MIDAS SHARES TIPS: Gold miner set to shine despite the panic over prices
, 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 year by 2015.
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 provide a comfortable cushion. If it rises, Archipelago’s shares should rise too. Investors will also benefit from growing production. Buy.