Shinhan Financial Group Co Ltd

2019

Annual Report and Accounts

Country of incorporation
Guernsey

Nature of business
Gold mining in Tanzania

Company registration number
43133

Registered office
11 New Street 
St Peter Port 
Guernsey GY1 2PF

Secretary
Vistra Fund Services (Guernsey) Limited 
11 New Street 
St Peter Port 
Guernsey GY1 3EG

Auditor
BDO LLP 
55 Baker Street 
London W1U 7EU

Nominated advisor and broker
Numis Securities Limited 
The London Stock Exchange Building 
10 Paternoster Square 
London EC4M 7LT

Website
www.shantagold.com

© 2020 Shanta Gold. All rights reserved.

Contents

About Shanta Gold 

Board of Directors 

Chairman’s Statement 

Chief Executive Officer’s Review 

Directors’ Report 

Corporate Governance 

Remuneration Committee Report 

Audit Committee Report 

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 

Notes to the proxy form 

1

3

5

7

21

25

33

35

37

45

46

47

48

51

80

82

83

About Shanta Gold

The New Luika Gold Mine is an 
established, low cost, cash generating 
operation boasting high grade resources 
rarely found around the world.

Shanta is focused on maximising operational value 
for shareholders from this mine, and other assets in 
its portfolio, through taking a modern and disciplined 
approach to mining. 

Alongside New Luika, Shanta owns Singida, an exploration 
and development stage project, located in central Tanzania. 
A portion of the Singida asset is held in a joint venture of 
which Shanta has a 90% interest.

Shanta announced the purchase of the West Kenya Gold 
Project in early 2020. The project has an Inferred Mineral 
Resource Estimate of 1,182,000 ounces grading 12.6 g/t. It is 
believed to be one of the highest grading 1 million+ oz gold 
deposits in Africa.

Shanta also holds exploration properties covering 
over 1,560 km2 in the under explored ex-colonial 
mining areas of the geologically rich Lupa Goldfield 
surrounding New Luika.

Shanta has established a solid operational track record 
which has allowed it to embark on an exciting exploration 
campaign across its large and highly prospective licence 
areas. This exploration programme is targeting new 
resources to extend the mine life of New Luika.

Shanta Gold is listed on the Alternative Investment Market 
(AIM) of the London Stock Exchange (ticker: SHG).

Board of Directors

Anthony Durrant
Non-executive Chairman

Eric Zurrin
Chief Executive Officer, Director

Luke Leslie
Chief Financial Officer, Director

Mr Durrant has had a long and 
distinguished career in the 
global natural resources sector, 
having formerly been the Global 
Head of Metals & Mining at UBS 
Investment Bank. He is currently 
Chairman of the Investment 
Advisory Committee of New York 
based Arias Resource Capital 
Management, which manages 
private equity funds investing 
in Latin American mining. 
Mr Durrant brings significant 
experience in capital markets 
and natural resources. Mr 
Durrant has longstanding links 
to East Africa.

Eric Zurrin has 18 years’ 
experience in mining and 
investment banking, previously 
with UBS Investment Bank in 
London. Eric re-joined Shanta in 
2017 having previously worked 
across a range of roles with 
Shanta including as interim 
CFO in 2015/2016 leading the 
financial restructuring and 
as a Commercial Analyst 
advising the former CEO in 
2013. Eric is a Canadian national 
and has worked and lived in 
North America, the UK, Asia 
and Africa. Eric completed 
his Bachelor of Commerce 
(Accounting) in Canada.

Luke Leslie is a mining investor 
with a background in Mergers 
& Acquisitions. He was formally 
a member of UBS Investment 
Bank’s Corporate Finance team 
based on London. Luke began 
his career as a management 
consultant with Accenture 
where he specialised in post-
acquisition integration and cost 
reduction strategies. Luke has 
served on the Board of a number 
of junior mining companies 
including Kincora Copper and 
REBgold prior to its merger 
with Aquila Resources. Luke 
has lived and worked in China, 
Hong Kong, Outer Mongolia and 
Myanmar.

3

2019 Annual Report and Accounts Ketan Patel
Non-executive Director

Robin Fryer
Non-executive Director

Keith Marshall
Non-executive Director

Mr Patel was a founder of Shanta 
Mining Company Limited (now 
a subsidiary of Shanta Gold) in 
2001 and chairs the company’s 
Sustainability committee. He 
has worked extensively in 
trading organisations in 
the UK and since 1986 has 
traded agrocommodities 
internationally. Mr Patel has 
extensive commercial interests 
in Tanzania and is a senior 
director of Export Holdings (Pty) 
Ltd and Managing Director of 
the Sea Cliff and White Sands 
Hotel in Dar es Salaam.

Mr Fryer is a chartered 
accountant and US certified 
public accountant and chairs the 
company’s Audit committee. He 
had a long and distinguished 
international career with 
Deloitte where he led the global 
mining and metals industry 
practice. Mr. Fryer has advised 
some of the world’s largest 
mining companies, including 
several Africa-based companies.

Mr Marshall is a mining 
engineer with over 35 years’ 
experience in the sector 
enabling him to accumulate 
a wealth of technical and 
managerial expertise with 
the last fifteen years spent in 
senior mine leadership roles. Mr 
Marshall’s last two operational 
roles were both with Rio Tinto, 
with whom he has worked 
for 22 years, as Managing 
Director of the Palabora Mining 
Company in South Africa and 
as President of the Oyu Tolgoi 
Project in Mongolia. He chairs 
the company’s Remuneration 
committee.

4

Chairman’s Statement

Dear Shareholders,

It is my pleasure to provide a review of your Company 
in 2019. The New Luika Gold Mine delivered robust 
operational results, a testament to Shanta’s employees who 
continue to deliver on all fronts while executing on our 
excellent safety record, which as a Company we are very 
proud of. We surpassed our stated production objective 
which helped to reduce net debt and increased our financial 
flexibility to pursue value driven growth.

Priorities and operating highlights
Reaching commercial production from the Ilunga 
Underground Mine in the year represented the introduction 
of a third source of underground mill feed to our plant, 
helping to diversify operational risk at New Luika. Our 
cost streamlining initiatives continued this year, including 
the connection of our mine to the national power grid. 
Power from the national grid is projected to cost 50% less 
than power generated from the Company’s Heavy Fuel Oil 
(“HFO”) power plant and contributes to the effort to bring 
lower grade ore into our reserves over the long term. 

One of the Company’s key objectives for 2020 and beyond 
continues to be mine life extension through on-mine 
exploration. We were successful in 2019, extending the 
mine life at New Luika into 2024 with exploration at 
depth. As well as 574,000 ounces of existing low-grade 
resources not currently incorporated into the mine 
plan, all of our underground deposits remain open at 
depth and along strike. Value contribution from every 
additional year of mine life is significant and the Board has 
therefore chosen to invest in a more expansive exploration 
programme for 2020.

The gold price is currently reaching heights not seen 
for almost seven years which increases the value of the 
Company’s second asset, Singida. We are considering a 
number of financing options to raise the capital required 
and remain committed to starting construction in 2020. 
Once in production, Singida should be a great success 
story for the region and the wider Tanzanian gold 
mining industry.

Whilst a lack of timely VAT refunds continues to provide 
a headwind for the Company, we welcomed the partial 
refunds late in 2019 and trust these will continue. The 
Company’s monthly VAT outgoings are approximately 
US$0.6 million.

We were delighted to announce the acquisition of the 
West Kenya Project from Barrick Gold, post the year end. 

The Project is a good fit in the Company’s portfolio and is 
expected to be mined using the same mining method used 
at New Luika. The Project is believed to be one of Africa’s 
highest quality ‘1 million plus’ ounce assets and is located 
a similar distance from Singida to the north, as New Luika 
is to the south. I look forward to the Company providing 
further updates, once completion conditions have been 
satisfied, which is expected midway through this year.

Social and economic contribution
Shanta’s Corporate Social Responsibility (“CSR”) 
programmes at New Luika are aligned to local and 
national priorities, and have been detailed on pages 16 to 
18. Our intentions are for the Singida project to provide 
similar benefits to Tanzania’s Singida region once mine 
development has commenced.

The Company’s economic contribution to Tanzania 
has been growing steadily since New Luika became a 
producing mine in 2013. In 2019, the Company contributed 
US$19 million in taxes and royalties to the Government 
of Tanzania. 40% of New Luika’s employees come from 
communities around the mine and 99% of our workforce 
are Tanzanian citizens. New Luika’s supply chain is almost 
exclusively Tanzanian and is an important ingredient for 
Shanta’s successes.

Outlook
We anticipate another year of steady production in 2020, 
with production forecasts expected to be similar to 2019 
at 80,000 – 85,000 oz of gold. Through exploration we are 
also looking to maintain similar production levels from 
New Luika for many years to come. 

The purchase of the West Kenya Project adds a future 
growth project to the Company’s producing mine at New 
Luika and development Project at Singida. In 2020, post 
completion, Shanta expects to become a geographically 
diversified company with a strong growth pipeline of high 
grade assets in East Africa, maintaining best practice in its 
environmental and social responsibilities. Our substantially 
reduced debt provides stability and flexibility and we are 
committed to enhancing returns to all stakeholders.

I’d like to take this opportunity to thank all the board and 
employees for their continued efforts in what was another 
successful year for Shanta. I look forward to the Company’s 
continued progress and success in the coming year.

Anthony Durrant 
Chairman

27 February 2020

5

2019 Annual Report and AccountsChief Executive Officer’s Review

2019 proved to be a successful 
12-month period for the Company, 
underpinned by consistent delivery of 
operational targets.

In addition, we are progressing our Singida asset further 
towards becoming the Group’s second producing mine. 
Once operational this is expected to see Shanta produce 
over 100,000 oz annually, and the asset-level financing 
needed is expected to be secured during the course of 2020.

Given the array of achievements at New 
Luika Gold Mine in the year, headlined 
by Shanta exceeding production 
guidance, it is only fitting to begin 
this review by extending my deepest 
gratitude to the entire Shanta Gold 
workforce for their dedication and 
hard work. Pleasingly, the successes 
of 2019 were achieved against the 
backdrop of an uncompromised safety 
record and, with our targeted on-
mine exploration activities continuing 
to produce encouraging results, I am 
looking forward to an increasingly 
prosperous future for Shanta and all of 
its stakeholders.

The Company’s operational successes throughout the year 
meant we were able to take advantage of a strong rise in 
the gold price, resulting in a financial performance that 
was equally as satisfying as our operational performance. 
This is best demonstrated by the fact that significant 
free cashflow continued to rapidly drive down debt, with 
the Company now fast approaching a net cash position. 
A stronger balance sheet with a high-margin gold 
mine allows us the flexibility to act swiftly on growth 
opportunities and return value to shareholders.

We expect a similar positive outcome to the year ahead, 
with annual production guidance at New Luika Gold Mine 
(“New Luika”) set at 80,000−85,000 ounces (“oz”) for 
2020 at an All-in Sustaining Cost (“AISC”) that will again 
generate significant EBITDA for the Group. 

Highlights

Raising the bar on safety
“There is no job that cannot be carried out safely” is one of 
several adages displayed prominently at New Luika and 
this message permeates through our entire business. No 
aspect of our performance is considered more important 
than maintaining a safe working environment, and 
responsibility for this is held by everyone at Shanta. 
This Company ethos has shown positive outcomes with 
our cumulative Total Recordable Injury Frequency Rate 
(“TRIFR”) (per 1 million hours worked) of 1.00 for 2019 
an 11% reduction from 2018 (1.12), and significantly 
below the global industry average of 3.41, as measured 
by the International Council on Mining and Metals. This 
achievement represents the Company’s fourth successive 
annual decline in recordable injuries. 

There were no Lost Time Injuries (“LTI’s”) during 2019 and 
by the year-end, the Company had surpassed 3.9 million 
man-hours without an LTI. Having now successfully 
operated for over two years without an LTI, Shanta is 
continuing to extend its track record of being among the 
safest gold mining operations worldwide and I’d like to 
again thank the team for their hard work in ensuring the 
continuation of high safety standards.

Striving for operational excellence
Having rigorously streamlined the Company’s cost base in 
the previous year, the team focussed on maintaining a lean 
operation and maximising value output from New Luika, 
while ensuring this was not to the detriment of our safety 
record. Prioritising throughput over recoveries was a key 
value-generating decision taken by management in the 
year and the processing plant has consistently performed 
above its nameplate capacity, contributing to one of 
Shanta’s most productive years yet.

One of the major successes of 2019 was reaching 
commercial production from the Ilunga Underground Mine 
on schedule and on budget. Commercial production was 
declared following net pre-production capital investment 
of only US$5.0 million and Ilunga is now the third source of 

7

2019 Annual Report and Accountshigh-grade underground feed at New Luika, alongside the 
Bauhinia Creek and Luika underground deposits.

Power generation represents one of New Luika’s most 
significant operating cash outflows, and as such steps 
were taken to streamline this cost in the year. A clear and 
effective way to achieve this was via a connection to the 
relatively inexpensive state (“TANESCO”) grid. We were 
delighted to announce that we were able to establish this 
connection towards the end of 2019 and, moving forwards, 
power costs at site are expected to be noticeably lower. As a 
result of this reduction in power costs, lower grade ore will 
now be economical to mine, which adds further ounces to 
the mine plan that we would not otherwise have considered 
processing. Connection to the TANESCO grid also further 
diversifies power sources at New Luika in line with Shanta’s 
wider risk reduction strategy, and one of the Company’s 
objectives is to incrementally increase the percentage of 
our power usage drawn from the grid.

AISC1 for 2019 were $777/oz, within cost guidance of 
US$740-780/oz for the year. Our staff continue to eradicate 
wastage at site and this achievement reflects the hard 
work put in throughout the year. The determination to 
optimise cost efficiency is engrained within the Group’s 
modern business approach, in which Shanta’s employees 
are incentivised to perform in direct alignment with 
shareholder interests.

Debt to equity value transfer
New Luika continued to generate significant operating 
cashflows during 2019 and Adjusted EBITDA2 for the year 
amounted to US$47.7 million (2018: US$45.7 million). 
This robust financial performance has enabled Shanta to 
continue its rapid reduction of both gross debt and net debt, 
with gross debt at its lowest position in over seven years 
and net debt down 55% from the end of 2018.

Cashflows have largely been used to fulfil debt obligations 
in recent years but the health of the Company’s current 
balance sheet will afford Shanta the opportunity to direct 
additional operating cashflows towards maximising 

1  Development costs at the BC, Luika and Ilunga underground operations are 

not included in AISC.

2  EBITDA is earnings before interest, tax, depreciation and amortisation 
which has been derived as operating profit exclusive of pre-production 
revenue, depreciation/depletion of tangible assets and amortisation of 
intangible assets. Adjusted EBITDA has been derived as EBITDA before 
non-cash loss on unsettled forward contracts.

shareholder returns. Shanta’s share price has outperformed 
all other London-listed pure play gold producers over the 
past two years and transferring value to shareholders 
continues to drive strategic decision-making for 
management, all of whom are also Shanta shareholders. 

Securing longevity through exploration
Exploration activities are at the forefront of the Company’s 
priorities, with 2019 marking a number of significant 
discovery successes. Our strategy at New Luika is to 
maintain a rolling life of mineable ounces which balances 
the cost of exploration with visibility on future production. 
The value that is added to the Company for every additional 
year of mine life is significant. We were successful this 
year in adding new reserves to the Life of Mine Plan, which 
now extends through to 2024 with new targets identified 
in the year in the form of Bauhinia Creek (“BC”) North and 
Elizabeth Hill (“EH”) North.

Adding ounces to the mine plan is one of the simplest ways 
that the Company can generate value for shareholders and 
the Board has taken the decision to increase the Company’s 
2020 exploration budget by 65% in 2020 to US$5.0 million. 
Key objectives include upgrading existing Mineral 
Resources and extending New Luika’s mining schedule 
beyond 2024. All of the underground deposits drilled during 
2019 remain open at depth and along strike, presenting 
potential for significant upside, with preparations ongoing 
to test the extension of these. Seven kilometres of drilling 
is planned for the coming year on our existing orebodies, 
supplemented by four kilometres of drilling at near-
mine targets.

New probable gold reserves totalling 135,438 oz were added 
to the mine plan in late 2019 following a modest drilling 
campaign on the BC Deep West and East, EH North, BC 
North and Black Tree Hill deposits, costing approximately 
US$1.0 million. These new reserves more than replaced 
2019 production, despite a 44,000 oz reduction in Ilunga 
underground reserves, representing successful delivery 
of the Company’s strategy to maintain a rolling mine life 
that balances the cost of exploration with visibility on 
future production. The drilling campaign also increased 
Indicated resources to 219,408 oz and added 94,007 oz of 
new Inferred resources, with minimal capital expenditure 
required to bring these deposits into production in the 
future as they are very close to the existing mining areas. 

8

New Luika Gold Mine Operations Review

New Luika Gold Mine operations

Tonnes ore mined

Tonnes ore milled

677,734 

603,373 

536,669 

632,287 

639,678 

702,336 

FY2017

FY2018

FY2019

FY2017

FY2018

FY2019

Grade (g/t)

Recovery (%)

4.3

4.4

4.2

91.2 

90.9 

89.4 

FY2017

FY2018

FY2019

FY2017

FY2018

FY2019

9

2019 Annual Report and Accounts Gold production (ounces)

Gold sales (ounces)

79,585 

81,872 

84,506 

80,365 

82,457 

80,926 

FY2017

FY2018

FY2019

FY2017

FY2018

FY2019

Silver production (ounces)

Realised gold price (US$/oz)

106,238 

106,851 

90,541 

1,263 

1,259 

1,377 

FY2017

FY2018

FY2019

FY2017

FY2018

FY2019

10

New Luika Gold Mine Operations Review

New Luika Gold Mine quarterly breakdown

Tonnes ore mined

603,373 

677,734 

136,616 

155,779 

166,772 

144,206 

142,784 

197,020 

179,978 

157,952 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

Tonnes ore milled

702,336 

639,678 

172,644 

177,647 

174,132 

177,913 

149,710 

157,426 

159,640 

172,902 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

Grade (g/t)

4.5 

3.9 

4.5 

3.8 

4.2 

4.0 

4.4 

4.3 

4.7 

4.4 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

Recovery (%)

89.9 

89.4 

89.3 

89.2 

89.4 

91.7 

91.5 

90.3 

90.9 

90.9 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

11

2019 Annual Report and Accounts Gold production (ounces)

84,506 

81,872 

22,374 

19,856 

22,726 

19,550 

17,663 

20,544 

19,723 

23,942 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

Gold sales (ounces)

80,926 

82,457 

21,358 

19,780 

22,477 

17,311 

18,352 

19,475 

19,737 

24,893 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

Silver production (ounces)

90,541 

106,851 

23,851 

23,461 

24,744 

18,485 

25,556 

27,145 

27,234 

26,916 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

Realised gold price (US$/oz)

1,305 

1,302 

1,462 

1,440 

1,377 

1,303 

1,302 

1,218 

1,225 

1,259 

Q1

Q2

Q3

Q4

FY2019

Q1

Q2

Q3

Q4

FY2018

12

Regionally, Shanta holds a sizeable portfolio of prospecting 
licenses covering approximately 1,500km2 in the highly 
prospective Lupa Goldfield, the second largest goldfield 
in Tanzania and an area home to numerous existing and 
historical gold mining operations. The Company generated 
several high confidence targets within this land package in 
2019 through soil sampling and scout drilling. This shallow 
drilling has already provided encouraging intersections 
and exploration activities, including geophysical surveys 
and soil sampling, will continue on premium targets 
throughout 2020.

Tanzania’s next significant gold mine
Shanta’s second project, Singida, continues to be a 
significant source of potential value for the Company and 
steps were taken in 2019 to fast-track a promising future 
from the asset for all stakeholders.

Support infrastructure and other preparatory arrangements 
at the Singida Project are complete and the Company is 
considering several options for raising the capital required 
to construct the Singida Gold Mine. In 2019, the Company 
announced its intentions to proceed with a targeted US$20 
million minimum equity offering via an Initial Public 
Offering (“IPO”) on the Dar es Salaam Stock Exchange 
(“DSE”). An IPO prospectus was submitted to the Tanzanian 
regulators and the DSE, both of whom have since provided 
formal feedback. Shanta intends to retain majority 
ownership and operatorship of the Project and the targeted 
IPO proceeds would finance upfront capital to bring the 
Project into production. In-country approvals remained 
outstanding at the year-end.

In connection with the planned IPO the Group entered 
into a non-binding term sheet with a privately-held, East 
African conglomerate in the year for a supplementary 
non-recourse loan facility to finance Singida, which is 
conditional on a minimum equity raise of US$15 million 
at the IPO.

The Group is continuing to consider all available financing 
options for the Singida project, which, once in production, 
is expected to increase consolidated Group production to 
over 100,000 oz per annum.

