Shinhan Financial Group Co Ltd Annual Report 2020

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FY2020 Annual Report · Shinhan Financial Group Co Ltd

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2020

Annual Report and Accounts

Country of incorporation
Guernsey

Nature of business
East Africa-focused gold producer, developer
and explorer

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
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY

Joint Broker
Tamesis Partners LLP
125 Old Broad Street
London EC2N 1AR

Website
www.shantagold.com

Contents

About Shanta Gold

Board of Directors

Chairman’s Statement

Chief Executive Officer’s Review

Directors’ Report

Corporate Governance Statement

Remuneration Committee Report

Risk report

Sustainability 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

About Shanta Gold

Shanta Gold is an East Africa-focused gold producer. It
currently has defined ore resources at the New Luika Gold
Mine (“New Luika”) and the Singida Project (“Singida”)
in Tanzania and holds exploration licences covering
approximately 1,100 km2 in the country. Shanta Gold
also owns the West Kenya Project in Kenya with defined
ore resources of 1.2 Mt grading 12.6 g/t and holds
approximately 1,121 km2 wholly owned exploration licences
and 40 km2 partially owned licences in the country.

Shanta’s flagship New Luika Gold Mine commenced
production in 2012 and produced 82,978 ounces in
2020. The Company is listed on the AIM Market (AIM)
of the London Stock Exchange (ticker: SHG) and has
approximately 1,048 million shares in issue.

For further information please visit: www.shantagold.com.

BOARD OF DIRECTORS

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 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 long-
standing links to East Africa.

Eric Zurrin has 20 years’
experience in mining and
investment banking including
previous roles with UBS
Investment Bank and BMO
Capital Markets. Eric has worked
and lived in North America, the
UK, Asia and Africa and held
senior positions in advisory,
private equity and operational
roles. Eric is a Canadian national
and completed his Bachelor of
Commerce Hons. (Accounting)
in Canada.

Luke is a mining investor with
a background in Mergers &
Acquisitions. He was formerly
a member of UBS Investment
Bank’s Corporate Finance team
based in London. Luke began
his career as a management
consultant with Accenture
where he specialised in post-
acquisition integration and cost
reduction strategies.

2020 Annual Report and AccountsBOARD OF DIRECTORS

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 is currently the interim
CEO for SolGold. His previous
operational roles were 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.

CHAIRMAN’S STATEMENT

Chairman’s Statement

Despite a global COVID-19 pandemic and the consequent
disruptions to supply chains, Shanta Gold has had a record
year. We have taken the opportunity to strengthen the
business through the acquisition of the West Kenya Project
from Barrick Gold and construction has started at Shanta’s
second mine at the Singida project where the first gold
pour is expected in late 2022.

Our underlying EBITDA increased 34% on 2019 to US$63.9
million, buoyed by higher gold prices. We also achieved a
record net profit of US$17.2 million. During the year, Shanta
extinguished its hedge book and significantly deleveraged,
moving from a net debt position of US$14.3 million to
finish the year with a net cash position of US$37.3 million.
Importantly, the team at New Luika continued to meet high
safety standards recording a third full year of zero Lost Time
Injuries.

Performance and operating highlights
As the COVID-19 pandemic spread rapidly across the
globe, Shanta was quick to implement safety protocols
across its operations while increasing critical inventories
at New Luika and forging new partnerships to prevent
disruption to the operations. As a result, New Luika had
another steady year of production and costs were within
guidance. We expanded the plant towards the end of the
year to allow for the processing of lower grade ore. The
Company continued to target costs with significant savings
achieved from the partial integration of the national power
grid. In 2020 we replaced ounces (“oz”) and increased
the mine life at New Luika for a second consecutive year,
through successful exploration campaigns.

Sustainability
Our economic contributions in Tanzania continue to be
significant. In 2020 the Company paid US$26 million to the
Government of Tanzania in the form of taxes and royalties.
New Luika supports the local economy in Songwe through
provision of employment opportunities and skill-based
training initiatives, and all our operations provide indirect
contributions via their supply chains which consist almost
exclusively of Tanzanian or Kenyan vendors. We aim to
have a workforce that reflects the countries that we operate
in and 99% of our employees are Tanzanian or Kenyan
nationals, with 40% of the Group’s employees coming from
communities neighbouring New Luika.

The Company places great importance on its social and
environmental responsibilities. In recognition of this we
will publish our 2021 Sustainability Report later this year,
detailing our ambitions for increasing the Company’s
positive impact in the future.

Business and market outlook
In 2021, Shanta will benefit from a strong balance sheet
and operations generating healthy cash flows. We are now
investing in the largest exploration programme in Shanta’s
history with 6 drill rigs currently operating in parallel across
three projects which we expect to extend mine life and
provide growth.

I am delighted to be in a position to announce that the
Board has proposed a final dividend of 0.10 pence per
share to be paid in April 2021, subject to shareholder
approval.

Portfolio developments
The acquisition of the West Kenya Project plays to the
Company’s strengths as a Long Hole Open Stoping
specialist. This project is a high-quality addition to Shanta’s
asset portfolio, believed to be among the highest grading
gold projects in Africa. Following the successful equity
raise conducted in the year, drilling is now underway to
determine the viability of a new gold mine.

Robin Fryer, who has been a Non-Executive Director and
Chairman of the Board’s Audit Committee for seven years,
has decided to retire after the AGM. I would like here to
recognize his most valuable contribution to the Company’s
transformation and to its current financial health, and
to wish him well for the future. We will be taking the
opportunity to make new appointments to our Board and
expect to make a further announcement on this shortly.

Construction is underway at Singida which is being funded
from free cash flow generation at New Luika. Once in
production the project is expected to produce an average
of 32,000 oz of gold annually over an initial seven-year
mine life. We expect Singida to transform lives for the
better in the Ikungi region of Central Tanzania.

During 2020 our employees have performed exceptionally
once again in difficult conditions. On behalf of the Board
I would like to thank them for their dedication and hard
work. I would also like to thank our shareholders for their
support and the communities for hosting our projects. We
enter 2021 committed to build on our consistent record,
and excited for the opportunities that lie ahead.

Anthony Durrant
Chairman

1 March 2021

2020 Annual Report and AccountsCHIEF EXECUTIVE OFFICER’S REVIEW

Chief Executive Officer’s
Review

During the year Shanta made great
strides across its portfolio, acquiring
the high-grade West Kenya Project
from Barrick Gold, beginning mine
construction at Singida and increasing
the mine life at New Luika. There is now
significant future value embedded in the
portfolio.

There were no Lost Time Injuries (“LTI’s”) during 2020
and the Company has now surpassed a milestone 6
million man-hours without an LTI. Having now successfully
operated for over three years without an LTI, Shanta
continues to mark itself as one of the safest gold mining
operations worldwide, achieving a Total Recordable Injury
Frequency Rate (“TRIFR”) (per 1 million hours worked)
of 0.97 in the year, a 3% reduction from 2019 (1.00) and
significantly below the global industry average of 3.20,
as measured by the International Council of Mining and
Metals. This represents a fifth successive annual decline
in injuries.

We finished the year meeting the better end of guidance
for production and cost and established new safety
records. In a year where disruptions were felt across the
supply chain, working procedures had to be changed to
ensure safety at the mine, including the lengthening of
rotation periods. I would like to extend my gratitude to
our employees for the sacrifices this entailed together with
their tireless hard work and commitment to our operations,
which ensured a successful 2020 for our shareholders.

Shanta’s investment proposition is robust, with a diversified
and highly complementary asset portfolio. The Company
is in excellent financial health, completing the year with
US$37.3 million of net cash and with most of the remaining
US$11.4 million of outstanding debt expected to be repaid
in April 2021. The recent closure of the Company’s hedge
book provides our shareholders with full exposure to the
gold price.

Shanta is now in a strong financial position which will
enable us to expand our reserves, increase production
and pay dividends. The Company will now start to pay
dividends, and a final dividend has been proposed for
payment in April 2021.

Highlights

Exceptional safety record
The Company delivered an industry-leading safety
performance during the year. We adopted robust
safeguards, introduced to mitigate the risks presented
at our operations by COVID-19. These measures helped
Shanta operate largely unaffected by the COVID-19
pandemic throughout 2020 and remain in place for the
ongoing protection of our team.

Strengthening our core operations
The processing plant at New Luika processed a record ore
tonnage in 2020. Plant expansion upgrades carried out at
the end of the year have increased processing capacity by
a further 14%. The team is working on realising additional
efficiency gains from the processing plant in 2021.

Low-cost grid power contributed 12% of Shanta’s power
requirements during the year; lowering power costs,
diversifying power source dependency and reducing
the mine’s carbon output. Shanta expects grid power
contribution to increase to 37% by the second half of 2021.

AISC for 2020 were US$841 /oz, at the lower end of 2020
guidance of US$830 – 880 /oz. Development costs at the
BC, Luika and Ilunga underground operations are not
included in AISC.

Building the Singida Gold Mine
Following a successful drilling campaign, Singida’s reserves
and grade were increased to 243,000 oz at 3.00 g/t. The
Company completed an internal Feasibility Study and
started construction work in Q4 2020.

Economics released during the year outline a compelling
business case for Singida, with considerable upside through
potential conversion of mineral resources currently outside
of the reserve-based mine plan. The project is projected
to add gold production of 32,000 oz per year at an AISC
of US$869 /oz. The Singida reserve sits within a substantial
resource and the reserve announced represents just 27%
of the existing total contained resources. Nearly all of this
reserve is within 120 metres from the surface, highlighting
the potential for reserve expansion.

2020 Annual Report and AccountsCHIEF EXECUTIVE OFFICER’S REVIEW

The Singida Gold Mine will directly employ more than 220
people by late 2021 with the whole workforce expected
to be Tanzanian. Singida will transform the Ikungi region
in central Tanzania to benefit local communities with an
estimated 5,000 people expected to benefit from direct
and indirect employment as well as Shanta’s livelihoods
program. The mine is expected to contribute to advances
in the local community’s health, water and education, in line
with the well-regarded CSR program at New Luika.

West Kenya Project acquisition
Shanta acquired the West Kenya Project from Barrick Gold
on 19 August 2020 for purchase consideration of US$7.8
million cash and 54.6 million Shanta Gold ordinary shares.
The consideration also included a two percent life of mine
net smelter return (NSR) royalty over the project. The
Project is believed to be one of the highest-grade gold
projects in Africa, with an inferred resource of 1,182,000 oz
grading 12.6 g/t. The licences cover 1,161 km2 of the Lake
Victoria greenstone gold field, which houses Global Tier
1 assets including North Mara and Geita Gold Mine. The
acquisition gives Shanta the opportunity to establish itself
as a major mining company in Kenya.

Shortly after the acquisition was completed, the Company
announced the results of an independent Scoping Study for
the Project. Highlights included a post-tax NPV8% of US$340
million at a base case gold price of US$1,700 /oz and an
unlevered IRR of 110%, with annual production for an initial
estimated nine-year mine life averaging 105,000 oz.

The Company is committed to progressing the project to
a construction decision, expected within the next three
years. To finance this, gross proceeds of £32.2 million
(approximately US$42.1 million) were raised during the year
through the issue of an aggregate 194,884,309 shares at
a price of 16.5 pence per Ordinary Share. This is expected
to be sufficient for the Company to be able to confirm the
viability of a potential new gold mine. Work is progressing
well so far, with two drill rigs now operational on site, and
the first phase of infill drilling underway.

Portfolio-wide exploration
The Company has a track record of replacing mined
reserves at New Luika, with 173,000 oz of new reserves
added in 2020 at a cost of US$19 /oz. This resulted in a
net increase of 37,000 oz after production depletion and
resource optimisation. All of New Luika’s underground

deposits drilled during 2020 remain open at depth and
along strike.

Regionally, Shanta holds a sizeable portfolio of prospecting
licences covering approximately 1,100 km2 in the
highly prospective Lupa Goldfield. During 2020, Shanta
conducted additional works at one of its key regional
targets, Porcupine South, following which it was able to
declare a maiden open pit resource at the deposit of
64,000 oz at 2.08 g/t. On the back of this success, further
exploration will be carried out at this target in 2021.
Porcupine South is located approximately 22 km east of
New Luika’s processing plant and is within economically
viable trucking distance.

During 2020, JORC compliant reserves across the Group
increased by 82% to 625,000 oz at a grade of 3.00
g/t. Group resources increased by 75% to 3.2 million
oz at a grade of 3.53 g/t, which was largely driven by
the acquisition of the West Kenya Project (NI 43-101
compliant). These results reflect the increase in exploration
expenditure during the year to US$4.8 million, which was
84% higher than 2019. The Company’s reserves assume a
long-term gold price of US$1,350 /oz.

Building on the exploration successes of 2020, the Board
has approved an US$8.0 million Tanzanian exploration
budget for 2021. Shanta recently announced the
appointment of Mr Yuri Dobrotin as the Company’s new
Group Exploration Manager. A global expert in gold
exploration, Yuri will be spearheading exploration activities
across the Group with a primary focus on West Kenya.
Adding new reserves to the respective mine plans can have
a tremendous impact on shareholder value and we look
forward to multiple exploration campaigns in 2021.

Final dividend proposed for April 2021
Significant free cashflow in 2020 helped Shanta continue its
rapid deleveraging of recent years, with gross debt falling
48% in the year to US$11.4 million. The Company repaid
its senior secured debt to Investec and entered a net cash
position for the first time in its producing history.

