Broker Ambrian is tipping the latest drilling update from Archipelago Resources (LON:AR) to have a material impact on the company’s valuation once the data is fully collated by the company and digested by the market.
Earlier this morning the company said it was confident of extending the life of its Toka Tindung gold mine in North Sulawesi, Indonesia, on the back of the results from 159 holes for a total of 20,000 metres.
The programme focused on areas to the north and east of the main ore-body as well the Toka pit.
Gold mineralisation has been confirmed to extend for at least a further half a kilometre north of the Toka open pit. The grade of the precious metal is generally low, though the intersections are wide with 18 of the 20 holes over 20 metres. One hole, TNRC019, uncovered a 44 metre section at 1.34 grams of gold per tonne.
To the east, the mineralisation is similarly low grade with 1.17 grams per tonne recorded. In one case this was over a width if 51 metres and in another the gold occurred over a 93 section.
However, Toka East also revealed some high grade intercepts with two 2 metre sections revealing gold grades of 12.3 grams and 15.4 grams of gold respectively.
Finally, the Toka Pit revealed a similar picture with a 76 metre sample at 1.03 grams per tonne and two 6 metre sections at 14.9 grams and 18.2 grams per tonne. The two high grade samples were extremely close to surface.
Toka Tindung currently contains a JORC compliant resource of 1.75 million ounces of gold equivalent from a series of open pits.
"However based on these initial drilling results and the highly prospective nature of the ground surrounding the known deposits, the company is confident of increasing the resource and reserve and thereby significantly extending the mine life,” the company said this morning.
In all Archipelago is spending US$30 million to extend the eight-year life of the Toka Tindung operation.
First gold was poured last there month and the company is ramping up production to 110,000 ounces of gold this year, and 160,000 after that.
The shares were slow to react and were flat at just over 65 pence in afternoon trade.
However Ambrian, which holds a 74 pence a share price target, believes there is potential to increase that valuation.
Analyst Adam Kiley said: "Given that the company has now successfully demonstrated production capability at the project, any reserve increase should have a material impact on the company’s market valuation."