Update on funding and fundraising for Shanta Gold

30 January 2012

SHANTA GOLD LIMITED

Update on funding and fundraising for Shanta Gold

Shanta raises US$25 million since December 2011, without equity dilution on favourable terms

Shanta Gold Limited, ('Shanta Gold' or the 'Company') (AIM: SHG), the near-term gold producer with operations in Tanzania, is pleased to announce an update regarding debt funding in support of the development of the New Luika Mine and projects in Tanzania.

In December 2011 the Board of Shanta Gold announced that it had secured a US$5 million bridging loan through Export Holdings Ltd and that the Board was well advanced with other institutions with respect to further funding.

The Board is very pleased to announce that a US$15 million facility with BFN Bank (UK) Limited has been approved by its credit committee and that the legal documentation is currently being finalised with the expectation that first draw-down will take place after 13 February 2012. Shanta Gold will make an additional announcement relating to the terms of the loan, once these terms are binding.

The Board is also pleased to announce that it has, on behalf of the Company, today entered into a new standby equity distribution agreement ("SEDA") backed loan agreement to the value of US$ 5 million ("New Loan Agreement") with YA Global Master SPV. Ltd ("YAGM") and a variation to the original SEDA announced in December 2009. This loan facility will be available for draw down from 1 February 2012.

Said Shanta Gold CEO, Gareth Taylor, "Effectively Shanta has raised US$25 million since December 2011, without equity dilution, on favourable terms. This funding will allow for operation of the Company through to production at the New Luika Gold Mine (NLGM) in April of this year. The NLGM is on track for cold commissioning in February, hot commissioning in March and production in April of this year with full production rates being achieved by the end of the second quarter 2012, as previously announced.

"Having received the mining licences for the Singida project the Board is now seeking to progress the Resettlement Action Plan - for people affected by the mine - and the manufacturing, purchase and transport of the key equipment for project construction. Shanta Gold is in discussions, at varying levels of development, with a number of institutions to secure the funding required for the above."

Under the SEDA backed loan agreement, YAGM has agreed to lend the sum of US$5,000,000 ("Commitment Amount") to be repaid in either (i) ten instalments commencing on 19 April 2012 and ending on 1 February 2013, or (ii) in the event that a validation event (as defined below) has not occurred within 30 days of the execution of the New Loan Agreement, in ten instalments commencing 31 days after signing the New Loan Agreement.

A validation event is defined as (i) the Company having entered into a binding, unconditional financing agreement for a minimum of US$10,000,000 with a third party non-related financing entity; or (ii) the Company having completed an equity fundraising which raises in excess of US$15,000,000 (before expenses) for the Company.

Other than the above, the main terms of the New Loan Agreement are as follows:

   (a)   the Company will be able to use the amounts advanced for general working capital purposes;

   (b)   interest will accrue on the Commitment Amount at a rate of 8% per annum;

   (c)   by way of security for the Commitment Amount, the Company has agreed to execute advance notices of the SEDA enabling the YAGM to convert such amount(s) outstanding into Ordinary Shares of the Company in case of default; and

   (d)   the Company has agreed to an implementation fee of US$384,000.

Under the original SEDA announced on 18 December 2009, YAGM committed up to GBP £3,000,000 to subscribe for new ordinary shares of the Company and this facility was available to the Company from 17 December 2009 until 17 June 2012.

The original SEDA facility has now been extended by a variation agreement which changes the amount from GBP £3,000,000 to GBP £6,000,000 and extends the availability period to 17 June 2014.

In consideration for YAGM agreeing to extend and vary the terms of the SEDA, the Company has agreed to an implementation fee of GBP £45,000 (plus any applicable VAT) on the earlier of:

   (i)   the Company's share price exceeding 125% of the share price upon signature of the New Loan Agreement

   (ii)   first drawdown of an advance under the SEDA.

Under the original SEDA, YAGM committed up to GBP £3,000,000 to subscribe for new ordinary shares of the Company and this facility was available to the Company from 17 December 2009 for a period of 30 months.

The terms of the original SEDA where announced on 18 December 2009 and a summary of the terms is set out below.

Under the SEDA, the number and timing of advances is at the discretion of Shanta Gold, subject to certain agreed restrictions under the SEDA, including:

   -   that the Company shall not be entitled to request more than one advance in any 10 day period; 

   -   the advance is limited to 200% of the volume weighted daily trading value for the 10 day trading period immediately prior to giving notice under the facility; and 

   -    that there is a constraint on holding greater than 2.99% of the issued share capital at any time or 0.99% in the event that Shanta Gold is itself under offer. 

Under the SEDA, YAGM agreed, at the request of the Company, to subscribe for new ordinary shares in the Company up to an aggregate amount equal to the Commitment Amount.  Subscriptions will be priced at 7% discount to the market price over the ten trading day period immediately after Shanta Gold notifies YAGM of a subscription request and will occur at such time and in such sizes as the Company may determine; subject to certain agreed limitations as contained in the SEDA.

For further information, please contact:

Shanta Gold Limited Tel:
Walton Imrie: [phone]
Gareth Taylor: [phone]

Nominated Adviser and Broker
Fairfax I.S. PLC
Ewan Leggat / Laura Littley
Tel: [phone]

Financial Relations
Tavistock Communications
Emily Fenton/Ed Portman
Tel: [phone]

Charmane Russell/Marion Brower/Pam Woltenholme
Russell & Associaties
Tel: + 27 11 880 3924

---

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Shanta Gold Limited via Thomson Reuters ONE

HUG#1581097