Shanta Gold plunges on new equity placing

Shares in Shanta Gold dropped like a stone after it went back to equity markets to raise another 30 million dollars 'to address short-term financing requirements'.

The firm also said initial production had been lower than anticipated at its flagship New Luika Gold Mine in Tanzania.

This was mainly down to reduced crushing capacity, as well as issues with the grinding levels, cyanide consumption and assay controls, the company said.

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This had resulted in reduced recoveries and a "lock up" of the gold in the plant.

Shares were down almost 11% after it announced the offer of at least 80m new shares to institutional and other investors.

The firm said the placing would be used for short term financing during the ramp up New Luika.

In April the firm raised $35m for similar reasons.

Shanta said the money would be split between $14m in payments due, $12m of fourth quarter operating costs, $5m of project finalisation capex, $7m of debt repayment and $4m of general working capital and transactional expenses.

"The placing provides the company with the flexibility to consider the suitability and attractiveness of additional alternative sources of non-dilutive financing which are currently under consideration as well as providing the flexibility to consider value enhancing corporate transactions," the company said.