Shanta Gold says it has brought its Ilunga underground mine at the New Luika Gold Mine (NLGM), in south-western Tanzania, into commercial production on schedule and on budget.

The first ore stope is now in production at a depth of 98 m below the portal and 130 m below surface, while the primary ventilation fan and underground infrastructure are installed and operational, the company said.

Commercial output comes following gross pre-production capital investment of only $7.9 million ($5 million after netting off pre-production revenue) and less than 12 months after the underground portal blast at Ilunga was carried out, Shanta said.

Ilunga is now the third source of high-grade underground feed from NLGM alongside Bauhinia Creek and Luika mines. The underground mine has a probable ore reserve of 660,500 t at 5.56 g/t for 118,000 oz contained, as well as inferred resources of 636,647 t at 3.57 g/t for 73,067 oz.

Shanta has previously said it views Ilunga as a high-grade production option in Tanzania, with the potential to contribute up to 25,000 t/month of ore and an average 20,000 oz per planned level of development.

The company previously moved development forward 12 months after the project showed off a “compelling business case”. This included a very low capital intensity of $75/oz (pre-production) and a pre-tax internal rate of return of 129% at a gold price of $1,200/oz.

Underground drilling targeting the conversion of the inferred ounces into the mine plan and extending the mine life at Ilunga is expected to take place in the first half of 2020.

Eric Zurrin, Chief Executive of Shanta Gold, said: “Bringing these high-grade ounces online within budget and on time is yet another example of our model at work, namely: adding low cost ounces to resources at our well established operations, thereby increasing the mine life and the free cash flow generation potential at NLGM.”