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Good morning, ladies and gentlemen. Welcome to the Shanta Gold Q1 2023 Production and Operational Update Call. My name is Frenzy and I will be the operator for your call this morning. [Operator Instructions] It's been my pleasure, and I would now like to turn the conference over to Eric Zurrin, CEO. Please go ahead, sir.
Thank you very much. Good morning. Thank you for dialing into today's quarter 1, 2023 production and operations report for Shanta Gold. I'm pleased to report a strong start to 2023 across all of our assets. We've had our first gold pour at Singida taking place last month on time and on budget. And now as a result, Shanta is a 100,000 ounce per year gold producer for the first time in its history. We have nearly 4 million ounces of gold resources across our 3 assets, including the high-grade West Kenya project. Now with 2 mines in production, I look forward to updating shareholders on our organic growth initiatives to come throughout the year.
Let's begin on Slide 2 of the presentation, where this morning, I've announced that I've informed the Board of my decision to step down from my role as CEO after 6 years with the company. I'll remain as CEO until the publication of our interim results and throughout Q3, so for at least the next 5 months, and that will ensure a smooth transition to new leadership for Shanta Gold. Shanta's business today is vastly different and vastly improved from the business that I took over in 2017. My team transformed Shanta from a single asset, single country gold producer, encumbered with debt, to a business where we now have diversified revenue and hugely attractive exploration potential.
Shanta's business, I can reiterate, has never been stronger. We're at a gold price in the gold price cycle that is very convincing for gold investors. And overall, I remain committed to all of our stakeholders and the Board and management during the succession process, so that we can find a suitable new CEO, new leadership to steer Shanta through its next phase of growth, particularly at the West Kenya project. As you can see here on Slide 2, Shanta is blessed with excellent talent and skills and the company is in fantastic shape.
On to Slide 3. Shanta has a diversified portfolio of East African assets. We believe our value is well over $500 million of NPV versus our market cap today of about $170 million. In Tanzania, we have our 2 producing mines. Singida is now in production. West Kenya is the obvious next step in our growth story, and we'll talk a bit about that in a few minutes. Our balance sheet is in excellent shape considering we finance Singida from cash flows and some debt, and we did not dilute our shareholders for the construction of the Singida Gold project. We're supported by excellent long-standing high-quality shareholders, mostly in London, who own about 42% of the company, including directors who own 7% of Shanta.
On to Slide 4. And you can see here, during the first quarter, Shanta became Africa's newest 100,000 ounce per year gold producer, a real testament to the team that put it all together and made it happen. As you can see on the chart, this is a step change from recent years where we had 1 asset. And if you extrapolate the cash flows at the current gold price, we're now roughly about a $200 million per year revenue business versus last year at about $110 million. So really a big change in terms of size, relevance, diversification of income streams, derisking of the overall portfolio. The overall EBITDA run rate as we sit today with 2 assets producing and the gold price just under $2,000 per ounce is in the range of about $60-million-odd per year, and that's based on analyst estimates. And free cash flow is running at about $3 million a month or roughly about $30 million or $35 million a year. So a real business, real assets, real cash flow. You'll see and you'll hear during the call, performance at Singida is going well, and we'll cover that shortly.
And then the big question on the right-hand side of the slide is where do we go from here? Well, we had excellent organic growth through reserve additions at both New Luika and Singida including mine life extensions, which we've been able to showcase over the years in New Luika. And then obviously, we have the West Kenya project, which is now the focus for unlocking significant value. We have active plans on that unfolding in the background as we speak. So lots to look forward to and to keep you updated on.
On Slide 5, and during the first quarter, we updated our reserves and resources, increasing total resources to now 3.7 million ounces. Just under half of that is from the West Kenya project that we acquired in 2020, and we've grown and upgraded since then. And as I said, we're actively working through strategies, take West Kenya through permitting and present the clear path to production. On Slide 6 and turning to a few points on the Q1 results. During the quarter, we produced 15,317 ounces of gold, slightly lower than what we expected to produce, which was just over 16,000 ounces, and that's a function of some of the challenges we had in February, which have been rectified. So the 15,300 is, as I said, slightly lower than budget. And what we had in February was reduced availability of underground equipment, particularly on the trucks, which we rectified in March. We also suffered from generally excessive rains in February that impacted the crusher with wet material and slowed the hauling from underground at the Luika deposit. Despite this, gold production for both January and March was above our budgeted number. And overall, April, as we said today, is on track for about 6,000 ounces a year -- sorry, 6,000 ounces during April, and we remain confident of hitting full year guidance at New Luika of 66,000 to 72,000 ounces.