Shanta Gold intends to pay a semi-annual dividend,
commencing with a proposed final dividend of 0.10 pence
per share. The Board will consider the Company’s financial
condition and outlook in determining or recommending
future payments. This marks Shanta’s transition into a

CHIEF EXECUTIVE OFFICER’S REVIEW

New Luika Gold Mine
Operations Review

New Luika Gold Mine operations

Tonnes ore mined

Tonnes ore milled

677,734

688,262

603,373

639,678

702,336

712,945

FY2018

FY2019

FY2020

FY2018

FY2019

FY2020

Grade (g/t)

Recovery (%)

4.4

4.2

4.0

90.9

89.4

89.7

FY2018

FY2019

FY2020

FY2018

FY2019

FY2020

2020 Annual Report and AccountsCHIEF EXECUTIVE OFFICER’S REVIEW

Gold production (ounces)

Gold sales (ounces)

81,872

84,506

82,978

82,457

80,926

83,228

FY2018

FY2019

FY2020

FY2018

FY2019

FY2020

Silver production (ounces)

Realised gold price (US$/oz)

106,851

90,541

92,232

1,259

1,377

1,495

FY2018

FY2019

FY2020

FY2018

FY2019

FY2020

CHIEF EXECUTIVE OFFICER’S REVIEW

New Luika Gold Mine
Operations Review

New Luika Gold Mine quarterly breakdown

Tonnes ore mined

688,262

603,373

150,842 141,687 195,183 200,550

136,616 155,779 166,772 144,206

FY2020

FY2019

Tonnes ore milled

712,945

702,336

174,069 176,415 181,036 181,425

172,644 177,647 174,132 177,913

FY2020

FY2019

Grade (g/t)

4.4

4.0

3.8

3.9

4.0

4.5

3.9

3.8

4.2

FY2020

FY2019

Recovery (%)

89.4

89.8

89.4

90.4

89.7

89.9

89.4

89.3

89.2

89.4

FY2020

FY2019

2020 Annual Report and AccountsCHIEF EXECUTIVE OFFICER’S REVIEW

Gold production (ounces)

82,978

84,506

20,167

22,216

19,973

20,622

22,374

19,856

22,726

19,550

FY2020

FY2019

Gold sales (ounces)

83,228

80,926

20,086

23,932

20,192

19,018

21,358

19,780

22,477

17,311

FY2020

FY2019

Silver production (ounces)

92,232

90,541

19,294

21,378

25,016

26,544

23,851

23,461

24,744

18,485

FY2020

FY2019

Realised gold price (US$/oz)

1,414

1,633

1,524

1,376

1,495

1,305

1,302

1,462

1,440

1,377

FY2020

FY2019

CHIEF EXECUTIVE OFFICER’S REVIEW

dividend-paying multi-asset gold producer. I would like
to personally thank all of our shareholders for their long-
standing support as the Company moves forward into
a new era of distributing a portion of cash returns to
investors.

VAT status on refunds
The Company’s VAT receivable rose to US$27.6 million
at the end of the year. US$1.9 million of the receivable
balance was offset against corporate taxes falling due
in the year and the remaining VAT receivable is subject
to verification audit by the Tanzanian Revenue Authority
(“TRA”) before being available for further offsets. The
Company has taken extensive legal and tax advice to
recover the VAT and is pursuing the appropriate avenues to
recover the full balance as discussed in note 3.

Tanzanian legislative framework
During 2017, the Tanzanian Parliament enacted several
legislative bills, which amended the Mining Act 2010 to
provide for an increased government shareholding in
mining projects. The amendments entitle the government
to a minimum of 16% free carried interest in all mining
projects, and the right to increase this commensurate with
the value of historic tax reliefs and exemptions enjoyed by
the mining company (up to a maximum of 50%). Since the
incorporation of its Tanzanian subsidiaries, Shanta has not
been the recipient of any preferential tax arrangements in
Tanzania nor has it been party to a Mining Development
Agreement.

These changes preceded the announcement by Barrick
Gold on 20 October 2019 that they had entered into a
bilateral agreement to share the future economic benefits
from Barrick Gold’s mines in Tanzania on a 50/50 basis. It
is management’s view that a similar arrangement between
Shanta and the Government of Tanzania could be required.

On 30 October 2020, the Mining (State Participation)
Regulations 2020 were published, which expanded on this
free-carried interest and provided that the Government of
Tanzania shall enjoy the right to receive a proportionate
share from any repayment of equity or loan.

It remains uncertain how the new legislative bills will be
interpreted and implemented. To date, with the exception
of the increase in royalties from 4% to 6% and the
introduction of a clearing fee of 1% which was effective
from July 2017, there has been no material impact on the
Group. The Company continues to take in-country legal
and tax advice to monitor the situation carefully.

Operations review

processing plant continues to operate above its nameplate
processing capacity and upgrades have been made
post year end to increase this further and drive greater
throughput.

AISC1 for the year were US$841/oz, at the lower end of
guidance of US$830 – US$880/oz. The Group maintains a
laser-like focus on its cost base and supplier contracts are
reviewed on an ongoing basis. Following connection to the
state (“TANESCO”) power grid towards the end of 2019,
low-cost grid power contributed 12% power requirements
in 2020, resulting in a 19% reduction against budgeted
power costs. This transition towards more grid power
contribution is expected to increase to as high as 37% at
New Luika by the second half of 2021.

Financial overview

Turnover for the year from sales of gold amounted to
US$147.4 million, compared to US$112.8 million in 2019.
This increase of 30.7% was largely driven by higher spot
gold prices during the year. By the end of 2020 the
Company had sold 83,228 oz of gold (2019: 80,926 oz),
with a further 3,775 oz in transit to the refinery. A loss on
non-hedge derivatives and other commodity contracts of
US$11.7 million (2019: US$9.8 million) was incurred in the
year and the Company is now unhedged.

Operating profit for the year was US$43.8 million (2019:
US$5.1 million), heavily impacted by the improved gold
price achieved per oz and reduced depreciation. EBITDA2
amounted to US$63.9 million (2019: Adjusted EBITDA of
US$47.7 million).

A profit before tax of US$39.0 million (2019: loss before tax
of US$1.2 million) was recorded. A tax charge amounting
to US$21.8 million (2019: US$8.3 million) resulted in a
profit after tax of US$17.2 million (2019: loss after tax
of US$9.5 million). The increased tax charge in 2020
reflects the Group’s increased profitability and US$4.1
million recognised in respect of historical tax assessments
conducted in the Period.

Unrestricted cash at the year-end totalled US$41.6 million
(2019: US$3.5 million). At the end of the year the Company
had net cash of US$37.3 million (2019: net debt of US$14.3
million), inclusive of liquidity available from 3,775 oz of
unsold doré in transit at the end of 2020.

New Luika Operations Review
New Luika had another strong year and set an all-time
record for tonnes milled. Total mill feed was 712,945 tonnes
(“t”) at an average grade of 4.0 g/t to produce 82,978 oz
of gold, in line with guidance of 80,000-85,000 oz. The

1 Development costs at the BC, Luika and Ilunga underground operations are not

included in AISC.

2 EBITDA is earnings before before tax, finance income, finance expense, 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. In 2019, Adjusted EBITDA was derived as EBITDA before non-cash
loss on unsettled forward contracts.

2020 Annual Report and AccountsCHIEF EXECUTIVE OFFICER’S REVIEW

Environment

Corporate social responsibility

Meeting our energy needs
We have taken steps in recent years to reduce our carbon
footprint and increasingly power our operations from
renewable sources. The solar hybrid power plant continues
to provide New Luika with clean electricity, contributing 2%
of New Luika’s total power requirements in 2020. We were
also able to meet 12% of New Luika’s power requirements
from the TANESCO grid, which draws 37% of its wattage
from hydro-electric sources. The Company is committed
to minimising its carbon footprint and alternative power
sources are expected to be a contributor of reliable and
clean energy for the mine moving forwards.

Managing our water supply
Consistent and plentiful water supply is a challenge in
the Songwe region which has unpredictable rainfall and
limited water infrastructure. We take our water stewardship
responsibilities seriously and work to balance the needs of
our operations without preventing access for others. Our
water recovery program at New Luika means nearly 50%
of water used in tailings is recovered via a Return Water
Dam (“RWD”). We are committed to the responsible and
efficient use of water and the team continue to look for
ways to manage our consumption and find innovative
solutions to water supply.

Responsible tailings and waste management
We prioritise careful waste management and take
disposal of hazardous waste from our mining operations
seriously. Our two Tailings Storage Facilities (“TSF’s”) have
been carefully constructed to safely contain waste from
ore processing. Waste rock from underground mining
activities is deposited on professionally engineered waste
rock dumps and in 2020 we started rehabilitating the
Luika Waste Rock Dump by adding topsoil and planting
vegetation, which will eventually repair the disturbed earth
naturally.

Protecting biodiversity and closure planning
The Songwe region has a rich ecosystem and we try to
harmonise our existence at New Luika with the wildlife
and plant species that inhabit the area. A new onsite tree
nursery plantation was completed at the start of 2020
to help with the reclamation of vegetation. In addition
we communicate clear rules to visitors and employees
regarding the safeguarding of wildlife and adhere to the
local laws for their protection.

We understand that our legacy on the Songwe region will
be felt long after mining activities have finished, and we
therefore have detailed social and environmental plans
in place for a successful closure of New Luika for our
community and country stakeholders. The latest version
of our detailed Mine Closure Plan (“MCP”) was approved
by the Mining Commission in 2020 and we will continue
to update this as necessary to ensure we fully restore
and rehabilitate the New Luika site after gold production
has ceased.

People
Our employees are the Company’s most important asset,
and it is through their commitment and sustained efforts
that we have succeeded in producing yet another set of
strong results.

The Group’s headcount, including employees at New Luika,
Singida and West Kenya Project, totalled 764 people at
the end of 2020 (2019: 748 people) and our Tanzanian staff
span every discipline. The Executive Committee and Board
of Directors of SMCL are led almost entirely by Tanzanian
nationals.

At the end of 2020, 99% of the Company’s workforce were
from our host countries Tanzania or Kenya (2019: 99%) and
approximately 40% of the Group’s employees are from
local communities around New Luika. This demonstrates
the importance of our mine as a major employer for nearby
villages and towns, driving the local economy in an area
that continues to suffer from high unemployment and
economic difficulties.

Business Sustainability
Shanta is committed to supporting social and economic
development around the Company’s producing mines.
Ensuring that our presence and activities benefit
all stakeholders is a core aspect of the Company’s
sustainability values.

We aim to support local businesses wherever possible and
procure products locally to both streamline the Company’s
logistics and support the nearby economy. In 2020, 83% of
New Luika’s procurement was in-country.

Shanta was recently awarded first place in Local Content
Performance for 2019/2020, as per Mining Act 123 in
Tanzania, a testament to our invaluable Social License
to operate.

The Company’s CSR programme has been developed
through the implementation of community initiatives that
are devised with the direct engagement of key community
and regional stakeholders. Shanta typically plays a partner
role in these projects, providing funding where required
but also ensuring capacity is built for the local populations
to engage in self-sustaining development. The goal is for
participants to retain learned skills that can be transferred
to future generations, leaving a lasting impact.

Several new initiatives have been rolled out in 2020 and
Education, Water, Livelihood and Health continue to
represent the bedrock of Shanta’s community priorities.

Education
The New Luika CSR team work closely with the Songwe
regional leaders and head teachers at the primary and
secondary schools in nearby Saza, Mbangala, Maleza and
Patamela to understand the educational priorities of their

CHIEF EXECUTIVE OFFICER’S REVIEW

students. Shanta’s team place great value on supporting
local education and employees made various donations
in the year. New Luika received 2,119 donated books that
were distributed to five local primary schools and these
are now kept in each school’s library to ensure easy access.
Shanta also partnered with several international suppliers in
the year to provide desktop computers, laptops, projectors
and printers for a new ICT lab at one of Songwe’s
Primary Schools.

For many years Shanta has supported regional educational
infrastructure development projects in Songwe. In 2020
Shanta donated 1,000 corrugated iron roofing sheets
and 1,000 bags of cement (50 kg each) for education
infrastructure in the region. Several of Shanta’s recent
educational infrastructure development projects have now
been completed. Two new staff houses constructed at Saza
will help the local schools attract and retain high quality
staff, and a further two are under construction at nearby
Patamela. In Maleza, three classrooms have been added to
the Primary School, expanding the number of classrooms
to seven.

With many children having to travel a significant distance
to reach schools in the region, damage to the roads can
present access issues. After a crucial 5.5 km stretch of
nearby road was damaged by flooding during the year,
Shanta assisted rebuild efforts by accommodating the
Tanzania National Roads Agency (TANROADS) at New
Luika and supported the necessary upgrade by providing
HDPE pipes and aggregates.

Over the past few years Shanta has provided teacher
training to its local schools through a partnership with
Hazelwood School (Charity Number 312081). National
Standard 7 results were announced towards the end of the
year and we were delighted that each of Maleza, Mbangala
and Patamela’s primary schools achieved a 100% pass rate.

Water
Availability of fresh water continues to be a massive
challenge for much of the local population in Songwe and
Singida, areas that suffer an extensive dry season, which
can last for six months.

The challenge is often geographic, with residents in
nearby Patamela historically relying on three distant
hand-held pumps for their water supply. During the year
Shanta installed new solar-powered water taps, benefiting
approximately 2,000 people, and each home now has
direct water access with the use of solar power having
the added benefit of avoiding reliance on any additional
electricity supply.

In 2021, plans are in place to connect our Luika dam
reservoir to Mbangala, providing fresh water for
approximately 7,600 people on a sustainable basis.

Livelihood
Farming is one of the key sources of income for the
population in Songwe, but there are many ongoing
challenges to this, particularly climate change, with the
resulting droughts, floods, and temperature shocks
causing income unpredictability. This has often meant
people turning to artisanal and small-scale mining, which is
dangerous and illegal. During the year, Shanta’s emergency
rescue team at New Luika responded to several incidents
involving artisanal miners as well as a locally established
mining company to evacuate their workers. Shanta works to
enhance the livelihoods of those in the surrounding region
by supporting a range of initiatives to help people find
sustainable opportunities to generate income.

Shanta’s farming collaboration with Export Trading Group
(“ETG”) has grown significantly since inception in 2016, and
approximately 1,500 farmers are enrolled in the scheme
which provides training on agriculture methods. In 2020
Shanta facilitated training to owners in the community
on harvesting and post-harvest handling, and treatment
advice regarding domestic animal diseases. In addition
to training, Shanta purchased and distributed 3,800 kg of
sesame and 300 kg of sunflower seeds for participating
farmers unable to purchase these themselves. During the
latest sesame harvest over 4,800 acres were cultivated with
the participating farmers expected to earn in the region of
US$1.0 million. This farming initiative continues to expand
with optimised farming practices being adopted regionally.

