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Shanta Gold top pick among gold juniors says Liberum

Last updated: 09:51 04 Dec 2012 EST, First published: 10:51 04 Dec 2012 EST

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Shanta Gold (LON:SHG) has been nominated as broker Liberum’s top junior gold pick after a visit to the New Luika mine in southwest Tanzania. 

The broker said the bottlenecks that hampered Shanta reaching full production at the mine have been identified and are well on the way to being resolved. 

A new crusher is due to arrive on site by Christmas, grinding levels have improved and leaching issues have been tackled.

The result is that the processing plant is currently running at 89% recovery with gold on carbon now at close to expected levels resulting in a “material lift in gold sales”, said Liberum.

The broker said the key takeways from its visit were that full year guidance is on track for this year and next at 6,000 oz in 2012 and 70,000 oz in 2013.

The process plant has reached targeted recoveries and with the exception of the crushing circuit is working well, while Liberum sees significant near mine exploration upside and optionality within the region which will drive mine life expansion/extensions.

It expects New Luika will produce 70,000oz in 2013 generating US$62mln of underlying earnings (EBITDA), equivalent to 44% of the current market cap. 

Liberum says, though, that its estimates beyond 2013 are likely to change post the release of a revised mine plan in early 2013 which should give a better understanding of long term mine scheduling.

The broker added it expects a re-rating on a 6-month view triggered by commissioning of the crusher late December, meeting FY’12 guidance and above all, "consistently delivering on quarterly production".

Shares edged higher to 19.15p.

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