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UPDATE - Shanta Gold outlines infill drill plans; says production will be at upper end of forecasts

-adds broker comment --

Shanta Gold (LON:SHG) has confirmed it will carry out an infill drilling at its New Luika gold mine in Tanzania.

The objective of the 5,000-metre programme is to “optimise  and de-risk” a planned underground life of mine extension to the project.

Shanta management, with the help of AMC Consultants, is considering two scenarios that would increase the longevity of the project.

The first would see the push underground made in early 2016 and production from that source augmenting open pit output later that year.

The second expansion option involves the introduction of a third mill to increase capacity to 840,000 tonnes a year from 600,000 currently. 

Chief executive Mike Houston said: "As stated previously, the board is determined to deliver a life of mine plan at New Luika that delivers real value for shareholders while taking into account  prevailing market conditions. 

“The step to underground mining is fundamental to fully exploiting the resource at New Luika and we have worked through the process  in some detail with our independent reviewer. 

“They have advised that in their view with the nature of the ore body that some additional drilling would de-risk the project. 

“The board and management are fully in agreement particularly as the short delay to complete the drilling program  will not materially impact on the current production profile or overall life plan.

The plans were outlined as Shanta revealed that 2014 production is likely to be at the upper end of the 80-83,000 ounce range, mined at an all sustaining US$900 to US$950 per ounce.

Guidance for next year is for output of 83,000 to 85,000 ounces with all-in costs falling to US$830 to US$880.

Broker Peel Hunt added that cost management and guidance at New Luika continues to be very impressive.

“With 17,500 ounces hedged until March 2015 at $1,317 an ounce, the prospect of extensions to the mine life and significant cost management momentum, Shanta Gold remains compelling value at 10p offering investors 70% upside from current levels.”

Shares were 9.75p today.

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