Shanta has also championed other agricultural projects, and
through its Mining Agriculture Improvement Project, has
sponsored training and accreditation for 57 local farmers
under TOSCI, the Government Institute responsible for the
certification and promotion of quality agricultural seeds.
The training provided under these schemes is crucial for
imparting skills and knowledge to participants which are
then transferrable into practice and ultimately will help
participating farmers better optimise future crop harvests.

In addition to traditional farming, the beekeeping initiative
rolled out by Shanta in 2018 at both Mbangala and Saza
has progressed strongly. Newly trained residents enrolled
in the programme harvested 2,350 kg of honey in 2020,
an 161% annual increase. The number of beehives in
operation has also increased from 143 to 250, and the
participants are protected by clothing outfits and beehive
huts all donated by New Luika. Towards the end of 2020 a
honey processing plant was purchased locally and donated
to the Mbanagala beekeeper’s group. This equipment will
help local honey processing become more efficient.

Health
Shanta supported the local response to the Coronavirus
pandemic, working closely with authorities in the
construction of a new District Coronavirus Patient
Treatment Centre. Shanta completed electrical and window
installation works, with wiring for the building completed

2020 Annual Report and AccountsCHIEF EXECUTIVE OFFICER’S REVIEW

in collaboration with TANESCO. In other efforts to support
the Songwe region, the New Luika team donated chemical
suits, masks, glasses and 1,000 litre water tanks to support
the district’s medical team.

Long-term health matters are a challenge for many in the
local region, and a key success during the year was a one-
day Community Health Bonanza delivered by Shanta’s team
at New Luika for the nearby villages of Mbangala and Saza.
Over 500 residents were screened for various health-related
matters including hypertension, diabetes, anaemia, and
Body Mass Index (“BMI”). Patients who required treatment
were provided with appropriate medicines and attendees
also received health and nutritional education from medical
doctors and nutritionists. Shanta collected 80 blood
donations during the event, which significantly replenished
the local District Blood Bank.

Outlook
Annual production guidance at New Luika for 2021 has
been set at approximately 80,000 oz at an AISC of US$900-
950 /oz1 on a like-for-like basis, and US$1,050 – 1,100 /
oz including development costs in line with the World
Gold Council (“WGC”) definition. This cost guidance
takes into consideration the impact of higher-cost
supplementary open pit mining from Elizabeth Hill, royalties
which are expected to be incurred on a higher average
selling price, and increased on-mine exploration spend
compared to 2020.

I would like to again extend my gratitude to our
employees, our shareholders, members of the Board and
our partners for their commitment to the Company and
unwavering support.

Eric Zurrin
Chief Executive Officer

1 March 2021

1 Development costs at the BC, Luika and Ilunga underground operations are not

included in AISC.

“Economics released during the year
outline a compelling business case
for Singida, with considerable upside
through potential conversion of
mineral resources currently outside of
the reserve-based mine plan.”

“The Company will now start
to pay dividends, and a final
dividend has been proposed for
payment in April 2021.”

DIRECTORS’ REPORT

Directors’ Report

The Directors present their annual
report and the audited financial
statements of the Group for the year
ended 31 December 2020.

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 gold production and
exploration 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 7–16. 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 57. The
activities for the year have resulted in the Group’s profit
before tax of US$39.0 million (2019: loss before tax of
US$1.2 million).

Dividends
No dividends were declared or paid during the year.
Following the year-end, the Directors have proposed a
final dividend of 0.10 pence per share payable (2019: Nil),
subject to the approval of shareholders on 24 March 2021.

Subsequent events
Except as disclosed in note 33 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 Liberum
Capital Limited.

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

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

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

2020 Annual Report and AccountsDIRECTORS’ REPORT

safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.

The Directors confirm that they have complied with the
above requirements in preparing the financial statements.

So far as each of the Directors are aware, there is no
relevant audit information of which the Group’s auditor is
unaware; having taken all the steps the Directors ought to
have taken to make themselves aware of any relevant audit
information and to establish that the Group’s auditor is
aware of that information.

Website publication
The Directors are responsible for ensuring that the annual
report and the financial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with applicable
legislation in Guernsey governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and
integrity of the Company’s website is the responsibility of
the Directors. The Directors’ responsibility also extends
to the ongoing integrity of the financial statements
contained therein.

Going concern
The Directors have reviewed the Group’s cash flow forecasts
for the period to March 2022 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.

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 33–36 and in
note 24 to the financial statements.

Signed on behalf of the Board of Directors on
1 March 2021.

Eric Zurrin
Chief Executive Officer

Anthony Durrant
Chairman

“Adding new reserves to the
respective mine plans can have a
tremendous impact on shareholder
value and we look forward to multiple
exploration campaigns in 2021.”

CORPORATE GOVERNANCE STATEMENT

Corporate Governance Statement

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.

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.

more heavily in on-mine exploration activities. The
objective is to generate returns for shareholders using
the cash generated from this and other projects in the
Company’s portfolio.

The Company announced that the construction of Singida
Gold Mine had commenced in the year. The acquisition
of the West Kenya Project from subsidiaries of Barrick
Gold Corporation was also announced and completed.
These assets supplement the Company’s growth pipeline
and are expected to bring additional economic benefit to
shareholders in the future.

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.

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 underground reserves at our Bauhinia
Creek, Luika 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

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 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 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 investing

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.

2020 Annual Report and AccountsCORPORATE GOVERNANCE STATEMENT

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, the Company’s registrars.

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 Songwe
and Singida in Tanzania, and with National and County
Government officials across the West Kenya Project in
Kenya, to ensure that the Group’s operations are compliant
with local laws and that 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 Kenya and
places great value on these close working relationships.
The management team of SMCL and Shanta Gold Kenya
Limited (“SGKL”) regularly attend government-run
conferences to promote the mining industry and SMCL also
regularly sponsors events in Tanzania.

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 Committee ensures that the company
has a remuneration strategy that attracts and retains
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.

As of December 2020, 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 three
times in 2020.

CORPORATE GOVERNANCE STATEMENT

Remuneration Committee
The Group’s Remuneration Committee comprised of
three Non-Executive Directors being Keith Marshall
(Chairman), Anthony Durrant and Ketan Patel. Details of the
Remuneration Committee’s responsibilities are provided
within the Remuneration Committee Report on page 33.
The Remuneration Committee met three times in 2020.

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 2020.

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 83 to 85. 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 affairs. 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
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. Three 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 2020:

2020 Annual Report and AccountsCORPORATE GOVERNANCE STATEMENT

Director

Eric Zurrin

Luke Leslie

Anthony Durrant

Ketan Patel

Robin Fryer

Keith Marshall

Number of meetings held in the year

Executive

Non-Executive

Board
meeting

Audit
Committee

Remuneration
Committee

Sustainability
Committee

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 and Kenya. 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

CORPORATE GOVERNANCE STATEMENT

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 have on local
communities 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 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 nationals of our host
countries and approximately 40% of these are permanent
residents of the local villages around New Luika.

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.

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.

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.

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.

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, the
Audit Committee Report on page 45, and the Sustainability
Committee Report on page 39 provide details as to key
work carried out over the year by these committees.

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.

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.

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 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
1 March 2021.

Eric Zurrin
Chief Executive Officer

Anthony Durrant
Chairman

2020 Annual Report and AccountsREMUNERATION COMMITTEE REPORT

Remuneration Committee Report

Dear Shareholders,

It is my pleasure to again report to you on behalf of
the Remuneration Committee. Throughout 2020 the
Committee has continued to focus on aligning reward
with performance and optimising incentives, such that
the Company’s remuneration framework best facilitates
an environment that will deliver ongoing maximum
shareholder returns.

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:

1. To offer competitive salary packages that attract, retain

and motivate highly-skilled individuals;

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

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.

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,

3. To encourage accountability in the workplace and link

◼ Review and approve any termination payment such

reward with success.

The Group currently operates the following remuneration
framework:

◼ Annual salary and associated benefits such as

paid holiday;

◼ Discretionary performance-related annual and/or

quarterly bonuses; and,

◼ Retention-based arrangements designed to

incentivise the Executive Directors to remain in the
Company’s employ.

The Remuneration Committee consists of myself as the
Chairman together with two other independent Non-
Executive Directors; Anthony Durrant and Ketan Patel. 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 2020.

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

Performance for the year
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
following table details notable performance indicators
that were set in December 2019 and considered by the
Committee in its assessment of the Group’s performance
during 2020.

2020 Annual Report and AccountsREMUNERATION COMMITTEE REPORT

Performance indicator

Key achievements in 2020

Safety record

◼ Zero LTIs in 2020 (over 36 months since last LTI)
◼ TRIFR of 0.97, the lowest level in the last 5 years
◼ Fifth successive annual decline in injuries and a 3% reduction from 2019

Share price
performance

◼ Share price increase of 78% in 2020
◼ Higher share price return than any of the Company’s London-listed gold producing peer group over three years,

returning 289% cumulatively since 1 January 2018

◼ Shanta Gold’s share price outperformed junior gold indices, major global indices, and the gold price during 2020
◼ Significant improvement in share trading liquidity (average daily traded value)
◼ Market capitalisation increase from GBP £75 million to GBP £177 million during 2020
◼ Numerous blue-chip investors added to the Company’s shareholder register

Operating performance

◼ Production in line with annual guidance
◼ Consistent and strong performance at New Luika, despite the emergence of the global coronavirus pandemic and its

impact on the business

◼ Increased operating flexibility, with ore sourced from three underground deposits and open pit operations in the year
◼ Process plant upgrades and integration of TANESCO grid power due to enhance operating performance further for the

year ahead

Profitability

◼ EBITDA of US$63.9 million, up 34% from US$47.7 million in 2019
◼ Operating profit of US$43.8 million, up 753% from 2019
◼ AISC of US$841/oz, at the lower end of 2020 guidance of US$830 – 880 /oz1

Financial position

◼ Long-standing deleveraging strategy delivered on with a net cash position reached in the first half of 2020, prior to

subsequent equity raise

◼ Hedge book extinguished in December 2020
◼ Total liquidity of US$53.5 million at the end of 2020
◼ VAT offset against corporate income tax during the year amounting to US$1.9 million, with strategy in place for potential

VAT recovery in 2021

Business prospects

◼ 173,000 oz added to reserves at New Luika in the year (net increase in reserves of 37,000 oz after resource optimisation

and 2020 depletion)

◼ All ounces mined in 2020 replaced with new reserves
◼ Plant expansion using idled pilot plant complete, with soft commissioning at the end of December 2020
◼ New discovery at Porcupine South added 64,000 oz of resources, confirming regional potential within Lupa Goldfield
◼ Singida internal study completed, giving rise to an increase in reserves, reserve grade and resources at the project
◼ Construction of Singida Gold Mine now underway
◼ West Kenya Project acquired and fully financed, with initial drilling commencing in late 2020

◼ Relationships strengthened in Tanzania with national government
◼ Robust social license to operate, with strong community and council relationships
◼ New Luika’s Mining Licence extended for an additional 10 years
◼ Various successful initiatives delivering long-term benefits to New Luika’s neighbouring communities
◼ Notable steps taken to diversify New Luika’s power generation away from heavy fuel oil (“HFO”) and thereby reduce

carbon footprint

Business sustainability

1 Development costs at the BC, Luika and Ilunga underground operations are not

included in AISC.

REMUNERATION COMMITTEE REPORT

The below graph compares the relative performance of
Shanta Gold common shares against the performance of
the spot gold price and the Van Eck GDXJ ETF over the last
three years1.

From December 31, 2017 to December 31, 2020, the share
price of the Company increased 289% compared to an
increase in the spot gold price of 45% and an increase in
the GDXJ Index of 57% during the same period2.

1 Sourced from Bloomberg.

2 Assuming an investment of £100 on 1 January 2018 with the gold spot price and

GDXJ Index translated into GBP Sterling and all dividends reinvested.

Taking note of the Group’s successes in the year in respect
of the above performance indicators, the Committee
concluded that annual bonus criteria for the year were
wholly met and approved bonus awards to Executive
Directors of 100% of respective eligible amounts.

Performance graph—2018 to 2020
SHG vs. Gold Spot Price and Market Vectors Junior Gold Miners (ETF)

2018

2019

2020

Shanta Gold Common Share

Gold S pot Price

Van Eck GDXJ ETF

400%

350%

300%

250%

200%

150%

100%

50%

2020 Annual Report and AccountsREMUNERATION COMMITTEE REPORT

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

Luke Leslie 1

Sub-total

31 December 2020

Fees/salary

Performance
bonus

Other

Total

Fees/salary

31 December 2019

Performance
bonus

408

150

340

346

288

1,163

634

430

358

788

Total

657

130

549

108

754

150

628

384

130

320

108

273

229

1,797

1,092

502

1,594

430

358

788

380

317

697

380

317

697

2,585

1,092

1,199

2,291

Base remuneration to Directors

1,163

1,422

Retention award

Eric Zurrin 1

Luke Leslie 1
Sub-total

Total remuneration to Directors

1,163

1,422

1 Executive
2 Non-executive

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.

Retention awards
Retention of the Executive Directors is key to the
Company’s long-term strategy. In recognition of this the
Committee approved a retention plan, disclosed in the
2019 Annual Report, under which a retention award of
GBP £200,000 would be paid to each of the Executive
Directors for remaining with the Company for a twenty-four
month period to the end of December 2020. During the
retention period, management completed a number of
important milestones for the company including, amongst
others, negotiating and completing the acquisition of
the West Kenya Project which followed twelve months of
due diligence, deleveraging the Company balance sheet,
extinguishing the hedge book and preparing the Singida
Gold Mine for a construction decision.

270

540

270

540

3,125

1,092

1,199

2,291

The year ahead
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

RISK REPORT

Risk report

Risk management
The Board and Senior Management maintain an Enterprise
Risk Assessment, updated on a regular basis, which
analyses the Company’s most material risks and mitigation
measures that have been put in place or are being
considered. Additional reports are provided monthly to
the Board, including operations reports, sustainability
reports, CSR reports, cost analysis and compliance reports
to facilitate ongoing comprehensive assessment of Shanta’s
primary and emerging risks.