Showcasing Tanzanian expertise
Shanta has proudly broken the industry mould in recent 
years by transitioning New Luika and Singida into 
operations run almost exclusively by in-country nationals. 

Tanzania has an established history of gold mining and 
local expertise is industry leading. In terms of headcount, 
Shanta’s group-wide workforce is over 99% Tanzanian; 
one of the Company’s single-most valuable strengths and 
testament to the talent that we have in-country. 

Shanta endeavours to support New Luika’s local suppliers 
where possible and this provides much needed economic 
benefits for the local area, further improving the strong 
relationships that we already have with our neighbouring 
communities, who are very supportive of Shanta and what 
we are trying to achieve. At the end of the year 40% of the 
Company’s workforce were employed from communities in 
the immediate vicinity of New Luika.

During 2019 Shanta paid US$19.0 million to the Government 
of Tanzania in taxes and royalties, exclusive of VAT 
payments. Monthly VAT outgoings continue to amount to 
approximately US$0.6 million.

VAT refunds
Outstanding VAT refunds are a headwind for the Company, 
however there were several breakthroughs in 2019 which 
could suggest the re-emergence of timely refunds. The 
Company’s VAT receivable amounted to US$21.9 million at 
the end of the year, largely unchanged from its position at 
the end of 2018. This was achieved following welcome cash 
refunds of US$2.7 million in the year, with an additional 
US$4.8 million of the receivable balance offset against 
corporate taxes falling due. The Group exports doré bars 
which is not considered to be a raw mineral and therefore 
not deemed to be an exempt supply under the amended VAT 
Act 2014 brought into effect in July 2017, making Shanta 
eligible for VAT refunds.

Mergers and acquisitions
Since the year-end, in February 2020, we were pleased to 
announce the purchase of the West Kenya Gold Project from 
Barrick Gold, a significant acquisition for Shanta. When the 
transaction closes, the project will be purchased for cash 
consideration of US$7 million and US$7.5 million in Shanta 
Gold shares, with a 2 percent net smelter royalty to be paid 
over the duration of the project and Shanta assuming up 
to US$4 million of outstanding third party liabilities. The 
project spans 1,161 km2 within the Lake Victoria greenstone 
gold field located in North West Tanzania and South West 
Kenya and has a NI-43101 compliant, Inferred Mineral 
Resource Estimate of 1,182,000 oz grading 12.6 g/t. It is 

13

2019 Annual Report and Accountsbelieved to be one of the highest grading 1 million+ oz gold 
deposits in Africa, with the region home to a number of 
global tier 1 assets including North Mara and Geita Gold 
Mine; all in all, excellent geography to be in.

Crucially, the Group’s operational successes in the year 
were delivered alongside tightly controlled costs and zero 
LTI’s for the year.

Our specialised, low cost mining makes Shanta an ideal 
company to own and develop this asset: we are one of 
the lowest cost practitioners of Long Hole Open Stoping 
underground mining, and it is anticipated that this will 
be the optimum mining method for this project. Once we 
complete the transaction midway through this year our 
team will move to site to complete the data handover, 
where we plan to proceed with a scoping study in advance 
of an infill drilling campaign. Subject to the exploration 
results, this would likely be followed by a Pre-feasibility 
study and a Definitive Feasibility Study. I look forward 
to providing updates on this exciting project during the 
course of 2020.

Operations review

New Luika operations review
New Luika delivered its highest ever mill feed from 
underground operations in 2019, with open pits providing 
supplementary ore feed for three months of the year, in 
line with the planned mining schedule. Total mill feed was 
702,336 tonnes (“t”) at an average grade of 4.2 g/t for the 
production of 84,506 oz of gold. The volume of ore milled 
was an all-time Company record and production for the 
year exceeded guidance of 80,000- 84,000 oz. This was a 
significant achievement and followed a strategic decision to 
prioritise throughput over recoveries, following a trade-
off study concluding that this will generate higher value 
returns for shareholders. The processing plant has coped 
very well with the higher throughput during 2019.

Bringing Ilunga, the third active source of high-grade 
ore at New Luika, into production in 2019 has bolstered 
operational flexibility and helped to mitigate operational 
risk at the mine. Commercial production was declared 
in July 2019 with the deposit’s first ore stope 98 metres 
below surface, coming less than 12 months after the 
underground portal blast was carried out. Almost 3,000 
metres of development was completed at Ilunga in the year 
with 93,000 tonnes of ore mined, providing a significant 
contribution to 2019 mill feed.

Quarter on Quarter AISC

776

748

769

696

730

701

773

723

894

777

Q1

Q2

Q3

Q4

FY

Q1

Q2

Q3

Q4

FY

2018

2019

AISC for the year were US$777/oz, within guidance of 
US$740 – US$780/oz. Development costs at the BC, 
Luika and Ilunga underground operations are not 
included in AISC. 

The Group operates a rolling review of its supplier contracts 
and costs are closely managed. Connecting New Luika to 
the TANESCO grid is expected to improve the cost of power 
generation at the mine and the team continues to seek 
other cost optimisation opportunities.

Financial Overview

Turnover for the year from sales of gold amounted to 
US$112.8 million, compared to US$103.8 million in 2018. 
This increase of 8.7% was largely driven by growth in the 
average realised selling price for the year. By the end of 
2019 the Company had sold 80,926 oz of gold (2018: 82,457 
oz), with a further 2,841 oz in transit to the refinery. 

With the exception of settling forward sales for 5,000 
oz, the Company deferred settlement of all forward sales 
throughout the year for full exposure to the spot gold price. 
The average gold price realised for the year was US$1,377/oz 
compared to the average spot price for the year of US$1,402/
oz. A mark to market valuation carried out at the end of the 
year resulted in a non-cash loss on open commodity swaps 
of US$8.4 million (2018: US$1.3 million). A loss of US$1.4 
million (2018: gain of US$1.0 million) was incurred on 
commodity swaps delivered into the year.

14

Cost of sales amounted to US$88.6 million (2018: US$75.3 
million) representing a gross margin of 21% (2018: 26%). 
This increase of US$13.3 million includes a non-cash 
increase in depreciation of US$5.0 million. Tonnes mined 
during the year were 11% lower than in 2018, however there 
was a 10% increase in tonnes milled. This increased plant 
throughput included drawdown of lower grade stockpiles in 
the year which increased the cost of milled tonnes in 2019. 
The average head grade for the year was 4.2g/t (2018: 4.4 
g/t) and recoveries from the plant were 89.4% (2018: 90.9%). 
As a result, the total cash cost of ore milled in 2019 was 
US$3.7 million higher than in 2018. Furthermore, US$1.1 
million of additional royalties were incurred on the higher 
average selling price for the year. US$5.0 million of pre-
production revenue from Ilunga was recognised during the 
Period at nil-margin.

Administration costs for the year amounted to US$6.6 
million (2018: US$6.5 million), representing the endurance 
of previously completed cost reduction initiatives.

Exploration expenditure for the year amounted to 
US$2.6 million (2018: US$1.5 million) and, amongst other 
successes, added new probable gold reserves of 135,438 oz 
to the mine plan at a grade of 4.07g/t, extending it through 
to 2024. The Company will continue to prioritise on-mine 
exploration with low cost, high impact drilling and the 
2020 exploration budget has been increased to US$5.0 
million with the aim of extending New Luika’s mine-life 
beyond 2024.

Operating profit for the year was US$5.1 million (2018: 
US$19.3 million), heavily impacted by the non-cash loss 
on forward contracts and increased non-cash charges to 
cost of sales in the year. Adjusted EBITDA amounted to 
US$47.7 million (2018: EBITDA of US$45.7 million). This 
relative consistency does not take into account the sale 
value of gold bullion on hand, which increased by 3,536 oz 
between respective year-ends. 

Net finance expense (cash and non-cash) amounted to 
US$6.4 million (2018: US$6.2 million), including a US$1.0 
million non-cash charge relating to an increase in the 
estimated silver stream liability, to align it with the 
extended mine plan announced in late 2019. Excluding this 
change in estimate and imputed interest calculated on the 
silver stream liability, which is also a non-cash expense, 
the net finance expense reduced in line with continued 
deleveraging of the balance sheet.

A loss before tax of US$1.2 million (2018: profit before tax 
of US$13.1 million) was recorded. A tax charge amounting 
to US$8.3 million (2018: US$5.2 million) resulted in a loss 
after tax of US$9.5 million (2018: profit after tax of US$8.0 
million). The increased tax charge in 2019 reflects brought 
forward tax losses on key mining licenses no longer being 
available, having been fully utilised. US$4.8 million of the 
2019 tax charge was set off against the Company’s brought 
forward VAT receivable during the year.

In the statement of financial position, non-current assets 
increased to US$129.0 million (2018: US$123.3 million). 
This follows the reclassification of US$20.0 million of 
VAT receivables to non-current assets, and is after net 
capitalised spend of US$17.3 million offset by US$31.3 
million of depreciation. Current assets totalled US$39.4 
million (2018: US$61.3 million), again following the 
reclassification of US$20.0 million of VAT receivables to 
non-current assets and, otherwise, largely the net effect 
of a US$2.6 million increase in inventories and a reduction 
in unrestricted cash of US$5.5 million. The value of the 
Company’s VAT receivable was largely unchanged from 2018 
following cash refunds and offsets approximately equal in 
value to VAT outflows during the year. Net working capital 
decreased to US$23.6 million (2018: US$40.4 million), 
primarily due to the reclassification of US$20.0 million of 
the Company’s VAT receivable to non-current assets.

Overall liabilities decreased to US$72.2 million (2018: 
US$79.4 million) following continued deleveraging. This 
included US$20.5 million of net capital repayments towards 
loans and borrowings and the silver stream during the year, 
including US$5.2 million spent on buying back convertible 
loan notes. The decrease in overall liabilities included a 
US$8.4 million increase in derivative financial liabilities 
in relation to the mark to market valuation of open 
commodity swaps at the year-end.

The unrestricted cash balance at the year-end totalled 
US$3.5 million (2018: US$9.0 million). Net debt reduced 
55% to US$14.3 million (2018: US$31.5 million), inclusive of 
liquidity available from 2,841 oz of unsold doré in transit at 
the end of 2019.

Hedging
As of the end of the year, the Company had sold forward 
40,000 oz to June 2020 at an average price of US$1,244/oz. 
These forward sales were entered into during late 2018 and 

15

2019 Annual Report and Accountswere considered prudent given the Company’s contractual 
debt repayments through to June 2020, with the gold price 
presenting an asymmetric risk in the event of a decline.

boost in an area that continues to suffer from high levels of 
unemployment and economic disadvantages.

The Company has the flexibility to defer settlement of 
forward sales and, with the exception of settling forward 
sales for 5,000 oz, had full exposure to the spot gold price 
during 2019. Despite growth in the gold spot price since the 
end of 2018, which benefitted Shanta significantly, having 
forward sales in place throughout the year enabled the 
Company to invest in its operations in the knowledge that 
short-term cashflows are protected, in advance of US$17.6 
million of contractual debt repayments scheduled for the 
first six months of 2020.

Post year-end, the total forward sales commitment at the 
end of January 2020 was 37,000 oz at an average price of 
US$1,244/oz.

Corporate Social Responsibility

People
Shanta’s achievements in the year were the direct result 
of an entire workforce operating collectively under the 
same philosophy, embracing opportunities and avoiding 
complacency. Every member of the team is motivated to 
exceed their own expectations and it is the application of 
this dedicated, accountable culture under which we operate 
that has enabled the Company to succeed in producing 
another set of very good results. 

The Group’s headcount, including employees at both 
New Luika and Singida, totalled 748 people at the end 
of 2019 (2018: 795 people) and our Tanzanian staff span 
every discipline. The Executive Committee and Board of 
Directors of the local operating entity, Shanta Mining 
Company Limited (“SMCL”), are led almost entirely by 
Tanzanian nationals.

Shanta aims to be a model corporate citizen and having 
a positive local impact is fundamental to both the way 
that it conducts daily operations and its reputation as a 
responsible gold producer. At the end of 2019, 99% of the 
Company’s workforce were Tanzanian (2018: 99%) and 
approximately 40% are from local communities around 
New Luika. The Mine is a significant source of employment 
for nearby villages and towns, providing a vital economic 

Business Sustainability
Our social and economic footprint within Tanzania is 
vitally important, particularly in Songwe and Singida. The 
Company strives to improve livelihoods in these areas 
through the implementation of community initiatives 
in which we typically play a developmental partner role. 
Ensuring that our presence benefits all stakeholders is a 
core aspect of the Company’s values.

Local suppliers are a key part of our supply chain and by 
procuring products locally the Company is able to simplify 
its logistics requirements. Farmers in two of the villages 
next to New Luika have been supplying food to the staff 
kitchen for the past three years. We have also engaged 
suppliers from local villages for products including rice, 
corn flour, beans, fruits and hardware, which is helping 
these communities to establish a reliable source of income.

Respect for the local environment is at the forefront of 
our efforts to operate responsibly. Management of the 
forests around New Luika helps to mitigate any short-term 
environmental disturbance and these efforts continue 
to be supplemented by an internally managed carbon 
offset programme.

Several of Shanta’s established livelihood programmes are 
growing regionally, most notably those centred around 
transferring skills. The goal is for participants in these 
programmes to retain learned skills that can be passed to 
future generations independently, leaving a lasting legacy. 
The desire to instigate positive change and embrace our 
social responsibilities drives the Company’s programmes 
and several new initiatives were rolled out in 2019. 

Education, Water, Livelihood and Health continue to 
represent the foundations of Shanta’s community priorities.

Education
Shanta’s partnership with Hazelwood School (Charity 
Number 312081), a UK based charity providing teacher 
training in the Songwe region, “Into Africa – Partners in 
Learning”, continued throughout 2019 with approximately 
1,300 volunteer hours spent at four schools near New 
Luika. A dedicated team of skilled teachers spent 
this time training local teachers on how to improve 

16

their methodology and the result has been a notable 
improvement in student performance across various 
subjects. School attendance levels are being sustained 
at higher levels across all of the schools, two of which 
earned record exam results in the year. Highlights of 
the programme included inaugural Information and 
Communications Technology (“ICT”) lessons, and maths 
lessons being delivered in Swahili. The programme has 
proven to be an invaluable source of teacher training and 
student support for participating schools.

Shanta has been offering a scholarship programme for 
underprivileged students since 2014, supporting 55 
students through Secondary Education, and 95 students 
through Primary Education every year. Shanta’s team 
places great value on supporting local education and 
employees made various donations in the year, contributing 
funds for stationery, chairs and tables. Hazelwood School 
carried out fundraising for an array of teaching equipment. 
The Company donated approximately a tonne of sports 
equipment which facilitated interschool competitions for 
local students.

By working with local authorities the Company is looking 
to hire a full-time ICT teacher, with the goal of unlocking 
the opportunities that online access can bring to Songwe’s 
education system. The Company donated computer 
hardware and wireless internet equipment to local schools 
in the year and installed desktop computers alongside an 
ICT Centre at nearby Mbangala Primary School. A pilot 
programme, “Power for Songwe”, was introduced by 
the Company in the year and solar power has now been 
installed at nearby Maleza Primary School, which was not 
otherwise connected to the national electricity grid. This 
initiative has provided lighting for evening studies at the 
school, and solar power at Patamela Primary School has 
now been commissioned for early 2020.

For many years Shanta has been involved in education 
infrastructure development within local communities, 
and during 2019 purchased the materials required to roof 
three classrooms in the Songwe Region. Plans are also 
in advanced stages to construct three new classrooms, a 
student ablution block and housing for teachers at Saza 
Primary School, less than five kilometres from New Luika.

Water
Availability of fresh water remains a huge challenge for 
many people living in Songwe and Singida, areas that are 
heavily affected by an extensive dry season, which can span 
more than six months without any rainfall.

Two deep water boreholes were constructed in 2019, 
including one in the nearby Patamela village which extends 
80 metres below ground level. A shallow borehole was also 
constructed for a family from the Elizabeth Hill area, which 
can produce over 5,000 litres of water per day. Stagnant 
water sources around New Luika, especially from the banks 
of Lake Rukwa, carry a major risk of water-borne disease. 
The boreholes have been designed to provide water that 
is free of impurities and sediment, and crucially, that is 
safe to drink.

In Patamela village, residents live without access to 
grid power and during the year the Company installed a 
solar-powered pump to supplement the newly constructed 
water borehole. These facilities vastly reduce the distance 
that many residents previously had to traverse to access 
clean water. 

Livelihood
Farmers in Songwe have historically faced significant 
challenges, with insufficient food crops making it a 
struggle to guarantee a self-sufficient food supply or 
meaningful income from agriculture outside of harvesting 
season. This has previously led to a dependency on 
dangerous and illegal artisanal mining as the only 
means of income generation. Since 2016, enrolment for 
Shanta’s farming collaboration with Export Trading Group 
(“ETG”) has grown annually, with approximately 1,500 
farmers enrolled at the end of the year. This represented 
a 71% increase on the 877 farmers who took part in the 
2019 programme.

Newly trained participants, who had no prior knowledge 
of farming, have been guided on how to cultivate an 
optimum yield from their soils, with expert agricultural 
assessments carried out to determine which crops are best 
suited to their land. The latest sesame harvest yielded 447 
tonnes of crop with a sale value of US$0.5 million, which 
was earned directly by participants. The scheme is highly 
structured with a year of classroom training supplemented 
by practical learning at a demonstration farm, followed 
by supported practical application during the following 

17

2019 Annual Report and Accountsharvests. Practices adopted through this initiative have 
led to an expansion of Shanta methods across Songwe and 
skills taught through this collaboration will provide future 
generations of farmers in the region with opportunities 
that previous generations didn’t have access to. 

Health
Untreated HIV infections are a widespread health issue in 
Songwe and during 2019 Shanta conducted an awareness 
programme at New Luika, covering topics such as 
transmission, preventative measures and treatments. 
Hundreds of staff took part in a voluntary HIV testing 
programme funded by the Company. Many of Shanta’s 
employees also donated blood in the year, helping Songwe 
become a leading district in the region in terms of annual 
blood donations, and the Company funded specific health-
related procedures for a selection of local residents who 
were in need.

Outlook
Annual production guidance at New Luika for 2020 has 
been set at 80,000−85,000oz at an AISC of US$830-880/
oz. This cost guidance takes into consideration the 
reintroduction of supplementary open pit mining for a 
portion of the year and royalties, which are expected to 
be incurred on a higher average selling price per ounce 
than in 2019. 

The 2020 exploration budget has been increased by 65% 
as the Company targets further mine-life extension and 
progress towards a potential asset level financing for 
Singida is accelerating.

The West Kenya Project acquisition announced in early 
2020 is significant for Shanta, expanding the Group across 
East Africa with realisable growth prospects and high 
asset quality spanning three attractive gold projects. 
This new project substantially adds to the Company’s 
resource inventory and regular updates will follow once the 
transaction has closed.

Summary
At the beginning of 2019, Shanta set itself ambitious 
and challenging targets for the year ahead and these 
were successfully delivered on. Our successes were only 
made possible by the support that we received from all 
of our stakeholders. Shanta is now fast approaching a 
transformative period in which lenders will no longer be 
the primary benefactors of the Company’s cashflows. 

I am looking forward to reporting progress to you 
throughout the year as Shanta’s journey continues on what 
I believe will be another successful year for the Company 
and its stakeholders.

I’d like to take this opportunity to again thank all of our 
shareholders, our employees, members of the Board and 
our partners, for their commitment to the Company and for 
their invaluable ongoing support.

Eric Zurrin
Chief Executive Officer

27 February 2020

18

“Crucially, the Group’s 
operational successes in the 
year were delivered alongside 
tightly controlled costs and 
zero LTI’s for the year.”

Directors’ Report

The Directors present their annual 
report and the audited financial 
statements of the Group for the year 
ended 31 December 2019.

Non- Executive
 ◼ Anthony Durrant (Chairman)
 ◼ Robin Fryer
 ◼ Ketan Patel
 ◼ Keith Marshall

General
The Company was established in 2005. On 11 July 2005, its 
shares were listed on the London Stock Exchange’s AIM 
market. The Company is a non-cellular Company limited by 
shares incorporated in Guernsey.

Principal activity
The Group’s principal activity is that of investment in gold 
exploration and production in East Africa.

Business review
A review of the business during the year is contained in the 
Chairman’s Statement on page 5 and in the Chief Executive 
Officer’s Review on pages 7 to 18. 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.

Financial results
The results for the year are set out in the consolidated 
statement of comprehensive income on page 45. The 
activities for the year have resulted in the Group’s loss 
before tax of US$1.2 million (2018: profit before tax of 
US$13.1 million). No dividends were paid or proposed by the 
Board of Directors (2018: US$Nil).

Subsequent events
Except as disclosed in Note 32 to the financial statements, 
no other material fact or circumstance has occurred 
between the reporting date and the date of this report.

Nominated advisor
The Company’s nominated advisor is Numis 
Securities Limited.

