Archipelago gets US$97 million revenue in H1

By Ruli Setiawan

London-listed Archipelago Resources Plc recently stated it recorded up to US$97 million worth of revenue, US$35 million worth of operating cash flow and a net profit of US$17 million throughout the first six months, relative to a loss of $3.6 million for H1 2011 from its Toka Tidung mine, North Sulawesi, previously reported to produce a total of 60,386 Au Eq oz at a cash cost of US$753.

Archipelago stated to maintain 2012 full year production guidance of 135,000 to 145,000 Au Eq oz. Cash costs over the period are expected to be in the range of $580 to $640 per oz (excluding royalties). During H1 2012, Archipelago sold 58,389 Au Eq oz. The Company realised gold prices of $1,661 per oz sold during H1 2012 (whereas the London PM Fix price for Au averaged $1,651 per oz for the same period).

"With production continuing to ramp up over the second half of 2012, Archipelago remains focused on generating significant cash flows and returning value to shareholders," said company managing director and CEO Marcus Engelbrecht in a statement submitted to the LSX.

The company stated that gold production subsequent to June 2012 has shown an upward trend with the focus in the second half being on increasing gold production, managing costs and generating a strong positive cash flow. Based on the success of the 2011 program, the company is targeting exploration drilling at our near mine deposits across the Toka Tindung Gold Mine.

The company also stated to add to the JORC complaint Resource and Reserve as the year progresses. Subsequent to the end of H1 2012 and based on drilling over that period, Archipelago announced encouraging drill results from the high grade southern satellite deposits of Blambangan and Pajajaran, as well as the Toka East prospect adjoining the Toka Tindung main open pit.

On the announcement, the company stated that Eddy Porwanto will cease his executive duties with Archipelago, but will remain on the Board of the Company, while Terkelin Purba has been appointed President Director of Archipelago's Indonesian operating entities, namely PT Meares Soputan Mining and PT Tambang Tondano Nusajaya.

Exploration
Archipelago's current mine plan includes five areas of mineralisation where it is economic to develop open pit operations. With the majority of these ore bodies open along strike and at depth, Archipelago's exploration strategy is to target near mine prospects for further drilling.

In relation to the southern pits, encouraging results were returned from drilling near the deposits of Blambangan (28 holes of RC drilling for 3,918m) and Pajajaran (24 holes of RC drilling for 3,200m and 9 holes of diamond drilling for 699m), including 34m at 3.27g/t (BP016, 6-20m), 24m at 5.64g/t (BP020, 16-40m) and 14m at 8.03g/t (BP015, 0-14m). In this regard, mineralisation at Blambangan is expected to continue below the current pit design and also along strike to the south; while linking up with the Pajajaran deposit to the north. High grade "shoots" can also be interpreted and are being targeted for additional resource definition.

Drilling adjacent to Pajajaran indicates high grade intersections located in narrow 2-5 metre wide zones, which are similar to what is currently being mined at Pajajaran (which has an average grade of 3-4 g/t). Thicker sections also represent intersections of known structures. In both cases, the areas have been subjected to relatively narrow drilling at this stage, and further prospectivity is likely.

Significant drill results have also been recorded at the Toka East prospect, which lies adjacent to the main Toka Tindung deposit. 49 of 51 RC drill holes (for 9,431m) intersected meaningful gold mineralisation including 25m at 2.45g/t (TITO058, 106-131m), 12m at 4.96g/t (TITO078, 87-99m) and 14m at 3.34g/t (TITO015A, 101-115m). The drilling indicates a geological model for Toka East which is similar to that of the adjoining main Toka Tindung deposit (with moderate to high grade vertical to sub-vertical mineralised gold feeder zones). Wider grade horizontal zones are also apparent.

Further drilling will occur at these and other near site targets over the remainder of 2012. With the positive drilling results to date, I am confident that exploration activities will lead to an increase in Archipelago's JORC compliant Resource and Reserve, with an update expected to be published in early 2013, expanding its resource and reserve which already supports a 9 year life-of-mine (plus 7 years of processing lower grade stockpiles).

Editing by Er Audy Zandri