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ARCHIPELAGO RESOURCES PLC

GRANTING

of an

EXCLUSIVE FINANCING MANDATE

to; and

ACCEPTANCE

of an

INDICATIVE TERM SHEET

from,

3 BANKS 

regarding

DEVELOPMENT

of the

TOKA TINDUNG GOLD PROJECT

 

Archipelago Resources Plc is pleased to announce that following receipt of expressions of interest from 10 banks regarding the provision of project finance ("Project Finance") to the Company's 85% owned Toka Tindung Gold Project ("Project") in North Sulawesi Indonesia, it has selected BNP Paribas, Standard Bank Plc and Australia and New Zealand Banking Group Limited to form a project finance syndicate ("Syndicate").  The 3 banks and the Company have agreed the terms of an indicative term sheet ("Indicative Term Sheet") which forms the basis of an exclusive financing mandate ("Mandate") entered into by the Company with the 3 banks on 5th January 2010.

Each of the three banks will now complete a process of due diligence necessary to obtain credit committee approval targeted for early 2010.

The Indicative Term Sheet contemplates the provision of US$60m of Project Finance together with a US$10m cost over-run facility. While the commercial terms are confidential, they are considered commensurate with the competitive environment in which the selection process has taken place.

The requirement for any additional working capital by way of equity has yet to be determined. Hedging of about 170,000 ounces (representing 15% of initial scheduled production) remains to be finalised, but is currently proposed to be by way of the purchase of put options leaving the Company fully exposed to any increase in the gold price.

The Company is very encouraged by the strong interest from experienced resource banks in providing the Project Finance for development of the Project in what are still challenging times for project financing in the mining industry generally.

The Company recently announced the issue of contractual letters of intent to McConnell Dowell regarding construction and management activities necessary to complete the processing plant and ancillary facilities. These awards are consistent with the Company's construction schedule and objective of production by 4th quarter 2010.

The Toka Tindung Gold Project has a resource of 1.75M ozs of gold equivalent, of which at least 1.1m ozs will initially be mineable by open pit.  When in operation the project will produce at an average annualised production rate of 160,000 ounces of gold equivalent per annum for at least 6 years together with an additional 2 years processing lower grade stockpiles. The Company's pits are currently designed at a very conservative US$600/oz gold price and as a result the Company is confident that with further exploration and sustained gold prices it will be able to substantially extend the life of the Project.

Archipelago is a mining company listed on the AIM market of the London Stock Exchange. The Company's principal activities are gold mining and exploration in Indonesia (as 85% owner of the Toka Tindung Gold Project in Sulawesi), Vietnam (as majority party in the Pac Lang and Cam Thuy/Ba Thuoc joint ventures with VINACOMIN a Vietnamese Government mining company) and the Philippines (as option holder over a 100% interest in the Corplex tenements).

 

Further Info:    

 

        Colin Loosemore, Managing Director, Archipelago Resources Plc.

        Tel:    00-618-9364-8301

 

        Richard Chase, Ambrian Partners Ltd

        Tel:    0207-634-4722

 

        Ron Marshman / John Greenhalgh, Lothbury Financial

        Tel:    020-7011-9411

 

        Gerry Beaney / Fiona Kindness, Grant Thornton Corporate Finance

        Tel:     020 7383 5100

 

www.archipelagoresources.com.au

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