Shanta Gold Kenya Limited (West Kenya Project), reported a net loss of $7.3 million (Sh874.7 million) last year, reflecting the capital investments it is making in anticipation of launching production in the future according to the company’s most recent annual report.
Despite the fact that the multinational has discovered commercially viable gold deposits in the region with resources estimated to be 1.6 million grains of gold, it still recorded a loss in the local operation, which increased by nearly eight times from $947,000 (Sh113.1 million) the year before.
“The latest phase of drilling at the West Kenya Project has continued to deliver consistently high-grade results that are indicative of the vast potential West Kenya offers in the Shanta Gold growth story,” said Eric Zurrin, Chief Executive Officer, Shanta Gold.
In the two years that Shanta Gold spent substantially on feasibility studies to ascertain the extent of gold reserves and whether to move forward with production, the West Kenya Project did not generate any money as it focused on spending on the project.
“The 2022 drilling campaign is two-part, focused on upgrading existing resources to the indicated category and resource expansion across our numerous targets,” said Zurrin.
In its annual report, Shanta Gold stated that the Kenya Revenue Authority (KRA) had issued tax demands to the company. It also stated that it had passed any potential liabilities to Barrick Gold Corporation, from which it had purchased the West Kenya licenses in 2020.
On November 15, 2021, KRA sent an income tax demand to a company, Shanta Gold Kenya Limited, over Barrick’s sale of its stake in the West Kenya project.
“The key finding highlighted within the correspondence being in respect of corporation tax falling due on an assessed net gain arising upon an assessed indirect transfer of interest in the West Kenya Project,” the multinational said.
“Subsequent to year-end, Barrick reached a settlement with the KRA, thereby settling all related obligations,” Shanta Gold said. On December 23, 2021, the local subsidiary also got a withholding VAT demand for an undisclosed sum because it was allegedly not collecting a two percent withholding tax on payments to suppliers.
Shanta Gold, it is contesting the claim and is prepared to ask Barrick Gold to pay any tax debts associated with the project in accordance with the SPA (SPA.
“Furthermore, in the unlikely event any amount becomes payable, the company can make a breach of warranty claim for any tax that becomes payable subject to the aggregate financial limits set out under the SPA being $2 million (Sh239 million).
Barrick Gold transferred to Shanta Gold its gold mining permits in a cash-and-stock deal worth a total of Sh1.4 billion. Additionally, based on future real gold production, Shanta Gold committed to pay Barrick Gold a royalty rate at a rate of 2 per cent.
As part of the agreement, Shanta Gold obtained the right to mine gold over a 1,161 square kilometre area spanning the counties of Kakamega, Kisumu, Siaya, and Vihiga.
