Gold producer, developer and explorer Shanta Gold said it was "very optimistic" about its mining project in Tanzania.
In a trading update, the East Africa focused company said its Singida Gold Project was fully supported communities and authorities in Tanzania.
The company said the project had in excess of 80,000 metres drilled and is an advanced stage with a mining licence in place. A 2011 feasibility study found that Singida has nine ore bodies with a combined resource of 858,000 ounces: Gold Tree 1, 2, 3, Jem, Vivian, Corn Patch, Corn Patch West, Gustav and Kaiser Chief.
The AIM-listed company said its New Luika Gold Mine produced stable output and cash flow which allowed it advance the Singida project, where significant progress on the relocation programme was made in recent months.
Three mining licences for Singida were issued in January 2012. Shanta Gold said since 2012 while the formal relocation exercise was ongoing, the gold market changed considerably as prices fell from about $1,650 per ounce to $1,350.
The company said the authorisations granted at that time, such as the existing environmental and social impact assessment, are in need of review although the mining licences remain valid until 2022 and may be renewed at that time.
A pilot production programme on the Singida is to start in the first quarter of 2017 on Gold Tree 1, building up to a milling rate of 10 tonnes per hour for gold production of about 800 ounces per month. The programme is expected to be cashflow positive and complements exploration for the new feasibility study and work programme required as part of the mining licence.
Shanta Gold invested development capital of about $4m which was funded from cashflow. It also commenced work on a feasibility study on the broader resources available and carried out further exploration in the area.
In the second half of the year 5,000 metres of reverse circulation drilling is planned from surface to about 100 metres.
Chief executive Toby Bradbury said: "Shanta is very optimistic about the prospects for Singida. Following an extensive consultation programme, the company is now able to progress development at Singida with the full support and enthusiasm from both the local communities and authorities.
"A new mine in this region of Tanzania has the potential to make a positive impact on the lives of many and Shanta intends to ensure that the economic benefit is extended beyond that of the mine itself. The company looks forward to working with our partners in Tanzania to bring this exciting project to life."
Shares in Shanta Gold were up 12.07% to 8.12p at 1554 BST.