prospecting licences and
mining licences under agreements which
provide for payments to be made in certain
circumstances to the party from whom the
licence was acquired. Payments under these
agreements are unquantified at this time
but the maximum amount payable is not
considered to be material. Such payments are
linked to the proven and probable reserves
once established.
Annual Report 2016 NOTES TO THE FINANCIAL STATEMENTS
The Directors confirm that there are no other
contingent liabilities as at 31 December 2016
(2015: US$Nil).
29. Events after reporting date
29.1 Completion of €2.1 million underground
equipment financing
On 18 May 2017 the Company announced
that it has completed a finance agreement
with Sandvik Mining and Construction
OY. The approximately €2.1 million
(US$2.3 million) financing will be used to
purchase underground mobile equipment and
is repayable quarterly in two tranches over
respective 36 month periods. The first tranche
will be repayable from June 2017 and the
second from October 2017. Both tranches will
carry a fixed interest cost of 6.5%.
29.2 Power Station equipment financing
On 22 May 2017 the Company announced
that it has received US$10.0 million financing
from Exim Bank (Tanzania) Limited following
the commissioning in March 2017 of its
7.5 Mega Watts (“MW”) Power Station (the
“Power Station”) at the New Luika Gold Mine
(“NLGM” or “the Mine”) located in the Lupa
Goldfield in southwest Tanzania. The facility
is for US$10.0 million, and is a four-year term
loan amortizing quarterly, bearing variable
interest at 7.25% per annum (2.75% below the
Exim Base Lending Rate). The facility is split
into a US$7.5 million long term funding and
US$2.5 million short-term funding for working
capital. The term loan is secured against the
NLGM Power Station.
50
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 Twelfth 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 3 July 2017 at 10.00am (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 2016.
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$1,087,000
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 Toby Bradbury 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 Luke Leslie as director of the Company who retires by rotation and who makes himself
available for re-election as a director of the Company
Special resolutions
9. That the regulations contained in the document signed for the purposes of identification by the Chairman be and are hereby
approved and adopted as the new articles of incorporation of the Company
Dated 12 June 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.
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 Twelfth 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 3 July 2017 at 10.00am 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 2016
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$1,087,000
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 Toby Bradbury 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 Luke Leslie as director
of the Company who retires by rotation and who makes himself available for re-
election as a director of the Company
Special Resolutions
9. That the regulations contained in the document signed for the purposes of
identification by the Chairman be and are hereby approved and adopted as the
new articles of incorporation of the Company
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. TThe “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
Completion and return of this Form of Proxy does not preclude a member
subsequently attending and voting at the Meeting.