Directors
The Directors who served during the year and to the date of 
this report are as follows:

Executive
 ◼ Eric Zurrin
 ◼ Luke Leslie

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.

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:

 ◼ Select suitable accounting policies and then apply them 

consistently;

 ◼ Make judgements and estimates that are reasonable 

and prudent;

 ◼ State whether applicable accounting standards have been 
followed, subject to any material departures disclosed 
and explained in the financial statements; and,

 ◼ 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.

21

2019 Annual Report and AccountsAuditor
BDO LLP has expressed their willingness to continue 
in office as auditor 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 the Remuneration 
Committee Report on pages 33-34 and in note 24 to the 
financial statements.

Signed on behalf of the Board of Directors on 
27 February 2020.

Eric Zurrin
Chief Executive Officer

Anthony Durrant
Chairman

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.

Going concern
The Directors have reviewed the Group’s cash flow forecasts 
for the period to April 2021 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. Further details have been provided 
within note 2.2.

22

“Our strategy at New Luika is to 
maintain a rolling life of mineable 
ounces which balances the cost 
of exploration with visibility on 
future production.”

Corporate Governance

Board of Directors
The Company had two Executive Directors 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.

of high-grade ore at New Luika. The objective is to quickly 
repay the Company’s debt and to generate returns for 
shareholders using the cash generated from this project. 

The Company implements a disciplined and modern 
approach to driving operational efficiencies across the 
organisation, a philosophy embraced by the entire Shanta 
team. This ensures that Shanta runs an efficient operation 
without compromising on growth opportunities as it 
continues to build on strong foundations to take the 
Company forward.

The individual directors of the Board have a wealth 
of experience from diverse professional and personal 
backgrounds. The Chairman is responsible for leading 
the Board, including ensuring that an appropriate level of 
diversity is maintained to promote distinct perspectives 
on Group and Company matters, and for implementing a 
robust governance framework. The Chief Executive Officer 
is responsible for leading the Company in its strategic 
pursuits and for ensuring that the Company’s business 
model is implemented effectively and in line with the 
Company’s values.

The Directors of the Company have elected to follow the 
main principles of the QCA Corporate Governance Code. The 
QCA Corporate Governance Code identifies ten principles 
that focus on the pursuit of medium to long-term value 
for shareholders without stifling the entrepreneurial spirit 
in which the company was created. The principles of the 
code are embedded into the Company’s internal reporting 
and governance structures, ensuring effective application. 
In addition to the details provided below, governance 
disclosures can be found on the Company’s website at www.
shantagold.com/corporate/corporate-governance.

1.  Strategy and business model
The Board seeks to maximise value for all our shareholders 
whilst ensuring continuity and consistency through 
sustainable and responsible mining.

The Company’s primary asset (“New Luika”) transitioned 
to a predominantly underground operation and entered 
commercial production in June 2017. Since 2017, New 
Luika’s underground mining activities have delivered a 
consistent plant feed and key developments to the business 
model made during the year included entering into 
commercial production from Ilunga, the third active source 

With the underground mine at New Luika fully established, 
exploration activities are currently being conducted in 
three distinct areas: 

 ◼ Targeted locations within existing mining licences 

adjacent to the existing reserves at our Bauhinia Creek 
and Ilunga deposits;

 ◼ Within the economic circle of New Luika; and,
 ◼ Regionally, utilizing prospective exploration ground held 

by the Company within the Lupa Goldfield.

This exploration programme is designed to ensure 
longevity for the Company’s existing operations.

2.  Understanding and meeting shareholder 

needs and expectations

The Board is aware of the needs and expectations of 
shareholders. The Company engages with its shareholders 
through quarterly conference calls and at its Annual 
General Meeting (“AGM”).

The board supports the use of the AGM to communicate 
with both institutional and private investors. All 
shareholders are given the opportunity to ask questions 
and raise issues; this can be done formally during the 
meeting or informally with the directors afterwards.

At the AGM, separate resolutions are proposed on each 
substantially separate issue. For each resolution, proxy 
appointment forms are issued alongside the release of the 
Annual Report, which provide voting shareholders with the 
option to vote in advance of the AGM if they are unable to 
attend in person. All valid proxy votes received for the AGM 
are properly recorded and counted by Computershare, our 
registrars. 

25

2019 Annual Report and AccountsAs soon as practicable after the AGM has finished, the 
results of the meeting are released via RNS and a copy of 
the announcement is uploaded to the Company website. At 
last year’s AGM, all resolutions were duly passed.

The Executive Directors, Eric Zurrin and Luke Leslie, 
have a regular programme of individual meetings with 
institutional shareholders and analysts following the 
release of each set of quarterly, half-yearly and annual 
results. These meetings provide a platform for detailed 
updates on the performance of the business. Feedback 
from these meetings is shared with the Board to ensure 
that shareholder opinion is central to ongoing strategic 
decision-making. 

The Company Secretary can be contacted by shareholders 
on matters of governance, as can Eric Zurrin and Luke 
Leslie. Contact details are provided within every Company 
announcement.

The Board is mindful of the need to protect the interests 
of minority shareholders. The Board does not consider 
there to be a dominant shareholder whereby it would 
be necessary for any specific contractual arrangements 
to be put in place to protect the interests of minority 
shareholders.

3.  Wider stakeholder needs and social responsibilities
The Company’s long-term success relies upon good 
relations with all its stakeholder Groups, both internal and 
external. The Board affords highest priority to ensuring 
that it maintains a strong understanding of the needs 
and expectations of all stakeholders. Feedback is sought 
regularly across several platforms.

The Group’s stakeholders include shareholders, 
employees, suppliers, customers, regulators, industry 
bodies, government bodies, and creditors (including the 
Group’s lending banks). The principal ways in which their 
feedback on the Group is gathered are via meetings and 
conversations. Feedback received from stakeholders based 
in Tanzania are tabled internally during weekly meetings 
held by Shanta Mining Company Limited’s Executive 
Committee. 

Views of the Group held by its stakeholders often represent 
the Group’s wider reputation and as such are considered 
vitally important. By holding regular meetings with 

stakeholders, the Group can identify these views and 
ensure that there is a platform for dialogue on any relevant 
matters. These meetings also enable bilateral discussions 
on any topics relevant to respective stakeholders and 
ensure that the Company’s presence in Tanzania is positive 
for all parties. 

The Company’s responsibilities to its stakeholders are 
considered crucial to the Company’s business plan. 
Throughout the year regular dialogue has been maintained 
with District and Regional Commissioners in both Songwe 
and Singida in order to ensure that the Group’s social 
responsibilities are being directed in line with the needs 
of local communities. The Company has strong positive 
relationships with many senior government officials in 
Tanzania and places great value on these close working 
relationships. The management team of SMCL regularly 
attend government-run conferences to promote the 
mining industry and SMCL also regularly sponsors these 
events. Reciprocating support received from local and 
national government is a key aspect of the Company’s 
business approach.

The Company also engages with its shareholders through 
quarterly calls and at its AGM, both of which provide 
an effective platform for two-way communication 
and feedback.

4.  Effective risk management throughout 

the organisation

The Board has three Sub-Committees which aim to meet a 
minimum of three times per year and are chaired by a non-
executive Director:

 ◼ The Audit Committee is responsible for ensuring that 

appropriate financial reporting procedures are properly 
maintained and disclosed in accordance with governing 
regulations.

 ◼ The Sustainability Committee ensures the company 
is considerate of all stakeholders and operates in 
accordance with the laws of the country in which the 
company operates.

 ◼ The Remuneration and Nominations Committee 

ensures that the company has a remuneration strategy 
that attracts and retains the necessary skills. It is 
also responsible in conjunction with the Chairman for 
ensuring that the Board is correctly structured in terms 
of good corporate governance.

26

As of December 2019, the structure and membership of 
Board Committees was as follows:

Audit Committee
The Group’s Audit Committee comprised of three Non-
Executive Directors being Robin Fryer (Chairman), 
Anthony Durrant and Ketan Patel. The Audit Committee 
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 reviewing 
the Group’s internal controls. The Audit Committee met 
four times in 2019.

Remuneration Committee
The Group’s Remuneration Committee comprised of four 
Non-Executive Directors being Keith Marshall (Chairman), 
Anthony Durrant, Ketan Patel and Robin Fryer. Details 
of the Remuneration Committee’s responsibilities are 
provided within the Remuneration Committee Report 
on page 33. The Remuneration Committee met three 
times in 2019.

Sustainability Committee
The Group’s Sustainability Committee comprised of three 
Non-Executive Directors being Ketan Patel (Chairman), 
Anthony Durrant and Keith Marshall. The Sustainability 
Committee 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 2019.

The Board has put in place mechanisms by which risks 
facing the Company are managed and reported internally. 
The Board reviews this internal reporting on a regular 
basis. The Board considers key business risks, including 
the financial risks facing the Company in the operation of 
its business. Control procedures have been put in place to 
appropriately monitor and mitigate these risks.

The key financial risks faced by the Group are detailed on 
pages 70-72. The Company has an established framework 
of internal financial controls to address these risks, 
the effectiveness of which is regularly reviewed by the 
Executive Directors, the Audit Committee and the Board.

The Board is responsible for reviewing and approving 
overall Company strategy, approving capital budgets and 

plans, and for determining the financial structure of the 
Company including treasury and tax. Monthly results and 
variances from plans are reported to the Board.

The Audit Committee assists the Board in discharging 
its duties regarding the financial statements, accounting 
policies and the maintenance of proper internal business, 
and operational and financial controls.

There are comprehensive procedures for budgeting and 
planning, for monitoring and reporting to the Board 
business performance against those budgets and plans, and 
for forecasting expected performance over the remainder 
of the financial period. These procedures cover costs, cash 
flows, capital expenditure and balance sheet accounts. 

The Board has ultimate responsibility for the Group’s 
system of internal control and for reviewing its 
effectiveness. This applies to mitigating both financial and 
non-financial risks faced by the Group. However, any such 
system of internal control can provide only reasonable, but 
not absolute, assurance against material misstatement or 
loss. The Board considers that the internal controls in place 
are appropriate for the size, complexity and risk profile 
of the Group.

The principal elements of the Group’s internal control 
system include:

 ◼ Close management of the day-to-day activities of the 

Group by the Executive Directors;

 ◼ An organisational structure with defined levels of 

responsibility;

 ◼ A comprehensive annual budgeting process producing a 
detailed integrated profit and loss and cash flow, which 
is approved by the Board;

 ◼ Detailed monthly reporting of performance against 

budget; and,

 ◼ Central control over key areas such as capital 

expenditure authorisation and banking facilities.

The Group continues to review its system of internal 
control to ensure compliance with best practice, while also 
having regard to its size and the resources available.

Non-financial controls covering areas such as health and 
safety, regulatory compliance, business integrity, risk 

27

2019 Annual Report and Accountsmanagement, business continuity and corporate social 
responsibility are continually assessed. 

The Board is committed to maintaining appropriate 
standards for all the Company’s business activities 
and ensuring that these standards are set out in 
written policies. A key example is the Company’s ‘Anti 
Bribery Policy’.

5.  A balanced and well-functioning Board led 

by the Chair

The Board and the committees regularly receive detailed 
and high-quality information to facilitate proper 
assessment of any matters requiring a decision or insight.

The Board comprises the Chief Executive Officer, the 
Chief Financial Officer and four Non-Executive Directors 
including the Chairman. Two non-executive directors are 
independent, which the Board believes to be an appropriate 
composition to maintain effective corporate governance.

A biography of each of the Directors is included on 
pages 3 to 4. 

Executive Directors are employed by the Group on a 
full-time basis whereas the Non-Executive Directors 
are remunerated on a fixed-fee part-time basis. All 
Directors devote a significant portion of their time in 
order to discharge their duties both at and outside of 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 2019: 

Director

Eric Zurrin

Luke Leslie

Anthony Durrant

Ketan Patel

Robin Fryer 

Keith Marshall

Number of meetings held in the year

Executive

Executive

Non-Executive

Non-Executive

Non-Executive

Non-Executive

Board 
meeting

Audit 
Committee

Remuneration 
Committee

Sustainability 
Committee

7

7

7

4

6

6

7

4

4

4

3

4

4

4

3

3

3

3

3

3

3

3

3

3

3

3

3

3

28

6.  Experience, skills and capabilities of the Board
Directors who have been appointed to the Company have 
been chosen because of the skills and experience they offer. 
The Board of Directors has strong, relevant experience 
across the areas of mining, accounting and banking. 

The Board is satisfied that, between the Directors, it has an 
effective and appropriate balance of skills and experience, 
including in the areas of gold mining and exploration. All 
Directors receive regular and timely information on the 
Group’s operational and financial performance. Relevant 
information is circulated to the Directors in advance 
of meetings.

Skills and knowledge have been gained through aggregated 
experience in gold mining and the wider sector and 
these are maintained through ongoing involvement and 
participation within the industry.

All Directors retire by rotation at regular intervals in 
accordance with the Company’s Articles of Association.

The Company Secretary, Vistra Fund Services (Guernsey) 
Limited, ensures that the Group is compliant with relevant 
legislation and regulatory requirements, and keeps the 
Board informed of its legal responsibilities.

7.  Board evaluation
Employee and Director performance is monitored annually 
via a formal assessment process. The Chairman of the 
Remuneration Committee is responsible for the assessment 
and monitoring of the performance of the Executive 
Directors. 

Agreed personal objectives and targets, including both 
financial and non-financial metrics, are set each year for 
the Executive Directors and performance is measured 
against these metrics. Further details regarding the results 
of this assessment have been set out in the Remuneration 
Committee Report on page 33.

Since the appointment of Anthony Durrant as Chairman, 
he has been responsible for assessing the individual 
contributions of each Director of the Board to ensure that:

 ◼ Their contribution is relevant and effective;
 ◼ They are committed; and,
 ◼ Where relevant, they have maintained their 

independence.

Succession planning is considered by the Board to be 
a crucial element of ensuring continued success and 
long-term prosperity for the Group. Regular reviews are 
conducted at Board and Executive Management level to 
ensure that high-potential individuals are identified and 
supported appropriately.

The Board comprises two Executive Directors and four 
Non-Executive Directors, which it believes to be an 
appropriate composition to maintain effective corporate 
governance. Each Director brings a wealth of expertise 
from their respective professional backgrounds and the 
Board considered itself able to perform effectively during 
the year under its current structure.

8.  A corporate culture that is based on ethical values 

and behaviours

Corporate responsibility begins with our own people, 
employment practices and maintaining equitable treatment 
across all levels of our organisation.

The Company has instituted various training and 
development programs in an effort to upgrade the skill 
level of all employees. The goal is to have a workforce 
where each individual takes full accountability for their 
work colleagues’ safety and the critical role they play in the 
success of Shanta Gold. 

We believe in taking care of our people who play a vital role 
in the success of our business.

We are committed to the safety, health, and welfare of our 
employees, contractors, management and visitors to our 
worksites in Tanzania. We maintain a zero-tolerance policy 
in regard to negligence of health and safety best practices. 
Education, training and ongoing communication are key to 
ensuring an injury-free workplace and promoting safety. 
Health and safety is an integral pillar of our performance 
and is used to evaluate the performance of all employees on 
a monthly basis. Employees are recognised for their safety 
awareness and performance each month to encourage 
safe practices.

We recognise the impact that our activities in Tanzania 
have on the local community in the operational areas of 
our mining activity. The Company believes it is critical 
that the local community is an integral stakeholder in 
the long-term sustainability of Shanta. We are focused on 

29

2019 Annual Report and Accountsadding business value beyond the financial contributions 
made through tax and royalty payments. Shanta Gold has 
an objective of training and employing local residents and 
thereby yielding direct and sustainable benefits to the local 
communities.

99% of the Group’s employees are Tanzanian nationals and 
approximately 40% of these are permanent residents of the 
local villages around New Luika.

9.  Governance structures and processes that support 

good decision-making

Details of the Company’s corporate governance 
arrangements are provided within this Statement. There 
are no matters expressly reserved for the Board. The Board 
considers the Group’s governance framework is appropriate 
and in line with its plans for growth.

Historical Annual Reports, notices of all general meetings 
from the last five years and the resolutions put to a vote 
at AGMs can be found on the Company’s website. Over the 
last five years all resolutions put to a vote at AGMs have 
been duly passed. Where a significant proportion of votes 
are cast against a resolution at any general meeting the 
Board seeks to understand the rationale for this through its 
engagement with shareholders. The Board also analyses the 
best means by which to adapt the governing frameworks 
of the Company in order to appease shareholder concerns 
where appropriate.

Bribery and anti-corruption
Shanta Gold is committed to acting fairly, ethically and 
with integrity in all territories in which it operates. A policy 
of the Company is not to engage in or tolerate bribery in 
any form within Shanta Gold, its subsidiaries, or within 
organisations with which it does business.

10.  Strong communication with shareholders and other 

relevant stakeholders

The Board attaches great importance to providing 
shareholders with clear and transparent information on the 
Company’s activities, strategy and financial position. 

As part of the Company’s compliance procedures 
in maintaining the highest standards of corporate 
governance, it adheres to the standards of the UK 
Bribery Act 2010.

The Board typically meets with large shareholders 
following the release of financial results and regards the 
AGM as a good opportunity to communicate directly with 
shareholders via an open question and answer session.

The Company regularly holds public question and answer 
calls in support of announcements, providing smaller and 
private investors with direct access to management. The 
Board receives regular updates on the views of shareholders 
through briefings and reports from the Chief Executive 
Officer, Chief Financial Officer and the Company’s 
brokers. In addition, analysts’ notes and brokers’ 
briefings are reviewed to achieve a wide understanding of 
investors’ views.

The Remuneration Committee Report on page 33 and the 
Audit Committee Report on page 35 provide details as to 
key work carried out over the year by these committees.

The Company discloses contact details on its website 
and on all announcements released via RNS, should 
shareholders wish to communicate with the Board. Details 
of all shareholder communications are provided on the 
Group’s website.

All officers and staff of Shanta Gold are required to comply 
with the Anti-Bribery Policy and, so far as is practicable, 
will third parties with whom the company does business. 
The Board of Directors of Shanta Gold has overall 
responsibility for bribery prevention within the Company 
and will closely monitor the effectiveness of the Anti-
Bribery Policy.

The Group operates a share dealing code for Directors on 
the basis set out in the AIM Rules.

Signed on behalf of the Board of Directors on 
27 February 2020.

Eric Zurrin
Chief Executive Officer

Anthony Durrant
Chairman

30

Remuneration Committee Report

Dear Shareholders,

Throughout 2019 the Committee has continued to focus on 
aligning reward with results and optimising incentives for 
our people to act like business owners.

Remuneration Policy and Aims of the 
Remuneration Committee
Our overall aim is to align employee remuneration with 
the successful delivery of long-term shareholder value. Our 
core principles enable us to achieve this goal:

Terms of reference
The terms of reference of the Remuneration Committee are 
set out below.

 ◼ Determine and agree with the Board the Company’s 

overall remuneration policy and monitor the efficacy of 
the policy on an ongoing basis;

 ◼ Determine and agree with the Board the remuneration of 

the Executive Directors and senior management;

 ◼ Determine the objectives and headline targets for any 
performance-related bonus or incentive schemes;

 ◼ Monitor, review and approve the remuneration 
framework for other senior employees; and,

1.  To offer competitive salary packages that attract, retain 

 ◼ Review and approve any termination payment such 

and motivate highly-skilled individuals;

2.  To align remuneration packages with performance-
related metrics that mirror our long-term business 
strategy; and,

3.  To encourage accountability in the workplace and link 

reward with success.

The Group currently operates the following 
remuneration framework:

 ◼ Annual salary and associated benefits such as paid 

holiday; and,

 ◼ Discretionary performance-related annual and/or 

quarterly bonuses.

The Remuneration Committee consists of myself as the 
Chairman together with three other independent Non-
Executive Directors, Anthony Durrant, Ketan Patel and 
Robin Fryer. The Committee aims to meet at least three 
times each year and its key responsibilities include 
reviewing the performance of senior staff, setting their 
remuneration and determining the payment of bonuses. 
The Remuneration Committee met three times in 2019.

The Chief Executive Officer and Chief Financial Officer 
are invited to attend meetings of the Committee, but no 
Director is involved in any decisions relating to their own 
remuneration. None of the Committee has any personal 
financial interest (other than as shareholders), conflicts of 
interests arising from cross-directorships, or day-to-day 
involvement in running the business.

that these are appropriate for both the individual and 
the Company.

Performance for the year
The Group delivered a strong operational performance 
in the year, with key objectives such as production and 
cost guidance delivered and an extension to New Luika’s 
mine life secured (see pages 7 to 14 of the Chief Executive 
Officer’s Review for details). The Group continues to operate 
with a high safety standard. The Company was again 
significantly deleveraged throughout the year which helped 
to transfer enterprise value to shareholders and affords 
Shanta greater flexibility for the future in its pursuit for 
further shareholder value accretion.

