Golden attitude

Robust Resources says that while gold is underpriced, at more than $US1200 an ounce it should still be profitable.

Robust Resources managing director Gary Lewis says gold miners should be able to make a profit with gold at $US1200 an ounce.

“I’ve always believed you shouldn’t be in the game if you can’t make money at $US1200 an ounce,” Lewis told Markets Spectator. At 1130 AEST gold’s spot price was $US1239.77 an ounce, down 22% in the last 12 months.

But Lewis says the current gold price is too low as physical demand for bullion is strong. Lewis expects gold to rise to between $US1500-1700 an ounce as a result of this demand (see Clifford Bennett's The aggressive play is gold). He gave no time period as to when that will occur.

Sydney-based Robust is raising $4.41 million in a fully underwritten share sale by Singapore-based Droxford International. Shareholders will be entitled to one new share for every six old shares at 30 cents a share, according to an ASX statement.

The new shares will give investors an option to acquire one new share for every 12 shares held at 50 cents a share within two years of the closing date of the share sale.

At 1130 AEST Robust’s shares were unchanged at 23 cents. The stock has plunged 71% in the last 12 months.

“It’s very hard to get Australian institutions to be interested in our company because of our exposure to Indonesia which has fallen out of favour,” says Lewis. “Our enterprise value ($8.1 million according to Bloomberg data) is the price of an apartment in Kirribilli,” he says half jokingly, referring to the Sydney waterfront suburb near the city’s famed Habour Bridge.

Robust claims 1.29 million ounces of gold, 27.7 million ounces of silver and 1.64 billion pounds of lead, zinc and copper.

The company’s share sale is part of its efforts to pay $15 million for a gold and copper mine in the Central Asian republic of Kyrgyz. The company is selling a 17.5% stake in its gold, silver, lead, zinc and copper mining project on the Indonesian island of Romang to the Salim Group for $5 million. Salim’s shareholding in the project will increase to 40%. Robust will retain a 60% stake in Romang.

The Romang stake sale, together with the 14.68 million share sale and the company’s cash reserves of $4 million, will enable Robust to pay for the Kyrgyz acquisition.

The Andash mine in Kyrgyz, of which Robust has an 80% stake, has 539,730 ounces of gold and 63,486 tonnes of copper. The cost of mining the gold and copper concentrate is between $US30-40 an ounce, ex copper credits, says Lewis.

Based on a $US3.50 a pound copper price and a $US1300 an ounce gold price the Kyrgyz mine’s net present value is $US241 million. Robust is also exploring for gold and copper in the Philippines.