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Archipelago Resources (LON:AR.) said today it is on track to produce between 135,000 -145,000 ounces of gold this year from its Toka Tindung mine in Indonesia.
Cash costs are also expected to be between US$540 to $590 per ounce.
Archipelago produced 31,189 ounces in the three months to March, its first full quarter of production at the mine since it hit nameplate capacity last November.
Over the quarter, the company mined 654,768 tons of ore, processed 427,859 tons at a head grade of 2.44g/t with a recovery rate of 91.2 per cent.
Production rates now are showing a marked increase, it added, following the end of the rainy season in Indonesia.
The mine plan also envisages an increase in ore grades as the year progresses.
Marcus Engelbrecht, chief executive, said: "This is the first full quarter of gold production from Toka Tindung since achieving nameplate throughput in November last year. Production is broadly in line with our planned processing schedule and we remain on target to achieve full year guidance."
Archipelago is hosting an analyst site visit to the Toka Tindung mine in Indonesia this week.
Currently on site is Ambrian Capital analyst Adam Kiley, who repeated a ‘buy’ recommendation today targeting 89p a share – some 47 per cent above the current price of 60.5p.
“This is the first full quarter of production for Archipelago and the results were within our expectations,” Kiley said.
“Importantly, the mill continued at its nameplate capacity, with recovery rates at over 91% during the quarter. Production was slightly below our forecast due to slightly lower grade being processed.
“We expect the grade to increase throughout the year (2.8 g/t by year end) as the higher-grade satellite pits are mined at a greater rate. We maintain our annual forecast for the year of 140,000 ounces of gold.”
Meanwhile Shore Capital’s Yuen Low told clients: “With relatively low cost production at a time of near-record gold prices and good exploration potential, we continue to favour an investment in this company, particularly as the shares have recently come off the c70p a share at which they were trading for much of Q1 2012."
Toka Tindung’s first gold pour came just over a year ago and it is now operating at name plate output.
Earlier this month Archipelago revealed that last year’s gold production saw the group bank a pre-tax profit of US$25.9 million, on output of more than 60,000 ounces.
With the potential increase to reserves and resources Archipelago chief Marcus Engelbrecht recently told Proactive Investors that production could probably be increased to between 200,000 and 250,000 ounces a year.
That will however rely on continued success with the drill-bit, as the company looks to the area surrounding Toka Tindung for additional resources.
"Obviously, we have to deliver on our exploration programme to do that but we are quite excited about the potential," he told Proactive.
The company plans to continue exploration in 2012 at Toka to find as much minable ore as possible, or, as Engelbrecht put it, "work the asset hard" to maximise value.
There is also a plan to examine opportunities for further growth in the region via mergers and acquisitions.
Archipelago is looking at opportunities in South East Asia and Australasia. Specifically, these will be assets already in production or near production, where the firm can bring a considerable level of technical expertise, Engelbrecht explained.