La Mancha Resources Inc.
TSX : LMA

La Mancha Resources Inc.

November 10, 2009 09:11 ET

La Mancha Reports Another Strong Quarter

MONTREAL, QUEBEC--(Marketwire - Nov. 10, 2009) - La Mancha Resources Inc. (TSX:LMA) - All amounts are expressed in CA dollars, unless otherwise indicated.

Unaudited

THIRD 2009 QUARTER HIGHLIGHTS

- Production of 24,439 ounces of gold, up 59% over last year

- Cash costs per ounce falls to US $422 per ounce, down 20% from last year

- Net earnings of $3.0 million

- Cash flow from operating activities of $8.8 million

- Cash and short term investments grow to $21.5 million

- Company reaffirms its 2009 gold production target of up to 100,000 ounces

La Mancha Resources Inc. (TSX: LMA, hereinafter "La Mancha" or the "Company") is pleased to report that its third quarter 2009 production totalled 24,439 ounces of gold at an average cash cost of US $422 per ounce, compared to 15,390 ounces of gold at an average cash cost of US $529 per ounce for the same quarter last year. This represents a 59% increase in gold production, with the bulk of the increase coming from a production ramp-up at the Australian Frog's Leg mine, which was inaugurated in May of 2008, coupled with a strong increase at the Ity mine, which more than compensated for the lower Hassai mine production.

Consolidated cash costs per ounce for the third quarter of 2009 were down 20% from the same quarter of 2008, due to the positive influence of the lower cash costs at the Frog's Leg mine and a strong improvement at the Ity mine, which more than offset a rise in the Hassai mine cash cost.

The table below tracks La Mancha's operational and financial improvement from last year.



-------------------------------------------------------------------------
Three-month period Nine-month period
ended Sept. 30, ended Sept. 30,
-------------------------------------------------------------------------
2009 2008 Difference 2009 2008 Difference
-------------------------------------------------------------------------
Attributable
production (in oz) 24,439 15,390 +59% 70,710 50,565 +40%
-------------------------------------------------------------------------
Revenues ($'000) 28,162 12,151 +131% 81,187 38,704 +110%
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Realized sales price
(USD/oz) 960 863 +11% 927 897 +3%
-------------------------------------------------------------------------
Cash cost (USD/oz) 422 529 -20% 454 557 -18%
-------------------------------------------------------------------------
Operating income
($'000) 6,018 (423) + 20,696 (1,336) +
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Net earnings ($'000) 3,045 (1,638) + 12,622 (6,596) +
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Operating cash flow
($'000) 8,829 1,821 +385% 26,466 986 +
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Dominique Delorme, President and CEO of La Mancha, stated: "While many other gold producers also benefited from the improved market conditions arising from the higher gold prices, our much improved performance is more so related to our ability to constantly increase production while improving our processes and reducing our costs. It is relevant to note that while our realized gold sales price increased by 11%, during the third quarter compared to last year, our operating cash flow increased by 385%."

La Mancha's third quarter revenues rose to $28.1 million this year from $12.1 million last year, due mainly to significantly stronger production and, to a lesser degree, favourable changes in the gold price and exchange rates.

With significantly increased production and improved margins due to higher gold prices and lower cash costs per ounce, La Mancha generated $8.8 million in cash flow from operating activities in the third quarter of 2009, compared to $1.8 million in the corresponding quarter of 2008.

Boosted by stronger cash flow, La Mancha recorded net earnings of $3.0 million for the third quarter of 2009, which included a net loss of $1.3 million from the disposition of financial securities. This compares to a net loss of $1.6 million registered in the third quarter of 2008. The significant improvement is mainly due to the higher operating margin this year, while last year's net loss also included a $0.76 million non-cash adjustment related to the write-down of the Company's Asset Backed Commercial Paper ("ABCP") taken in the third quarter.

As of September 30, 2009, the Company's cash and short-term investments stood at $21.5 million, while its corporate debt stood at $13.3 million.

For the nine months ended September 30, 2009, La Mancha posted net earnings of $12.6 million while its attributable gold production totalled 70,710 ounces of gold. This compares to a net loss of $6.6 million and gold production of 50,565 ounces in the same period of 2008.

Mr. Delorme also noted, "Looking back over the past nine months, we can proudly analyze our scorecard and observe that we are on track to accomplishing our objectives. We have delivered growth both in terms of production and resources. On a year-to-date basis, we have increased production by 40% while reducing our cash costs per ounce by 18%. We have also added over 2.1 million ounces of gold and gold equivalent to our inferred resource, based on the newly published 43-101 VMS resource estimate. Our improved operational results have also transferred to our bottom line, as we can now boast net earnings of $12.6 million and cash flow from operating activities of $26.5 million after nine months."

OPERATIONS

The Frog's Leg mine generated 12,283 ounces of gold net to La Mancha at an average cash cost of US $358 per ounce in the third quarter of 2009, compared to 3,630 ounces generated in the corresponding period of 2008. This represents a 23% reduction in cash costs per ounce over the previous quarter, with the significant increase in gold grades more than offsetting an unfavourable change in the currency exchange rate.

As shown in the following table, underground ore production steadily continues to gain pace, with a record performance once again recorded in the last quarter.