Basic salary and benefits for Executive Directors are 
reviewed on an annual basis and any changes made to the 
structure of these are based on a combination of individual 
performance and market conditions. Executive Directors 
are provided with life assurance cover of two times 
annual salary.

Bonus awards are assessed on overall business and 
individual performance. Executive Director and senior 
management remuneration packages are heavily linked 
to performance criteria to incentivise daily conduct in 
alignment with the best interests of our shareholders. 
The annual bonus criteria for the year were partially met 
and as a result the Remuneration Committee approved 
bonus awards to Executive Directors of 86.7% of respective 
eligible amounts.

33

2019 Annual Report and AccountsDirectors’ remuneration

(US$000)

Fees, salary, bonuses and 
related benefits

Eric Zurrin 1

Anthony Durrant 2

Luke Leslie 1

Robin Fryer 2

Ketan Patel 2

Keith Marshall 2

Sub-total

Share based payments

Eric Zurrin 1

Anthony Durrant 2

Luke Leslie 1

Ketan Patel 2

Keith Marshall 2

Sub-total

Total remuneration to directors

1  Executive
2  Non-executive

31 December 2019

31 December 2018

Performance 
bonus

Fees/salary

Total

Performance 
bonus

Fees/salary

Total

273

-

229

-

-

-

384

130

320

70

80

108

657

130

549

70

80

108

502

1,092

1,594

380

-

317

-

-

697

1,199

-

-

-

-

-

-

1,092

380

-

317

-

-

697

2,291

239

-

198

-

-

-

437

239

-

198

-

-

437

874

290

65

239

70

47

74

785

-

65

-

33

33

131

916

529

65

437

70

47

74

1,222

239

65

198

33

33

568

1,790

During the year to 31 December 2018 certain non-executive 
directors were party to a fee sacrifice arrangement under 
which those directors were issued with new ordinary 
shares in the Company. The cash-based portion of 
performance bonuses awarded to executive directors 
is intended predominantly to be used for settlement of 
personal tax obligations arising on share awards.

The year ahead
Upon review, the Committee has noted that that there has 
been no increase in the fees paid to the Non-executive 
directors of the Company since 2013. Detailed consideration 
of these fees has been undertaken, taking into account the 
following:

 ◼ Industry and peer-group benchmarking;
 ◼ The devaluing impact of inflation since annual Non-

executive Director fees were last fixed; and,
 ◼ The history of the Non-executive Directors 

accommodating Company cash constraints during more 
challenging financial times, by forgoing cash payments 
in lieu of shares.

Based on the review performed, the Committee is 
recommending and seeking shareholder approval for the 
following fee increases to be effective from 1 January 2020:

 ◼ The fee paid to the Chairman of the Company to increase 

from US$130,000 to US$150,000 per annum;

 ◼ The fees paid to the Non-executive Directors of the 

Company to increase from US$65,000 to US$70,000 per 
annum;

 ◼ The fees paid to the respective Chairmen of the Audit, 

Remuneration and Sustainability Committees to increase 
from US$5,000 to US$15,000 per annum; and,

 ◼ A new Committee Member fee of US$5,000 per annum to 

be implemented.

Retention of the Executive Directors is key to the 
Company’s long-term strategy. In recognition of this the 
Committee has approved an arrangement under which the 
Executive Directors will be financially rewarded should 
they continue to remain in the Company’s employ at the 
end of 2020.

The Committee views the Company’s wider remuneration 
structure as appropriately balanced to incentivise high 
performance and considers it to be aligned with current 
market conditions. This will undergo ongoing review 
throughout the coming year to ensure that our employees 
and executives are remunerated appropriately in the best 
interests of the Company.

The Committee and I remain focused on ensuring that 
employees and executives continue to be rewarded in line 
with the delivery of long-term shareholder value and will 
continue ensuring that the remuneration structure in 
place reflects and incentivises the Company’s culture of 
employee-shareholder alignment.

Keith Marshall
Chair of the Remuneration Committee

34

Audit Committee Report

Dear Shareholders,

I am pleased to present this report on behalf of the Audit 
Committee and to report on another year in which the 
Company’s internal financial reporting and control systems 
were both robust and operated effectively, enabling it to 
undergo a smooth external audit process. 

Aims of the Audit Committee
The overall aim of the Audit Committee is to assist the 
Board in discharging its duties regarding the financial 
statements, to ensure that a robust framework of 
accounting policies is in place and enacted, and to oversee 
the maintenance of proper internal financial controls.

The Audit Committee consists of myself as the Chairman 
together with two other Non-Executive Directors, Anthony 
Durrant and Ketan Patel. The Committee aims to meet 
at least three times each year and its key responsibilities 
include monitoring the integrity of the Group’s financial 
reporting. The Chief Executive Officer and Chief Financial 
Officer are invited to attend meetings of the Committee.

Key responsibilities
The Audit Committee is committed to:

 ◼ Maintaining the integrity of the financial statements of 
the Company and reviewing any significant reporting 
matters they contain;

 ◼ Reviewing the Annual Report and Accounts and other 
financial reports and maintaining the accuracy and 
fairness of the Company’s financial statements, 
including through ensuring compliance with applicable 
accounting standards and the AIM Rules; 

 ◼ Reviewing the adequacy and effectiveness of the internal 
control environment and risk management systems; and,

 ◼ Overseeing the relationship with and the remuneration 

of the external auditor, reviewing their performance and 
advising the Board members on their appointment.

The Audit Committee met four times in 2019 and 
the external auditors were present during three of 
these meetings.

Activities of the Audit Committee during the year
On behalf of the Board, the Audit Committee has closely 
monitored the maintenance of internal controls and risk 
management during the year. Key financial risks are 
reported during each Audit Committee meeting, including 
developments and progress made towards mitigating 
these risks.

The Committee received regular reports from the Chief 
Financial Officer throughout the year and was satisfied 
with the effectiveness of internal controls and risk 
mitigation. The Committee also received and considered 
reports from the external auditor, BDO LLP (“BDO”), which 
included control findings relevant to their audit.

Significant reporting matters
The Audit Committee has reviewed the recommendations 
of management and the judgements disclosed in note 3 
on page 58, including what it has considered to be the 
most significant reporting matter(s) and judgement(s) as 
set out below.

 ◼ The recoverability of the Group’s VAT receivable. 
The Committee reviewed the assessment made 
by management that the Group’s VAT receivable 
is recoverable, and also that a significant portion 
of it should be recognised as a non-current asset. 
The Committee is satisfied that management have 
considered this appropriately and that a reasonable 
conclusion has been reached based on the information 
available to the Group. Appropriate disclosure has been 
made within note 3 on page 58.

External audit
The Audit Committee considers various matters when 
reviewing the appointment of an external auditor including 
their performance in conducting the audit and its scope, 
terms of engagement including remuneration and their 
independence and objectivity.

BDO have been appointed as external auditor since 2012. 
The Audit Committee has confirmed it is satisfied with 
BDO’s knowledge of the Company and its effectiveness 
as external auditor as well as the provision of non-audit 
services. As such the Audit Committee has recommended 
the reappointment of BDO to the Board. There will be 
a resolution to this effect at the forthcoming Annual 
General Meeting.

35

2019 Annual Report and AccountsThe year ahead
The Committee and I remain focused on ensuring that the 
current framework of internal controls in place at Shanta is 
both maintained and regularly reviewed for improvement 
and will continue to closely monitor the financial risks 
faced by the business alongside progress made towards 
mitigating these. 

The Committee and I will also maintain close ongoing 
dialogue with the Company’s external auditors, 
highlighting any emerging financial risks or matters facing 
the Company throughout the coming year and ensuring 
that the Company’s financial reporting mechanisms 
continue to be subjected to appropriately robust scrutiny 
and challenge.

Robin Fryer
Chair of the Audit Committee

36

Independent auditor’s report to the 
members of Shanta Gold Limited

Opinion
We have audited the financial statements of Shanta Gold 
Limited (the ‘Parent Company’) and its subsidiaries (the 
‘Group’) for the year ended 31 December 2019 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 notes to the 
financial statements, including a summary of significant 
accounting policies. 

The financial reporting framework that has been applied 
in the preparation of the Group financial statements is 
applicable law and International Financial Reporting 
Standards (IFRSs) as adopted by the European Union. 

Conclusions relating to going concern
We have nothing to report in respect of the following 
matters in relation to which the ISAs (UK) require us to 
report to you where:

 ◼ The Directors’ use of the going concern basis of 
accounting in the preparation of the financial 
statements is not appropriate; or

 ◼ The Directors have not disclosed in the financial 

statements any identified material uncertainties that 
may cast significant doubt about the Group’s or the 
Parent Company’s ability to continue to adopt the 
going concern basis of accounting for a period of at 
least twelve months from the date when the financial 
statements are authorised for issue.

Key audit matters
Key audit matters are those matters that, in our 
professional judgment, were of most significance in our 
audit of the financial statements of the current period and 
include the most significant assessed risks of material 
misstatement (whether or not due to fraud) we identified, 
including those which had the greatest effect on: the 
overall audit strategy, the allocation of resources in the 
audit; and directing the efforts of the engagement team. 
These matters were addressed in the context of our audit 
of the financial statements as a whole, and in forming our 
opinion thereon, and we do not provide a separate opinion 
on these matters.

In our opinion:

 ◼ The financial statements give a true and fair view of the 
state of the Group’s affairs as at 31 December 2019 and of 
the Group’s loss for the year then ended;

 ◼ The Group financial statements have been properly 

prepared in accordance with IFRSs as adopted by the 
European Union; and

 ◼ The financial statements have been prepared in 

accordance with the requirements of the Companies 
(Guernsey) Law, 2008.

Basis for opinion
We conducted our audit in accordance with International 
Standards on Auditing (UK) (ISAs (UK)) and applicable law. 
Our responsibilities under those standards are further 
described in the Auditor’s responsibilities for the audit 
of the financial statements section of our report. We are 
independent of the Group and the Parent Company in 
accordance with the ethical requirements that are relevant 
to our audit of the financial statements in the UK, including 
the FRC’s Ethical Standard as applied to listed entities, 
and we have fulfilled our other ethical responsibilities 
in accordance with these requirements. We believe that 
the audit evidence we have obtained is sufficient and 
appropriate to provide a basis for our opinion.

37

2019 Annual Report and AccountsMatter identified

Going Concern

When preparing the financial statements, Management 
and the Directors are required to make an assessment of 
the Group’s ability to continue as a going concern for a 
period of at least 12 months from the date of signing the 
financial statements.

Details of management’s consideration of the 
appropriateness of the going concern basis are set out in 
note 2.2.

The combination of the following make this a key area of 
focus for the audit:

•  The uncertainty of the timing of the VAT receivable of 

US$21.9m;

•  The debt repayments of US$14.0m due in 2020 (which 

includes loans of US$11.5m, silver streaming agreement 
(“SSA”) of US$1.8m and Lease liabilities of US$0.7m, as 
disclosed in note 20 and 21);

•  The payment of the US$7.0m cash consideration in 
relation to the Acacia Exploration (Kenya) Limited 
agreement, as disclosed in note 32;

•  The post year end restructuring of the convertible loan 

notes of US$10.0m, as disclosed in note 32; and
•  The waiver from Investec, as detailed in note 20.     

How we addressed the matter

We evaluated Management’s and the Directors assessment of going concern.

Our specific audit testing in this regard included:

•  Critical assessment of management’s and the Directors financial forecasts for the period to April 

2021 and the key underlying assumptions, including:
 – gold pricing used in the forecast in comparison to forecasted future gold prices from 

independent third party sources

 – forecast production statistics assessed in comparison to the Life of Mine Plan and against 

current year performance

 – operating and capital expenditure have been compared to the board approved budget for 

2020

 – outstanding derivatives, including their settlement dates, were agreed to January 2020 third 

party statements

 – debt repayments were confirmed to third party loan agreements to check completeness and 

timing, including the post year end convertible loan note restructuring to extend the maturity 
of the convertible loan notes to April 2021

 – in respect of the convertible loan note restructuring, we confirmed the terms to the original 

loan agreement and the signed irrevocable agreements

 – we confirmed that the forecast period excluded receipts associated with VAT receivables due 

to the uncertainty of the timing

•  We recalculated management’s covenant compliance calculations and forecast covenant 

compliance calculations and assessed their consistency with the ratios stated in the relevant 
lender agreements.

•  We performed sensitivity analysis in respect of the key assumptions underpinning the forecasts, 
including gold pricing, production and operational costs and assessed the level of cash under 
such sensitivities.

Key observations
We found the key assumptions made by Management and the Directors in respect of going concern to be reasonable and the disclosures in the financial 
statements to be in line with the accounting standards.

Matter identified

Recoverability of VAT (see note 17)

The Group has significant VAT receivables of $21.9m as at 
31 December 2019, of which $20.0m is classified as non-
current.

As disclosed in note 3, judgement is required as to the 
timing of recovery of the VAT. As such, the recoverability, 
carrying value and presentation of VAT represent a 
significant focus for our audit.

How we addressed the matter

We considered and challenged management’s assessment of the carrying value, timing of 
recovery and presentation of the receivables.

Our specific audit testing in this regard included: 

•  We considered and challenged management’s assessment of the recovery of the VAT. In 

particular, this included consideration of the history of re-payments, including the repayments 
made in the year, the ability to offset the receivable against corporate tax payments, the current 
regulatory environment, the nature of correspondence with the relevant authorities, publicly 
available information and inquiries made with management and its VAT advisors. 

•  We have obtained written confirmation from the Group’s legal adviser, which supports the 
Board’s assessment that the VAT is legally valid and remains recoverable. In relying upon 
the assessments made by such expert, we evaluated the competence and objectivity of the 
professional adviser relied upon by management.

•  We reviewed correspondence between the Group and the Tanzanian Revenue Authority (“TRA”) 
and made inquiries of management regarding the nature of its ongoing discussions with the 
TRA.

•  We considered and challenged management’s assessment of the classification between current 

and non-current including consideration of the payment history, ability to offset, nature of 
ongoing correspondence and legislative changes.

•  We reviewed the disclosures in the financial statements to ensure that they were prepared in 

accordance with the requirements of the accounting standards.

Key observations
We found management’s assessment of the carrying value, timing of recovery and presentation of the VAT receivable to be acceptable and appropriately 
disclosed.

38

Our application of materiality
We apply the concept of materiality both in planning 
and performing our audit and in evaluating the effect 
of misstatements. We consider materiality to be the 
magnitude by which misstatements, including omissions, 
could influence the economic decisions of reasonable users 
that are taken on the basis of the financial statements. 
Importantly, misstatements below these levels will 
not necessarily be evaluated as immaterial as we also 
take account the nature of identified misstatements, 
and the particular circumstances of their occurrence, 
when evaluating their effect on the financial statements 
as a whole.

Materiality

31-Dec-19

31-Dec-18

Basis of materiality

Materiality for financial 
statements as a whole

US$1.7m

US$2.2m 1.5% Revenue 

(2018: 5% of 
EBITDA)

Materiality for 
significant component 
of the Group

US$1.5m

US$1.95m Capped at 90% of 
group materiality 
(2018: 90%)

We consider revenue to be the financial metric of the most 
interest to shareholders and other users of the financial 
statements, given the Group’s continuation as a producing 
mining operation. We had previously used EBITDA as the 
basis for materiality, however in 2019 revenue is deemed to 
be a more appropriate measure due to the volatility of using 
a profit based measure.

Performance materiality is the application of materiality 
at the individual account or balance level and is set at 
an amount which reduces to an appropriately low level 
the probability that the aggregate of uncorrected and 
undetected misstatements exceeds materiality for the 
financial statements as a whole. Performance materiality 
was set at US$1.3m (2018: US$1.7m) for the financial 
statements as a whole, and US$1.1m (2018: US$1.5m) for the 
significant component of the Group. This represents 75% 
(2018: 75%) of the above materiality levels.

We agreed with the Audit Committee that we would report 
to the committee all audit differences in excess of US$0.04 
million, as well as differences below that threshold that, in 
our view, warranted reporting on qualitative grounds. We 
also report to the audit committee on disclosure matters 
that we identified when assessing the overall presentation 
of the financial statements.

An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding 
of the Group and its environment and assessing the risks 
of material misstatement in the financial statements at the 
group level.

Whilst Shanta Gold Limited is a Company registered in 
Guernsey and listed on the Alternative Investment Market 
in the UK, the Group’s principal operations are located in 
Tanzania. In approaching the audit, we considered how the 
Group is organised and managed. We assessed there to be 
one significant component, being Shanta Mining Company 
Limited, which includes the New Luika mine and Singida 
operations.

A full scope audit for Group reporting purposes was 
performed on the significant overseas component by BDO 
in Tanzania. The Group audit team performed specified 
procedures over the key audit areas and an audit of the 
consolidation as well as the parent company. The non-
significant components, being Holding and Exploration 
Companies, were subject to analytical review procedures by 
the Group audit team.

As part of our audit strategy, as Group auditors:

 ◼ Detailed Group reporting instructions were sent to the 
component auditors, which included the significant 
areas to be covered by the audits (including areas that 
were considered to be key audit matters as detailed 
above), and set out the information to be reported to the 
Group audit team.

 ◼ Members of the Group audit team were physically 
present in Tanzania at certain times during the 
fieldwork phases of the audits. 

 ◼ The Group audit team was actively involved in the 

direction of the audits performed by the component 
auditor for Group reporting purposes, along with 
the consideration of findings and determination of 
conclusions drawn.

 ◼ The Group audit team visited the New Luika operating 
mine, reviewed the Tanzanian auditor’s work papers 
in Tanzania, attended clearance meetings for the 
significant component and spent significant periods of 
time with the component auditors during their fieldwork 
and completion phases.

As a result of the approach outlined above, we achieved 
coverage as follows:

Total assets

94%

Revenue

100%

39

2019 Annual Report and AccountsOther information
The Directors are responsible for the other information. 
The other information comprises the information included 
in the Annual Report and Accounts, other than the 
financial statements and our auditor’s report thereon. 
Our opinion on the financial statements does not cover 
the other information and, except to the extent otherwise 
explicitly stated in our report, we do not express any form 
of assurance conclusion thereon.

In connection with our audit of the financial statements, 
our responsibility is to read the other information and, 
in doing so, consider whether the other information is 
materially inconsistent with the financial statements or 
our knowledge obtained in the audit or otherwise appears 
to be materially misstated. If we identify such material 
inconsistencies or apparent material misstatements, we 
are required to determine whether there is a material 
misstatement in the financial statements or a material 
misstatement of the other information. If, based on the 
work we have performed, we conclude that there is a 
material misstatement of this other information, we are 
required to report that fact. We have nothing to report in 
this regard.

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:

 ◼ Proper accounting records have not been kept by the 

Parent Company; or

 ◼ The financial statements are not in agreement with the 

accounting records; or 

 ◼ 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.

Responsibilities of directors
As explained more fully in the Directors’ responsibilities 
statement set out on page 21, the Directors are responsible 
for the preparation of the financial statements and for 
being satisfied that they give a true and fair view, and 
for such internal control as the Directors determine is 
necessary to enable the preparation of financial statements 
that are free from material misstatement, whether due to 
fraud or error.

In preparing the financial statements, the Directors are 
responsible for assessing the Group’s and the Parent 
Company’s ability to continue as a going concern, 
disclosing, as applicable, matters related to going concern 
and using the going concern basis of accounting unless 

the Directors either intend to liquidate the Group or the 
Parent Company or to cease operations, or have no realistic 
alternative but to do so.

Auditor’s responsibilities for the audit of the 
financial statements
Our objectives are to obtain reasonable assurance about 
whether the financial statements as a whole are free from 
material misstatement, whether due to fraud or error, 
and to issue an auditor’s report that includes our opinion. 
Reasonable assurance is a high level of assurance, but is 
not a guarantee that an audit conducted in accordance 
with ISAs (UK) will always detect a material misstatement 
when it exists.

Misstatements can arise from fraud or error and are 
considered material if, individually or in the aggregate, 
they could reasonably be expected to influence the 
economic decisions of users taken on the basis of these 
financial statements.

A further description of our responsibilities for the audit 
of the financial statements is located on the Financial 
Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description 
forms part of our auditor’s report.

Use of our report
This report is made solely to the Parent Company’s 
members, as a body, in accordance with Section 262 of the 
Companies (Guernsey) Law, 2008. Our audit work has been 
undertaken so that we might state to the Parent Company’s 
members those matters we are required to state to them 
in an auditor’s report and for no other purpose. To the 
fullest extent permitted by law, we do not accept or assume 
responsibility to anyone other than the Parent Company 
and the Parent Company’s members as a body, for our audit 
work, for this report, or for the opinions we have formed.

Jack Draycott
For and on behalf of BDO LLP
London, United Kingdom
27 February 2020

BDO LLP is a limited liability partnership registered in 
England and Wales (with registered number OC305127).