The below outlines the risk reporting structure in place
and summarises the nature of information presented to
the Board:

Shanta Gold Limited Board

CEO

Audit Committee

Sustainability Committee

Enterprise Risk Assessment
1. Political and Social License

to Operate

2. Resource Protection

Shanta Mining Company Limited
Board Report
(Tanzanian Operating Company)

Operations

3. Illegal Mining/Theft/ Terrorism

Environment and Sustainability

4. Taxation Regime

5. Operational

6. Environmental/Safety

7. Cash Flow and Profitability

8. Employees

Social Risks

Executive Committee Reports
> 40 meetings in 2020

Monthly Report of Operations
and Sustainability
12 reports in 2020

Heads of Departments (HODs)
Formal engagement with CEO
Quarterly full-day workshops

Budget, Operational and
Strategy Setting
Annual three-day meeting with all
HODs

2020 Annual Report and AccountsRISK REPORT

Principal risks and uncertainties

Risk

Background

Risk mitigation

1. Political and social
license to operate

Evaluating Shanta’s
contribution to society and
economy in host countries

◼ Implementation of CSR projects
◼ CSR department within Company to manage programmes and

relationships

Key performance
indicator (See page 34)

Business Sustainability

2. Resource protection Risk of losing mining title at
New Luika Mine, Singida, or
West Kenya Project

3. Illegal mining/theft/

terrorism

4. Taxation regime

Risk of loss or theft of
mineral, loss of access
to areas of licence, risk
of crime and violence,
reputational risk

Risk of change in Economic
Regime impacting Shanta’s
business

5. Operational

Risk of internal and external
factors negatively impacting
operations and production

6. Environmental/

safety

Risk of major environmental
incident or catastrophic
impact to communities

◼ Proportion of Annual Budget allocated to fund CSR programmes
◼ Regular dialogue maintained with regional and government

officials and Company contribution to the economy
communicated

◼ Investment in drilling activities and Mine Life extension
◼ Exploration budget for 2021 significantly increased from 2020

Business Sustainability

expenditure

◼ Investment committed at the Singida Project to fund construction
◼ Shanta is progressing the West Kenya Project to reach feasibility

decision

◼ CSR programmes to support alternative livelihoods
◼ Government security forces retained at NLGM
◼ Increased security management presence
◼ Security infrastructure at all offices

Operating Performance

Business Sustainability

◼ Engagement with tax specialists to support management

Profitability

approach

◼ Regular communication between Board and Tax and Finance

Management team in country

◼ Regular dialogue between CEO, senior management in-country

and relevant government authorities

◼ Uninterrupted access to water
◼ Ore stockpile levels are carefully managed
◼ Alternative power sources
◼ Increased flexibility in underground mining access
◼ Labour challenge addressed through incentive scheme

Financial Position

Operating Performance

Profitability

◼ Review and audit of safety management systems are regularly

Safety Record

conducted internally and on a periodic basis by external auditors

◼ All EIA’s and EMP’s are reviewed to ensure full compliance
◼ Independent audits are undertaken to review environmental

management practices

◼ Shanta is audited and accredited to ensure compliance with

Cyanide Code

Operating Performance

7. Cash flow and
profitability

Risk of adverse financial
liquidity, reduced access to
capital, negative impacts of
gold price movement

◼ Hedge book restructured and cleared in 2020
◼ Liquidity monitored daily
◼ Costs are carefully monitored and reviewed against budget

monthly

Profitability

Financial Position

Share Price Performance

◼ Annual budgets are set during a robust 3-day workshop to target

efficiencies

◼ Working capital limits maintained
◼ Diversified banking relationships across multiple jurisdictions

8. Employees

Risk of losing key
employees, skills, access to
expatriate workers

◼ Policy in place to give preferential treatment to hires from host
countries in recruitment of skilled positions that are available in
the country

Business Prospects

Business Sustainability

◼ Succession plans in place for expatriate positions to enable

replacement with those from host countries

◼ Company has a local skills development programme focussed on

the villages surrounding NLGM

SUSTAINABILITY COMMITTEE REPORT

Sustainability Committee Report

Dear Shareholders,

I am delighted to have the opportunity to highlight the
work that has been ongoing at Shanta Gold during 2020
in our efforts to protect the environment and promote the
livelihoods of people living in the areas where we operate.

The role of our Sustainability Committee
Sustainability is at the heart of our business activities and
is led by our Sustainability Committee which consists of
myself as the Chairman together with two other Directors;
Anthony Durrant and Keith Marshall. The Committee aims
to meet at least three times each year and is responsible for
setting the sustainability strategy for the Group.

The Committee met three times during 2020. At each
meeting, reports for the Group in relation to health and
safety, environment, and social matters were reviewed
and evaluated. The Committee continues to focus on our
core priorities of health and safety, employee wellbeing,
environmental stewardship, and community.

The aim of the Committee is to identify the sustainability
issues that are most material to our stakeholders and

monitor the Group’s effectiveness in addressing these. We
endeavour to align ourselves with industry best practice for
the prevention and management of both the risks that we
face as a business and those which our activities have the
potential to pose to others. Reporting channels embedded
across the business facilitate effective communication
of the Group’s overarching sustainability strategy to our
operations. Regular meetings are held at New Luika
between the departmental heads and management to
integrate sustainability into our day-to-day operations.

Stakeholder engagement
Our approach to sustainability is driven by engaging with
key stakeholders from local communities, national bodies,
and our investors. We recognise that Shanta’s long-term
success relies upon good relations with all its stakeholder
groups, both internal and external, and in maintaining a
strong understanding of their needs and expectations.

Views of Shanta held by its stakeholders often represent
the Group’s wider reputation, so are considered vitally
important. Feedback is regularly sought across several
platforms to ensure that Shanta can identify these views
and enable dialogue on any relevant matters.

Performance for the year

Core priority

Health & Safety

Metric

Total recordable injury frequency rate (“TRIFR”)

Environmental Stewardship

Recovered water (%)

Waste recycled (%)

Diesel & HFO consumed (‘000 litres)

Energy consumed from renewable sources (MWh)

Community

Social project expenditure (US$ million)

Taxes, royalties and levies paid in Tanzania (US$ million)

2020

0.97

31%

96%

12,383

2,690

0.4

26.2

2019

Year on year

Change (%)

1.00

30%

96%

13,424

798

0.3

19.0

-0.03

+1%

-1,041

+1,892

+0.1

+7.2

-3%

+3%

-8%

+237%

+33%

+38%

2020 Annual Report and AccountsSUSTAINABILITY COMMITTEE REPORT

Health and safety
Protecting the health and wellbeing of our employees is
a priority and the Company implements a zero-tolerance
policy towards any form of negligence in respect of health
and safety best practices.

Climate change
Climate risks and opportunities form part of our business
strategy. Increasingly we are taking steps to diversify our
power sources and find renewable energy solutions to meet
power requirements at New Luika.

Education, training, and ongoing communication are
key to ensuring an injury-free workplace and promoting
safety. These are principles which are embedded in our
management systems, and employees are incentivised to
achieve high safety standards through financial recognition
for collective safety-related performance. Where possible
the Company seeks to minimize occupational health risks
through, for example, the provision of appropriate personal
protective equipment and regular monitoring of air quality.

In 2017, we added a solar hybrid power plant which
provides New Luika with reliable, low cost electricity and
contributed 865 megawatt hours (“MWh”) in 2020, 2% of
New Luika’s total power requirements. We connected to
the state power grid (‘TANESCO’) in 2019, and grid power
contributed 12% of New Luika’s power requirements in
2020. TANESCO power is a cleaner source of energy for
New Luika than power generated onsite, with 37% of the
provided wattage generated from hydro-electric sources.

Our workforce’s commitment to operating safely resulted
in another year without an LTI, and since the year-end the
Company has surpassed a milestone 6.0 million man-hours
without an LTI. Shanta also achieved a TRIFR per 1 million
hours worked of 0.97 in 2020, a fifth successive annual
decline in injuries.

Leveraging the existing frameworks and attitudes in
place at our operations was a key success factor in
our response to the emergence of the coronavirus
pandemic in the year. Our team’s agility in responding
to the new risks posed by COVID-19 ensured that robust
safeguards were implemented at our operations early, to
protect the wellbeing of our team. I applaud the team’s
collective response to the emerging situation and this has
undoubtedly factored into the Company’s ability to hit its
operational targets for the year. Importantly, Shanta also
took a leading role in educating local communities on risks
posed by the virus and the measures available to them for
reducing their chances of exposure to it.

Our people
Our people play a critical role in the success of our business
and we recognise that corporate responsibility begins with
our own people, employment practices and maintaining
equitable treatment across all levels of our organisation.

The Company has various training and development
programs in place to facilitate the ongoing development
of our employees. Our objective is to have a workforce
where everyone takes accountability of their personal
development and the critical role that they play in the
Company’s successes.

Shanta has a long-established track record of training and
employing local residents and thereby yielding direct and
sustainable benefits to its local communities. At the end of
2020, 99% of the Company’s workforce were nationals of
our host countries and approximately 40% were permanent
residents of villages near the mine.

Power by source (MWh)

100%

80%

60%

40%

20%

2016

2017

2018

2019

2020

HFO (MWh)

Solar (MWh)

Tanesco (MWh)

With the above initiatives, we have seen a reduced
dependency on our own heavy fuel oil (‘HFO’) power plant.
Diesel and HFO consumption has reduced by 8% in 2020
and our energy consumption from renewable sources
has increased by 237% as a result of the contribution of
grid power to the company’s energy requirements. Our
analysis indicates that diversification of our power portfolio
has decreased the cost of energy being supplied to our
operations, while also increasing resilience and reducing
risk of a single source of energy.

An important target in addressing our impact on climate
change is to continue reducing our dependence on power
sourced from fossil fuels. In 2021, we will endeavour to
increase power from the state grid by approximately 3x to
around 35-40%.

The Company places high importance on addressing
climate change and is in the process of appointing an ESG
adviser, who will assist in developing a climate change
strategy for the Company.

SUSTAINABILITY COMMITTEE REPORT

Environmental stewardship
Respect for the local environment is at the forefront of
our efforts to operate responsibly. Our Environmental
Management Program ensures the Company operates in
line with local legislation, but we also strive to surpass the
minimum regulatory standards and expectations for our
industry and set ourselves higher and stricter standards to
work towards.

In pursuing these ambitious environmental objectives,
we target responsible management of our water needs,
mitigate ecological risk through safe tailings and waste
management, support our local biodiversity and maintain a
detailed closure plan.

Managing our water supply
Mining activities require a consistent and large volume of
water supply, which is a challenge in the Songwe region
where the year divides into extreme wet and dry seasons.
We aim to be efficient with our water usage, to meet our
needs without compromising water availability for our local
communities.

New Luika has a focused water recovery program whereby
nearly 50% of water used in tailings is recovered via a
Return Water Dam. Overall, in 2020, 31% of our water
usage was recovered. The team at New Luika work closely
with the Lake Rukwa Basin Water Board to communicate
water conservation strategies in place, and Annual Water
Reports are prepared for the Board to monitor the status of
water resources and consumption.

Responsible tailings and waste management
The generation of waste, both hazardous and non-
hazardous is an inevitable consequence of extracting
ore from the ground. We take the disposal of waste
very seriously and understand that by doing so we
are responsible for protecting the health of our local
stakeholders.

Waste rock from our underground mines is deposited
on waste rock dumps. During the year the New Luika
Environment Team made progress in rehabilitating the
Luika Waste Rock Dump by depositing topsoil. Newly
planted vegetation will eventually rehabilitate these waste
rock dumps naturally.

Gold extraction from ore at New Luika requires the use
of chemical solutions such as cyanide, and traces of
these reagents remain in the tailings after gold has been
extracted. To limit potential environmental damage,
we have carefully constructed Tailings Storage Facilities
(“TSF’s”) to contain the waste and these undergo continual
monitoring. We currently have two downstream TSF’s
at New Luika which have been engineered with care to
mitigate the risk of seepage or spills. They are inspected

annually by an Independent Competent Person and the
Company has an emergency action plan integrated into its
Emergency Response Plan for potential failures.

Protecting biodiversity and closure planning
New Luika is situated in a rich ecological area near Lake
Rukwa, and there is an abundance of wildlife and plant
species. Strict rules around the protection of wildlife are
communicated to all visitors and employees. In preparation
for the relatively uncommon occasions during which
potentially harmful animals come into proximity with
members of our team, clear protocols are in place to report
these incidents and relocate the animals safely.

Forest management continues around New Luika
and remains a focus for mitigating any environmental
disturbance caused by our mining activities. Construction
of an onsite tree nursery was completed at the start of
the year as part of the Company’s ongoing biodiversity
recovery plan.

The Company has a formal and externally approved
plan in place for the long term remediation of the New
Luika site, documented in a detailed Mine Closure Plan
(“MCP”). During 2020, the latest iteration of the MCP was
approved by the Mining Commission following a thorough
inspection of the mine by representatives from the Mining
Commission, Ministry of Minerals, National Environment
Management Council (NEMC), Ministry of Water, Ministry of
Natural Resources and Local Government Officials.

Adding value to the community
Throughout our Company we recognise the impact that
our activities have on local communities, who are key
stakeholders and, in some cases, reliant on our responsible
operating approach. We are dedicated to adding value
beyond the financial contributions that we make in the form
of tax and royalty payments.

The Company has four underlying principles which govern
our community priorities: Education, Water, Livelihood
and Health. Often the Company partners with other
local business in project roll-outs, providing funding
where required, and focussing on initiatives that lend
themselves towards the self-sustaining future development
of participants. In 2020 the Company helped with the
construction of regional educational infrastructure,
improved local water access, supported approximately
1,500 farmers, assisted in the local response to the
coronavirus pandemic and provided healthcare for over
500 residents in a community health day, among other
achievements. More details on Shanta’s sustainability
projects have been provided within the Chief Executive
Officer’s Review on pages 7–16.

2020 Annual Report and AccountsSUSTAINABILITY COMMITTEE REPORT

Several new initiatives are planned for 2021 with
Education, Water, Livelihood and Health continuing as the
cornerstones of Shanta’s community priorities.

The year ahead
We are proud of our achievements to date, particularly in
the local communities and for our continued application of
industry leading safety practices.

