Going for gold in Indonesia
Charting Archipelago Resources and the path to production at Toka Tindung
For any company to enjoy a 50 per cent rise in its share price over the last six months, without doubt, it has to come up with something significant. Whether this is to achieve its first gold pour at a much-anticipated project, to raise large funds (and stand fully-funded) for an ambitious drill program, or to gain backing from impressive shareholders and local partnering, it means that investors worldwide are sitting up and taking notice of what’s on offer.
In the case of London AIM-listed Archipelago Resources Plc (LON: AR) the company has done all of the above. In April it carried out its first pour from the Toka Tindung gold project (where it has 95 per cent ownership) near North Sulawesi island, Indonesia; a project with a JORC resource of 1.75 million ounces of gold (one million in reserves initially minable through five open pits) where, having secured various vital funding in the last few months, the company is embarking on a major exploration programme to potentially increase its original decade-old resource figures significantly.
Toka Tindung has been the subject of great interest for some time, not least since Archipelago acquired it from its previous owners in 2002, before listing in 2003. With 2011 production targeted at 80,000 ounces gold equivalent (with an average of approximately 160,000 ounces gold equivalent annually in 2011/2012 for the first six years of an initial eight-year mine life) it is clear that the team’s ambitious drill program is the first step towards big goals for this, its flagship project.
Realising potential at Toka Tindung
A project not without its trials and tribulations along the way, Toka Tindung represents resilient and unceasingly strong focus from the Archipelago team, as well as numerous strategic moves to ensure its potential is realised. From weathering a temporary shutdown in 2007, to bringing in a highly desirable local partner in the form of Rajawali Corporation (now a five per cent owner in the project and 52.7 per cent owner in Archipelago alongside Baker Steel at 9.2 per cent and Blackrock 3.2 per cent) the company has dealt with hurdles by remaining flexible while fixated on bringing the project to fruition. In the nearer term—leading up to September—the team is dedicating the majority of its efforts to ramping up production (to 80,000 ounces gold equivalent then beyond) and is well placed to do so with all of the requisite capital in place: £28 million from its raising in November, a $55 million loan facility from an Indonesian bank and a $15 million working capital loan facility, as well as the cash to underlay its incoming exploration drilling programme.
At a glance, the exploration potential on offer looks likely to bear fruit. Figures based on five drill holes from 2007 (including the best intersection of 12 metres grading 9.5 grams per tonne gold) may well mean that mineralisation extends lower than 100 metres at the project, which Archipelago will now investigate.
Additionally, an area three kilometres to the north, uncovered by previous owners in 1999, has turned up some one and two ounce high grade closely-spaced float samples on surface. The company states that this programme—estimated to take around two years at a cost of £30 million—is also well-timed in terms of current pricing. And to top it all off the team has plenty of capacity should it require surplus in the months to come (thanks to the oversized crusher and mill acquired from Barrick’s El Tambo gold mine in Chile) and four drill rigs secured and on order to carry out the work planned.
A Southeast Asian focus
For the month of July, Archipelago was firmly-rooted on international “buy” lists, and as brokers hinted that news to-be-announced would solidify its position as a great performer, the miner’s wider Southeast Asian exploration focus has been inspected. The success it has, and continues to have, at Toka Tindung has captured the interest of many investors; now intent on surveying the company’s wider portfolio to see what else it has banked up. In Viet Nam, the miner has a 65 per cent interest in an exploration licence which includes the old Pac Lang Gold Mine (with applications for two additional exploration licences at Cam Thuy – Ba Thuoc). In the Philippines it has rights to acquire not less than an 80 per cent interest in the Corplex projects in the Surigao peninsula of NE Mindanao; a gold-copper plentiful region home to the Boyongan copper-gold porphyry.
For the foreseeable, Toka Tindung is the company-maker: In production, in ramp-up towards hefty (yet achievable) production goals, prepped for a major exploration programme and well-funded to manoeuvre at every turn. It is a story of great progress to date, firm foundations (financial and initial production) for development and bags of exploration potential.
www.archipelagoresources.co.uk
