Singapore's Think Environmental eyes more gold concessions in 3 to 6 months

Singapore’s Think Environmental (THEC.SI) aims to produce a few hundred ounces of gold per month when its first plant begins operations in the West African nation of Mali later this year, and then ramp up to 3,000 ounces per month by March 2012, senior officials said.

The firm has three existing mines in Keikoro, a site in southern Mali, and is in talks to acquire more concessions in Africa and Asia, said Mark Gillie, director of African operations at Think Environmental.

However, analysts and traders said the numbers could be optimistic given that Think Environmental is shifting into gold mining from investments in environmental services. Its gold mining strategy and expertise is as yet unproven, they said.

 

“We don’t know the potential of the mines, what they can actually get out of the mines, until they have really gone into production and show some positive result,” said Yeak Chee Keong, an analyst at Kim Eng Securities.

 

Think Environmental had ordered a gold production plant with a capacity to process six tons of soil per hour to search for the precious metal.

 

The firm also plans to buy a second one with a capacity of 20 tons of soil per hour, slated to commence production by the end of this year, for around half a million US dollars.

 

“It’s going to start from a few hundred (ounces per month), and then to 1,000, 2,000 and 3,000,” said Roger Poh, director of corporate communications at Think Environmental. 

 

“The second machine is about three times larger than the first machine, so the capacity will ramp up fairly quickly with the second machine,” he said.

 

Gillie told Reuters the company is in talks for seven more gold concessions globally and expects to close most of them in the next 3-6 months.

 

“It’s reasonable to say that within 3 to 6 months, the projects that we are currently working on, we are anticipating to close most of the deals,” Gillie said.

 

The firm aims to secure a total of 12-20 gold mines in places such as Western and Southern Africa, Indonesia, Mongolia as well as the Philippines by March 2013.

 

Gillie said he is bullish on gold prices due to the safe haven status of the metal and is optimistic about Think Environmental’s profit margins.

 

“We are looking at anything between US$300 ($372.4) and US$450 an ounce as in cash cost. Right now gold price is around US$1,450. So we are looking at profits in the region of US$1,000 an ounce,” he said.

 

Think Environmental has allocated US$30-US$45 million for its gold division in the next 12 months, which will be partly funded by the recent sale of non-core green assets that raised $8.2 million. The remaining cash will come from internal resources and bank borrowings.

 

The firm reported a net loss of $1.87 million for the six months ended September 2010, compared with a $1.2 million profit a year earlier, mainly due to the delay in the start of operations of its green business units and operational costs.

 

“If the gold mining business goes according to the plan, it’ll definitely be a turnaround. If you look at the margins, even if the gold price were to fall to say US$700, they are still profitable,” said Roger Tan, head of research at SIAS Research.

 

Gold futures hit an all-time high above US$1,500 an ounce on Tuesday on a combination of U.S. dollar decline, crude oil gains and worries about sovereign debt problems in Europe.