Shanta Gold : Q4 2016 Production & Operational Update

19 January 2017

Shanta Gold Limited

("Shanta Gold", "Shanta" or the "Company")

Q4 2016 Production and Operational Update

Shanta Gold (AIM: SHG), the East Africa-focused gold producer, developer and explorer, announces its production and operational results for the quarter ended 31 December 2016 ("Q4", the "Quarter" or the "Period") for its New Luika Gold Mine ("NLGM"), in Southwest Tanzania.

Highlights Operational

• Quarterly gold production of 18,897 ounces ("oz") (Q3: 20,580 oz);

• Record annual gold production for 2016 of 87,713 oz, beating guidance of 82,000 - 87,000 oz (2015: 81,873 oz);

• Quarterly gold sales of 15,285 oz at an average price of US$1,187 per oz ("/oz"), compared to average spot price of US$1,217, closing at US$ 1,148 /oz;

• Gold sales for 2016 of 86,331 oz (2015: 80,622 oz) at an average price of US$1,232

  /oz, compared to average spot price of US$1,249 /oz;

• Cash costs for Q4 of US$486 /oz (Q3: US$387 /oz) and All in Sustaining Cost ("AISC") of US$747 /oz (Q3: US$621 /oz);

• AISC for 2016 of US$661 /oz against guidance of US$690-740 /oz (2015: US$845

  /oz); and

• No lost time injuries for the Quarter.

  Financial

• Cash balance of US$15.0 million ("m") (Q3: US$25.8 m);

• Cash used in operating activities of US$0.1 m in Q4, compared to US$11.1 m of cash generated from operating activities in Q3, reflecting lower gold price on lower sales at higher cost but also with increased working capital in supplier prepayments and VAT on all capital and operating expenditure;

• Cash generated in operations of US$45.9 m in FY 2016 (2015: US$31.8 m);

• Capital expenditure of US$12.9 m (Q3: US$14.2 m);

• Retirement of US$9.1 m Letter of Credit with all payments (for the ISI power station) made from cashflow;

• Gross debt of US$57.9 m (Q3: US$70.5 m) and net debt of US$42.9 m (Q3: US$38.4 m);

• US$5.25 m proceeds for silver stream was received in the quarter; and

• Forward sales from January to August 2017 of 21,000 oz at an average price of US$1,318 /oz.

  Development and Exploration

• New Luika Underground project is on time and within budget, with 1,260 metres of tunnel development completed at year end. First development ore was delivered in December as scheduled and the first raise bore ventilation shaft was 97% complete;

• Underground high grade ore production on target for Q2 2017;

• Feasibility study underway for New Luika's Ilunga deposit as a new high grade underground operation (utilising existing NLGM infrastructure) with an updated Mine Plan incorporating this and Elizabeth Hill to be completed at the end of Q1 2017;

• Infill drilling program completed at Singida's Gold Tree 2 and Gold Tree 3 deposits; and

• Singida Pilot Mining Project scheduled to start operations in Q2 2017.

  Guidance for 2017

• Annual guidance for 2017 of 80,000 - 85,000 oz at AISC of US$800 - US$850 /oz;

• The transition from surface to underground operations will require processing of lower grade ores during H1 2017 as access to higher grade underground ore is established. This will result in production being weighted to the second half of the year;

• 2016 costs benefited significantly from an accelerated mining program for the remaining lives of both the Luika and Bauhinia Creek open pits. This innovative approach significantly reduced the mining costs but is confined to the 2016 year. It should be noted that the initial guidance for AISC in 2016 was US$750 - US$800/ oz; and

• The Base Case Mine Plan 2016 - 2020 guidance is for five year average production of 84,000 oz with a life of mine average AISC of US$695 /oz.

Note 1: Cash Cost - Back of mine operating and administrative costs excluding royalty.

Note 2: AISC - Cash cost plus royalty, stay in business capital expenditure, interest and G&A.