Looking to the future, the Committee is aiming to keep
the Company ahead of the curve on sustainability matters
and to align its sustainability reporting with industry best
practice. Shanta is expecting to shortly publish its 2021
Sustainability Report, which will provide a comprehensive
overview of our sustainability-related efforts, challenges,
and recent achievements. To all of our team who continue
to drive the Company’s positive local impact, I would like
to take this opportunity to extend my deepest thanks on
behalf of the Committee.

Ketan Patel
Chair of the Sustainability Committee

AUDIT COMMITTEE REPORT

Audit Committee Report

Dear Shareholders,

I am pleased to again report to you on behalf of the Audit
Committee. The Company’s established financial reporting
structures have continued to perform effectively in the year,
and the Committee has continued to oversee the proper
maintenance of these in order to ensure the integrity of the
Company’s Annual Report. 2020 was another successful
year in which the Company’s robust framework of internal
controls facilitated 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 terms of reference of the Audit Committee are set
out below.

◼ Maintain the integrity of the financial statements of the
Company and review any significant reporting matters
they contain;

◼ Review the Annual Report and Accounts and other

financial reports and maintain the accuracy and fairness
of the Company’s financial statements, including
through ensuring compliance with applicable accounting
standards and the AIM Rules;

◼ Review the adequacy and effectiveness of the

Company’s internal control environment and risk
management systems; and,

◼ Oversee 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 three times in 2020 and the
external auditors were present during all three 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 70, 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 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 70.

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.

2020 Annual Report and AccountsThe year ahead
The Committee remain focused on ensuring that the robust
framework of internal controls currently in place at Shanta
is maintained. We will continue to closely monitor the
financial risks faced by the business, whilst also ensuring
that measures are in place to mitigate these where
appropriate.

The Committee will also continue the 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 scrutiny and challenge.

Robin Fryer
Chair of the Audit Committee

AUDIT COMMITTEE REPORT

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SHANTA GOLD LIMITED

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

Opinion on the financial statements
In our opinion:

◼ The financial statements give a true and fair view of the
state of the Group’s affairs as at 31 December 2020 and
of the Group’s profit 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.

We have audited the financial statements of Shanta Gold
Limited (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2020 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.

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 believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Independence
We remain 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.

Conclusions relating to going concern
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of

accounting in the preparation of the financial statements is
appropriate. Our evaluation of the Directors’ assessment of
the Group’s ability to continue to adopt the going concern
basis of accounting, has been set out in the key audit
matters section below.

Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the entity’s ability to continue as a
going concern for a period of at least twelve months from
when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.

Overview

Coverage

100% (2019: 100%) of Group revenue

97% (2019: 94%) of Group total assets

94% (2019: 91%) of Group profit before tax

Key audit
matters

Going concern

Recoverability of VAT

Carrying value of mining assets

2019




2020




Materiality

Group financial statements as a whole

US$1.8 million (2019: US$1.9 million) based on 4.5% of
profit before tax (2019: 1.5% of revenue).

An overview of the scope of our audit
Our Group audit was scoped by obtaining an
understanding of the Group and its environment, including
the Group’s system of internal control, and assessing the
risks of material misstatement in the financial statements.
We also addressed the risk of management override
of internal controls, including assessing whether there
was evidence of bias by the Directors that may have
represented a risk of material misstatement.

Our involvement with component auditors
For the work performed by component auditors, we
determined the level of involvement needed in order to
be able to conclude whether sufficient appropriate audit

2020 Annual Report and AccountsINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SHANTA GOLD LIMITED

evidence has been obtained as a basis for our opinion on
the Group financial statements as a whole. Our involvement
with component auditors included the following:

◼ 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.

◼ 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 reviewed the component

auditor’s work papers remotely, attended clearance
meetings for the significant component and engaged

with the component auditors during their fieldwork and
completion phases.

Key audit matters
Key audit matters are those matters that, in our
professional judgement, 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) that 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.

Matter identified

Going Concern

Our response

Management is required to perform an
assessment of the Group’s ability to continue
as a going concern. The assessment is
expected to cover a period of at least 12
months from the date of signing the financial
statements, and the Directors are required to
consider significant events and conditions that
exist beyond the 12 month period from the
date of approval of the financial statements.

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

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

Our specific audit testing in this regard included:

◼ Critical assessment of management’s financial forecasts for the period to March 2022 and the key

underlying assumptions, including:
– gold pricing used in the forecast was compared 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 2021
– debt repayments were confirmed to third party loan agreements to check completeness and timing
– we confirmed that the forecast period excluded receipts associated with VAT receivables due to the

uncertainty of the timing

◼ We have reviewed the scenarios prepared by Management which taken into account the reduction in

certain key assumptions.

◼ 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.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SHANTA GOLD LIMITED

Matter identified

Our response

Recoverability of VAT (see note 17)

The Group has significant VAT receivables of
US$27.6 million as at 31 December 2020,
of which the entire balance is classified as
non-current.

As disclosed in note 17, judgement is required
as to its validity, the timing of recovery of the VAT
and consideration of the Tanzanian legislation
and definition of Raw Minerals. As such, the
recoverability, carrying value and presentation of
VAT represent a significant focus for our audit.

The recoverability of the Group’s VAT was therefore
considered to be a key audit 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 external 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 to
evaluate the reasonableness of Management’s judgement in respect of the recoverability of VAT.
◼ 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.

Matter identified

Our response

Carrying value of mining and exploration and
evaluation assets
(see note 11 and 12)
The Group’s total mining assets and exploration
and evaluations assets at 31 December 2020
were US$77.4 million and US$43.3 million
respectively. These classes of assets are the most
significant to the statement of financial position.

Management and the Directors are required to
assess whether there are potential indicators
of impairment of the Group’s mining assets at
each reporting date and, if potential indicators
of impairment are identified, management
are required to perform a full assessment of
the recoverable value of the mining assets in
accordance with the requirements of the relevant
accounting standard.

The assessment of the recoverable value of the
mining assets required judgments and estimates
by management and the Board regarding
the inputs applied in the models including
future gold and silver prices, production and
reserves, operating and development costs and
discount rates.

Carrying value of mining and exploration and
evaluation assets is considered a key audit
matter as significant judgement and estimates
are applied by Management. In addition, due to
Covid-19 there is an increased level of judgement
involved in Management’s forecasts which
underpin the carrying value of mining assets.

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 have reviewed Management’s impairment assessment and considered whether there are

any indicators of impairment in line with criteria set out under IAS 36 for the development and
production assets and under IFRS 6 for exploration and evaluation assets. Management prepared
value in use models to support their impairment assessment.

◼ We assessed the appropriateness of Management’s determination of each cash generating unit

(CGU) in order to determine if the conclusions were in line with IAS 36.

◼ We obtained management’s discounted cash flow models, and performed data integrity and

mechanical checks on the models using our proprietary tool.

◼ We compared the actual performance of the CGUs during 2020 to budgets for the period in order to

assess the quality of management’s forecasting.

◼ We critically challenged the NPV model, focussing on the appropriateness of estimates with reference

to empirical data and external evidence with specific emphasis on the following assumptions:
gold and silver prices, reserves and production levels, operating and development costs and
discount rates.

◼ We compared the gold price forecast to published market data, including market consensus research,
which confirmed the price forecasts used in the model to be in an acceptable range versus market
forecasts.

◼ We assessed the consistency of production profiles and capital expenditure forecasts against the

Group’s LOM plans, approved budgets and discussed with operational management to inform our
assessment and understanding of these plant and budgets.

◼ We reviewed management’s sensitivity analysis and performed our own additional sensitivity
analysis on a combination of key inputs to assess the impact of changes in assumptions.
◼ 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
Based on our work we concur with management’s assessment that there is no impairment and the carrying value of the Group’s mining and exploration and
evaluation assets are appropriate.

2020 Annual Report and AccountsINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SHANTA GOLD LIMITED

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.

Reporting threshold
We agreed with the Audit Committee that we would
report to them all individual audit differences in excess of
US$37,000 (2019:US$38,000). We also agreed to report
differences below this threshold that, in our view, warranted
reporting on qualitative grounds.

In order to reduce to an appropriately low level the
probability that any misstatements exceed materiality,
we use a lower materiality level, performance materiality,
to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.

Based on our professional judgement, we determined
materiality for the financial statements as a whole and
performance materiality as follows:

Group financial statements

31 Dec 20

Materiality

US$ 1.8 million

31 Dec 19

US$1.9 million

1.5% Revenue

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

4.5% Profit before tax

Users of the financial
statements of profit-
orientated entities will
generally be concerned
with reported earnings
both at the pre-taxation
and post-taxation levels.
As the Group has become
profit making, profit before
tax is considered the most
appropriate benchmark
measure

US$1.3 million

US$1.4 million

75% of Group Materiality

Basis for
determining
materiality

Rationale for
the benchmark
applied

Performance
materiality

Basis for
determining
performance
materiality

Component materiality
We set materiality for each component of the Group
based on a percentage of Group materiality dependent
on the size and our assessment of the risk of material
misstatement of that component. Component materiality
was set at US$1.6 million. In the audit of the components,
we further applied performance materiality levels of 75%
of the component materiality to our testing to ensure that
the risk of errors exceeding component materiality was
appropriately mitigated.

Other information
The directors are responsible for the other information.
The other information comprises the information included
in the Annual Report 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. 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 course of
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 this gives rise to a material misstatement in the
financial statements themselves. 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, 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.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SHANTA GOLD LIMITED

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.

Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is
detailed below:

◼ Holding discussions with management and the
audit committee and considering any known or
suspected instances of non-compliance with laws and
regulations or fraud;

◼ Testing the appropriateness of journal entries made

through the year by applying specific criteria to detect
possible irregularities and fraud;

◼ Performing a detailed review of the Group’s year-end
adjusting entries and investigating any that appear
unusual as to nature or amount;

◼ For significant and unusual transactions, particularly

those occurring at or near year-end, investigating the
possibility of related parties and the sources of financial
resources supporting the transactions;

◼ Extending inquiries to individuals outside of

Management and the accounting department to
corroborate Management’s ability and intent to carry out
plans that are relevant to developing the estimate; and

◼ Reviewing minutes from board meetings of those

charges with governance to identify any instances of
non-compliance with laws and regulations.

Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.

A further description of our responsibilities is available
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, Statutory Auditor
London, United Kingdom

1 March 2021

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

2020 Annual Report and Accounts“Low-cost grid power grid
contributed 12% of Shanta’s power
requirements during the year,
lowering power costs, diversifying
power source dependency and
reducing the mine’s carbon output.”

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Consolidated statement of
comprehensive income

31 Dec 2020

31 Dec 2019

147,431

(11,688)

(19,361 )

(59,664)

(79,025)

56,718

(8,156)

(4,809)

43,753

1,870

(6,622)

39,001

(21,798)

17,203

112,795

(9,833)

(30,613)

(57,982)

(88,595)

14,367

(6,625)

(2,611)

5,131

(6,375)

(1,191)

(8,291)

(9,482)

17,203

(9,481)

2.023

2.018

(1.206)

(US$000)

Revenue

Loss on non-hedge derivatives and other commodity contracts

Notes

Depreciation

Other cost of sales

Cost of sales

Gross profit

Administration expenses

Exploration and evaluation costs

Operating profit

Finance income

Finance expense

Profit / (Loss) before taxation

Taxation

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

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

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

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

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

The accompanying notes on pages 63 to 86 form an integral part of these financial statements.

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

2020 Annual Report and AccountsCONSOLIDATED STATEMENT OF FINANCIAL POSITION

Consolidated statement of
financial position

Notes

31 Dec 2020

31 Dec 2019

(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

Provision for decommissioning

Provision for deferred taxation

Total non-current liabilities

Current liabilities

Trade and other payables

Loans and other borrowings

Convertible loan notes

Income tax payable

Total current liabilities

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

The accompanying notes on pages 63 to 86 form an integral part of these financial statements.

The financial statements were approved and authorised for issue by the board of
Directors on 1 March 2021 and signed on its behalf by:

Eric Zurrin
Chief Executive Officer

Anthony Durrant
Chairman

43,343

77,449

3,260

27,560

151,612

30,040

4,649

2,500

41,582

78,771

230,383

23,378

82,748

2,947

19,968

129,041

27,090

6,282

2,500

3,506

39,378

168,419

210,493

158,440

338

5,374

450

1,043

(51,776)

165,922

4,270

6,346

10,451

21,067

12,208

5,713

9,999

15,474

43,394

64,461

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

230,383

168,419

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Consolidated statement of
changes in equity

US$000

Total equity 31 December 2018

Effect of adoption of IFRS 16

Share
capital

Share
premium

117

157,731

Total equity 1 January 2019 as restated

117

157,731

Loss for the year

Other comprehensive income for the year

Total comprehensive income for year

Share based payments

Lapsed options

591

Total equity 31 December 2019

118

158,322

Profit for the year

Other comprehensive income for the year

Total comprehensive income for
the year

Share based payments

Lapsed options

627

Shares issues (net of expenses)

Total equity 31 December 2020

51,395

149

210,344

The accompanying notes on pages 63 to 86 form an integral part of these financial statements.

698

(13)

(212)

473

(135)

338

Share
option
reserve

Convertible
loan notes
reserve

Translation
reserve

Shares to
be issued

Retained
deficit

Total
equity

5,374

450

416

592

(59,835)

105,127

(10)

592

(59,845)

105,117

(9,482)

(9,481)

212

17,203

614

96,250

17,203

135

1,043

51,426

5,374

450

627

(69,114)

5,374

450

1,043

(51,776)

165,922

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

2020 Annual Report and AccountsCONSOLIDATED STATEMENT OF CASH FLOWS

Consolidated statement of
cash flows

(US$000)

Net cash flows generated from operating activities

Notes

31 Dec 2020

31 Dec 2019

34,608

37,598

Investing activities

Purchase of intangible assets

Purchase of plant and equipment

Purchase of right of use assets

Purchase of assets under construction

Capitalised mine development expenditure

Net cash flows used in investing activities

Financing activities

Ordinary shares issued (net of expenses)

Loans repaid

Principal paid on lease liabilities

Interest paid

Purchase of silver to fulfil Silver Stream obligation

Buy-back of convertible loan notes

Equipment loan repaid

Loans received (net of loan arrangement fees)

Net cash flows received from / (used in) financing activities

(8,549)

(142)

(260)

(4,654)

(8,543)

(22,148)

39,996

(10,987)

(1,087)

(1,975)

(331)

25,616

(108)

(54)

(13,572)

(7,104)

(20,838)

(13,985)

(1,587)

(3,443)

(5,219)

(1,046)

3,068

(22,212)

Net increase / (decrease) in cash and cash equivalents

38,076

(5,452)

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

The accompanying notes on pages 63 to 86 form an integral part of these financial statements.

