Robust Resources is protecting itself from a potential takeover bid before the full potential of its polymetallic treasure on Romang island in east Indonesia is understood.
It has called in JP Morgan as a defense advisor, knowing that the big-time potential of Romang has already prompted some calls to its bigger shareholders by potential predators on their willingness or otherwise to sell at above market prices.
There is no action on that front yet but it could all come to a head in coming months as Robust's aggressive exploration work since November 2008 begins to deliver the goods in the south of the island, as well as testing the north where the hope is that something special is waiting to be revealed.
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Seven drill rigs are currently whirring away on the island, with Robust drawing on its $47 million cash kitty to spend $15 million on aggressive drilling programs this financial year. It's a big effort by a company of any size, let alone one like Robust that at Tuesday's closing price of $1.37 a share was being valued at all of $117 million.
Romang lies only 650 kilometres north-west of Darwin but it takes three planes and a boat to get there. The out-of-Africa Billiton – now the other half of BHP – was there until 1999. It pulled out when the turmoil that followed the end to the Suharto regime the year before got all too much.
Billiton's decision to exit was made all that much easier by a gold price that was trading at $US260-$US280 an ounce (Australia's own Peter Costello had sold off the nation's gold reserve two years earlier and the Bank of England was following suit).
Billiton's activity on the island – two collapsed volcanoes, joined at the belly that pop out of the sea – was fairly limited. But what it did find is essentially what Robust has found more of - a thick gold-silver cap (50 metres) under which sits a big sulphide system of lead, zinc, copper, gold and silver.
That's at what Robust calls its South Romang project area. In the next week or two Robust is due to release of maiden resource estimate for the area. It will be the start of the story. Expectations are that it will be nice start too, with an initial 600,000-800,000 ounces of gold equivalent (giving the silver, lead, zinc and copper also present a gold value).
That should draw a line under Robust's market value as it will allow the company to move in to a pre-feasibility study in to a relatively low-cost development that could lead to first production in 2014.
Investec Securities, which has a $2.20 a share target price on Robust, reckons that South Romang pretty much covers Robust's current market value. As a result, investors get exposure to Northern Romang for free. And that is where there could be some real excitement next year.
The northern caldera is a geologically older system which is also much bigger and more deeply eroded than that seen down south.
Early work points to a large gold/copper porphyry system being present. It is going to get its first test with the drill bit, with Robust kicking off a 5000 metre program. The intention is to release results on completion rather than drip-feed the results. While drip-feeding might create some headlines, Robust first wants to understand what it is on to up north.
Robust is partnered on Romang by Indonesia's Salim conglomerate which earlier this year agreed to take up a 22.5 per cent stake in the project in return for $30.7 million in cash.
Also cheering on Robust is its biggest shareholder, Talbot group with 12 per cent. Then comes JP Morgan Asset management out of London which speaks for about 8 per cent, ASX-listed Trafford Resources (5 per cent) and the 3.5 per cent held by Anthony Salim, boss man at Salim.
