La Mancha Resources Inc.
TSX : LMA

La Mancha Resources Inc.

November 13, 2008 15:32 ET

La Mancha Announces its Third Quarter Results

All amounts are expressed in CA dollars, unless otherwise indicated. Unaudited HIGHLIGHTS - Total production of 15,390 ounces of gold (up 22%) - Revenues of $12.2 million - Net loss of $1.6 million - Cash flow from operations of $1.8 million - Cash position of $9.8 million - Revised 2008 gold production target of 71,000 ounces

MONTREAL, QUEBEC--(Marketwire - Nov. 13, 2008) - La Mancha Resources Inc. (TSX:LMA)(hereinafter "La Mancha" or the "Company") is pleased to report that its third quarter production reached 15,390 ounces of gold compared to the 12,570 ounces of gold produced in the same quarter last year. This increase in production is due to the start of production at the Frog's Leg mine and an improved performance at the Ity mine, which together compensated for lower production from the Hassai mine. The average cash cost per ounce for the quarter amounts to US $529. This result represents a 11% increase over the US $476 cash cost per ounce recorded in the third quarter of 2007 but a 14% improvement over the US $612 cash cost per ounce recorded during the previous quarter of 2008. It is important to note, however, that Frog's Leg production and costs are not taken into account in the calculation of the average cash costs for the quarter since the mine is still considered to be in its start-up phase.

La Mancha's third quarter revenues rose 29% to reach $12.1 million, in line with the 31% increase in the average gold price observed over the same period. It is important to consider however that the cash inflows generated by the sale of Frog's Leg production were applied against the capital cost of the mine rather than being considered as revenues, since the mine has not yet achieved "commercial production" status.

La Mancha's cash flows from operating activities rose to $1.8 million during the third quarter compared to negative ($0.8 million) in the corresponding quarter of 2007 and negative ($1.8 million) in the second quarter of 2008. As shown in the following segmented information table, the Company's capacity to generate cash remains intimately tied to the cash generation potential of the two African mines, which generated a combined cash flow of more than $2.9 million during the quarter.



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African mines Australian mines Corporate Total
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Cash flow from
operations 3,033 (349) (1,121) 1,563
Changes in working
capital (65) 321 2 258
Net cash flow from
operations 2,968 (27) (1,119) 1,821
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It is worth noting, however, that the Australian subsidiary's cash flow from operating activities improved during the third quarter, almost reaching cash flow neutrality. The Company's cash position stood at $9.8 million as at September 30, 2008.

"Since the new La Mancha was created in September of 2006, the Frog's Leg mine has always been the Company's main growth engine. The mine first contributed to La Mancha's resource growth, and now, with its start-up in May 2008, it is contributing to La Mancha's growth in production. More importantly, however, we are at the junction where Frog's Leg and our Australian subsidiary are about to contribute to La Mancha's cash flow generation potential and profitability. The fact that we were able to bring the mine into production two months earlier than anticipated and that it is now rapidly progressing towards positive cash generation is very promising for the Company," said Michel Cuilhe, President and CEO of La Mancha.

La Mancha recorded a net loss of $1.6 million during the third quarter of 2008, which includes a non cash charge of $760 thousand related to the additional write-down of the Company's Asset Backed Commercial Paper ("ABCP") holdings due to the recent deterioration of the credit conditions on the markets and a $90 thousand gain related to a gold-denominated loan.

For the nine months ended September 30, 2008, La Mancha's gold production reached 50,565 ounces, a 28% increase over the 39,480 ounces produced in the corresponding period of 2007. This production level, coupled with the anticipated production for the last quarter of 2008 forces La Mancha to revise its 2008 annual gold production to 71,000 ounces, down from the 87,000 ounces announced in January 2008.

"Thanks to our main shareholder's support, La Mancha remains well financed to pursue its business plan. The Company's internal cash flows, cash reserves, current credit facility and other financing alternatives provide La Mancha access to sufficient liquidity to execute its operating and development plan in the normal course of business," added Mr. Cuilhe.