During the quarter, operating costs were $1,141 an ounce, and all-in sustaining cost was $1,429 an ounce. So all-in sustaining cost per ounce was above 5% -- 5.3% higher than budget due to slightly lower than budgeted production on a per unit basis. But on an absolute dollar basis, and when you look at it, and this is how we like to look at it in terms of spending, all-in sustaining cost was 3% lower than budget. We spent about $21.9 million at the all-in sustaining cost level versus 22.7% in the budget. So really, the all-in sustaining cost per unit was higher than planned because the production was slightly lower than planned. I'm pleased to come out of the Singida capital spending period with strong financial liquidity of about $11.5 million. And the backdrop being a healthy gold price environment, where we have very, very few hedges to get through, including this month, one in the next couple of days, which will satisfy and move on. Finally, during the quarter, our safety record was outstanding. We had 0 LTIs and 0 recordable injuries.
Moving on to Slide 8 of the presentation, where here you can see a photo of the New Luika gold mine processing plant, absolutely a lovely part of Tanzania, which I have been privileged enough to go back and forth to over the last 10 years. This mine has been in production since 2013. The current life has been extended a fourth consecutive time to 2028, and we will shortly be drilling the Luika underground, probably about June time to add new reserves to the plan. Next week, at exactly this spot in this photo, we will be hosting London-based shareholders and analysts in Tanzania to visit our operations and showcase our team and capabilities.
On to Slide 9 and a few areas of focus from the last quarter. Mining of physicals was in line with volumes from Q4. We had a total of 166,186 tonnes of ore grading 3.3 grams per tonne that was mined from underground in Q1 compared with 177,000 tonnes in Q4. We had about 64,000 tonnes of ore grading 1.44 gram per tonne mined from open pits compared with 65,000 tonnes at 1.53 gram per tonne in Q4. During the first quarter, open pit mining performed very well following the changes we made in December. Mined ore from the open pits was 34% above budget of 48,000 tonnes, and that was really attributable to better surface mining equipment and mechanical availability. Production, as I said already, was better than planned in January and March, while February was not. As I said, during February, availability of trucks at the underground operation was below plan, and we had the excessive rains impacting ramp access and the extended rebuild of Solo number 1, so one of our underground drilling units.
All combined, these factors led to a change of mining sequence in February, which meant we did not mine the tonnes and stopes that we planned and production was slightly lower than expected. All of those were rectified in March and April is looking good. At the processing plant, during the quarter, we milled 217,500 tonnes. That is in line with previous quarters and exactly on track with 2023 budgeted figure of 870,000 tonnes for the year. Pleasing now to say that April is looking good across Singida and New Luika. Generally speaking, we're targeting about 8,400 ounces per month from New Luika and Singida, which gets us to 100,000 ounces per year. And as I said, April production at New Luika is progressing well. We said it's on track for 6,000 ounces. In Singida, we've already produced 2,200 ounces in the first 22 days of April. So I think with some conviction and confidence, I can say April 2023 could very well be the best ever production month in Shanta's history. Overall, hopefully, we can get to 9,000 ounces of production this month. On to Slide 10. During the quarter, we updated our group-wide reserves and resources. We extended the mine life at New Luika again now to 2028, Q1 2028. And we're confident that we'll be able to extend it again going forward.
Let's move forward to a discussion on Singida over the Slides 11 to 15, and I'll make a few general points. During the quarter, we poured first gold on March 30 at Singida. This was on time and on budget. We're now just tabulating the final cost of the Singida capital, which is rounding up around about $40 million. So it's very satisfying to see that be done through a pandemic and a global inflation crisis. We've now produced 2,200 ounces in the first 22 days of April at Singida. Our figures show that we will be able to achieve around 3,000 ounces of gold production this month in Singida's first month of operation, which is a great achievement. We are benefiting from higher-than-average grades on the stockpile at Singida, and we've previously said that Singida's production run rate is around 32,000 ounces per year. So subject to the final 5-year plan at Singida that we'll release later this quarter.
