Companies: AR.   

Australian-based Archipelago Resources, which is looking for gold in South-East Asia, has raised half of a target £2 million private placing at 30p and, says the company, will return to the market for up to £8 million 'at a higher price' if Aussie banks agree to lend £20 million for its Toku Tindung gold project in Indonesia. Robert Tyerman reports.

Colin Loosemore, managing director of AIM-quoted Archipelago, says studies show Toku Tindung could hold 1.75 million oz of gold, extractable at the rate of 160,000 oz a year at a cash cost – before capital and finance costs – of $267 an ounce, against today's price of nearly $453. If gold stays at $420 or above, he argues the studies suggest Archipelago could make £14 million a year out of the project, once it has raised the finance needed, and earn at least 16p a share annually from it.

If all goes well, the company hopes to start production from Toku Tindung in the first quarter of 2006. Archipelago is also hoping to develop the Cam Thuy-Ba Thuoc deposit in Vietnam, which Loosemore, a veteran of the successful Brancote mining venture, says could be much bigger than Toku Tindung.

At 29.5p and with relatively high mining costs, the shares offer speculative potential, closely geared to the gold price.