40

31 Dec 2019

31 Dec 2018

112,795

(9,833)

(30,613)

(57,982)

(88,595)

14,367

(6,625)

(2,611)

5,131

53

(6,375)

(1,191)

(8,291)

(9,482)

(9,482)

1

(9,481)

(1.206)

(1.206)

103,803

(1,259)

(25,654)

(49,661)

(75,315)

27,229

(6,520)

(1,454)

19,255

65

(6,179)

13,141

(5,152)

7,989

7,989

(4)

7,985

1.029

1.017

Consolidated statement of 
comprehensive income

(US$000)

Revenue

Loss on non-hedge derivatives and other commodity contracts

Notes

4

5

Depreciation

Other cost of sales

Cost of sales

Gross profit

Administration expenses

Exploration and evaluation costs

Operating profit

Finance income

Finance expense

(Loss) / Profit before taxation

Taxation

(Loss) / Profit for the year attributable to the equity holders of the parent Company

(Loss) / Profit after taxation

Other comprehensive income:

Items that may be reclassified to profit or loss:

Exchange differences on translating foreign entities which can subsequently be 
reclassified to profit or loss

Total comprehensive (expense) / income attributable to the equity holders of the 
parent Company

(Loss) / earnings per share attributable to the equity holders of the parent 
Company

Basic (loss) / earnings per share (US$ cents)

Diluted (loss) / earnings per share (US$ cents)

The accompanying notes on pages 51 to 74 form an integral part of these financial statements.

The (loss) / profit for the year and the total comprehensive 
(expense) / income 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.

6

7

8

9

10

10

45

2019 Annual Report and AccountsConsolidated statement of 
financial position

Notes

31 Dec 2019

31 Dec 2018

(US$000)

ASSETS

Non-current assets

Intangible assets

Property, plant and equipment

Right of use assets

Other receivables

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 notes reserve

Translation reserve

Shares to be issued

Retained deficit

TOTAL EQUITY

LIABILITIES

Non-current liabilities

Loans and other borrowings

Convertible loan notes 

Provision for decommissioning

Provision for deferred taxation 

Total non-current liabilities

Current liabilities

Trade and other payables 

Contract liabilities

Loans and other borrowings

Convertible loan notes

Income tax payable

Total current liabilities

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

The accompanying notes on pages 51 to 74 form an integral part of these financial statements.

The financial statements were approved and authorised for issue by the board of 
Directors on 27 February 2020 and signed on its behalf by:

Eric Zurrin 
Chief Executive Officer 

Anthony Durrant
Chairman

11

12

13

17

16

17

18

23

24

20

21

22

9

19

20

21

23,378

82,748

2,947

19,968

129,041

27,090

6,282

2,500

3,506

39,378

168,419

23,277

99,989

-

-

123,266

24,479

25,330

2,500

8,958

61,267

184,533

158,440

157,848

473

5,374

450

627

(69,114)

96,250

5,219

-

8,426

10,518

24,163

23,612

-

14,026

9,987

381

48,006

72,169

698

5,374

450

592

(59,835)

105,127

8,230

10,060

8,545

8,230

35,065

14,550

189

23,664

5,000

938

44,341

79,406

168,419

184,533

46

 
 
 
Consolidated statement of 
changes in equity

Share 
capital

Share 
premium

Share 
option 
reserve

Convertible 
loan notes 
reserve

116

157,152

1,037

5,374

Translation 
reserve

Shares to 
be issued

Retained 
deficit

512

(68,240)

US$000

Total equity 1 January 2018

Profit for the year

Other comprehensive income for the year

Total comprehensive income for the year

Share based payments 

Lapsed options

Total equity 31 December 2018

Effect of adoption of IFRS 16 (note 28)

Total equity 1 January 2019 as restated

Loss for the year

Other comprehensive income for the year

Total comprehensive expense for the year

Share based payments 

Lapsed options

-

-

-

1

-

117

-

117

 -   

 -   

-

1

-

-

-

-

579

-

157,731

-

157,731

 -   

 -   

-

591

-

-

-

-

13

(352)

698

-

698

 -   

 -   

-

(13)

(212)

 473 

-

-

-

-

-

5,374

-

5,374

 -   

 -   

-

-

-

Total 
equity

96,405

7,989

(4)

7,985

737

-

7,989

-

7,989

64

352

(59,835)

105,127

(10)

(10)

(59,845)

105,117

(9,482)

(9,482)

1   

 1   

(9,481)

(9,481)

-

212

614

-

-

-

-

80

-

592

-

592

 -   

 -   

-

35

-

454

-

(4)

(4)

-

-

450

-

450

 -   

 -   

-

-

-

Total equity 31 December 2019

 118 

 158,322 

 5,374 

 450 

 627 

(69,114)

 96,250

The accompanying notes on pages 51 to 74 form an integral part of these financial statements.

The nature and purpose of each reserve within Shareholders’ equity is described as follows:

Reserve

Share capital

Description and purpose

Amount subscribed for share capital at nominal value

Share premium

Amount subscribed for share capital in excess of nominal value

Share option reserve

Cumulative fair value of options charged to the statement of 
comprehensive income net of transfers to the retained deficit on 
exercised and cancelled/lapsed options

Convertible loan notes reserve

Equity element of convertible loan notes

Translation reserve

Cumulative gains and losses on translating the net assets of overseas 
operations to the presentation currency

Shares to be issued

Nominal value of share capital and premium on shares to be issued

Retained deficit

Cumulative net gains and losses recognised in the consolidated 
statement of comprehensive income

47

2019 Annual Report and AccountsConsolidated statement of cash flows

(US$000)

Net cash flows generated from operating activities

Notes

25

31 Dec 2019

 37,598

31 Dec 2018

31,030

Investing activities

Purchase of intangible assets

Purchase of plant and equipment

Assets under construction

Mine development expenditure

Net cash flows used in investing activities

Financing activities

Loans repaid

Buy-back of convertible loan notes

Equipment loan repaid

Principal paid on lease liabilities

Interest paid

Contributions to restricted cash 

Loans received (net of loan arrangement fees)

Net cash flows used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

The accompanying notes on pages 51 to 74 form an integral part of these financial statements.

(108)

(54)

(13,572)

(7,104)

(20,838)

(13,985)

(5,219)

(1,046)

(1,587)

(3,443)

-

3,068

(22,212)

(5,452)

 8,958 

 3,506 

-

(38)

(9,501)

(7,053)

(16,592)

(13,747)

-

(2,400)

(944)

(4,579)

(625)

3,264

(19,031)

(4,593)

13,551

8,958

48

Notes to the financial statements

1.  General information
Shanta Gold Limited (the Company) is a limited company 
incorporated in Guernsey. The address of its registered 
office is 11 New Street, St Peter Port, Guernsey, GY1 2PF. 
The nature of the Group’s operations and its principal 
activities are set out in the Chairman’s Statement, the Chief 
Executive Officer’s Review and the Directors’ Report on 
pages 5 to 22.

These financial statements were approved and authorised 
for issue on 27 February 2020 by Eric Zurrin and Anthony 
Durrant on behalf of the Board.

2.  Accounting policies
The principal accounting policies adopted in the 
preparation of the consolidated financial statements are set 
out below. The policies have been consistently applied to all 
the years presented, unless otherwise stated.

2.1  Basis of preparation
The consolidated financial statements have been prepared 
under the historical cost convention except for certain 
financial instruments which are carried at fair value, 
as explained in the accounting policies below. They are 
presented in US Dollars, which is also the Company’s 
functional currency. Amounts are rounded to the nearest 
thousand, unless otherwise stated. 

The financial statements have been prepared in accordance 
with International Financial Reporting Standards (IFRS 
and IFRIC Interpretations) issued by the International 
Accounting Standards Board (“IASB”), as adopted by the 
European Union (“IFRS”).

The preparation of financial statements in compliance with 
adopted IFRS requires the use of certain critical accounting 
estimates. It also requires Group’s management to exercise 
judgement 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.

2.2  Going concern
Based on a review of the Group’s budgets, cashflow 
forecasts and its ability to flex its forecast spending to suit 
prevailing circumstances, the Directors consider that the 
Group has adequate resources to continue its operational 
existence for the foreseeable future. This review included 
consideration of the letter received from Investec in the 

year which extended the period under which Investec 
waives its rights to enforce security or accelerate any loans 
under the Facilities Agreement through to 31 August 2020, 
as disclosed in note 20.

At 31 December 2019 the Group had a cash balance of US$3.5 
million and access to the restricted Exim Bank working 
capital facility of US$2.5 million, which it continues to have 
access to. Despite delays in recovering VAT, the Group has 
sufficient operating cashflows to continue to operate for 
the foreseeable future, including meeting contractual debt 
repayments in the forecast period. Since the year-end, the 
maturity of the convertible loan notes has been extended to 
April 2021 and the Group expects to settle these when they 
become due from operating cashflows.

The Group expects to settle existing future commitments 
associated with the post balance sheet acquisition of 
the West Kenya Project when they become due from 
operating cashflows.

The Directors have concluded that these circumstances 
form a reasonable expectation that the Group has adequate 
resources to continue in operational existence, for the 
foreseeable future. For these reasons, the Directors 
continue to adopt the going concern basis in preparing the 
Annual Report and Accounts.

2.3  New standards, amendments and interpretations 

effective in 2019

A number of new and amended standards and 
interpretations issued by IASB have become effective 
for the first time for financial periods beginning on (or 
after) 1 January 2019 and have been applied by the Group 
in these financial statements. With the exception of IFRS 
16 “Leases”, none of these new and amended standards 
and interpretations had a significant effect on the Group 
because they are either not relevant to the Group’s 
activities or require accounting which is consistent with 
the Group’s current accounting policies.

Details of the impact the adoption of IFRS 16 has had on 
these financial statements are given in note 28.

2.4  New standards, amendments and interpretations that 

are not yet effective and have not been early adopted

There are a number of standards, amendments to 
standards, and interpretations which have been issued by 
the IASB that are effective in future accounting periods 

51

2019 Annual Report and Accounts —Notes to the financial statementsand which have not been adopted early. None of these 
are expected to have a significant effect on the Group, in 
particular: 

 ◼ IAS 1 Presentation of Financial Statements and IAS 8 

Accounting Policies, Changes in Accounting Estimates 
and Errors (Amendment – Definition of Material)

 ◼ IFRS 3 Business Combinations (Amendment – Definition 

of Business)

 ◼ IFRS 9, IAS 37 and IFRS 7: Interest rate 

benchmark reform

 ◼ Revised Conceptual Framework for Financial Reporting.

The principal accounting policies adopted are set out below.

2.5  Basis of consolidation
2.5.1   
Subsidiaries
Subsidiaries are all entities (including structured entities) 
over which the Group has control. The Group controls 
an entity when it 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 deconsolidated 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

2.5.2 
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 at their fair values 
at the acquisition date.

2.6  Foreign currencies
Functional and Presentation Currencies
2.6.1 
The individual financial statements of each company 
within the Group 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 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 Dollar) 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 
translation reserve.

Transactions and balances

2.6.2 
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 retranslated 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 
retranslated.

Exchange differences arising on the settlement of 
monetary items, and on the retranslation of monetary 
items, are included in profit or loss for the period. Exchange 
differences arising on the retranslation of non-monetary 
items carried at fair value are included in profit or loss 
for the period except for differences arising on the 
retranslation 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.

2.7  Revenue recognition
The Group enters into spot agreements for the sale of 
refined gold. The Group recognises the sale upon delivery 
at which point control of the product has been transferred 
to the customer. Transfer of control generally takes place 
when refined gold is credited to the customer’s account at 
the refinery. The Group also enters into forward contracts 

52

for the sale of refined gold. Revenue arising from sales 
under these contracts is recognised when the product 
has been delivered under the terms of the contract at 
which point control of the product has been transferred to 
the customer. 

Revenue is measured based on the consideration to which 
the Group expects to be entitled under the terms of a 
contract with a customer. In most cases the consideration 
is determined by reference to the gold market price 
at the point of delivery, except for instances where 
the arrangement falls under a forward sales contract. 
Consideration typically falls due upon delivery.

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 under the terms of the contract. 
These forward sales contracts meet the own use exemption 
under IFRS 9 and as such are recognised as revenue.

Inventory

2.8 
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 depreciation 
of relevant mining assets, 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.

2.9 

Intangible assets and exploration and evaluation 
expenditure

Exploration expenditure

2.9.1 
Exploration expenditure is defined as expenses incurred 
on the initial search for mineral deposits with economic 
potential as well as expenditure incurred for the 
purposes of obtaining more information about existing 
mineral deposits.

Exploration expenditure, with the exception of costs 
of acquiring tenement rights, is typically expensed as 
incurred, until an ore body is considered commercially 
recoverable.

demonstrated that the related evaluation expenditure will 
generate future economic benefit. 

Once an ore body is considered commercially recoverable 
the project is classified as a “development project”. 
Evaluation expenditure incurred on development projects is 
capitalised within the “assets under construction” category 
of property, plant and equipment.

Acquired exploration and evaluation properties
2.9.3 
Exploration and evaluation stage properties acquired 
either as an acquisition of individual assets or as part of 
a business combination are capitalised as an intangible 
asset. The Group capitalises costs only when it has the 
direct or indirect right to explore or evaluate the associated 
acquired properties. Subsequent exploration and evaluation 
expenditure incurred on such properties is expensed as 
incurred until the technical and commercial viability of 
developing the property has been demonstrated under the 
same criteria described above. 

Once the commercial viability is determined the acquired 
exploration and evaluation properties are transferred 
to assets under construction within property, plant 
and equipment.

Licensing costs

2.9.4 
The costs of acquiring mining and prospecting licenses, 
which are reflected in the financial statements as 
intangible assets, are capitalised and are amortised on a 
straight-line basis when mining operations commence. 

Costs of entering into option agreements to explore and 
evaluate other license holders’ rights, with the option of 
converting these licenses are also capitalised and treated 
on the same basis. Subsequent to initial recognition, 
tenement rights are assessed for impairment annually 
and when facts and circumstances indicate they may be 
no longer viable, or where licenses have expired with no 
intention of renewal, an impairment loss is recognised 
as exploration costs in the statement of comprehensive 
income. Where expiring licenses are in the renewal process 
they are not considered impaired until a decision is reached 
by the Licencing Authority, unless there are circumstances 
which suggest that the renewal will not be granted.

2.10  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

Rates (%)

Evaluation expenditure 

2.9.2 
Evaluation expenditure arises from a detailed assessment 
of deposits or other projects that have been identified as 
having economic potential in order to determine their 
technical feasibility and commercial viability. Evaluation 
expenditure is expensed as incurred unless it can be 

Mine equipment and vehicles 

Power Generation and Office equipment

Computer equipment

Motor vehicles

Furniture and fittings

25.0

12.5

33.3

25.0

16.7

53

2019 Annual Report and Accounts —Notes to the financial statementsThe useful lives and residual values are re-assessed annually.

impairment losses. Amortisation is calculated on the basis 
of units of production.

2.10.1  Mining assets
Once a project reaches the stage of commercial production, 
the capitalised development project is transferred from 
assets under construction to the “mining assets” category. 
Mining assets are depreciated using the unit of production 
method based on proven and probable reserves. 

Subsequent development expenditure is capitalised only 
if it is expected to give rise to a future economic benefit. 
Costs associated with underground development are 
capitalised when the works provide access to the ore 
body, whereas costs associated with ore extraction from 
operating ore body sections are treated as operating costs.

Assets under construction

2.10.2 
Assets under construction comprise development projects 
and assets in the course of construction at both the mine 
development and production phases. 

Development projects comprise interests in mining 
projects where ore body is considered commercially 
recoverable and the development activities are ongoing. 
Expenditure incurred on a development project is recorded 
at cost, less applicable accumulated impairment losses. 
Any net income earned before the commencement of 
commercial production is credited against the capitalised 
development expenditure. Interest on borrowings, incurred 
for the purpose of the establishment of mining assets, is 
capitalised during the construction phase. 

The cost of an asset in the course of construction comprises 
its purchase price and any costs directly attributable 
to bringing it into working condition for its intended 
use, at which point it is transferred from assets under 
construction to other relevant categories and depreciation 
commences. 

Assets under construction are not depreciated.

Deferred stripping asset

2.10.3 
Production stripping costs in the open pit mines are 
capitalised as a “deferred stripping asset” within property, 
plant and equipment if all of the following criteria are met:

 ◼ It is probable that the future economic benefit associated 

with the stripping activity will flow to the entity;

 ◼ The entity can identify the component of the ore body 

for which access has been improved; and

 ◼ The costs relating to the stripping activity associated 

with that component can be measured.

If the above criteria are not met, stripping costs are 
recognised directly in profit or loss.

The Group initially measures the stripping activity asset at 
cost, this being the accumulation of costs directly incurred 
to perform the stripping activity that improves access to 
the identified component ore.

After initial recognition, the stripping activity asset 
is carried at cost less accumulated amortisation and 

2.11  Impairment of non-current assets
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 statement of comprehensive 
income and is limited to the carrying amount that 
would have been determined, net of depreciation, had 
no impairment loss been recognised in the previous 
reporting period.

2.12  Taxation
The Company is taxed at the standard rate of income tax 
for Guernsey companies, which is 0%. The Group is liable 
for Tanzanian tax arising on activities in the Tanzanian 
subsidiaries, which are liable for Tanzanian Corporation 
Tax at 30%. In addition, the Group may be liable for 
withholding taxes on the repatriation of assets and income 
from the Tanzanian subsidiaries to the Company as there is 
no double tax treaty between Guernsey and Tanzania.

Taxation on the profit or loss for the year comprises both 
current and deferred taxes. Current taxation is provided 
for on the basis of the results for the year computed in 
accordance with tax legislation and any adjustment of the 
tax payable for the previous year. 

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. 

54

The carrying amount of deferred tax assets is reviewed 
at each reporting date and reduced to the extent that it is 
no longer probable that sufficient taxable profits will be 
available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected 
to apply in the period when the liability is settled or the 
asset is realised. Deferred tax is charged or credited to the 
statement of comprehensive income, except when it relates 
to items charged or credited directly to equity, in which 
case the deferred tax is also dealt with in equity.

2.13  Provisions
Provisions are recognised when the Group has a present 
obligation, legal or constructive, resulting from past events 
and it is probable that an outflow of resources embodying 
economic benefits will be required to settle the obligation 
and a reliable estimate can be made of the obligation.

2.14  Decommissioning, site rehabilitation and 

environmental costs

The Group is 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 a 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 grants 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.

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.

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 revenues generated through the sale of gold arise from 
sales to one customer. There was a change in customer 
during the year.

2.17  Leases
IFRS 16 was adopted 1 January 2019 without restatement 
of comparative figures. The following policy applies 
subsequent to the date of initial application, 1 January 2019.

The Group accounts for a contract, or a portion of a 
contract, as a lease when it conveys the right to use an asset 
for a period of time in exchange for consideration. Leases 
are those contracts that satisfy the following criteria:

 ◼ There is an identified asset;
 ◼ The Group obtains substantially all the economic 

benefits from use of the asset; and,

 ◼ The Group has the right to direct use of the asset.

The Group considers whether the supplier has substantive 
substitution rights. If the supplier does have those rights, 
the contract is not identified as giving rise to a lease. In 
determining whether the Group obtains substantially all 
the economic benefits from use of the asset, the Group 
considers only the economic benefits that arise from use of 
the asset. In determining whether the Group has the right 
to direct use of the asset, the Group considers whether 
it directs how and for what purpose the asset is used 
throughout the period of use. If the contract or portion of 
a contract does not satisfy these criteria, the Group applies 
other applicable IFRSs rather than IFRS 16.

Lease liabilities are measured at the present value of the 
contractual payments due to the lessor over the lease 
term, with the discount rate determined by reference to 
the rate inherent in the lease unless this is not readily 
determinable, in which case the Group’s incremental 
borrowing rate on commencement of the lease is 
used. Variable lease payments are only included in the 
measurement of the lease liability if they depend on an 
index or rate. In such cases, the initial measurement of the 
lease liability assumes the variable element will remain 
unchanged throughout the lease term. Other variable lease 
payments are expensed in the period to which they relate.

2.16  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.

On initial recognition, the carrying value of the lease 
liability also includes:

 ◼ Amounts expected to be payable under any residual 

value guarantee;

 ◼ The exercise price of any purchase option granted in 

favour of the Group if it is reasonably certain to assess 
that option; and,

For management purposes, the Group is organised into one 
main operating segment, this being mining, processing, 
exploration and related activities. The Group also operates 

 ◼ Any penalties payable for terminating the lease, if 
the term of the lease has been estimated based on 
termination option being exercised.

55

2019 Annual Report and Accounts —Notes to the financial statementsRight of use assets are initially measured at the amount of 
the lease liability, reduced for any lease incentives received, 
and increased for:

 ◼ Lease payments made at or before commencement 

of the lease;

 ◼ Initial direct costs incurred; and,
 ◼ The amount of any provision recognised where the 

Group is contractually required to dismantle, remove or 
restore the leased asset.