OPERATIONS

The Frog's Leg mine produced a total of 7,120 ounces of gold (3,630 ounces attributable to La Mancha) during the quarter ended September 30, 2008. The quarter's production was negatively impacted by the limited milling availability at the nearby Greenfield plant. The toll-milling agreement entered into between La Mancha and Greenfield provides for specific milling periods throughout the year. In accordance with this agreement, no milling took place for La Mancha's account in September. Third quarter production was therefore limited to the gold produced in July and August. The mining that took place in September allowed La Mancha to accumulate a stockpile of high grade underground ore representing 20,500 tonnes at an average grade of 4.05 g Au/t, which will be milled over the fourth quarter of the year.

Year-to-date mining rates are in line with the initial budget, but grades are lower than budgeted due to the fact that access development to the higher grade stopes was delayed. Both mining rates and grades are expected to increase in the coming months as the mobile fleet grows and stoping of the main Mist section can begin. Frog's Leg's annual production target is revised to 30,500 ounces (14,000 ounces attributable to La Mancha), on the basis of the continuation of the current mining rates but to reflect milling availability that is more restricted than anticipated.

As of September 30, 2008, $33.4 million ($17.9 million attributable to La Mancha) had been invested in the development of Frog's Leg. Management expects $4 million ($2 million attributable to La Mancha) to be required in additional investments before the end of the year to achieve "commercial production", mainly for underground development and the second purchasing phase of mobile fleet equipment. It is expected that the total development cost of Frog's Leg will then reach $37.4 million ($19.1 million attributable to La Mancha) or 7% more than budgeted in the 2007 feasibility study. Most of the cost overrun can be attributed to the delays required to connect the mine to Australia's public power services, a delay that increased the energy costs in the first stages of development of the mine, in addition to slowing down the progress of mine development.

The Hassai mine produced a total of 13,900 ounces of gold (5,560 ounces attributable to La Mancha) at an average cash cost of US $677 per ounce for the quarter ended September 30, 2008. This compares to 18,675 ounces of gold (7,470 ounces attributable to La Mancha) produced in the third quarter of 2007 at a cash cost of US $494. This relatively poor performance, both in terms of ounces produced and cash cost per ounce, is essentially due to the lower grade processed over the quarter and to the water limitations that has imposed the drought of the past few months.

Although the tonnage of higher-grade quartz ore milled significantly improved in September, the quarter's production was essentially dominated by the lower-grade SBR-type ore. Of the 190,097 tonnes milled during the quarter, 121,127 tonnes were SBR (64% of total ore milled), and 68,970 tonnes were quartz (36% of total ore milled).

The intense training initiatives put forward by the recently appointed site management and the new maintenance standards set up by the consultants mandated to that effect are starting to pay their dividends. The tonnage of quartz ore milled in September averaged 1,210 tonnes per day to reach a total of 32,659 tonnes (53% of total ore milled) compared to an average of 731 tonnes per day and 21,230 tonnes per month over the previous 8 months (32% of total ore milled). Preliminary results indicate that the performance of the quartz line remained strong in October, with 31,277 tonnes milled over the month (49% of total ore milled), thus suggesting an improving grade and gold production for the fourth quarter. Management will build on these improved performances to gradually increase the rate of the quartz line to its design capacity of 2,000 tonnes per day. As of September 30, 2008, there were approximately 817,500 tonnes of quartz ore at an average grade of 4.17 g Au/t stockpiled near the mill, representing approximately 1,3 years of plant capacity once the quartz circuit reaches its full potential.

This delay in completing the commissioning of the new quartz line has forced La Mancha to revise its 2008 attributable gold production target for the Hassai mine from 40,000 ounces to 32,000 ounces. This new revised objective is based on a production rate of 600 tonnes per day of SBR and 1,350 tonnes per day of quartz at a combined average grade of 4.4g Au/t for the months of November and December.

For the nine months ended September 30, 2008, Hassai's contribution amounted to 22,280 ounces of gold at a cash cost of US $629 per ounce compared to 24,960 ounces at a cash cost of US $475 per ounce for the first nine months of 2007.