3,506

41,582

8,958

3,506

NOTES TO THE FINANCIAL STATEMENTS

Notes to the financial statements

1. General information
Shanta Gold Limited (the Company) is a limited company
incorporated in Guernsey. The address of its registered
office is 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 21–22.

These financial statements were approved and authorised
for issue by the Board of Directors on 1 March 2021 and
signed on its behalf by Eric Zurrin and Anthony Durrant.

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.

Basis of preparation

2.1
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. Notwithstanding
the Group’s current strong financial performance and

position, the Board are cognisant of the potential impacts
of COVID-19 on the Group. To date, there has been little
impact of COVID-19 on the Group’s operations and, whilst
the potential future impacts are unknown, the Board has
considered the operational disruption that could be caused
by factors such as illness amongst our workforce and
potential disruptions to supply chain, factoring in these
potential impacts and reasonable mitigating actions to
forecasts and sensitivity scenarios.

At 31 December 2020 the Group had an unrestricted
cash balance of US$41.6 million and net cash of US$37.3
million. 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. The Group expects to
settle existing future commitments associated with the
maturity of the convertible loan notes.

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 2020

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 2020 and have been applied by the Group in these
financial statements. 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

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
and which have not been adopted early. None of these
are expected to have a significant effect on the Group, in
particular:

2020 Annual Report and Accounts NOTES TO THE FINANCIAL STATEMENTS

◼ IFRS 3 Business Combinations: Amendment – Definition

of Business

◼ IFRS 9, IAS 39 and IFRS 7: Interest rate

benchmark reform

◼ IFRS 16 Leases: COVID-19-Related Rent Concessions
◼ IAS 1 Presentation of Financial Statements and IAS 8

Accounting Policies, Changes in Accounting Estimates
and Errors: Amendment – Disclosure Initiative –
Definition of Material

◼ Revisions to the Conceptual Framework for Financial

Reporting.

The principal accounting policies adopted are set
out below.

Basis of consolidation

2.5
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. The consolidated financial
statements comprise the financial statements of the
subsidiaries listed in note 14.

2.5.2 Business combinations
The acquisition method of accounting is used to account
for business combinations by the Group. The consideration
transferred for the acquisition of a business is the fair value
of the assets transferred, liabilities incurred and the equity
interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Acquisition
related costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed in
a business combination are measured at their fair values at
the acquisition date.

A business is an integrated set of activities and assets
that is capable of being conducted and managed for the
purpose of providing a return in the form of dividends,

lower costs or other economic benefits. A business consists
of inputs and processes applied to those inputs that
have the ability to create outputs that provide a return to
the Company and its shareholders. A business need not
include all of the inputs and processes that were used by
the acquiree to produce outputs if the business can be
integrated with the inputs and processes of the Company
to continue to produce outputs If the integrated set of
activities and assets is in the exploration and development
stage, and thus, may not have outputs, the Company
considers other factors to determine whether the set of
activities and assets is a business. Those factors include, but
are not limited to, whether the set of activities and assets:

◼ Has begun planned principal activities;
◼ Has employees, intellectual property and other inputs
and processes that could be applied to those inputs;

◼ Is pursuing a plan to produce outputs; and
◼ Will be able to obtain access to customers that will

purchase the outputs.

Foreign currencies

2.6
2.6.1 Functional and Presentation Currencies
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.

2.6.2 Transactions and balances
In preparing the financial statements of the individual
companies, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recorded
at the rates of exchange prevailing on the dates of the
transactions. At each reporting date, monetary assets
and liabilities that are denominated in foreign currencies

NOTES TO THE FINANCIAL STATEMENTS

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.

Revenue recognition

2.7
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
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.
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

2.9.1 Exploration expenditure
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.

2.9.2 Evaluation expenditure
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
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.

2.9.3 Acquired exploration and evaluation properties
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.

2.9.4 Licencing costs
The costs of acquiring mining and prospecting licences,
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 licence holders’ rights, with the option of
converting these licences 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 licences have expired with no

2020 Annual Report and Accounts intention of renewal, an impairment loss is recognised
as exploration costs in the statement of comprehensive
income. Where expiring licences 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 (%)

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

The useful lives and residual values are re-assessed annually.

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.

2.10.2 Assets under construction
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

NOTES TO THE FINANCIAL STATEMENTS

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.

2.10.3 Deferred stripping asset
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 impairment
losses. Amortisation is calculated on the basis of units of
production.

Impairment of non-current assets

2.11
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.

NOTES TO THE FINANCIAL STATEMENTS

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%, and for Kenyan tax arising on activities in
the Kenyan subsidiaries, which are liable for Kenyan
Corporation Tax at 25%. In addition, the Group may be
liable for withholding taxes on the repatriation of assets
and income from the Tanzanian and Kenyan subsidiaries
to the Company as there is no double tax treaty between
Guernsey and Tanzania or Kenya.

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

The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by
the reporting date.

Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amounts
of the assets and liabilities in the financial statements and
the corresponding tax bases used in the computation
of taxable profit and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.

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

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

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.

2.16 Segmental information
An operating segment is a distinguishable component
of the Group that is involved in gold mining, processing,
exploration or related activities, within a particular
economic environment, which is subject to risks and
rewards that are different from those of other segments.

Operating segments are reported in a manner consistent
with 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.

The Group operates in two geographical locations;
Tanzania and Kenya. For management purposes, the
Group is organised into two main operating segments,
this being mining, processing, exploration and related
activities in Tanzania, and exploration activities at the West
Kenya Project.

All of the Group’s activities within each geographical
location are interrelated and each activity is dependent on
the others. Accordingly, all significant operating decisions
are based upon analysis of the Group as two segments.

2.17 Leases
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.

2020 Annual Report and Accounts NOTES TO THE FINANCIAL STATEMENTS

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.

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,

◼ Any penalties payable for terminating the lease, if

the term of the lease has been estimated based on
termination option being exercised.

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;

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.

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.

2.18.1 Financial assets
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.

◼ 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.

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

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

◼ 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”).

NOTES TO THE FINANCIAL STATEMENTS

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 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.

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. In the event of a shortfall in silver production
versus the Company’s minimum delivery obligations, the
Company may have to procure silver externally and, if so,
any additional associated cost is recognised as a finance
expense. 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.

2.18.2 Financial liabilities
The classification of financial liabilities at initial recognition
depends on the purpose for which the financial liability was
issued and its characteristics.

All purchases of financial liabilities are recorded on trade
date, being the date on which the Group becomes party to
the contractual requirements of the financial liability. Unless
otherwise indicated the carrying amounts of the Group’s
financial liabilities approximate to their fair values.

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.

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.

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.

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.

2020 Annual Report and Accounts 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);

◼ 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.

2.18.3 Capital
Financial instruments issued by the Group are treated
as equity if the holder has only a residual interest in the
assets of the Group after the deduction of all liabilities.
The Company’s ordinary shares are classified as equity
instruments.

For the purpose of disclosure given in note 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.

NOTES TO THE FINANCIAL STATEMENTS

3. Critical accounting estimates, assumptions and

judgements

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.

The estimates, assumptions and judgements that have a
risk of causing material adjustment to the carrying amount
of assets and liabilities within the next financial year are
discussed below.

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 a range of discount rates, gold
prices, cash costs and also the impact of any 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$1,893 /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
11.0% (2019: 9.2%).

◼ The impact of revisions to the intended future mining

schedule and expected cash costs since an impairment
assessment was last carried out.

NOTES TO THE FINANCIAL STATEMENTS

◼ 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.

Consideration was given to the impact of the ongoing
COVID-19 global pandemic on the Group’s operations. The
COVID-19 pandemic was found not to be an indicator of
impairment for any of the Group’s CGUs as to date there
has been no material disruption and no material impact on
the Group’s operations.

Management have also performed sensitivity analysis
by flexing certain variables downwards by reasonable
amounts for each CGU and assessing whether the revised
recoverable value would result in an impairment charge.
The following sensitivities were applied for all years:

◼ Reduction in gold price by 50%
◼ Increase in discount rate to 13.0%
◼ Decrease in production by 30%
◼ Increase in operational expenditure by 80%
◼ Increase in capital expenditure by 80%

None of the changes set out above in isolation would result
in an impairment. The sensitivity analysis also does not
factor in any of management’s mitigation responses should
these changes occur.

Impairment of intangible assets
The Group tests whether acquired exploration and
evaluation assets, mining options and licence 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.

In Tanzania, 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, licences
which are viable and within the licence 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 licences.

The Group’s Lupa Goldfields licences are considered to be
a single CGU and are assessed collectively. Management
have concluded that, whilst the number of active licences
has reduced in the year, no impairment has been identified
as highlighted in note 11.

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’ 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, ‘raw
minerals’ does not include doré and input VAT on gold
exported by the Group in the form of doré is claimable
under the legislation passed in 2017.

On 19 June 2020 the Finance Act, 2020 was published, in
which section 68 of the VAT Act, 2014 was amended such
that exportation of raw minerals is no longer treated as an
exempt supply for which no input tax is deductible.

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

The Company’s input VAT refund application for the period
from July 2017 to June 2020 has been initially rejected on
the grounds that gold doré exported during that period
was deemed a raw mineral under the legislation prevailing
at the time. The Company has obtained an independent
legal opinion confirming that under a proper construction
of the law, Shanta is eligible for input VAT refunds under
section 28 of the VAT Act, 2014, which prevailed during
that period.

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 set-offs, the carrying value in the financial statements is
considered to be fully recoverable. The VAT receivable has
been classified as a 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.

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

The following scenarios demonstrate the potential impact
of the time value of money on the present value of the
VAT receivable, based on an estimated Tanzanian risk-free
rate of 9.10%. 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.

2020 Annual Report and Accounts Timing of future cashflows

2021

2022

2023

Total
cashflows
US$000

Present
value
US$000

75%

50%

25%

50%

25%

50%

27,560

24,734

27,560

24,208

27,560

23,725

27,560

22,715

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.

NOTES TO THE FINANCIAL STATEMENTS

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$0.4 million (2019: US$0.5 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 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.
The year-end Silver Stream obligation uses forward curve
information based on the year-end silver spot price, which
was US$24.9 /oz at the end of 2020 (2019: US$11.7 /oz). A
1% change in silver production estimates would result in an
impact of less than US$0.1 million (2019: 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

31-Dec-20

31-Dec-19

Revenue from contracts with customers

147,431

112,795

147,431

112,795

All revenue is derived from sales of gold from one
geographic location and to one customer.

5. Loss on non-hedge derivatives and other

commodity contracts

US$000

Valuation of open non-hedge derivatives
and other commodity contracts

Loss on commodity swaps delivered into
/ settled

31-Dec-20

31-Dec-19

(8,434)

(11,688)

(1,399)

(11,688)

(9,833)

NOTES TO THE FINANCIAL STATEMENTS

There were no open non-hedge derivatives and other
commodity contracts at 31 December 2020. During the
year losses of US$11,688,000 (2019: US$1,399,000) were
realised on commodity swaps delivered into, as the spot
gold prices at the settlement dates were higher (2019:
higher) than the fixed forward prices of the instruments.

6. Finance income

US$000

Bank interest

Change in estimate of decommissioning
liability (note 22)

7. Finance expense

US$000

Loan and other Interest 1

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)

Loan modification adjustment on
Convertible Loan note (note 21)

Finance expense at amortised cost

Unwinding of discount on
decommissioning liability (note 22)

Purchase of silver to fulfil Silver Stream
obligation

31-Dec-20

31-Dec-19

1,850

1,870

31-Dec-20

31-Dec-19

2,032

3,578

1,443

940

1,178

228

(216)

5,700

591

123

870

176

988

146

5,881

494

331

Total finance expense

6,622

6,375

(1) Loan and other Interest includes interest on loans and borrowings of US$711,000 (2019:

US$1,926,000) (note 20) and coupon interest on Convertible Loan Notes of US$1,321,000
(2019: US$1,652,000) (note 21).

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

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

US$000

31-Dec-20

31-Dec-19

Depreciation of tangible assets

Amortisation of right of use assets

Amortisation of intangible assets

Directors remuneration

Staff costs

Auditors’ remuneration

Audit fees of the Company and Group

Audit fees of subsidiaries by associates of
Group auditor

Audit fees of subsidiaries by other auditors

Fees for review of interim information

18,956

1,163

3,125

17,623

162

27,384

3,933

2,291

16,972

143

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)

31-Dec-20

31-Dec-19

21,866

6,003

Deferred tax (income) / charge

Net charge

(68)

21,798

2,288

8,291

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

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

39,001

(1,191)

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

11,700

1,376

3,718

880

4,124

21,798

(357)

863

7,273

762

(250)

8,291

2020 Annual Report and Accounts Deferred tax
Analysis of deferred tax assets and deferred tax liabilities is
as follows:

US$000

Deferred tax asset

Deferred tax liability

Net deferred tax liability

31-Dec-20

31-Dec-19

(10,451)

(10,518)

(10,451)

(10,518)

There were no recognised tax losses remaining at the
reporting date (2019: US$Nil). At the end of the year,
the Group had further tax losses available in Tanzania
amounting to US$42,604,000 (2019: US$14,497,000). Of
these losses, US$18,213,000 (2019: US$13,098,000) 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 remaining
US$24,391,000 (2019: US$1,399,000) of these losses
have arisen as a result of realised losses on speculative
transactions, for which no deferred tax asset has been
recognised as it is not yet probable that future tax gains
on speculative transactions 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
(2019: 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:

(US$000)

Deferred
tax asset

Deferred
tax liability

Net
deferred tax
liability

At 31 December 2018

3,897

(12,127)

Tax losses utilised in the year

(3,897)

Accelerated tax depreciation

Other movements

At 31 December 2019

Accelerated tax depreciation

Other movements

At 31 December 2020

(8,230)

(3,897)

1,476

133

1,476

133

(10,518)

710

(643)

710

(643)

(10,451)

NOTES TO THE FINANCIAL STATEMENTS

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

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

Profit / (loss) used in calculation of basic
earnings per share (see below)

31-Dec-20

31-Dec-19

17,203

(9,482)

17,203

(9,482)

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

2.023

(1.206)

Weighted average number of shares
in issue

850,274,078 785,971,533

There were share incentives outstanding at the end of the
year that could potentially dilute basic earnings per share in
the future as shown in the table below:

31-Dec-20

31-Dec-19

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

Shares to be issued

4,543,126

6,555,926

Shares to be issued relate to performance bonuses payable
to management and senior employees in respect of 2020.