Subsequent to initial measurement lease liabilities increase 
as a result of interest charged at a constant rate on the 
balance outstanding and are reduced for lease payments 
made. Right-of-use assets are amortised on a straight-line 
basis over the remaining term of the lease.

When the group revises its estimate of the term of any lease 
(because, for example, it re-assesses the probability of a 
lessee extension or termination option being exercised), it 
adjusts the carrying amount of the lease liability to reflect 
the payments to make over the revised term, which are 
discounted using a revised discount rate. The carrying 
value of lease liabilities is similarly revised when the 
variable element of future lease payments dependent on a 
rate or index is revised, except the discount rate remains 
unchanged. In both cases an equivalent adjustment is 
made to the carrying value of the right-of-use asset, with 
the revised carrying amount being amortised over the 
remaining (revised) lease term. If the carrying amount 
of the right-of-use asset is adjusted to zero, any further 
reduction is recognised in profit or loss.

The following policy applied prior to the date of initial 
application of IFRS 16, 1 January 2019.

Determining whether an arrangement is, or contains, 
a lease was based on the substance of the arrangement 
and required an assessment of whether fulfilment of the 
arrangement was dependent on the use of a specific asset 
or assets and whether the arrangement conveyed a right to 
use the asset. 

Leases of plant and equipment where the Group assumed 
a significant portion of risks and rewards of ownership 
were classified as a finance lease. Finance leases were 
capitalised at the estimated present value of the underlying 
lease payments. Each lease payment was 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 were 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 were retained by the lessor were 
classified as operating leases. Payments made under 
operating leases were charged to the statement of 
comprehensive income on a straight-line basis over the 
period of the lease.

2.18  Financial instruments
Financial assets and financial liabilities are recognised 
in the Group statement of financial position when the 

Group becomes a party to the contractual provisions of 
the instrument. Financial assets and financial liabilities 
are only offset and the net amount reported in the 
consolidated statement of financial position and statement 
of comprehensive income when there is a currently 
enforceable legal right to offset the recognised amounts 
and the Group intends to settle on a net basis or realise the 
asset and liability simultaneously.

Financial assets and financial liabilities are initially 
measured at fair value. Transaction costs that are directly 
attributable to the acquisition or issue of financial assets 
and financial liabilities (other than financial assets and 
financial liabilities at fair value through profit or loss) are 
added to or deducted from the fair value of the financial 
assets or financial liabilities, as appropriate, on initial 
recognition. Transaction costs directly attributable to the 
acquisition of financial assets or financial liabilities at fair 
value through profit or loss are recognised immediately in 
profit or loss.

Financial assets

2.18.1 
All regular way purchases or sales of financial assets are 
recognised and derecognised on a trade date basis. Regular 
way purchases or sales are purchases or sales of financial 
assets that require delivery of assets within the time frame 
established by regulation or convention in the marketplace. 

All recognised financial assets are measured subsequently 
in their entirety at either amortised cost or fair value, 
depending on the classification of the financial assets.

a)  Classification of financial assets
Financial assets that meet the following conditions are 
measured subsequently at amortised cost using effective 
interest rate method:

 ◼ the financial asset is held within a business model 

whose objective is to hold financial assets in order to 
collect contractual cash flows; and

 ◼ the contractual terms of the financial asset give rise on 
specified dates to cash flows that are solely payments 
of principal and interest on the principal amount 
outstanding.

The Group does not hold any financial assets that meet 
conditions for subsequent recognition at fair value through 
other comprehensive income (“FVTOCI”).

All other financial assets are measured subsequently at fair 
value through profit or loss (“FVTPL”).

b)  Derecognition of financial assets
The Group derecognises a financial asset only when 
the contractual rights to the cash flows from the asset 
expire, or when it transfers the financial asset and 
substantially all the risks and rewards of ownership of 
the asset to another entity. If the Group neither transfers 
nor retains substantially all the risks and rewards of 
ownership and continues to control the transferred asset, 
the Group recognises its retained interest in the asset 
and an associated liability for amounts it may have to 
pay. If the Group retains substantially all the risks and 

56

rewards of ownership of a transferred financial asset, 
the Group continues to recognise the financial asset 
and also recognises a collateralised borrowing for the 
proceeds received.

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.

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.

Financial liabilities

2.18.2 
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.

a)  Financial liabilities measured subsequently at 

amortised cost

Financial liabilities that are not (i) contingent 
consideration of an acquirer in a business combination, 
(ii) held-for-trading, or (iii) designated as at FVTPL, 
are measured subsequently at amortised cost using the 
effective interest method. The Group’s financial liabilities 
measured at amortised cost comprise loans and other 
borrowings, equipment loans, lease obligations, silver 
stream obligation, convertible loan notes and other 
payables and accruals.

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.

b)  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 liability is settled 
through the silver produced by the Group throughout 
the year. 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. Bi-product credits from the silver stream 
arrangement are recognised within cost of sales.

c)  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 loan, 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 loan 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.

d)  Derivative financial instruments
Derivative financial instruments are initially recognised 
at fair value on the date a derivative contract is entered 
into and are subsequently re-measured at FVTPL. The 
Group holds derivative financial instruments to hedge its 
gold revenue exposure. These are designated as non-hedge 
commodity derivatives and are accounted for at fair value 
through profit or loss. The respective fair value movements 
are reflected within the statement of comprehensive 
income as gains / losses on non-hedge derivative and other 
commodity contracts.

e)  Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised 
when the Group has extinguished its contractual 
obligations, it expires or is cancelled. Any gain or 
loss on derecognition is taken to the statement of 
comprehensive income.

f)  Fair Value measurement hierarchy
IFRS 13 “Fair Value Measurement” 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:

 ◼ quoted prices (unadjusted) in active markets for identical 

assets or liabilities (level 1);

57

2019 Annual Report and Accounts —Notes to the financial statements ◼ input other than quoted prices included within level 
1 that are observable for the asset or liability, either 
directly (i.e. as prices) or indirectly (i.e. derived prices 
(level 2); and

 ◼ inputs for the asset or liability that are not based on 
observable market data (unobservable input) (level 3).

The level in the fair value hierarchy within which the 
financial asset or financial liability is categorised is 
determined on the basis of the lowest level input that is 
significant to the fair value measurement.

Financial assets and financial liabilities are classified in 
their entirety into only one of the three levels.

Capital

2.18.3 
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 23 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.

3.  Accounting judgements and estimation
The preparation of financial statements in conformity with 
IFRS requires management to make judgements, 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 
judgements 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 judgement are:

Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment 
when events or changes in circumstances indicate the 
carrying amount may not be recoverable. Where potential 
triggers for impairment are identified which may indicate 
that the carrying value of items of property, plant and 
equipment may have been impaired, a review is undertaken 
of the recoverable amount of that asset based on value in 
use calculations which involve management’s estimates 
and assumptions including range of discount rates, gold 
prices, cash costs and also the impact of recent legislative 
changes in Tanzania.

For the purposes of assessing impairment, assets are 
grouped at the lowest level for which there are largely 
independent cash inflows (cash generating units or 
“CGU”). The Group has two CGUs being New Luika Gold 
Mine and Singida within property, plant and equipment. 
Management’s judgement is that no indicators of 
impairment have occurred during the year. This has 
included consideration of the potential sources of 
impairment indicators prescribed under IAS 36. Key 
considerations have included:

 ◼ The gold price of US$1,517/oz at the end of the period, 
based on observable market or publicly available data, 
including forward prices and analyst forecasts.

 ◼ The impact of gearing at the period end on the NPV of 
future cash flows, which would be discounted using a 
weighted average cost of capital (“WACC”) reflecting 
specific market risk factors and country risk during an 
impairment assessment, calculated to be approximately 
9.2% (2018: 11.1%).

 ◼ The impact of revisions to the intended future mining 
schedule and expected cash costs since an impairment 
assessment was last carried out.

 ◼ The current legal and regulatory environment in 

Tanzania, for which management’s judgement is that 
there have been no significant adverse changes enacted 
during the year.

Impairment of intangible assets
The Group tests whether acquired exploration and 
evaluation assets, mining options and license acquisition 
costs have suffered any impairment under IFRS 6 when 
facts and circumstances suggest that the carrying amount 
may not be recoverable. The recoverable amounts are 
determined based on an assessment of the economically 
recoverable mineral reserves, and future profitable 
production or proceeds from the disposition of recoverable 
reserves. Actual outcomes may vary. 

The Mining Act 2010, (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. No indication of impairment was 
noted during the year and the Directors have no reason to 
believe renewal will not be granted on the licenses.

Recoverability, classification and measurement of VAT receivable
In July 2017, the Mining Act 2010 (the “Mining Act”) was 
amended to restrict exportation of raw minerals (the 
“export ban”). An amendment to the VAT Act 2014 also 
came into effect, treating any exportation of raw minerals 
as an exempt supply for which no input tax is deductible. 
The term ‘raw minerals’ however remained undefined 
across the statutes. The Group exports doré bars which it 
does not consider to be a raw mineral.

On 25 January 2019, Government Notice 60 was published 
which clarified that the ‘export ban’ seeks to prohibit 
the export of mineral and mineral concentrates without 
mineral value addition (“the Guidelines”). The Guidelines 
introduce the new concept of ‘mineral value addition’ 

58

and, per the Guidelines, gold doré is considered to have 
undergone sufficient value addition in Tanzania to 
qualify for export.  On 22 February 2019, The Written 
Laws (Miscellaneous Amendments) (No.2) Act amended 
the Mining Act to provide a definition of ‘raw minerals’. 
Accordingly, when read together with the Guidelines that 
establish that doré has sufficient value added to qualify for 
export, it should now be accepted that ‘raw minerals’ does 
not include doré. Input VAT on the gold exported by the 
Group in the form of doré is claimable under the legislation 
passed in 2017.

There is an express legislative framework in Tanzania 
to apply VAT due to a taxpayer by way of setoff against 
tax due to the Tanzanian Revenue Authority (“TRA”). 
Based on confirmations from TRA, approved VAT Refunds 
have been assessed as being immediately available for 
repayment or setoff.

Recoverability of the VAT receivable in Tanzania is assessed 
based on a judgement by management and following review 
of all relevant considerations, including precedent set 
within the financial year in the form of reimbursements 
and setoffs, the carrying value in the financial statements 
is considered to be fully recoverable. The VAT receivable 
has been classified as both a current and non-current 
asset based on the Group’s judgement of the timing of 
recoverability, which has taken into account several 
factors including the nature of ongoing correspondence 
with the relevant authorities. Refer to note 17(1) for further 
details regarding the Group’s judgement of the timing of 
recoverability. 

The following scenarios demonstrate the potential 
impact of the time value of money on the present value 
of the non-current portion of the VAT receivable, based 
on an estimated Tanzanian risk-free rate of 5.63%. The 
VAT receivable is outside of the scope of IFRS 9 and no 
adjustment for the time value of money has been made to 
the VAT receivable within these financial statements:

Timing of future cashflows

2021

2022

2023

75%

50%

50%

25%

25%

50%

25%

25%

0%

0%

25%

50%

Total 
cashflows 
US$000

19,968 

19,968 

19,968 

19,968 

Present 
value 
US$000

18,652 

18,400 

18,161 

17,671 

Scenario 1

Scenario 2

Scenario 3

Scenario 4

Key sources of estimation uncertainty are set out 
as follows:

Depreciation of mining assets
Mining assets are depreciated using the unit of production 
method based on proven and probable reserves. Units 
of production are significantly affected by resources, 
exploration potential and production estimates together 
with economic factors, commodity prices, foreign currency, 
exchange rates, estimates of costs to produce reserves and 
future capital expenditure. The depreciation charge for the 
year is disclosed within note 12.

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 judgements. The depreciation charge for the 
year is disclosed within note 12.

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. 
These net realisable tests take into account management’s 
estimate of the maximum values to be realised from ore 
stockpiles, in some instances through blending of different 
ore stockpile grades, prior to these being added to future 
processing plant feeds. The carrying value of stock is 
disclosed within note 16.

Mineral Resources and Ore Reserves
Quantification and classification of Ore Reserves requires a 
judgement on whether Mineral Resources are economically 
mineable and whether they meet the criteria of ‘proven’ 
or ‘probable’ respectively. These judgements are based on 
an assessment of relevant mining, geological, economic 
and environmental factors amongst others. These factors 
are a source of uncertainty and changes could result in an 
increase or decrease in Mineral Resources and Ore Reserves.

Decommissioning, site rehabilitation and environmental costs
The Group’s mining and exploration activities are subject 
to various laws and regulations governing the protection 
of the environment. The Group recognises management’s 
best estimate of the rehabilitation costs in the period in 
which they are incurred. This estimate includes judgements 
from management in respect of which costs are expected 
to be incurred in the future, the timing of these costs and 
their present value. Actual costs incurred in future periods 
could differ materially from the estimates. Additionally, 
future changes to environmental laws and regulations, 
life of mine estimates and discount rates could affect the 
carrying amount of this provision. Such changes could 
similarly impact the useful lives of assets depreciated 
on a straight-line-basis, where those lives are limited to 
the life of mine. A 1% change in the discount rate on the 
Group’s rehabilitation estimates would result in an impact 
of US$0.5 million (2018: US$0.4 million) on the provision for 
environmental and site restoration. The value of the year-
end decommissioning provision is disclosed within note 22.

Silver Stream obligation
Under the silver streaming agreement to which the Group 
is party there is an obligation to deliver silver by-product 
to the sole customer in return for proceeds remitted in 

59

2019 Annual Report and Accounts —Notes to the financial statementsthe 2016 financial year. The value of obligation arising 
through this agreement is established by computing 
the present value of estimated future cash flows at the 
financial liability’s original effective interest rate. This 
exercise incorporates the impact of judgements made 
within the mine plan in respect of future silver production 
and includes estimates in respect of the anticipated price of 
silver in future periods based on silver future price curves. 
A 1% change in silver production estimates would result 
in an impact of less than US$0.1 million (2018: less than 
US$0.1 million) on the silver stream liability.

4.  Revenue
The Group has recognised the following amounts relating 
to revenue in the statement of comprehensive income:

US$000

Revenue from contracts with customers

31-Dec-19

31-Dec-18

112,795

112,795

103,803

103,803

The settlement profile of open non-hedge derivatives and 
other commodity contracts was restructured in January 
2020. The total forward sales commitment at 31 January 
2020 was 37,000 oz at an average price of US$1,244/oz. 
Refer to note 30 for further details.

At 31 December 2018, the following commodity hedges 
were in place:

Product 

Fixed 
Price  Start Date 

End Date 

Quantity

Gold - USD 

1,213

07/09/2018

28/02/2019

Gold - USD 

1,219

13/09/2018

28/02/2019

Gold - USD 

1,238

11/10/2018

28/06/2019

Gold - USD 

1,239

11/10/2018

31/05/2019

Gold - USD 

1,250

04/12/2018

31/05/2019

10,000

10,000

10,000

10,000

5,000

Loss on non-hedge derivatives and other 
commodity contracts

Mark To 
Market
US$000’s

(750)

(690) 

(617) 

(579) 

(234) 

(2,870)

All revenue is derived from sales of gold from one 
geographic location and to one customer. There was a 
change in customer during the year. In 2018, US$3.7 million 
of gold revenue arose from 3,000 ounces sold in advance 
of shipment during the year. Shipment of these ounces 
occurred in early January 2019 as agreed with the customer.

6.  Finance income

US$000

Bank interest

5.  Loss on non-hedge derivatives and other 

commodity contracts

US$000

Valuation of open non-hedge derivatives 
and other commodity contracts 

(Loss)/Profit on commodity swaps delivered 
into / settled

31-Dec-19

31-Dec-18

(8,434)

(2,230)

(1,399)

971

(9,833)

(1,259)

A mark to market valuation of open non-hedge derivatives 
and other commodity contracts was completed at 31 
December 2019. This resulted in derivative financial 
liability of US$11,304,000 (2018: US$2,870,000) as the spot 
gold price was above the fixed forward prices of these 
instruments. During the year losses of US$1,399,000 (2018: 
gains of US$971,000) were realised on commodity swaps 
delivered into, as the spot gold prices at the settlement 
dates were lower (2018: higher) than the fixed forward 
prices of the instruments.

At 31 December 2019, the following non-hedge derivatives 
and other commodity contracts were in place:

Product 

Fixed 
Price  Start Date 

End Date 

Quantity

Mark To 
Market
US$000’s

Gold - USD 

1,225

30/08/2019

28/02/2020

14,000

(4,141)

Gold - USD 

1,226

30/08/2019

31/01/2020

Gold - USD 

1,253

13/06/2019

12/06/2020

Gold - USD 

1,253

11/10/2018

29/05/2020

Gold - USD 

1,264

04/12/2018

29/05/2020

1,000

10,000

10,000

5,000

Loss on non-hedge derivatives and other 
commodity contracts

(293) 

(2,779) 

(2,764) 

(1,327) 

(11,304)

31-Dec-18

31-Dec-17

53

53

65

65 

31-Dec-19

31-Dec-18

 3,578 

 123 

 870 

176 

 988 

 146 

 5,881 

4,847

-

1,075

(572)

-

217

5,567

7.  Finance expense

US$000

Loan and other Interest

Interest on lease liabilities (note 13)

Interest on Silver Stream advance (note 20)

Fair value adjustment on Silver Stream 
advance (note 20)

Change in estimate on Silver Stream 
advance (note 20)

Convertible Loan Note accretion (note 21)

Finance expense at amortised cost

Unwinding of discount on decommissioning 
liability (note 22)

 494 

612

Total finance expense

 6,375 

6,179

The finance expense arising on financial liabilities 
measured at amortised cost has been calculated using the 
effective interest rate method.

60

8.  Loss / Profit before taxation
Loss / Profit before tax is arrived at after charging:

US$000

31-Dec-19

31-Dec-18

Depreciation/depletion of tangible assets

Amortisation of right of use assets

Amortisation of intangible assets

Share based payment costs 

Directors remuneration

Staff costs

Auditors’ remuneration

Audit fees of the Company and Group

Audit fees of subsidiaries by associates of 
Group auditor

Fees for review of interim information

27,384

3,933

 7 

- 

 2,291 

 16,972 

143

56

18

26,391

-

7

536

1,790

15,667

90

56

22

available in Tanzania amounting to US$13,004,000 (2018: 
US$8,672,000). These tax losses have arisen within non-
producing licence areas for which no deferred tax asset has 
been recognised, as it is not yet probable that future taxable 
profits will be available against which these tax losses can 
be utilised. 

The deferred tax liability has arisen on the temporary 
differences between the carrying value of assets and tax 
written down value of assets. Included within the Group’s 
deferred tax liability is an amount of US$5.2 million 
(2018: US$5.2 million) relating to deferred tax liability on 
the acquisition of Shield Resources Limited and Boulder 
Investments Limited.

The movement in deferred tax assets and liabilities during 
the year is as follows:

9.  Taxation
Effective 1 January 2008, the Company is taxed at the 
standard rate of income tax for Guernsey companies which 
is 0%. Taxation for other jurisdictions is calculated at the 
rates prevailing in the respective jurisdictions.

Tax charge for the year relates to:

US$000

Current tax charge (Corporate and turnover 
tax charge)

Deferred tax charge

Net charge 

31-Dec-19

31-Dec-18

6,003

3,242

Tax losses utilised in the year

Accelerated tax depreciation

2,288

8,291

1,910

5,152

Other movements

At 31 December 2019

(US$000)

At 31 December 2017

Tax losses utilised in the year

Accelerated tax depreciation

Other movements

At 31 December 2018

Deferred tax 
asset

Deferred tax 
liability

Net deferred 
tax liability

9,241

(5,344)

-

-

3,897

(3,897)

-

-

-

(15,561)

-

3,341

93

(12,127)

-

1,476

133

(6,320)

(5,344)

3,341

93

(8,230)

(3,897)

1,476

133

(10,518)

(10,518)

The tax charge for the year can be reconciled to the (loss) / 
profit before taxation per the statement of comprehensive 
income as follows:

(Loss) / Profit before taxation (US$000)

(1,191)

13,141

Tax at the standard tax rate

Tanzanian Corporation tax at 30%

Different tax rates applied in overseas 
jurisdictions

Permanent adjustments

Unrecognised taxable losses in subsidiaries

Adjustments in respect of prior periods

Tax charge

(357)

863

7,273

762

(250)

8,291

3,942

899

(28)

339

-

5,152

10.  (Loss) / Earnings per share
Basic (loss) / earnings per share is computed by dividing 
the (loss) / profit attributable to ordinary shareholders 
by the weighted average number of ordinary shares 
outstanding during the year.