At Singida, we expect to declare commercial production during Q2 and announce that 5-year plan. As you can see here on Slide 11, a photo of Singida, which is all brand-new equipment. And the philosophy we have adopted at Singida is that we've designed Singida for expansion. So when the reserve life extends or increases, we will be able to add additional throughput capacity at Singida, we believe, possibly taking it up by 35% to 50% for $5 million or less based on our numbers. So lots of upside potential at Singida, which will come from exploration success.
In terms of Singida ramp-up, we've had regular teasing issues as expected. We've been working through those over the last 3 or 4 weeks. And we've had some fantastic help with that in terms of consultants and the plant is being stabilized for steady-state operations, which we're achieving more often than not. So I think the plant is stabilizing nicely.
On Slide 15, at Singida, I just want to reiterate the investment case at Singida, which is that it's largely underexplored. It's ripe for reserve additions. And as you can see here, and we've said this many times before, I think about 90% of Singida's reserves are within 120 meters of surface. And this is a greenstone gold deposit. This project, this asset is begging, absolutely begging for exploration. And I think we have the right team to do that. So we've been looking at that for some time, and it's really just been a function of cash flow prioritization, which will change shortly as we generate cash flow from Singida.
A brief recap now on Slide 17 of West Kenya. We acquired the asset in late 2020 for a mere $14 million. Today, the resources are 1.76 million ounces grading 5.6 grams per tonne. So you can hopefully conclude that the purchase price was very attractive, and this is now across 2 mining camps across the West Kenya project. As I said already, West Kenya accounts for 48% of Shanta's total resources, and so that was an update made in Q1. Shanta shareholders now have outstanding long-dated optionality to the gold price through this absolutely wonderful project. West Kenya itself is not a known story.
It's largely because it's been hold up as a noncore asset of large mining companies. And our job is to make sure West Kenya comes to life. It comes to life with the right ingredients that demonstrate the value. And as I said, we are working through potential options on how we do that with West Kenya. This is more strategic. And we also have a team literally that started to work at a workshop this week at Kisumu to think through the specifics of how we articulate the plan to permitting and production. So a lot of work has been happening in the background. It's pleasing to see the outcomes of that work. And we're trying to turn that work, that analysis, those internal studies into strategic deliverables that ultimately result in value for Shanta shareholders.
On to Slide 18 and just this is the first of the 2 camps at the West Kenya project. During the quarter, we upgraded the resources at Kakamega Camp. We delivered a material growth and quality with the latest mineral resource estimate demonstrating a 91% increase in the indicated ounces and an overall increase to 1.7 million ounces. So not only was there a significant conversion of the deposit into indicated ounces, but these ounces yet again demonstrated high grades. And as you can see here, indicated grades of 11.45 grams per tonne. So really quite special. Just to remind you, the oxides at Bushiangala and Isulu, so this is the area within about 80 or 90 meters of surface. So those oxides are now in the indicated category. They contain 100,000 and 600 ounces grading 10.44 grams per tonne. So you can imagine just how valuable those oxides are in terms of high-margin cash flow during the construction ramp-up phase.
On to Slide 19. During the quarter, we announced an updated resource at Ramula. This is the second camp at West Kenya. It's about 35 kilometers from Kakamega, and this is following the strong drilling results we had in Q4. And so what this demonstrated here is that there's a significant increase in indicated ounces at Ramula, and that's now just under 0.5 million ounces. And as you can see here, there's all sorts of low-hanging fruits to expand and increase the Ramula deposit. The bigger picture with Ramula is that it's part of a camp. There's another 5 targets within just a few kilometers.
