This concept may seem alien to many in the West, but such scepticism may help to explain why Shanta’s market value of about £110m represents a discount to the $165m (£135m) of net assets on its balance sheet.
Such a discount to book value will hopefully provide investors with some protection, should they need it. For the moment, however, Shanta is on track to increase production by more than 40pc in 2023 to around 94,000 ounces and build on 2022’s 18pc advance. New Luika’s AISC is expected to be $1,200-$1,300 an ounce and Singida’s around $1,300-$1,400, so gold prices north of $1,900 are a boon.
No wonder last week’s first-half results reported a 70pc year-on-year jump in sales and a move into profit, while positive free cash flow reduced the already modest net debt position. A sixth consecutive dividend payment for a half-year also speaks of management’s confidence in its Tanzanian assets, while exploration work in west Kenya could yet add a little gold dust to the investment case.
Nevertheless, small mining companies are not suitable for everyone, not least because things can and do go wrong.
The gold price can be volatile, for a start, while Shanta Gold aims to bounce back after missing production targets in 2022. In addition, the Aim-quoted concern is looking for a new chief executive after Eric Zurrin’s decision to step down in 2023 after a six-year spell in charge. The identity of his successor is eagerly awaited.
Shanta still has a chance to really shine.
Questor says: hold
Ticker: SHG
Share price at close: 10.5p
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Russ Mould is investment director at AJ Bell, the stockbroker
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