As the Group is in a profit-making position, the potential
ordinary shares are dilutive and therefore a diluted earnings
per share has been calculated as follows:

Profit for the year attributable to equity holders of
Company

Profit used in calculation of diluted earnings per share

Diluted earnings per share (US cents)

Weighted average number of shares in issue and
potential ordinary shares

31-Dec-20

17,203

2.018

852,665,906

In 2019 the potential ordinary shares were anti-dilutive as
the Group was in a loss-making position and therefore a
diluted loss per share was not calculated.

NOTES TO THE FINANCIAL STATEMENTS

11. Intangible assets

US$000

At 31 December 2018

Additions

Amortisation

At 31 December 2019

Additions

Amortisation

At 31 December 2020

Owned
prospecting
licences

Third party
primary mining
licences

Owned mining
licence

Third party
mining licence

Acquired
exploration
and evaluation
assets

387

108

(7)

197

(14)

183

251

22,519

251

22,519

19,979

251

42,498

Total

23,277

108

(7)

23,378

19,979

(14)

43,343

Acquired exploration and evaluation assets relate to the
Group’s Lupa Goldfields licences which were acquired in
April 2013 and the West Kenya Project which was acquired
in August 2020. The Lupa licences cover a significant land
package of prospective exploration ground surrounding the
Company’s New Luika Gold Mine.

Kenya Limited (formerly Acacia Exploration (Kenya) Limited)
from three subsidiaries of Barrick Gold Corporation
(“Barrick”). On 19th August 2020, the Company completed
the acquisition. US$20.0 million has been capitalised in
respect of US$7.8 million cash consideration paid, 54.6
million Shanta Gold ordinary shares issued to Barrick, and
transaction costs of US$0.7 million.

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 66 active licences relating to the
Lupa Goldfields (2019: 82). Management have concluded
that whilst some of the Lupa Goldfields licences acquired
in 2013 are no longer in the portfolio, no impairment has
been identified.

11.1 Acquisition of West Kenya Project
On 10th February 2020, the Company (through its wholly
owned subsidiary, Shanta Gold Kenya (Guernsey) Limited)
agreed to purchase 100% of the shares of Shanta Gold

The consideration for this transaction also included a 2%
net smelter royalty chargeable on future gold production
at the West Kenya Project. Consideration also included
an additional cash payment of US$0.5 million (see note
32), which may become payable within four years of the
acquisition date, subject to satisfaction of a condition
subsequent to the acquisition agreement.

The West Kenya Project does not meet the definition of
a business outlined by IFRS 3 or as detailed within the
Company’s accounting policies (see note 2.5.2). Assets and
liabilities acquired as part of the transaction are accounted
for at cost, with the excess of the purchase price over the
cost of the assets and liabilities acquired being allocated
to acquired exploration and evaluation assets within
intangible assts.

2020 Annual Report and Accounts 12. Property, plant and equipment

NOTES TO THE FINANCIAL STATEMENTS

US$000

Cost

At 1 January 2019

Additions
Pre-production revenue1

Reclassified on adoption of IFRS 16

Asset transfers

Disposals

Change in estimate

At 31 December 2019

Gold
processing
plant

Mining
assets

Assets under
construction

Mining
and other
equipment

Decom-
missioning
asset

Deferred
stripping
asset

Total

43,030

106,915

42,069

5,340

35,776

251,696

(668)

370

6,661

18,566

13,572

(3,563)

10,235

(12,370)

(11,133)

1,765

(4)

42,732

123,811

16,205

32,751

(613)

4,727

443

20,730

(3,563)

(11,801)

(4)

(613)

36,219

256,445

Accumulated Depreciation

At 1 January 2019

24,641

69,875

Reclassified on adoption of IFRS 16

Charge for the year

Disposals

(405)

4,561

16,888

At 31 December 2019

28,797

86,763

Net book value

18,328

(4,985)

5,633

(4)

18,972

3,614

35,249

151,707

292

(5,390)

27,384

(4)

3,906

35,259

173,697

At 31 December 2019

13,935

37,048

16,205

13,779

821

960

82,748

Cost

At 1 January 2020

Additions

Change in estimate

At 31 December 2020

Accumulated Depreciation

At 1 January 2020

Charge for the year

At 31 December 2020

Net book value

42,732

123,811

8,543

16,205

5,793

42,732

132,354

21,998

32,893

32,751

4,727

36,219

256,445

142

(821)

3,906

14,478

(821)

36,219

270,102

28,797

2,968

31,765

86,763

12,150

98,913

18,972

3,582

22,554

3,906

35,259

173,697

256

18,956

3,906

35,515

192,653

At 31 December 2020

10,967

33,441

21,998

10,339

704

77,449

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

against capital expenditure in 2019.

2. Assets under construction primarily relate to capitalised costs at the Singida Project and

ongoing phases of underground development at New Luika.

Mining
and other
equipment

Current lease liabilities

Mobile equipment 1

Mobile equipment 2

Solar power units 3

Office space 4

Mobile equipment 5

Office space 6

Office space 7

Office space 8

Leased land 9

Non-current lease liabilities

Mobile equipment 1

Mobile equipment 2

Solar power units 3

Mobile equipment 5

Office space 6

Leased land 9

6,411

469

(3,933)

2,947

1,476

(1,163)

3,260

2,355

479

123

(1,704)

(55)

Total lease liabilities

31-Dec-20

31-Dec-19

146

266

125

546

266

237

116

1,178

660

515

579

1,757

133

237

168

538

1,198

1,216

(846)

1,757

(1) 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.

(2) 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.

(3) 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.

(4) Office space: a lease for office space from Nevada Golden Coins Limited for a five year period

commencing in November 2015.

(5) Mobile equipment: A lease for mobile equipment from Sandvik for a capital amount of
€987,000 ($1,200,000) repayable quarterly over thirty-six months commencing on 25
February 2020.

(6) Office space: a lease for office space from Nevada Golden Coins Limited for an eighteen

month period commencing November 2020.

(7) Office space: a lease for office space from Innovative Management Services Limited for an

eight year period commencing 1 January 2013.

(8) Office space: a lease for office space for a five year and eight month period commencing 27

April 2016.

(9) Leased land: a lease of land for a five year period commencing 1 April 2017.

NOTES TO THE FINANCIAL STATEMENTS

13. Leases

US$000

Right of use assets

At 1 January 2019

Reclassified on adoption of IFRS 16

Recognised on adoption of IFRS 16

Amortisation

At 31 December 2019

At 1 January 2020

Additions

Amortisation

31 December 2020

Lease liabilities

At 1 January 2019

Recognised on adoption of IFRS 16

Interest expense

Lease payments

Foreign exchange movements

At 31 December 2019

At 1 January 2020 (note 20)

Additions

Interest expense (note 7)

Lease payments

Foreign exchange movements

At 31 December 2020 (note 20)

2020 Annual Report and Accounts NOTES TO THE FINANCIAL STATEMENTS

14. Subsidiary companies
At 31 December 2020, the Group had the following
subsidiary undertakings:

Name of company

Shanta Gold Holdings Limited

Chunya Gold Holdings Limited

Shamba Limited

Shanta Gold Kenya (Guernsey) Limited

Rukwa Limited

Boulder Investments Limited

Shanta Gold Mauritius Limited

Shanta Mining Company Limited

Singida Resources Public Limited Company

Shield Resources Limited

Mgusu Mining Limited

Nsimbanguru Mining Limited

Shanta Gold Kenya Limited (formerly Acacia Exploration
(Kenya) 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%

Guernsey

Cyprus

Mauritius

Tanzania

Kenya

Tanzania

United Kingdom

Principal activity

Holding Company

Investment Company

Exploration and mining

Dormant

15. Categories of financial assets and liabilities

US$000

31-Dec-20

31-Dec-19

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)

149

2,500

41,582

44,231

(5,713)

(9,999)

(12,208)

(27,920)

(4,270)

2,500

3,506

6,089

(14,026)

(9,987)

(12,308)

(36,321)

(5,219)

Total financial liabilities measured at amortised cost

(32,240)

(41,540)

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)

NOTES TO THE FINANCIAL STATEMENTS

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.

16. Inventories

US$000

Plant spares and consumables

Gold in ore stockpile

Gold in gold room and CIL

31-Dec-20

31-Dec-19

13,961

11,385

4,694

11,572

10,185

5,333

30,040

27,090

The cost of consumable inventories consumed during
the year and included in working cost amounted to
US$24.2 million (2019: US$28.4 million). Plant spares and
consumables increased in the year as a result of measures
taken to mitigate potential supply chain risks associated
with COVID-19.

17. Trade and other receivables

US$000

Non-current assets

VAT receivable 1

Current assets

Prepayments 2

VAT receivable 1

Other receivables 3

31-Dec-20

31-Dec-19

27,560

19,968

3,218

1,431

4,649

4,311

1,888

6,282

During the year no impairments were recognised (2019:
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 Tanzania Revenue Authority (“TRA”). Based
on confirmations from TRA, approved VAT Refunds have been assessed as being immediately
available for repayment or setoff. In 2020, US$1.9 million of the brought forward VAT
receivable was set off against corporate taxes falling due in the year, utilising the full balance
of VAT Refunds available for setoff. Refund applications for the period from July 2020 to
December 2020, which amount to US$4.4 million, require audit by the TRA before being
formally approved. Refund applications for the period from July 2017 to June 2020, which
amount to US$23.2 million, have been initially rejected by the TRA and the Company intends
to appeal this decision. The legislation relevant to the Company’s refund applications for
the period from July 2017 to June 2020 (summarised in Note 3) is clear and the Company
expects its appeal to be successful. The full outstanding balance has been classified as
a non-current asset for the purposes of these financial statements. Refer to Note 3 for
additional details.

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.

3. Other receivables: Other receivables include an amount of US$1,282,000 paid to appeal
certain findings of historic tax assessments carried out during the year, for the which the
Company has concluded there is a high chance of its appeal being successful. In the event of a
successful appeal, amounts paid to file the appeal are refundable to the Company.

18. Restricted cash
An amount of US$2,500,000 (2019: 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

31-Dec-20

31-Dec-19

6,818

8,406

Derivative financial liability (note 5)

11,304

Accruals

5,390

3,902

12,208

23,612

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.

20. Loans and other borrowings

US$000

Current liabilities

Loans payable to Investec Bank less
than 1 year 1
Silver Stream 2

Loans payable to Exim Bank less
than 1 year 3
Equipment loan 4

Lease liabilities (note 13)

Non-current liabilities
Silver Stream 2

Loans payable to Exim Bank more than
1 year 3

Lease liabilities (note 13)

Total loans and other borrowings

31-Dec-20

31-Dec-19

5,343

1,899

2,636

1,178

5,713

3,691

579

4,270

9,983

1,765

5,959

299

660

14,026

2,471

2,210

538

5,219

19,245

The finance expense recognised in respect of loans and
borrowings in the year amounted to US$0.7 million (2019:
US$1.9 million).

(1)

Investec loan: Loan from Investec Bank in South Africa relates to two facilities totalling
US$40 million obtained in May 2015. The facilities bore an annual interest rate of 3-month
US$ LIBOR +4.9% and were 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 repaid
in the year.

(2) Silver Stream: The Company entered into a Silver Streaming agreement (“SSA”) with

Silverback Limited (“Silverback”), a privately held Guernsey-based investment company,
under which Silverback paid the Company an advanced payment of US$5.25 million on
closing. Silverback will also pay the Company an ongoing payment of 10% of the value of
silver sold at the prevailing silver price at the time of deliveries which will be made annually.
The SSA relates solely to silver by- product production from New Luika with minimum silver

2020 Annual Report and Accounts 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 2020. 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-20

31-Dec-19

(4,236)

2,207

(1,443)

(940)

(1,178)

(5,590)

(3,948)

1,746

(870)

(176)

(988)

(4,236)

(3) 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.

In 2019 SMCL refinanced its existing term loan with Exim. The new term loan facility
comprised 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.

(4) 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 bore interest at a fixed rate of 6.5% over three
years. The equipment purchases were part of Shanta’s capital programme and followed a
previous similar arrangement entered into during 2016.

21. Convertible loan notes

US$000

Balance at 1 January

Purchase by group company

Cash paid interest

Coupon interest (note 7)

Accreted Interested (note 7)

Loan modification adjustment (note 7)

At 31 December

31-Dec-20

31-Dec-19

9,987

(1,321)

1,321

228

(216)

9,999

15,060

(5,219)

(1,652)

1,652

146

9,987

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 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.

NOTES TO THE FINANCIAL STATEMENTS

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.

In early 2020 the holders of the convertible loan notes
voted in favour of a restructuring that extended their
maturity date by one year, resulting in a fair value
adjustment of US$216,000. The Company retains the
option to redeem the convertible notes earlier than
the extended maturity date. At the end of 2020, Group
liabilities included the obligation to repay US$9.8 million of
outstanding notes in April 2021.

22. Provision for Decommissioning

US$000

Balance at 1 January

Unwinding of discount (note 7)

Change in estimate (note 6, note 12)

At 31 December

31-Dec-20

31-Dec-19

8,426

591

(2,671)

6,346

8,545

494

(613)

8,426

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
yields of Tanzanian Sovereign Bonds with a maturity profile
commensurate with the anticipated rehabilitation schedule
have been used to determine discount factors applied
to anticipated future rehabilitation costs. 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 2020 and use the
latest Tanzanian Sovereign Bond yields.