31-Dec-19

31-Dec-18

(Loss) / profit for the year attributable to 
equity holders of Company

(Loss) / profit used in calculation of basic 
earnings per share (see below)

(9,482)

(9,482)

Basic (loss) / earnings per share (US cents)

(1.206)

7,989

7,989

1.029

Weighted average number of shares 
in issue

785,971,533

776,599,071

Deferred tax 
Analysis of deferred tax assets and deferred tax liabilities is 
as follows:

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:

US$000

Deferred tax asset

Deferred tax liability

Net deferred tax liability

31-Dec-19

31-Dec-18

-

(10,518)

(10,518)

3,897

(12,127)

(8,230)

The deferred tax asset has arisen on unused tax losses in 
Tanzania. During the year the Group utilised all recognised 
tax losses in Tanzania and there were no recognised tax 
losses remaining at the reporting date (2018: US$9,967,000). 
At end of the year, the Group had further tax losses 

31-Dec-19

31-Dec-18

The Group has the following instruments 
which could potentially dilute basic earnings 
per share in the future:

Share options

Shares to be issued 

-

550,000

6,555,926

8,488,153

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.

61

2019 Annual Report and Accounts —Notes to the financial statementsIn 2018 the potential ordinary shares were dilutive as the 
Group was in a profit-making position and therefore a 
diluted earnings per share was calculated as follows:

Profit for the year attributable to equity holders of 
Company (US$000)

Profit used in calculation of diluted earnings per share 
(US$000)

Diluted earnings per share (US cents) 

Weighted average number of shares in issue and 
potential ordinary shares

31-Dec-18

7,989

7,989

1.017

785,637,224

11.  Intangible assets

US$000

At 31 December 2017

Additions

Amortisation

At 31 December 2018

Additions

Amortisation

At 31 December 2019

Owned 
prospecting 
licences

Third party 
primary mining 
licences

Owned mining 
licence

Third party 
mining licence

24 

-

-

24

-

-

24

387 

-

-

387

-

-

387

103 

-

(7)

96

108

(7)

197

251 

-

-

251

-

-

251

Acquired 
exploration and 
evaluation assets

22,519 

-

-

Total

23,284 

-

(7)

22,519

23,277

-

-

108

(7)

22,519

23,378

Acquired exploration and evaluation assets relate to the 
Group’s Lupa Goldfields licences which were acquired in 
April 2013. The licences cover a significant land package of 
prospective exploration ground surrounding the Company’s 
New Luika Gold Mine.

Impairment of licences
No impairment of licences has been identified or 
recognised during the year.

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. At the 
year-end there were no licences under renewal.

62

12.  Property, plant and equipment

US$000

Cost

At 1 January 2018

Additions

Asset transfers

Disposals

Asset write-offs

Change in estimate

At 31 December 2018

Accumulated Depreciation

At 1 January 2018

Charge for the year

Disposals

At 31 December 2018

Net book value

At 31 December 2018

Cost

At 1 January 2019

Additions

Pre-production revenue 1

Reclassified on adoption of IFRS 16

Asset transfers

Disposals

Change in estimate

At 31 December 2019

Accumulated Depreciation

At 1 January 2019

Reclassified on adoption of IFRS 16

Charge for the year

Disposals

At 31 December 2019

Net book value

At 31 December 2019

Gold 
processing 
plant

Mining 
assets

Assets under 
construction

Mining 
and other 
equipment

Decom- 
missioning 
asset

Deferred 
stripping 
asset

Total

39,946 

-

3,084

-

-

-

91,638 

6,345

8,932

-

-

-

22,900

11,051

(15,385)

-

-

-

38,826

20

3,369

(40)

(106)

-

43,030

106,915

18,566

42,069

20,526 

4,115

-

24,641

57,207

12,668

-

69,875

-

-

-

-

9,536 

8,832

(40)

18,328

5,506 

18

-

-

-

(184)

5,340

3,175 

439

-

3,614

35,068 

708

233,884 

18,142

-

-

-

-

-

(40)

(106)

(184)

35,776

251,696

34,912 

125,356 

337

-

26,391

(40)

35,249

151,707

18,389

37,040

18,566

23,741

1,726

527

99,989

42,069

5,340

43,030

-

-

(668)

370

-

-

106,915

6,661

-

-

18,566

13,572

(3,563)

-

10,235

(12,370)

-

-

-

-

54

-

(11,133)

1,765

(4)

-

42,732

123,811

16,205

32,751

-

-

-

-

-

(613)

4,727

35,776

443

-

-

-

-

-

36,219

251,696

20,730

(3,563)

(11,801)

-

(4)

(613)

256,445

24,641

(405)

4,561

-

28,797

69,875

-

16,888

-

86,763

-

-

-

-

-

18,328

(4,985)

5,633

(4)

18,972

3,614

35,249

151,707

-

292

-

-

10

-

(5,390)

27,384

(4)

3,906

35,259

173,697

13,935

37,048

16,205

13,779

821

960

82,748

1.  Revenue generated from underground development ore mined at nil margin in 

2019 was offset against capital expenditure in the year.

63

2019 Annual Report and Accounts —Notes to the financial statements13.  Leases

US$000

Right of use assets

At 1 January 2019

Reclassified on adoption of IFRS 16 (note 12)

Recognised on adoption of IFRS 16 (note 28)

Amortisation

At 31 December 2019

Lease liabilities

At 1 January 2019 (note 20)

Recognised on adoption of IFRS 16 (note 28)

Interest expense (note 7) 

Lease payments 

Foreign exchange movements

At 31 December 2019 (note 20)

Current lease liabilities 

Mobile equipment 1

Mobile equipment 2

Mobile equipment 3

Solar power units 4

Office space 5

Non-current lease liabilities 

Mobile equipment 2

Mobile equipment 3

Solar power units 4

Mining 
and other 
equipment

-

6,411

469

(3,933)

2,947

2,355

479

123

(1,704)

(55)

1,198

31-Dec-19

31-Dec-18

-

266

237

116

41

660

133

 237 

 168 

538

764

439

259

-

-

1,462

408

485

-

893

Total lease liabilities

1,198

2,355

In the previous year, the Group only recognised lease assets 
and lease liabilities in relation to leases that were classified 
as ‘finance leases’ under IAS 17, ‘Leases’. The assets were 
presented in property, plant and equipment in note 12 
and the liabilities were presented as part of the Group’s 
borrowings in note 20. For adjustments recognised on 
adoption of IFRS 16 on 1 January 2019, refer to note 28.

(1)  Mobile equipment: a lease for mobile equipment from Sandvik for a capital 

amount of €4,634,000 (US$5,261,000) repayable monthly over thirty-six months 
commencing on 15 June 2016 for Tranche 1 and 14 September 2016 for Tranche 2 
and payable quarterly.

(2)  Mobile equipment: a lease for mobile equipment from Sandvik for a capital 
amount of €712,000 (US$832,000) repayable monthly over thirty-six months 
commencing on 29 November 2018. 

(3)  Mobile equipment: a lease for mobile equipment from Sandvik for a capital 
amount of €635,000 (US$718,000) repayable monthly over thirty-six months 
commencing on 28 February 2019. 

(4)  Solar power units: a lease for solar power units from Redavia Tanzania Asset 

Limited for a five year period commencing in May 2017 for variable lease payments 
payable monthly. 

(5)  Office space: a lease for office space from Nevada Golden Coins Limited for a five 

year period commencing in November 2015.

64

14.  Subsidiary companies
At 31 December 2019, the Group had the following 
subsidiary undertakings:

Name of company

Shanta Gold Holdings Limited

Chunya Gold Holdings Limited

Shamba Limited

Rukwa Limited

Boulder Investments Limited

Shanta Mining Company Limited

Singida Resources Public Limited Company

Shield Resources Limited

Mgusu Mining Limited

Nsimbanguru Mining Limited

Chunya Resources Limited

Songea Resources Limited

Kakapo Resources Limited

Dondoro Resources Limited

Shanta Gold UK Limited

Holding

Country of Incorporation 
and principal place of 
business

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Guernsey

Guernsey

Guernsey

Guernsey

Cyprus

Tanzania

Tanzania

Tanzania

Tanzania

Tanzania

Tanzania

Tanzania

Tanzania

Tanzania

United Kingdom

Principal activity

Holding Company

Holding Company

Holding Company

Investment Company

Investment Company

Exploration and mining

Exploration and mining

Exploration and mining

Exploration and mining

Exploration and mining

Dormant

Dormant

Dormant

Dormant

Dormant

15.  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 20)

Convertible loan notes (note 21)

Trade and other payables

Non-current financial liabilities

Loans and other borrowings (note 20)

Convertible loan notes (note 21)

31-Dec-19

31-Dec-18

83

 2,500 

 3,506 

 6,089 

(14,026)

(9,987)

(12,308)

(36,321)

(5,219)

-

(5,219)

132

2,500

8,958

11,590

(23,664)

(5,000)

(11,680)

(40,344)

(8,230)

(10,060)

(18,290)

Total financial liabilities measured at amortised cost

(41,540)

(58,634)

Financial liabilities at fair value through profit or loss

Derivative financial liabilities - commodity hedge (note 5)

Total financial liabilities at fair value through profit or loss

(11,304)

(11,304)

(2,870)

(2,870)

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. The fair values of the Group’s loans and 
other borrowings are considered equal to the book value as 
the effect of discounting on these financial instruments is 
not considered to be material.

65

2019 Annual Report and Accounts —Notes to the financial statements31-Dec-19

31-Dec-18

US$000

31-Dec-19

31-Dec-18

20.  Loans and other borrowings

16.  Inventories

US$000

Plant spares and consumables

Gold in ore stockpile

Gold in gold room and CIL

 11,572 

10,185

5,333

 27,090 

9,784

12,563

2,132

24,479

The cost of consumable stores consumed during the year 
and included in working cost amounted to US$28.4 million 
(2018: US$26.0 million).

17.  Trade and other receivables

US$000

Non-current assets

VAT receivable 1

Current assets

Prepayments 2

VAT receivable 1

Other receivables

31-Dec-19

31-Dec-18

19,968

19,968

 4,311 

 1,888

 83 

 6,282 

-

-

3,408

21,790

132

25,330

During the year no impairments were recognised 
(2018: US$Nil). The Directors consider that the carrying 
amount of trade and other receivables approximates their 
fair value.

1.  VAT receivable:  There is an express legislative framework in Tanzania to apply 

VAT due to a taxpayer by way of setoff against tax due to the Tanzanian Revenue 
Authority (“TRA”). Based on confirmations from TRA, approved VAT Refunds have 
been assessed as being immediately available for repayment or setoff. In 2019, 
US$4.8 million of the brought forward VAT receivable was set off against corporate 
taxes falling due in the year, leaving a US$1.9 million balance of approved VAT 
Refunds available for future setoff. These remaining approved VAT Refunds are 
considered to be a current asset. US$20.0 million of the Company’s VAT receivable 
is not yet approved under the terms of the framework and has been classified as a 
non-current asset for the purposes of these financial statements

2  Prepayments: Prepayments at the year-end comprise advance payments 

made to suppliers in accordance with the ordinary course of business and other 
administrative expenses paid in advance

18.  Restricted cash
An amount of US$2,500,000 (2018: US$2,500,000) has been 
shown separately from cash as it has an external restriction 
placed upon it in accordance with the Exim Bank loan 
facility agreement (note 20).

19.  Trade and other payables

US$000

Trade payables

Derivative financial liability (note 5)

Accruals

31-Dec-19

31-Dec-18

 8,406 

 11,304 

 3,902 

 23,612 

8,553

2,870

3,127

14,550

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.

Current liabilities 

Loans payable to Investec Bank less than 
1 year 1

Equipment loan 2

Silver stream 3

Loans payable to Exim Bank less than 1 year 4

Equipment loan 5

Lease liabilities (note 13)

Non-current liabilities 

Silver stream 3

Loans payable to Exim Bank more than 
1 year 4

Equipment loan 5

Lease liabilities (note 13)

Total loans and other borrowings

5,343

16,029

-

1,765

5,959

299

660

292

1,533

3,558

790

1,462

14,026

23,664

2,471

2,210

-

538

5,219

19,245

2,415

4,615

307

893

8,230

31,894

(1)  Investec loan: Loan from Investec Bank in South Africa relates to two facilities 

totalling US$40 million obtained in May 2015. The facilities bear an annual interest 
rate of 3-month US$ LIBOR +4.9% and are secured on the bank account which is 
credited with gold sales, the shares in SMCL and a charge over the assets of SMCL. 
Both facilities were fully drawn in previous years.

Facility A is for US$20 million and was used to repay the previously outstanding FBN 
Bank Ltd loan. Capital repayments of US$1.17 million are due every quarter 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. During 2017 this was converted into a term 
facility with capital repayments of US$1.54 million payable quarterly over 3 years.

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 Shield 
Resources Limited, and made between the Investec and the Security Agent;

•  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 in 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,

•  Shield Resources Pledge in 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.

In July 2017, new legislation was enacted by the Tanzanian Parliament including the 
Written Laws Act July 2017, the Natural Wealth and the Resources Contracts 2017, 
and the Mining Regulations, 2018. On 3 August 2018 Shanta received a reservation 
of rights letter under the Facilities Agreement informing the Company of non-
compliance with certain matters in the new legislation. Regulation for how these 
new acts will be implemented remains to be published in full. Shanta received a 
postponement and reservation of rights letter from Investec in connection with 
this letter whereby Investec undertook not to exercise their rights to enforce 
security or accelerate any loans under the Facilities Agreement in respect of certain 
technical breaches thereof covering the period to 31 December 2018. Investec 
subsequently provided Shanta new postponement and reservation of rights letters 
and undertakings not to exercise their rights to enforce security or accelerate 
any loans under the Facilities Agreement in respect of certain technical breaches 
thereof which extend the period under which Investec waives its rights through 
to 31 August 2020, at which point the loans are already scheduled to be fully 
repaid. As the waiver in place at 31 December 2018 did not at the time extend for a 
further 12-month period, the Investec loan was considered a current liability at 31 
December 2018 for annual reporting purposes.

(2)  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 fixed rate of 6% per annum.

66

 
 
 
 
 
(3)  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 per cent. 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 New Luika with minimum silver delivery obligations 
totalling 608,970oz Ag over a 6.75-year period. There is a requirement to settle any 
shortfall in silver delivery from the minimum obligation in cash. The term of the 
SSA is 10 years during which time the Company will sell silver to Silverback 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. The Silver 
Stream liability was re-estimated during the year to include the extension to life of 
mine plan achieved in 2019. The liability is calculated using the forward silver price 
and interest at the effective rate is imputed interest.

US$000

Balance at 1 January 

Value of silver transferred

Interest at the effective interest rate

Adjustment for the value in future estimates

Change in estimate

At 31 December

31-Dec-19

31-Dec-18

(3,948)

1,746

(870)

(176)

(988)

(5,144)

1,699

(1,075)

572

-

(4,236)

(3,948)

(4)  Loans payable to Exim Bank: The Company entered into a US$10.0 million 

financing from Exim Bank (Tanzania) Limited (“EXIM”) following the commissioning 
in March 2017 of its 7.5 Mega Watts (“MW”) Power Station at New Luika. This facility 
comprised US$7.5 million long term funding and US$2.5 million short-term funding 
for working capital, with the four-year term loan bearing variable interest at 7.25% 
per annum (2.75% below the Exim Base Lending Rate). The term loan is secured 
against the New Luika Power Station and was fully drawn during 2018.

On 26 February 2019 SMCL refinanced its existing term loan with Exim. The new 
term loan facility comprises US$7.5 million long term funding and US$2.5 million 
short-term funding for working capital, and extends until the end of 2021. The term 
loan continues to bear variable interest at 7.25% per annum (2.75% below the Exim 
Base Lending Rate). The term loan is secured against the New Luika Power Station 
and included a grace period on principal repayments until September 2019. 25% 
of the drawn down balance continues to be held as restricted cash in accordance 
with the conditions of the agreement. The US$2.5 million short-term funding for 
working capital is held as restricted cash in accordance with the conditions of 
the agreement (note 18). SMCL has not drawn down further amounts on the new 
facility, aside from the principal balance that was otherwise outstanding at the 
time of refinancing.

(5)  Equipment Loan: This loan is in respect of a €2.1 million underground equipment 
financing entered into during 2017 with Sandvik Mining and Construction OY 
and is payable in 24 instalments commencing on 28 June 2017 and bears interest 
at a fixed rate of 6.5% over three years. The equipment purchases were part of 
Shanta’s capital programme outlined in the RMP and followed a previous similar 
arrangement entered into during 2016.

of the Company’s outstanding notes to vote in favour of 
a buyback of approximately 33.33% of the outstanding 
notes in April 2019 and a 1-year extension to the maturity 
date of the remaining notes. At the end of 2018, the Group 
liabilities included the obligation to repay US$5.0 million 
of outstanding notes in April 2019 and US$10.0 million of 
outstanding notes in April 2020.

On 18 January 2019 Rukwa Limited, a wholly owned 
subsidiary of Shanta Gold Limited, repurchased 325,000 of 
the Company’s outstanding notes from El Oro Limited for a 
total consideration of US$276,250. On 16 May 2019 Shamba 
Limited, a wholly owned subsidiary of Shanta Gold Limited, 
repurchased 4,868,000 of the Company’s outstanding notes 
in accordance with the scheme and timetable set out in 
written resolutions passed by the holders of the notes on 
26 June 2018. Following these transactions, the principal 
value of the remaining outstanding notes not held directly 
or indirectly by Shanta Gold Limited is US$9,807,000.

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. 
Conversion of the convertible loan notes is at the discretion 
of the beneficiary holders. Accreted interest is charged 
to the statement of comprehensive income over the life 
of the notes.

22.  Provision for Decommissioning

US$000

Balance at 1 January 

Increase in provision (note 12)

Unwinding of discount (note 7)

Change in estimate (note 12)

At 31 December 

31-Dec-19

31-Dec-18

8,545

-

494

(613)

8,426

8,099 

18

612

(184)

8,545

21.  Convertible loan notes

US$000

Balance at 1 January 

Purchase by group company

Cash paid interest

Coupon interest (note 7)

Accreted Interest (note 7)

At 31 December

31-Dec-19

31-Dec-18

15,060

(5,219)

(1,652)

1,652

146

9,987

14,843

-

(2,026)

2,026

217

15,060

The above provision relates to site restoration at New Luika 
and nearby open pits. The fair value of the above provision 
is measured by unwinding the discount on expected 
future cash flows using a discount factor that reflects the 
credit-adjusted risk-free rate of interest. 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. 
The liability was re-estimated in the year to align with the 
updated mining schedule announced in 2019.

During 2012 fixed coupon convertible loan notes amounting 
to US$25 million were issued, due for repayment on 
13 April 2017 and containing 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 2016 
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. During 2018 
the Group received irrevocable undertakings from holders 

67

2019 Annual Report and Accounts —Notes to the financial statements 
23.  Share capital

Authorised

787,375,086 ordinary shares 
of 0.01 pence each

31-Dec-19

31-Dec-18

£78,738

£77,889

Issued and fully paid

At 1 January 2018

Issued in year

Number

768,628,311

10,261,471

As at 31 December 2018

778,889,782

Issued in year

8,485,304

As at 31 December 2019

787,375,086

£

US$000

76,863

1,026

77,889

849

78,738

116

1

117

1

118

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.

24.  Share-based payments
Equity-settled share option scheme
Options in issue are as follows:

Grant date

8 September 2009

27 July 2010

26 September 2011

6 January 2012

Exercise price

Final exercise date

Number of options at 
31 December 2019

Number of options at 
31 December 2018

6p

8 September 2019

18.2p

25p

27 July 2020

26 September 2021

23.13p

6 January 2022

-

495,000

500,000

1,170,000

2,165,000

280,000

760,000

500,000

1,420,000

2,960,000

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.

