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Shanta Gold – Large scale Director buying a signal?

By Doc Holiday | Saturday 15 June 2013


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


On Friday, AIM listed Shanta Gold (SHG) announced that director Jonathan Leslie had bought 2.3 million shares which brings his total holding to 15.44 million or 3.34% of the company.

Even at the current low price of 12p this purchase is not immaterial.

The company is now capitalised at £55.42 million and is just off 12 month lows (10.375p) and well off 12 month highs (34.5p).

It would seem directors are not alone in buying shares in Shanta and although the sector has almost leprous status among investors at present, no trend lasts forever.

I won't comment too much on the price of gold as I'm hardly an expert however the basic principles of buying stocks with decent funding positions and strong buying support to fill the gaps of any distressed seller with a feasible strategy to increase growth has to be worth a closer look.

Shanta gold has explicitly confirmed that it is on track to hit its 2013 production target of 70,000oz from an increased crushing capacity and a programme to cut cash costs from $800oz to $850oz to $675-775oz is firmly in place.

The Company estimates that the recoverable gold over the next five years at its flagship 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.

Odey Asset Management LLP is increasing its position with some steady buying seen in recent months.

Hence it is not just directors but also some of the most switched on long term value investors in London who are buying.

The recent AGM allowed the company to remind us all of its strong balance sheet and real cash generation.

There are risks, most notably that the gold price may fall further or that Shanta may mess up operationally (it has not always delivered).

However for me the salient bull points are:

  • Reliable cash with robust balance sheet 
  • Significant production upgrades 
  • Reduction of cash costs 
  • Increased Institutional and Boardroom buying activity 
  • Stifled sector looking at trend reversal

Targeting the right company in the right sector at the right time is always difficult but a fundamentally simple case has been laid out here briefly.

All the best. 

Doc Holiday is a seeker of value among small caps.

You can follow him on twitter at DDS_Doc_Holiday or see more of his work on his own blog at docslaymanschatter.blogspot.com


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