Archipelago Resources, a gold producer in Indonesia, has faced a stock decline but remains a strong investment due to its low production costs and upcoming dividend payments. With experienced management and robust production forecasts, the company is poised to take advantage of the current gold market dynamics. Despite recent price fluctuations, Archipelago reports strong demand for its gold and maintains confidence in its future operations.

1. MIDAS SHARES TIPS: Gold
miner set to shine despite
the panic over prices

2. The sharp fall in the gold price has spooked
investors. Shares in mining groups have tumbled
and questions have been raised about whether
gold firms are past their sell-by date.
Archipelago Resources has not been immune to
these concerns. It produces gold in Indonesia and
its stock has fallen 19 per cent in the past month
from 60p to 481⁄2p. But at this level, the shares
are cheap.
Unlike most gold companies trading on AIM,
Archipelago is already in production. It is one of
the lowest-cost producers on the London market
and it is about to start paying a dividend.

3. FORTUNES: Boss Marcus Engelbrecht and
Sulawesi island

4. Archipelago joined AIM in 2003 just after securing the
rights to a large mine, Toka Tindung, on the
Indonesian island of Sulawesi. Early days were tricky
as the firm struggled to get mining permits, but
Rajawali Corporation took a major stake in 2009 and
the company’s fortunes changed.
Rajawali is an Indonesian conglomerate run by one of
the country’s richest men, Peter Sondakh. Not
surprisingly, he and his colleagues are well
connected, and following their investment, doors
opened and the firm won permission to start mining.
Production began in April 2011. Four months later a
new chief executive, Marcus Engelbrecht, was
appointed and the company has been making good
progress ever since.

5. Engelbrecht, an Australian, has a wealth of
experience, including more than 20 years at mining
giant BHP Billiton. The rest of the management are
old mining hands too and are respected among City
brokers, not least because they have so far delivered
exactly what they said they would.
In January 2012, for example, Engelbrecht said
production for the year would be between 135,000
and 145,000 ounces of gold. Ultimately, the firm
produced 139,000 ounces. This year, production is
forecast at between 140,000 and 155,000 ounces.
The group is still assessing the potential of Toka
Tindung and signs are encouraging. An upbeat
resource update was released on Friday and
Engelbrecht hopes to be producing 200,000 ounces a

6. The firm is fortunate, too, because all-in costs,
including production, capital expenditure, exploration
and administration, are about $900 (£588) per ounce,
while the average for London-listed groups is about
$1,300.
This means the firm is less vulnerable to short-term
gold price swings and has enough cash to pay a
dividend. Last month, it unveiled a maiden payout of
1.25p a share for 2012 plus a 1p special dividend. A
progressive dividend policy is expected from now on.
Midas verdict: The gold price has bounced from a
closing low of $1,380 on April 16 to $1,471.5 today.
While pundits debate its prospects, Archipelago reports
robust demand for its gold and is confident about the
future. Even if the gold price slips, this firm’s low costs

7. The firm is fortunate, too, because all-in costs,
including production, capital expenditure, exploration
and administration, are about $900 (£588) per ounce,
while the average for London-listed groups is about
$1,300.
This means the firm is less vulnerable to short-term
gold price swings and has enough cash to pay a
dividend. Last month, it unveiled a maiden payout of
1.25p a share for 2012 plus a 1p special dividend. A
progressive dividend policy is expected from now on.
Midas verdict: The gold price has bounced from a
closing low of $1,380 on April 16 to $1,471.5 today.
While pundits debate its prospects, Archipelago reports
robust demand for its gold and is confident about the
future. Even if the gold price slips, this firm’s low costs