Details of the share options outstanding during the year are:

Outstanding at 1 January

Lapsed share options

Cancelled share options

Outstanding at end of year

Exercisable share options at the end of year

31 December 2019

31 December 2018

Number

Weighted average 
exercise price (£)

Number

Weighted average 
exercise price (£)

2,960,000

(515,000)

(280,000)

2,165,000

2,165,000

0.206

0.206

0.060

0.224

0.224

3,840,000

(880,000)

-

2,960,000

2,960,000

0.192

0.144

-

0.206

0.206

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:

68

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

31 December 2012

£0.34

£0.25

10 years

55%

0%

1.70%

£0.34

£0.30

10 years

55%

0%

1.70%

£0.34

£0.35

10 years

55%

0%

1.70%

23-Aug-12

23-Aug-12

23-Aug-12

£0.240

1.585

£0.229

1.585

£0.219

1.585

£0.23

£0.231

10 years

55%

0%

1.70%

6-Jan-12

£0.148

1.560

Total charge over the vesting period

US$94,989

US$181,336

US$173,645

US$700,984

Long-term incentive plan (LTIP)
Share awards are granted to employees and Directors on 
a discretionary basis, and the remuneration committee 
decides whether to make share awards under the LTIP 
at any time. LTIPs share awards in issue at year-end are 
as follows:

Grant date

Exercise price

Final vesting date

15-Apr-16

WAEP

WAEP

0p

0p

0p

28-Feb-18

Outstanding at end of year

Exercisable at end of year 

Number of shares at 
31 December 2019

Number of shares at 
31 December 2018

-

-

-

550,000

550,000

550,000

Details of the share options outstanding during 
the year are:

US$’000

Outstanding at 1 January

Lapsed / forfeited

Outstanding at end of year

31-Dec-19

550,000

(550,000)

31-Dec-18

1,982,000

(1,432,000)

-

550,000

Write-off of tangible assets

25.  Net cash flows from operating activities

US$000

31-Dec-19

31-Dec-18

(Loss) / Profit before taxation for the year

(1,191)

13,141

Adjustments for:

Depreciation/depletion of tangible assets

27,384

Amortisation of right of use assets

Amortisation/write off of intangible assets

Share based payment costs

Loss on non-hedge derivatives and other 
commodity contracts (note 5)

Unrealised exchange gains

Non-cash settlement of Silver Stream 
obligation (note 20)

Finance income (note 6)

Finance expense (note 7)

Pre-production revenue (note 12)

-

3,933

7

614

9,833

(200)

(1,745)

(53)

6,375

3,563

26,391

106

-

7

737

1,259

-

(1,699)

(65)

6,179

-

Operating cash flow before movement in 
working capital

48,520

46,056

Increase in inventories

Increase in receivables

Decrease in payables

Taxation paid

Interest received

(2,611)

(5,671)

(963)

39,275

(1,730)

53

(4,946)

(7,578)

(497)

33,035

(2,070)

65

Net cash flow from operating activities

37,598

31,030

The Company’s mid-market closing share price at 
31 December 2019 was 9.55 pence (2018: 6.20 pence). The 
lowest and highest mid-market closing price during the 
year was 4.65 pence (2018: 4.25 pence) and 10.20 pence 
(2018: 6.40 pence) respectively.

Monte Carlo inputs for 
shares awarded

Share price at grant

Option exercise price

Expected life of options

Expected volatility

Expected dividend yield

2016

£0.07

£Nil

3 years

46.62%

0%

2015

2014

£0.0875

£0.1475

£Nil

3 years

50.54%

0%

£Nil

4 years

55.42%

0%

2013

£0.18

£Nil

4 years

59.88%

0%

Risk free rate

Grant date

0.42%

1.77%

1.77%

1.77%

05-Apr-16

01-Jan-15

01-Apr-14

01-Apr-13

Fair value per share option

£0.0707

£0.0588

£0.0769

£0.1709

Exchange rate used

1.2928

1.5332

1.5180

1.5180

The volatility assumption is based on a statistical analysis 
of daily share prices over the last three years.

69

2019 Annual Report and Accounts —Notes to the financial statements26.  Reconciliation of liabilities arising from 

financing activities

Non-current 
loans and other 
borrowings 
(Note 20)

Current loans and 
other borrowings
(Note 20)

US$000

At 1 January 2018

Cash flows

Non-cash flows

Silver Stream

Increase in finance lease obligations

Interest accruing in the period

Effects of foreign exchange

Reclassification from non-current to 
current liabilities

At 31 December 2018

Cash flows

Non-cash flows

Silver Stream

Finance lease obligations 
recognised on transition to IFRS16

Interest accruing in the period

Effects of foreign exchange

Reclassification from non-current to 
current liabilities

At 31 December 2019

27,132

2,500

-

1,550

235

-

(23,187)

8,230

2,499

-

168

1,140

-

(6,818)

5,219

Convertible 
loan notes
 (Note 21)

14,843

(2,026)

Restricted cash 
(Note 18)

(1,875)

(625)

-

-

2,243

-

-

15,060

(6,871)

-

-

1,798

-

-

-

-

-

-

-

(2,500)

-

-

-

-

-

-

Total

58,185

(19,031)

(1,699)

1,550

5,540

(91)

-

44,454

(22,214)

(1,745)

479

5,882

(124)

-

18,085

(18,880)

(1,699)

-

3,062

(91)

23,187

23,664

(17,842)

(1,745)

311

2,944

(124)

6,818

14,026

9,987

(2,500)

26,732

27.  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:

 ◼ Trade and other receivables 
 ◼ Cash and cash equivalents
 ◼ Restricted cash
 ◼ Trade and other payables
 ◼ Loans and borrowings
 ◼ Convertible loan notes
 ◼ Asset loans
 ◼ Commodity price hedging

The Group held derivative financial instruments during the 
years ended 31 December 2019 and 2018 and these were in 
respect of forward sales of gold and swap contracts. 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. The risk 
management policies employed by the Group to manage 
these risks are set out below.

27.1  Interest rate risk
The Group’s exposure to interest rate risk relates to 
the Group’s cash and cash equivalents and various loan 
facilities. Interest rate risk is the risk that the value of 
financial instruments or future cash flows will fluctuate 
due to the changes in market interest rates. All cash 
deposits as well as loans are at floating rates and the Group 
exposes itself to the fluctuation of the interest rate that is 
inherent in such a market.

70

The current 3-month US$ LIBOR rate for US$ is 2.1%. The 
variable rate loans bear interest at LIBOR + 4.9%. Currently, 
the interest charge per month is an average of US$24,000 
(2018: US$137,000). A 1% increase or decrease in the LIBOR 
rate will increase or decrease the monthly interest charge 
by approximately US$3,000 (US$2,000 after tax) (2018: 
US$37,000, (US$30,000 after tax)).

The Group’s cash and cash equivalents are carried at an 
effective interest rate of 1% (2018: 1%).

27.2  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 maturity of financial liabilities is as follows:

US$000

Loans and other borrowings

Equipment loan

Lease liabilities

Silver Stream

Convertible loan notes

Derivative financial liability

Other payables and accruals

31 December 2019

Less than 
3 months

3 months 
to 1 year

Later than 
one year but 
no later than 
five years

(4,203)

(196)

(210)

-

-

(4,809)

(12,308)

(21,726)

(4,181) 

(2,650) 

(111) 

(679) 

(1,765) 

(10,447) 

(6,495)

- 

 -  

(749) 

(2,471) 

 -  

-

 -  

(23,678)

(5,870) 

The Group’s exposure to credit risk is explained below:

31 December 2018

Trade and other receivables
The Group generates revenue from the sale of gold. In the 
event of a default by a debtor of amounts due from trade 
and other receivables, the Group will be able to meet those 
costs. Sales are made principally to one customer. There 
was a change in customer during the year. 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.

Cash and cash equivalents
The Group has significant concentration of credit risk 
arising from its bank holdings of cash and cash equivalents.

To manage this exposure, the Group has a policy 
of maintaining its cash and cash equivalents with 
counterparties that have a credit listing of at least A from 
independent rating agencies. Given this high credit rating, 
the Directors do not expect any counterparty to fail. The 
Board has reviewed the maximum exposure on the Group 
financial assets and has concluded that the carrying values 
as at reporting date are fully recoverable.

27.3  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.

US$000

Loans and other borrowings1

Equipment loan

Finance lease

Silver Stream

Convertible loan notes

Derivative financial liability

Other payables and accruals

Later than 
one year but 
no later than 
five years

3 months 
to 1 year

(2,931)

(827)

(780)

(1,533)

(6,688)

(2,870)

-

(4,976)

(257)

(960)

(2,415)

(10,675)

-

-

(15,629)

(19,283)

Less than 
3 months

(17,049)

(363)

(764)

-

-

-

(11,680)

(29,856)

(1) 

In early 2019 Shanta received a postponement and reservation of rights letter from 
Investec, which extended to 28 February 2020, in which Investec undertook not to 
exercise their rights to enforce security or accelerate any loans under the Facilities 
Agreement in respect of certain technical breaches thereof for the reasons outlined 
in note 20. The Investec loan would have been partially classified as a non-current 
liability had the waiver previously in place at 31 December 2018 extended for a 
twelve-month period.

27.4  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, Euro and Sterling, however most 
transactions are in USD. The Group’s management monitors 
the exchange rate fluctuations on a continuous basis and 
acts accordingly.

71

2019 Annual Report and Accounts —Notes to the financial statements(US$000)

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Derivative financial liability

Loans and other borrowings

Convertible loan notes

Net exposure

(US$000)

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Derivative financial liability

Loans and other borrowings

Convertible loan notes

Net exposure

USD

83

3,427 

(8,854)

(11,304)

(18,073)

(9,987)

(44,708)

US$

132

8,836

(8,233)

(2,870)

(28,442)

(15,060)

(45,637)

31 December 2019

EUR

-

 -   

(167)

-

(1,172)

-

(1,339)

31 December 2018

EUR

-

-

(59)

-

(3,452)

-

(3,511)

TZS

-

 72 

(3,216)

-

-

-

(3,144)

TZS

-

93

(3,333)

-

-

-

(3,240)

GBP

-

 7 

(71)

-

-

-

(64)

GBP

-

29

(55)

-

-

-

(26)

Total

83

 3,506 

(12,308)

(11,304)

(19,245)

(9,987)

(49,255)

Total

132

8,958

(11,680)

(2,870)

(31,894)

(15,060)

(52,414)

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:

TZS : US$

EUR : US$

GBP : US$

Average rate

Closing rate

2019

0.0004

1.1190

1.2772

2018

0.0004

1.1809

1.3338

2019

0.0004

1.1191

1.3127

2018

0.0004

1.1464

1.2692

27.5  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.

to not reassess whether a contract is, or contains, a lease at 
the date of initial application. Contracts entered into before 
the transition date that were not identified as leases under 
IAS 17 and IFRIC 4 were not reassessed. The definition 
of a lease under IFRS 16 was applied only to contracts 
entered into or changed on or after 1 January 2019. The new 
accounting policies are disclosed in note 2.17. 

On adoption of IFRS 16, the Group recognised lease 
liabilities in relation to leases for a solar energy plant 
and office space which had previously been classified as 
‘operating leases’ under the principles of IAS 17, ‘Leases’. 
These liabilities were measured at the present value of the 
remaining lease payments, discounted using the lessee’s 
incremental borrowing rate as of 1 January 2019 of 7%. For 
leases previously classified as finance leases the entity 
recognised the carrying amount of the lease asset and 
lease liability immediately before transition as the carrying 
amount of the right of use asset and the lease liability at 
the date of initial application. The measurement principles 
of IFRS 16 are only applied after that date and has not 
resulted in adjustments to the related right of use assets 
immediately after the date of initial application.

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.

IFRS 16 provides for certain optional practical expedients, 
including those related to the initial adoption of the 
standard. The Group applied the following practical 
expedients when applying IFRS 16 to leases previously 
classified as operating leases under IAS 17:

28.  Effects of changes in accounting policies
This note explains the impact of the adoption of IFRS 16, 
‘Leases’, on the Group’s financial statements. 

As indicated in note 2.3 above, the Group has adopted 
IFRS 16, ‘Leases’ retrospectively from 1 January using 
the modified retrospective approach, with recognition of 
transitional adjustments on the date of initial application 
(1 January 2019), without restatement of comparative 
figures. The Group elected to apply the practical expedient 

 ◼ Relying on previous assessments on whether leases are 
onerous as an alternative to performing an impairment 
review – there were no onerous contracts as at 1 
January 2019;

 ◼ Accounting for operating leases with a remaining lease 
term of less than 12 months as at 1 January 2019 as 
short-term leases;

 ◼ Excluding initial direct costs for the measurement of the 
right-of-use asset at the date of initial application; and

72

 ◼ Using hindsight in determining the lease term 

where the contract contains options to extend or 
terminate the lease.

Measurement of lease liabilities

US$000

Recognised lease commitments

Lease commitments discounted using incremental 
borrowing rate of 7% 

Add: finance lease liabilities recognised as at 
31 December 2018

Lease liabilities recognised at 1 January 2019

Of which are:

 Current

 Non- current

2019

533

479

2,355

2,834

1,616

1,218

Measurement of right of use assets
The associated right-of-use assets for solar power units 
and office space were measured on a retrospective basis 
as if the new rules had always been applied. For leases 
previously classified as finance leases the right-of use 
assets were measured at the amount equal to the lease 
liability at the date of initial application. 

Adjustments recognised in the statement of financial position on 
1 January 2019
The change in accounting policy affected the following 
items in the statement of financial position on 
1 January 2019:

 ◼ Property, plant and equipment – decrease by 

US$6,411,000

 ◼ Right-of-use assets – increase by US$6,880,000
 ◼ Lease liabilities – increase by US$479,000.

The net impact on retained earnings on 1 January 2019 was 
a decrease of US$10,000.

29.  Related party transactions
Details of the remuneration of the Directors, who are 
key management personnel, are contained within note 8 
and the Remuneration Committee Report on pages 33-34. 
Executive Directors are considered key management.

At the end of the year, Luke Leslie and Robin Fryer held 
convertible loan notes with an aggregate principal value 
of US$220,000 (2018: US$330,000) and US$263,000 (2018: 
US$393,000) respectively.

During 2019 an amount of US$37,899 (2018: US$37,178) was 
paid to Keith Marshall in respect of engineering services 
provided to the Company.

During 2019 an amount of US$182,000 (2018: $Nil) was paid 
to ETG Logistics Limited in respect of logistics services 
provided to the Company. ETG Logistics Limited is a 
subsidiary company of the wider Export Trading Group 
within which Ketan Patel holds directorships.

30.   Commitments
The Directors confirm that the Group has a capital 
commitment of US$1.5 million (2018: US$0.8 million) 
relating to underground mining equipment at New Luika. 

As at 31 December 2019, the Group had commitments in 
respect of forward sales and swap contracts of 40,000 
ounces (2018: 45,000 ounces) of gold at an average price 
of US$1,244/oz (2018: US$1,230/oz). Since the year end, the 
Group has not entered into additional forward sales or 
swap contracts however the settlement profile of forward 
sales contracts in place has been restructured. The total 
commitment at the end of January 2020 was 37,000 ounces 
(January 2019: 45,000 ounces) at an average price of 
US$1,244/oz (January 2019: US$1,230/oz).

73

2019 Annual Report and Accounts —Notes to the financial statementsAt 31 January 2020, the following commodity hedges 
were in place:

Product 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Gold - USD 

Fixed price 

Start date 

1,225 

1,224 

1,224 

1,223 

1,223 

1,264 

1,264 

1,252 

1,252 

1,251 

1,251 

1,251 

1,251 

1,250 

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

16/01/2020

End date 

31/03/2020

30/04/2020

29/05/2020

30/06/2020

31/07/2020

31/07/2020

27/08/2020

27/08/2020

30/09/2020

30/10/2020

30/11/2020

30/11/2020

31/12/2020

29/01/2021

Loss on non- hedge derivatives and other commodity contracts

31.  Contingent liabilities
The Directors confirm that there were no contingent 
liabilities as at 31 December 2019 (2018: US$Nil).

32.  Events after reporting date
On 10 February 2020 the Company announced that it has 
entered into a definitive agreement pursuant to which it 
will purchase 100% of the shares of Acacia Exploration 
(Kenya) Limited (“AEKL”), a subsidiary of Barrick Gold 
Corporation (“Barrick”). AEKL’s primary asset (the “West 
Kenya Project”) is a 100% participating interest in licences 
held by Afriore, which includes an existing high-grade 
resource, contained on the Isulu and Bushiangala prospects. 

A maiden NI43-101 compliant Inferred Mineral Resource 
Estimate (MRE) was announced in 2017. The latest update 
of the MRE was completed in May 2018 and amounted to 
1,182,000 oz gold grading 12.6 g/t.

The acquisition cost for 100% of the outstanding share 
capital of AEKL is:

 ◼ US$7 million in cash, payable on Completion (the 

“Consideration Cash”);

 ◼ US$7.5 million in Shanta Gold Shares, to be issued on 

Completion (the “Consideration Shares”); and,

 ◼ 2% life of mine net smelter return royalty across the 
current seven Prospecting Licences contained in the 
West Kenya Project, payable on actual gold production in 
the future.

The Consideration Shares shall be issued at 10.4977 
pence per share. Barrick will receive 54,650,211 shares 
in the Company, equivalent to a pro forma interest of 
approximately 6.44%. These will be subject to a one-month 
lock-up agreement and further eleven-month orderly 
market agreement, from Completion.

Pursuant to the terms of the acquisition, Shanta has also 
agreed to inherit certain liabilities of AEKL and to adjust 

Quantity

Mark to market 
(US$000)

 2,000 

 2,000 

 2,000 

 4,000 

 2,000 

 2,000 

 3,000 

 1,000 

 4,000 

 4,000 

 1,000 

 3,000 

 4,000 

 3,000 

 (659)

 (665)

 (670)

 (1,353)

 (683)

 (600)

 (907)

 (314)

 (1,267)

 (1,277)

 (322)

 (966)

 (1,298)

 (982)

(11,963)

the consideration to reflect certain working capital items, 
the net impact of which is likely to be an additional cash 
sum payable by Shanta to settle third party liabilities on or 
after Completion of up to US$4 million. 

Closure of the transaction is conditional upon required 
regulatory approvals in Kenya, which include standard 
consents from the Mining Authorities to the assignment of 
interests and the transfer of Prospecting Licences, approval 
of the Transaction by the Competition Authority of Kenya, 
and registration of the Company’s interest in the Project 
Licences by the Mining Authorities. Under the criteria of 
IFRS 3, control of the West Kenya Project is not expected to 
transfer to Shanta until the transaction closes.

The Company announced on 20 February 2020 that it has 
received irrevocable undertakings from holders of the 
convertible loan notes to vote in favour of a restructuring 
that will extend their maturity date by one year. The 
Company will retain the option to redeem the convertible 
notes earlier than the extended maturity date. Written 
resolutions will be sent to the Loan Note Holders in short 
order which, if passed by the requisite majority, will 
enable the Company to implement this arrangement. 
Extending the maturity of the notes provides the Company 
with increased flexibility in advance of transacting the 
Consideration Cash to Barrick upon closure of the West 
Kenya Project transaction.

74

79

2019 Annual Report and Accounts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 Fifteenth Annual General Meeting of the shareholders of the Company will be held at 
11 New Street, St Peter Port, Guernsey, GY1 2FL on 20 March 2020 at 11:30am (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 2019.

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 approve the Directors’ remuneration paid for the year to 31 December 2019 as detailed in the 2019 Annual Report 

and Accounts.

5.  To approve the Non-Executive Directors’ aggregate fees for the period between 1 January 2020 to 31 December 2020 

inclusive to be US$435,000.

6.  To re-appoint BDO LLP as the auditors of the Company.

7. 

To authorise the directors to fix the remuneration of the auditors as the Directors see fit.

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.

9.  To approve any other business of which due notice has been given and which the Meeting is competent to consider.

Dated 27 February 2020

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.

80

81

2019 Annual Report and Accounts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 Fifteenth 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 11 New Street, 
St Peter Port, St Peter Port, Guernsey, GY1 2PF on 20 March 2020 at 11:30am 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)

For

Against

withheld

Vote 

Ordinary Resolutions—Ordinary Business

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 2019.

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. 

5. 

Ordinary Resolution to approve the Directors’ remuneration paid for the year to 
31 December 2019 as detailed in the 2019 Annual Report and Accounts.

Ordinary Resolution pursuant to Article 19.2 to approve the Non-Executive Directors’ 
aggregate fees for the period between 1 January 2020 to 31 December 2020 inclusive to be 
US$435,000.

6. 

Ordinary Resolution to re-appoint BDO LLP as the auditors of the Company.

7. 

8. 

Ordinary Resolution to authorise the Directors to fix the remuneration of the auditors as  
the Directors see fit.

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.

9. 

Ordinary Resolution to approve any other business of which due notice has been given  
and which the Meeting is competent to consider.

Date

Signature(s) or common seal (see Note 3)

82

Notes to the proxy form

1.  A proxy need not be a member of the Company.

2.  If you do not indicate how you wish your proxy to use your vote in a particular manner, the proxy will 

exercise his/her discretion as to how he/she votes and as to whether or not he/she abstains from voting.

3.  The Form of Proxy must be in writing under the hand of the appointer or of his/her attorney duly 

authorised in writing, or if the appointer is a corporation under its common seal or under the hand of the 
officer or attorney duly authorised.

4.  If you wish your proxy to cast all of your votes for or against a resolution you should insert an “X” in the 
appropriate box. If you wish your proxy to cast only certain votes for and certain votes against, insert the 
relevant number of shares in the appropriate box. 

5.  The “Vote Withheld” option is provided to enable you to instruct your proxy to abstain from voting on a 
particular resolution. A “Vote Withheld” is not a vote in law and will not be counted in the calculation of 
the proportion of the votes “For” or “Against” a resolution. 

6.  Forms of Proxy, to be valid, must be lodged, together with the power of attorney or other authority (if 

any) under which it is signed, or a notarially certified copy of such power of authority, at the Company’s 
registered office by fax +44 1481 729200 or email to: corporate.secretarial.gg@vistra.com or posting the 
original to: PO Box 91, 11 New Street, St Peter Port, Guernsey GY1 3EG 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.

83

2019 Annual Report and Accounts84

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2019 Annual Report and Accounts