23. Share capital

Authorised

1,043,465,532 ordinary
shares of 0.01 pence each

31-Dec-20

31-Dec-19

£78,738

£77,889

Issued and fully paid

Number

US$000

At 1 January 2019

778,889,782

77,889

Issued in year

8,485,304

As at 31 December 2019

787,375,086

Issued in year

256,090,446

849

78,738

25,609

As at 31 December 2020

1,043,465,532

104,347

117

118

149

NOTES TO THE FINANCIAL STATEMENTS

54,650,211 ordinary shares were issued to Barrick in
respect of the acquisition of the West Kenya Project
in the year. 194,884,309 ordinary shares were issued
during a successful equity raise completed on 23
October 2020. 6,555,926 ordinary shares were issued
to Executive Directors in the year in respect of 2019
performance bonuses.

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

27 July 2010

26 September 2011

6 January 2012

Exercise price

Final exercise date

Number of options at
31 December 2020

Number of options at
31 December 2019

18.2p

27 July 2020

25p

26 September 2021

23.13p

6 January 2022

500,000

1,170,000

1,670,000

495,000

500,000

1,170,000

2,165,000

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 2020

31 December 2019

Number

Weighted average
exercise price (£)

Number

Weighted average
exercise price (£)

2,165,000

(495,000)

1,670,000

0.224

0.182

0.237

2,960,000

(515,000)

(280,000)

2,165,000

0.206

0.060

0.224

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:

2020 Annual Report and Accounts NOTES TO THE FINANCIAL STATEMENTS

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

£0.34

£0.30

£0.34

£0.35

10 years

55%

1.70%

55%

1.70%

55%

1.70%

23-Aug-12

£0.240

1.585

£0.229

1.585

£0.219

1.585

£0.23

£0.231

10 years

55%

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

25. Net cash flows from operating activities

US$000

31-Dec-20

31-Dec-19

Profit / (Loss) before taxation for the year

39,001

(1,191)

Adjustments for:

Depreciation/depletion of tangible assets

Amortisation of right of use assets

Amortisation/write off of intangible assets

Share based payment costs

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

Unrealised exchange (losses) / gains

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

Finance income—decommissioning
provision (note 6)

Finance expense (note 7)

Pre-production revenue (note 12)

18,956

1,163

1,043

(2,207)

27,384

3,933

614

8,434

(200)

(1,745)

(1,850)

(53)

6,622

6,375

3,563

Operating cash flow before movement
in working capital

62,817

47,121

Increase in inventories

Increase in receivables

(Decrease) / Increase in payables

Taxation paid

Interest received

(2,950)

(7,705)

(11,404)

40,758

(6,170)

(2,611)

(5,671)

436

39,275

(1,730)

Net cash flow from operating activities

34,608

37,598

NOTES TO THE FINANCIAL STATEMENTS

26. Reconciliation of liabilities arising from financing

activities

US$000

At 1 January 2019

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

Cash flows

Non-cash flows

Silver Stream

Finance lease obligations
recognised

Interest accruing in the period

Effects of foreign exchange

Reclassification from non-current
to current liabilities

At 31 December 2020

Non-current
loans and other
borrowings
(Note 20)

Current loans and
other borrowings
(Note 20)

8,230

2,499

168

1,140

(6,818)

5,219

1,020

1,141

(3,110)

4,270

23,664

(17,842)

(1,745)

311

2,944

(124)

6,818

14,026

(12,728)

(2,207)

196

3,226

3,110

5,713

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

Convertible
loan notes
(Note 21)

15,060

(6,871)

1,798

9,987

(1,321)

1,333

Restricted cash
(Note 18)

(2,500)

Total

44,454

(22,214)

(1,745)

479

5,882

(124)

26,732

(14,049)

(2,207)

1,216

5,700

9,999

(2,500)

17,482

The Group held derivative financial instruments during the
years ended 31 December 2020 and 2019 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.

2020 Annual Report and Accounts NOTES TO THE FINANCIAL STATEMENTS

The maturity of financial liabilities is as follows:

US$000

Loans and other
borrowings

Lease liabilities

Silver Stream

Convertible loan notes

Other payables and
accruals

31 December 2020

Less than
3 months

3 months
to 1 year

Later than
one year but
no later than
five years

(1,306)

(1,344)

(202)

(12,783)

(867)

(1,899)

(10,447)

(611)

(3,691)

(14,291)

(14,557)

(4,302)

31 December 2019

US$000

Less than
3 months

3 months
to 1 year

Later than
one year but
no later than
five years

Loans and other borrowings

(4,203)

(4,181)

(2,650)

Equipment loan

Lease liabilities

Silver Stream

Convertible loan notes

Derivative financial liability

Other payables and
accruals

(196)

(210)

(4,809)

(12,308)

(111)

(679)

(749)

(1,765)

(2,471)

(10,447)

(6,495)

(21,726)

(23,678)

(5,870)

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

Interest rate risk

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

The Group’s cash and cash equivalents are carried at an
effective interest rate of 1% (2019: 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 Group’s exposure to credit risk is explained below:

a) 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.

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

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

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.

NOTES TO THE FINANCIAL STATEMENTS

(US$000)

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Loans and other borrowings

Convertible loan notes

Net exposure

(US$000)

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Derivative financial liability

Loans and other borrowings

Convertible loan notes

USD

40,796

(9,014)

(8,456)

(9,999)

13,347

US$

3,427

(8,854)

(11,304)

(18,073)

(9,987)

31 December 2020

TZS

1,385

(2,846)

EUR

(1,472)

(1,379)

(1,472)

31 December 2019

TZS

(3,216)

EUR

(167)

(1,172)

GBP

615

(64)

551

GBP

(71)

Net exposure

(44,708)

(3,144)

(1,339)

(64)

KSH

(284)

(55)

(224)

Total

1,431

41,582

(12,208)

(9,983)

(9,999)

10,823

Total

3,506

(12,308)

(11,304)

(19,245)

(9,987)

(49,255)

The Group’s policy is, where possible, to allow Group
entities to settle liabilities denominated in their functional
currency. In order to monitor the continuing effectiveness
of this policy, the Board reviews quarterly the liabilities,
analysed by the major currencies held by the Group of
liabilities due for settlement and expected cash reserves.

The following significant exchange rates applied
during the year:

Average rate

Closing rate

2020

0.0004

1.1412

1.2844

0.0090

2019

0.0004

1.1190

1.2772

2020

0.0004

1.2259

1.3490

0.0092

2019

0.0004

1.1191

1.3127

TZS : US$

EUR : US$

GBP : US$

KSH : US$

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.

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.

28. Segment information
The Group had two operating segments during the year:

◼ Tanzanian Assets – gold mining, processing, exploration

and related activities in Tanzania

◼ West Kenya Project – gold exploration activities in Kenya

Segment results, assets and liabilities include items
directly attributable to a segment, as well as those that
can be allocated on a reasonable basis. These have been
disaggregated as follows:

2020

Tanzanian
Assets

West Kenya
Project

Total

147,431

18,150

44,700

1,870

(6,622)

(21,798)

18,150

147,431

(947)

17,203

(947)

43,753

1,870

(6,622)

(21,798)

17,203

US$000

Revenue

Segment result

Operating profit / (loss)

Financial income

Financial expense

Taxation

Profit / (Loss) attributable
to equity holders of the
parent company

Segment assets

Segment liabilities

Non-current asset additions

209,583

(64,164)

14,478

20,800

(297)

19,979

230,383

(64,461)

34,457

The Group acquired the West Kenya Project on 19 August
2020. Prior to this date, the Group had one operating
segment and as such no further disaggregation of financial
results has been made in respect of 2019.

2020 Annual Report and Accounts NOTES TO THE FINANCIAL STATEMENTS

These preliminary findings do not represent a formal
tax demand. Two key preliminary findings have been
highlighted within the correspondence, being in respect
of corporation tax falling due on an assessed net gain
arising upon an assessed indirect transfer of interest in
the West Kenya Project, and VAT arising on an assessed
transfer of an underlying participating interest in the
West Kenya Project.

Legal advice has been obtained in respect of these
preliminary findings. In respect of the assessed net gain
arising upon an assessed indirect transfer of interest
in the West Kenya Project, the legal advice obtained
concludes that such taxes are payable by the seller in
the transaction. Furthermore, specific warranties within
Shanta’s Sale and Purchase Agreement with Barrick
provide protections for the Company in respect of this
matter. In respect of VAT arising on the transaction,
the legal advice obtained concludes that VAT does not
apply to transfers of shares, and hence the acquisition
of Shanta Gold Kenya Limited (formerly Acacia
Exploration (Kenya) Limited) by Shanta Gold Mauritius
Limited in 2020 is not a transaction that attracts VAT
under Kenyan tax laws.

No liability or provision has been recognised within the

2020 financial statements in respect of these preliminary
findings from the KRA and, whilst any future payments
by the Group in respect of these matters would likely
be material, the likelihood of such future payments is
considered to be remote.

(iii) A US$4.1 m tax charge has been recognised in the

year in respect of historical tax assessments conducted
by the TRA during 2020. These assessments also
highlighted a matter in respect of certain royalties
which have been found by the TRA to be disallowable
for corporation tax purposes. The Company has
appealed this finding and has obtained expert external
opinion supporting its grounds for objection. The
Company considers there to be a remote chance of this
matter being upheld on appeal. No liability has been
recognised at the year-end in relation to this matter.
The total possible exposure in relation to this matter
amounts to US$3.4 million.

The Directors confirm that they are not aware of any
other contingent liabilities as at 31 December 2020
(2019: US$Nil).

33. Events after reporting date
Following the year-end, the Directors have proposed a
final dividend of 0.10 pence per share payable (2019: Nil),
subject to the approval of shareholders on 24 March 2021.
This final dividend is expected to be payable to those
shareholders on the Company’s register on 9 April 2021.

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 33–36.
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 (2019: US$220,000) and US$263,000 (2019:
US$263,000) respectively.

During 2020 an amount of US$Nil (2019: US$37,899) was
paid to Keith Marshall in respect of engineering services
provided to the Company.

During 2020 an amount of US$233,000 (2019: US$182,000)
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.

The Company reimburses its staff for work-related
international flights at cost. Due to the coronavirus
pandemic, several international flight tickets purchased
by Luke Leslie in the year were cancelled and refunded
by airline operators after this expenditure had been
reimbursed to him by the Company. These refunded
amounts, worth US$27,528 at the end of the year, remain in
credit on Luke Leslie’s account and will be applied to future
international travel costs.

30. Commitments
The Directors confirm that the Group had capital
commitments of US$3.6 million (2019: US$1.5 million)
relating to underground mining equipment at New Luika
and long-lead capital items on order at Singida.

31. Dividend per share
Following the year-end, the directors have proposed a
final dividend of 0.10 pence (2019: Nil) per share totalling
approximately US$1.5 million (2019: Nil), subject to the
approval of shareholders on 24 March 2021. This final
dividend has not been accrued in the consolidated
statement of financial position.

32. Contingent liabilities
Contingent liabilities identified as at 31 December 2020
have been summarised as follows:

(i) Under the terms of the Share Purchase Agreement

for the West Kenya Project acquisition, US$0.5 million
of cash consideration is conditional on satisfaction of
certain conditions relating to the Company obtaining
required approvals in respect of the Gold Rim Project
Licences. These conditions had not been met as at 31
December 2020 and no amount has been recognised.

(ii) One of the Company’s subsidiaries, Shanta Gold Kenya
Limited, received preliminary findings on 9 February
2021 from the Kenya Revenue Authority (the “KRA”)
in respect of an initial review conducted regarding
the disposal by three subsidiaries of Barrick of their
interests in the West Kenya Project during 2020.

2020 Annual Report and AccountsNOTICE OF THE ANNUAL GENERAL MEETING

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 Sixteenth Annual General Meeting of the shareholders of the Company will be held at
11 New Street, St Peter Port, Guernsey, GY1 3EG on 24 March 2021 at 10.00am (the “Meeting”) for the purpose of
considering and, if thought fit, passing the following resolutions numbered 1 — 11 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 2020

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 2020 as detailed in the 2020 Annual Report

and Accounts

5. To approve the Non-Executive Directors’ aggregate fees for the period between 1 January 2021 to 31 December

2021 inclusive to be US$405,000

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 Eric Zurrin 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 consider and if thought fit re-elect Keith Marshall as a director of the Company who retires by rotation and who

makes himself available for re-election as a director of the Company

10. To consider and if thought fit re-elect Ketan Patel as a director of the Company who retires by rotation and who

makes himself available for re-election as a director of the Company

11. To approve a final dividend proposed by the Directors of 0.10 pence per share.

Dated 1 March 2021

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.

2020 Annual Report and AccountsFORM OF PROXY

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

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, Guernsey, GY1 3EG on 24 March 2021 at 10.00am and at any adjournment thereof and to attend and vote thereat
as indicated below. To allow effective constitution of the Meeting, if it is apparent to the Chairman that no shareholders will be present in
person or by proxy, other than by proxy in the Chairman’s favour, then the Chairman may appoint a substitute to act as proxy in his stead
for any shareholders provided that such substitute proxy shall vote on the same basis as the Chairman.

Please indicate with an ‘X’ in the appropriate space how you wish your votes to be cast (see Note 4).

For

Against

Vote
withheld

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 2020

2. Ordinary Resolution to receive and consider the report of the directors of the Company

3. Ordinary Resolution to receive and consider the report of the auditors of the Company

4. Ordinary Resolution to approve the Directors’ remuneration paid for the year to 31 December 2020 as

detailed in the 2020 Annual Report and Accounts

5. Ordinary Resolution to approve the Non-Executive Directors’ aggregate fees for the period between 1

January 2021 to 31 December 2021 inclusive to be US$405,000

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

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

8. Ordinary Resolution to consider and if thought fit re-elect Eric Zurrin 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 consider and if thought fit re-elect Keith Marshall as director of the Company who

retires by rotation and who makes himself available for re-election as a director of the Company

10. Ordinary Resolution to consider and if thought fit re-elect Ketan Patel as director of the Company who

retires by rotation and who makes himself available for re-election as a director of the Company

11. Ordinary Resolution to approve a final dividend proposed by the Directors of 0.10 pence per share

Date

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

NOTES TO THE PROXY FORM

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.

2020 Annual Report and Accounts96