On the exploration front, the third quarter was intense in activity as three programs were carried out on the property:

A) Taillings qualifications:

The sampling process that will allow the qualification of the 7 million of tonnes of tailings accumulated over the first 16 years of mine operations is well underway. The very high grades of the ore mined in Hassai throughout the years and the subsequent recovery rate obtained via heap leaching suggest that a significant amount of gold is still present in the tailings. The program's objective is to demonstrate that the gold content of the tailings remains significant enough to justify the construction of a CIP plant. The program's impact on the Company's resources will be included in the year-end resource calculation.

B) Gold exploration:

The first resource development phase for the Kamoeb deposit was successfully completed in October. 39 holes were drilled for a total of 4,100 meters. Preliminary drill results for the program should be made public in early December, while the subsequent resource update will be included in the year-end resource calculation.

C) VMS exploration:

51 additional VMS exploration holes representing more than 6,400 meters have been drilled since July 2008 on the second VMS target on the property: Hadal Awatib. Drill results will be made available in December 2008 and January 2009 as they become available. In July 2008, La Mancha was pleased to report that preliminary drill results for the first of five locations where volcanogenic massive sulphides (VMS) have been identified on its Hassai property indicate a minimum conceptual VMS deposit of 20 million tonnes at 1.3 - 1.5 g Au/t and 1.5% - 2.0% Cu.

The Ity mine increased its total production by more than 20% to 13,505 ounces of gold (6,200 ounces attributable to La Mancha) during the third quarter of 2008, compared to 11,110 ounces (5,100 ounces attributable to La Mancha) the previous year. This significant increase in production is the result of the higher grades that are now being mined from the new Mount Ity pit and the higher recovery rate registered, which together compensated for the lower tonnage milled over the quarter.

Cash costs decreased by 12% to US $396 per ounce during the third quarter of 2008, compared to US $449 per ounce during the corresponding quarter of 2007. This reduction in cash costs is the result of the higher efficiency associated with higher production volume and a lower cost of consumables, which compensated for the unfavourable evolution in the Euro - US dollar exchange rate seen between the two periods.

For the nine months ended September 30, 2008, Ity's contribution amounted to 16,470 ounces of gold at a cash cost of US $462 per ounce, compared to 14,520 ounces at a cash cost of US $467 per ounce for the first nine months of 2007. Despite the improved performance of the mine in the third quarter, Management reviewed Ity's 2008 annual production target to 50,100 ounces of gold (23,000 ounces of gold attributable to La Mancha).

On the exploration front, the drilling that took place on the mine site over the year is being reviewed as part of the resource update currently being done for Ity. The 194 holes representing some 8,987 meters drilled all returned positive results, and several high grade zone were intersected. The resulting resource update should be made available to the market by the end of November.

CORPORATE DEVELOPMENT

Appointment of a Director

La Mancha is pleased to announce the appointment of Mr. Michael A. McMurphy as a Director of the Company, effective today. Mr. McMurphy has been evolving in the Areva group of businesses in various functions since 1983. In 2003, he was appointed as President of Areva Inc. in the United States until his recent appointment as Senior Executive Vice-President of Mining, Chemistry, Enrichment Sector of AREVA NC in Paris. Mr. McMURPHY is a graduate of the United States Air Force Academy (B.S.), St Mary's University (M.A.), and the University of Texas School of Law (J.D., honors).

Investor Relations Calendar

Over the coming months, La Mancha will be present at the Hard Assets San Francisco Conference.

La Mancha will also be hosting Company presentation seminars in the following locations:



Toronto: Noon on November 26, 2008, at The Suites, located at
1 King Street West;

Calgary: Noon on December 3, 2008, at Fairmont Palliser Calgary,
located at 133 - 9th Avenue SW;

Vancouver: 1pm on December 4, 2008, at Hyatt Regency Vancouver,
located at 655 Burrard Street.


These presentation seminars are open to the public and La Mancha invites all investors to attend. For event details and reservations, please contact Mr. John Boidman from Renmark at (514) 939-3989 or at jboidman@renmarkfinancial.com.

Consolidated Financial Statements

The management discussion and analysis and unaudited consolidated financial statements with explanatory notes for the quarter ended September 30, 2008, are available in PDF format on La Mancha's website at www.lamancha.ca and through SEDAR at www.sedar.com.

