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Strategic and Operational Update

April 15, 2013

Shanta Gold Limited, the East African focused gold producing company, is pleased to provide the following strategic and operational update.

Highlights

Consolidation of the Shield Lupa Licences and Termination of the Great Basin Gold Joint Venture

The Company is pleased to announce that it has acquired Boulder Investments which owns 100% of Shield Resources and the prospective Lupa licences, from RK Mine Finance Trust I.  The licences cover a significant portion of the exploration ground surrounding the Company’s New Luika Gold Mine including active licences of 1,313 sq km and a further 1,237 sq km of licences under application.  This is a large area of prospective exploration ground with a number of priority targets for further investigation by the Company.  Over 57 known artisanal or colonial gold mining operations have been identified to date and Shanta Gold has had encouraging early-stage drilling results.

The Company has paid US$2.4 million at closing, with an additional US$2.4 million deferred over 24 months and US$3.1 million issued as a promissory note due 12 April 2017, both bearing interest at 2.6%.  The consolidation of the prospective exploration ground secures 100% control and ownership over the prospective Lupa licences.

The previous exploration joint venture with Great Basin Gold entered into in June 2011, which included a conditional payment obligation on Shanta Gold subject to exploration results, has also been terminated.  The termination of the joint venture eliminates all potential dilution to Shanta Gold whereby it would have been obliged to issue shares in the Company to the value of US$70 per oz for Measured & Indicated ounces and US$20 per oz for Inferred ounces for any gold resource defined above 500,000 oz and all mined gold ounces.  This transaction also eliminates the Company’s remaining minimum exploration spend of over US$10 million in the next 20 months to earn its 80% interest in Shield.

Appointment of New Chairman

The Company is pleased to announce the appointment of Anthony Durrant as non-executive Chairman effective 20th May 2013. Mr Durrant will assume the position at the time of the Company’s AGM, succeeding Walton Imrie.  Mr. Durrant brings considerable expertise and proven leadership experience to the role.

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

Operational Update

Following the initial production of 5,748 oz of gold in Q4 2012, the Company produced 11,888 oz in Q1 2013, including 5,735 oz in March 2013.  Significant progress in the first quarter including the impact of the upgrade to the crushing circuit from December 2012 combined with a strengthened operational management team have provided the Company with a strong base for its future growth.

As previously announced, the Company’s original two-stage crushing circuit was upgraded to a three-stage crushing circuit in early January and has operated well at 960 tonnes per day (tpd) in Q1 2013 compared to an average of 610 tpd in the period August to December 2012.  The Company will further increase crushing capacity in Q2 2013 with a modified unit to an estimated 1,200 tpd throughput in H2 2013 and is planning a longer term upgrade with expansion potential to be in place by the end of 2013.  Removal of other plant bottlenecks with continued operating improvements at the mills, CIL tanks and gold room have resulted in steady increases in plant throughput. It will be necessary to upgrade the incinerator and smelting capacity in the gold room to handle the planned increase in production.

The Company reiterates that its 2013 production target of 70,000 oz is achievable if the further crusher capacity and other planned plant improvements are successfully implemented during Q2 2013. At the current monthly run rate, circa 63,000 oz would be produced for the full year.

Cash costs are currently within the range of US$800 to US$850 per oz and are expected to reduce to US$675 to US$775 per oz as a review of the current cost structure is undertaken and targeted improvements are achieved.  Specific areas of focus include the restructuring of major service and supply agreements and the assessment of alternative sources of power.

The Company estimates that the recoverable gold over the next five years at the New Luika Gold Mine is 430,000 oz at an average blended grade of 6.3 g/t, up previously from 225,000 oz over the first three years.  The completion of the Company’s maiden reserve and formal publication of the mine plan over an initial five year period through to the end of 2017 is only subject to interpretation of final geotechnical in-pit drilling results which is expected to be finalized and published in early Q3 2013. It is not anticipated that there will be any material changes to five year estimates given above. 

Separately, the Company is upgrading its 2011 Definitive Engineering Study of Singida to Bankable-Feasibility level.

Commenting on the recent developments Mike Houston, CEO, said:

“The Company has had a positive start to the year both from a corporate and operational perspective. The consolidation of the prospective exploration ground secures 100% control and ownership over the Shield licences.  We are excited by the significant potential of the licence areas which are located close to our established New Luika plant.

I am delighted that Tony has accepted the position of Chairman of Shanta Gold and look forward to working with him. His experience within the global mining and capital markets will be great assets to the Company. I would like to thank Walton for all he has done for Shanta Gold. Throughout his time with the Company Walton has provided entrepreneurial leadership and I wish him well for the next stage of his long and successful career."

Over the last quarter, we have made good progress at New Luika. We have spent a considerable amount of time understanding the ore body, pit design at Bauhinia Creek and drivers of the processing plant and have carefully planned our gold production over the next five years at New Luika. 

Going forward, a permanent upgrade of the crushing circuit capable of handling 1,500 tpd is targeted to be in place by the end of 2013, thereby increasing our throughput potential by approximately 50% at a modest capital cost.  I am also excited by the longer term potential of the Bauhinia Creek ore body which is open at depth and we will explore through a drilling programme over the next 12 to 18 months.  The consolidation of the Lupa Goldfields provides exciting exploration-led growth potential for the company.  Singida is a likely value-enhancing opportunity that needs more attention and I have put in place a dedicated project team that is driving the upgrade of the 2011 Engineering Study.  A key objective is to unlock Singida’s potential as efficiently as possible.

I am encouraged by the progress over recent months and I, along with the rest of the Board, are confident that Shanta Gold has established a clear pathway for growth in gold production both in the year ahead and beyond.”

Mr Durrant said: "Shanta Gold is an African gold company with a compelling growth story in a region of increasing importance for gold production.  I am excited about the future possibilities and look forward to working with Mike and his team to lead Shanta towards continued growth and success."

Additional Information

A list of Mr Durrant's current and past directorships held within the last five years is set out below:

Current
Court & Smith Ltd.
Gazelle Partners Ltd.
Mussel Inn Ltd.
Trimalgam Investments ltd.
The Native Flora Co Ltd.
Amref Flying Doctors Ltd.
AKT Foundation
Jura Management Ltd.

Past
Conrico International Ltd
The New Shakespeare Co Ltd.
African Medical & Research Foundation

Currently, Anthony Peter Wynn Durrant (age 65) holds no shares in the Company.

Save for the above, there is no further information that is required to be disclosed in accordance with Rule 17 and paragraph (g) of Schedule 2 of the AIM Rules for Companies with respect to the appointment of Anthony Durrant.

Enquiries:
Shanta Gold Limited                Tel: +255 (0) 22 2601 829
Mike Houston, CEO
Edward Johnstone, FD

Nominated Adviser and Broker
Liberum Capital Limited            Tel: + 44 (0)20 3100 2000
Michael Rawlinson / Tom Fyson / Christopher Kololian

Financial Public Relations
FTI Consulting                            Tel: +44 (0)20 7269 7100
Billy Clegg / Oliver Winters

About Shanta Gold Limited

Shanta Gold is an East African focused gold producing company. It currently has defined ore resources on the New Luika and Singida projects in Tanzania and holds exploration licences over a number of additional properties. The Company’s flagship New Luika Gold Mine commenced production in 2012. The Company is admitted to trading on AIM and has approximately 462 million shares in issue.

For further information visit the Company's website: www.shantagold.com.

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