Toby Bradbury, Chief Executive Officer, commented:

"I'm pleased to report that Shanta's Q4 2016 performance has rounded off an excellent year for the Company. We achieved record gold production of 87,713 oz at a very competitive, and Company record, AISC of US$661/oz. Shanta has beaten full year guidance on both cost and volume. This is a fantastic accomplishment and I would like to extend my thanks

and appreciation to all of our hardworking and dedicated employees and contractors who have made this success possible."

"In 2017, Shanta will continue to deliver high margin ounces and to generate strong operational cash flows. Shanta is now 15 months into New Luika's Base Case Mine Plan, as presented in September 2015, and since then the Company has consistently delivered to meet its annual guidance, both in 2015 and 2016. The underground project is significantly de-risked with initial access already developed within the Bauhinia Creek orebody. High grade ore production from underground operations is scheduled to start within six months and I look forward to keeping the market updated on our progress."

"Shanta's improved financial position is particularly satisfying with a reduction in gross debt from a peak at the end of H1 2016 of US$75 m to US$57.9 m at year end. Debt is projected to continue to reduce in 2017 despite the scheduled completion of the underground development program in the first half of 2017."

Analyst conference call and presentation

Shanta Gold will host an analyst conference call and presentation today, 19 January 2017, at 09:30 GMT. Participants can access the call by dialling one of the following numbers below approximately 10 minutes prior to the start of the call.

UK Toll-Free Number: 0808 2370030

UK Toll Number: [phone]

PIN: 63802503#

The presentation will be available for download from the Company's website: www.shantagold.com or by clicking on the link below:

http://www.anywhereconference.com?UserAudioMode=DATA&Name=&Conference=13168 2118&PIN=63802503

A recording of the conference call will subsequently be available on the Company's website.

Enquiries:

Shanta Gold Limited
Toby Bradbury (CEO) Mark Rosslee (CFO)	[phone]
Nominated Adviser and Broker
Peel Hunt LLP
Matthew Armitt / Ross Allister / Chris Burrows	[phone]
Financial Public Relations
Tavistock
Jos Simson / Emily Fenton / Barney Hayward	[phone]

About Shanta Gold

Shanta Gold is an East Africa-focused gold producer, developer and explorer. It currently has defined ore resources on the New Luika and Singida projects in Tanzania and holds exploration licences over a number of additional properties in the country. Shanta's flagship New Luika Gold Mine commenced production in 2012 and produced 87,713 ounces in 2016. The Company is admitted to trading on London's AIM and has approximately 583 million shares in issue.

For further information please visit: www.shantagold.com.

Operational

Production Summary

Q4 2016	Q3 2016	Q2 2016	Q1 2016
Tonnes ore milled	151,827	144,930	151,698	149,128
Grade (g/t)	4.26	4.90	5.48	5.69
Recovery (%)	90.8	90.2	89.5	89.3
Gold (oz)
Production	18,897	20,580	23,896	24,341
Sales	15,285	23,426	26,134	21,486
Silver production(oz)	24,731	30,381	36,316	35,144
Realised gold price (US$)	1,187	1,301	1,246	1,132

Note: quarterly production figures reconciled at year end

Production from the quarter maintained the reducing trend for the year which was planned as a key element of maintaining consistent production during the transition into the underground operations. Importantly, annual guidance for production was beaten and a new annual record for production at 87,713 oz was achieved. The year-end ROM stocks were 90,000 tonnes at an average grade of 4.6 g/t for a contained 13,000 oz which, with on-going surface mining and a contribution of high grade underground development ore, will ensure continuity of ore supply to the mills into 2017. The first half of 2017 anticipates lower average grade until high-grade ore is accessed from the Bauhinia Creek underground. Gold production, consequently, will be biased to the second half.

Plant efficiencies have improved through the year with record recoveries of 90.8% achieved in Q4 2016. Q4 2016 was the first full quarter to benefit from the completion of the new 1,000 m3leach tank increasing leach residence times in circuit. Recovery rates of 90% are expected to be maintained.