ABOUT LA MANCHA RESOURCES INC.:

La Mancha Resources Inc. is an international gold producer based in Canada with operations, development projects and exploration activities in Africa, Australia and Argentina. La Mancha's shares trade on the Toronto (TSX) under the symbol "LMA". For more information on the Company, visit its website at http://www.lamancha.ca/.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

This press release contains certain "forward-looking statements", including, but not limited to, the statements regarding the Company's strategic plans, future commercial production, development and construction of mine and production targets and timetables, mine operating costs; development plans, objectives; statements regarding the assumptions the achievement of commercial production at the Frog's Leg mine, statements regarding the potential of its three exploration programs at Hassai and more specifically the gold content of the tailings; statement regarding the accuracy of our resources; statements regarding the Company's ability to improve the capacity of its Quartz line and to lower its cash costs. Forward-looking statements express, as at the date of this press release, the Company's plans, estimates, forecasts, projections, expectations or beliefs as to future events and results. Forward-looking statements involve a number of risks and uncertainties, and there can be no assurance that such statements will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements. Risks and uncertainties that could cause results or future events to differ materially from current expectations expressed or implied by the forward-looking statements include, but are not limited to, factors associated with fluctuations in the market price of precious metals, mining industry risks, exploration risks, risks associated with foreign operations, environmental risks and hazards, uncertainty as to calculation of mineral reserves, requirement of additional financing or additional permits, authorizations or licences, risks of delays in construction and production and other risks referred to in La Mancha's 2007 Annual Information Form filed with the Securities Commissions, as well as the Toronto Stock Exchange.



HIGHLIGHTS

(unaudited)
(All amounts are in CND dollars unless otherwise noted)

Third Quarter ended First 9 months ended
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
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RESULTS (consolidated,
in thousands of $)
Revenues 12,151 9,384 38,704 36,361
Cash flow from
operating activities 1,821 (832) 986 430
Net earnings (loss) (1,638) (3,239) (6,596) (7,553)
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PER SHARE ($)

Net earnings (loss) (0.01) (0.02) (0.05) (0.05)
Basic weighted
average number of
common shares
outstanding
(in thousands) 142,030 141,989 142,015 141,910
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ATTRIBUTABLE GOLD
PRODUCTION

Number of ounces
produced 15,390 12,570 50,565(1) 39,480
Mine operating costs
(US$ per ounce) 529 476 557 472
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September 30 December 31
2008 2007
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FINANCIAL POSITION
(in thousands of $)

Cash and short-term
investments 9,809 13,062
Total assets 136,660 131,579
Shareholders' equity 97,377 104,679
Total number of shares
outstanding
(in thousands) 142,035 142,008
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GOLD PRODUCTION Third Quarter ended First 9 months ended
STATISTICS September 30, September 30, September 30, September 30,
2008 2007 2008 2007
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Frog's Leg (51%)
Attributable Production
(ounces) 3,630 n/a 9,905 n/a
Tonnage milled (t) 78,060 n/a 223,060 n/a
Grade milled (g Au/t) 3.2 n/a 2.9 n/a
Recovery rate (%) 90 n/a 92 n/a
Cash costs (US$ per ounce) n/a n/a n/a n/a

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Hassai (40%)
Attributable Production
(ounces) 5,560 7,470 22,280 24,960
Tonnage milled (t) 190,100 216,220 596,220 675,000
Grade milled (g Au/t) 3.1 3.6 4.0 3.8
Recovery rate (%) 73 75 73 76
Cash costs (US$ per ounce) 677 494 629 475

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ITY (45.9%)(2)
Attributable Production
(ounces) 6,200 5,100 16,470 14,520
Tonnage milled (t) 108,730 120,300 342,600 312,950
Grade milled (g Au/t) 4.8 3.8 4.0 3.6
recovery rate (%) 81 76 81 83
Cash costs (US$ per ounce) 396 449 462 467
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(1) including 1,910 ounces of pre-production following the de-watering of
the White Foil mine
(2) La Mancha's interest in the Ity mine was reduced from 51% to 45.9 %
upon mine renewal in May 2007


Contact Information

  • La Mancha Resources Inc.
    Martin Amyot
    Vice President Corporate Development
    514-987-5115
    info@lamancha.ca