Prime News Kenya

Gold firm to invest Sh2.4bn in Kenya mines

Posted By : Justice Bimpeh

Guernsey-incorporated Shanta Gold is set to invest $24 million (Sh2.4 billion) in staffing and gold exploration costs in Kenya after buying seven mining licences covering the Western part of the country from Toronto-based Barrick Gold Corporation.

The spending, to be spread over three years, was disclosed by Shanta in an analyst call on Monday.

“What we expect (to spend) is likely to be $8 million (Sh800 million) each year for three years,” Shanta’s chief executive Eric Zurrin said in response to a question from an analyst.

“But we will get much more clarity on that number as we go through the next six months or so.”

Mr Zurrin added that less than $2 million (Sh200 million) per year will be spent on staff and the minimum investments required to keep the licences.

Shanta is buying the West Kenya operation from Barrick Gold at a total cost of $14.5 million (Sh1.4 billion) in cash and shares. The deal is expected to be completed mid this year.

Barrick will take $7 million (Sh700 million) in cash and a 6.4 percent stake or 54.6 million shares of Shanta valued at $7.5 million (Sh753 million). This will see Barrick become the fifth largest shareholder in Shanta.

Shanta earlier said that additional work to delineate the size of the orebody, progress an updated mineral resource estimate and proceed to a construction decision could take up to three years.

The multinational will acquire licences for rights to mine gold over a 1,161 square kilometre area straddling Kakamega, Kisumu, Siaya and Vihiga counties.

The area has deposits estimated at 1.1 million ounces with a current market value of Sh186 billion.

Shanta has also agreed to pay Barrick a royalty rate at a rate of two percent, based on actual gold production in the future.

The West Kenya project made a pre-tax loss of $5.9 million (Sh592 million) in the year ended December 2018. Gross assets in the same period stood at $10.6 million (Sh1 billion).

Shanta says it will inherit certain liabilities of the project, noting that it could pay an additional $4 million (Sh400 million) to settle third party claims.

The proposed transaction marks increased deal-making in local gold operations that have seen little production.

Source : Business Daily

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