I think the closest target is about 600 meters away. And when you put all of those together, Ramula starts to look like a 2 million-ounce camp with very attractive open pit potential. So this is all part of our workshop or thinking how do we unlock this, how do we put this together. There's just so many options to think through, and it's starting to look like Ramula as a starter operation for us, getting that going to the indications here that Ramula has the open pit potential, particularly attractive from a cost and timing perspective, and Ramula could very well be a nice 50,000 to 60,000 ounce starter operation based on our numbers. Now finally, on Slide 20. We expect another busy period over the next few months, as shown on this slide. I'll be around, as I said, until the end of September. I'm working closely with the Board on finding a successor. But I reiterate, Shanta's business today is vastly improved from the one that I took over in 2017, and that's thanks to the team that's really transformed Shanta from the single asset, single country gold producer to a real business with diversified revenue and hugely attractive exploration potential. And you can see that exploration potential here in the catalyst as we talk about drilling at West Kenya, drilling at New Luika, and hopefully, we'll have drilling at Singida to pull along as well, all in the next couple of months.
At Singida, we'll be articulating, first bringing it into "commercial production" articulating the 2023 plan, the 5-year plan, which will be very similar, not as similar in terms of production ounces to what we already announced in October 2020. So lots to look forward to at Singida. And overall, Shanta's business, as I say again and again, has never been stronger and Shanta is an excellent gold mining company. So it's an exciting time for Shanta, for our shareholders. We look forward to continuing to deliver returns and taking the company forward.
Now with that, I'll hand it back to the operator and open it up for any Q&A.
[Operator Instructions] We have the first question from Ben Davis from Liberum.
Just a few questions from me. Firstly, you mentioned things interesting on Singida, which has kind of been talked around before in terms of the Singida expansion possibilities. What's the best way to think about that in terms of time line? I presume, obviously, you want to see commercial production from this. But is basically exploration then bottlenecked deciding whether to move forward with those expansion plans?
Yes, that's absolutely right. We have explorations of reserve additions. And then I suspect if we start drilling sometime in the summer, I mean, we're not talking about a lot of drilling. I mean, if we even budgeted $1 million of drilling at Singida, if we could add additional reserve ounces this year, we could really start thinking and articulating an expansion plan there at Singida relatively quickly. And so what that expansion would look like is a second mill. We already -- as you'll see the next week end when you're there, we already have the civils and the footprint in place for the second mill. And we have space for 2 additional tanks as well. The crusher has been oversized from the get-go. So that's lots of capacity on the crushing side, and the gold room is ready for expansion as well with lots of capacity there. So it's really just adding another mill and some more tanks, which we think latest numbers we saw were under $5 million to do that.
Great. And then essentially, all self-financing from Singida?
Absolutely, yes, 100%.
Perfect. Next one on New Luika. So the plant availability issues in February. So just to confirm that wasn't necessary to do with power, which impacted last year in Q4.
There wasn't, no. No, it was down to the rains and the truck availability.
Okay. Got you. Got you. And then lastly, yes, sorry to hear you that you'll be leaving. So that will be, I mean, in terms of recruitment, that process has just started in terms of finding a replacement for yourself? Have you got any immediate plans in terms of going elsewhere? Or this is just the start of the process?
It's just the start of the process. Really, this is all very friendly with the Board. It's all in best intention. I've been coming and going to Tanzania for a long time, for 10 years, and in this role for 6. And I think it's important for CEOs to reflect and have self-renewal, not to have fun for too long. And I think more often the case, they do. I think it's a mistake. And I think it's important for companies to be able to renew themselves and reinvent. So here we are.
Well, thanks for what you've done. I think I'm sure it will be a relatively easy hire given what you've left in, but I appreciate all that, Eric.
[Operator Instructions] There seems to be no further questions at this time, and I hand back to Mr. Zurrin.
Thank you very much, operator. I appreciate everyone attending the call and listening to our update. We have a lot of work to do with West Kenya. And with that work comes all sorts of opportunity. Shanta is a completely different company to what it was a year, 3 years, 6 years ago. We have 2 producing assets, a lot of upside potential, and certainly very strong cash flows given the gold price environment and our production profile. So lots to look forward to. Thank you for your support. We'll be in touch in due course.
Ladies and gentlemen, this concludes today's conference. Thank you very much for joining, and have a good day.