Good read16 Aug 2013 12:12
Indonesia-based gold miner Archipelago Resources (LON:AR.) shrugged off the weak gold price in its latest half year as output from its Toka Tindung mine rose while costs fell.
Revenues rose by 14% in the six months to June despite a drop in the average price of gold over the period to US$1,492 an ounce (oz) from US$1,661.
Archipelago offset that with higher production from Toka Tindung, where output rose by 20% to 72,636 ounces gold equivalent (gold plus silver), and sharply reduced costs.
Cash costs fell 18% to US$618 per ounce as the strip ratio fell while the head grade for gold produced rose to 2.69 grams per tonne from 2.29.
Revenues for the half year rose to US$110.9mln (previous year: US$96.9mln), with earnings 12% higher at US$19.1mln.
Cash flow also jumped to US$40.7mln, with gross cash and equivalents now around US$108mln.
The numbers mean investors will be rewarded by a further interim dividend of 0.5p a share to be paid on September 27 this year.
This comes on top of the inaugural dividend of 2.25p per share announced last year and to be paid on August 30.
Archipelago said it intends to use its balance sheet strength for further upgrades and exploration at Toka Tindung and also for any corporate opportunities that may arise.
The miner expects the strong first half performance to continue over the rest of the year and repeated its 2013 full year guidance of 140,000 to 155,000 gold equivalent oz at a cash cost of US$620 to US$680 per oz (net of silver credits and royalties).
On the subject of costs, managing director and chief executive Colin Sutherland told a conference call: "Higher volume, higher grade and the reduction of raw material usage contributed to the decrease.
"The company remains in the lower quartile of industry cash costs and continues to review opportunities to lower our costs in order to increase our margins."
Sutherland said Archipelago had been in preliminary talks with the local government about bringing industrial power to the site - something, which, he reckons, could lead to halving the firm's current cost of 30 cents per kilowatt hour.
Meanwhile, exploration will begin at the Marawuwung area to the west of the main Toka pit and 32,400m of drilling is planned for this area over the course of 2013 to define a resource.
In the southern deposits, drilling is now focused on converting recently defined inferred resources to measured and indicated resources, and in to reserves.
Results from this are expected to be incorporated into a year-end resource and reserve statement.
The firm is continuing to look at options for expanding the plant and mulling the development of heap leaching, for which a scoping study has begun, earmarked for completion by the end of 2013.
The board reckons this could add around 25-40,000 ounces to the firm's annual production profile.
Sutherland said: "Our focus on maintaining robust margins resulted in operating cash fl
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