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Data provided for Three-month Three-month Three-month Three-month
100% of the period ended period ended period ended period ended
mine Dec. 31, 2008 March 31, 2009 June 30, 2009 Sept. 30, 2009
--------------------------------------------------------------------------
Underground ore
mined (t) 116,861 142,834 149,764 169,400
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Apparent grade
mined (g Au/t) 4.46 4.23 4.22 5.16
--------------------------------------------------------------------------
Apparent gold
content of ore
mined (oz) 16,753 19,403 20,348 27,609
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A total of 67,530 tonnes were processed during the quarter, in line with the toll-milling agreement, while La Mancha's share of underground ore mined was 86,390 tonnes. Consequently, as at quarter-end, the La Mancha stockpile had grown to 57,800 tonnes of ore at 4.95 g/t Au. The next toll-milling campaign of 85,000 tonnes is set to start on November 22, at the nearby Greenfields plant.

In line with production targets, the Frog's Leg mine generated 34,330 ounces of gold for La Mancha in the nine months ended September 30, 2009, at a cash cost of US $414 per ounce, compared to 9,905 ounces generated during the period from May 2008 (its inauguration) until September 30, 2008.

During the third quarter, operations at the Hassai mine were affected by 1) lower than expected average tonnage milled per day of operation and 2) a mechanical failure that forced a 15-day shutdown of the ball mill. Difficulties associated with the operations of a dry line are once again the source of problems. A new vacuum system aiming at reducing the current level of dust is being implemented. As a consequence, the Hassai mine produced a total of 12,435 ounces of gold (4,974 ounces attributable to La Mancha) at an average cash cost of US $750 per ounce for the third quarter of 2009. This compares to a production of 13,900 ounces of gold (5,560 ounces attributable to La Mancha) at an average cash cost of US $677 per ounce in the third quarter of 2008.

Cash costs per ounce increased 11% in the third quarter of 2009 over the same period of 2008 due to diseconomies of scale effect and a higher stripping ratio, which together outweighed the advantage gained by the slightly higher processed gold grades and the favourable change in currency exchange rates.

For the nine months ended September 30, 2009, the Hassai mine generated 17,975 ounces of gold for La Mancha at a cash cost of US $627 per ounce, compared to 22,280 ounces of gold at a cash cost of US $629 per ounce for the first nine months of 2008.

The Ity mine produced a total of 15,647 ounces of gold (7,182 ounces attributable to La Mancha) at an average cash cost of US $303 per ounce for the third quarter of 2009. This compares to a production of 13,505 ounces of gold (6,200 ounces attributable to La Mancha) at an average cash cost of US $396 per ounce in the third quarter of 2008. This significant increase in production is the result of the higher grades, obtained from the Mount Ity pit, which more than compensated for the lower tonnage milled over the quarter.

Cash costs per ounce during the third quarter of 2009 decreased 23% compared to the same period of 2008, as a result of the higher efficiency associated with the greater production volume and, to a much lesser degree, a favourable change in currency exchange rates.

For the nine months ended September 30, 2009, the Ity mine generated 18,405 ounces of gold for La Mancha at a cash cost of US $358 per ounce, in line with production targets, compared to 16,470 ounces of gold at a cash cost of US $462 per ounce for the first nine months of 2008.

VMS EXPLORATION PROGRAM

On September 10 and November 4, 2009, La Mancha reported its first 43-101-compliant resource estimate for the first two VMS targets, the Hassai pit and the Hadal Awatib pits, on its Hassai property in Northeast Sudan. The cumulative inferred VMS resource, for the first two of six targets, now exceeds 2 million ounces of gold and 575,000 tonnes of copper. The gold equivalent of the cumulative copper resource represents 3,369,500 ounces of gold (1,347,800 ounces attributable to La Mancha) using a long-term gold price of US $750/oz and a long term copper price of US $2/lb.

A summary of the cumulative VMS resource estimate is presented below.



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43-101 resource Ore Au Total Au Au attribu- Cu% Total Cu attribu-
as of November (t) (g/t) (in oz) table to Cu (t) table to
3, 2009 LMA (in oz) LMA (in t)
---------------------------------------------------------------------------
Hassai pit
(target #1)
Supergene
inferred
resource 1,530,000 2.29 112,000 44,800 2.75 42,000 16,800
Primary
zone
inferred
resource 18,620,000 1.49 894,000 357,600 1.37 255,000 102,000
--------------------------------------------------------------------------
Subtotal
inferred
resource 20,150,000 1.55 1,006,000 402,400 1.48 297,000 118,800
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Hadal Awatib
(target #2)
Indicated
resource 2,898,000 0.93 86,700 34,680 1.27 36,800 14,720
--------------------------------------------------------------------------
Inferred
resource 28,330,000 1.18 1,072,000 428,800 0.99 279,000 111,600
--------------------------------------------------------------------------
Total
(targets 1
& 2)
--------------------------------------------------------------------------
Indicated
resource
(i) 2,898,000 0.93 86,700 34,680 1.27 36,800 14,720
Inferred
resource
(i) 48,480,000 1.33 2,078,000 831,200 1.23 576,000 230,400
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(i) Indicated resource is not included into the inferred resource


Reported resource figures were calculated using a cutoff grade of 0.8% Cu Eq, a long time copper price of $4,409/t ($2/lb), and a long term gold price of US$750/oz. This resource estimate is based on the result of the 109 holes drilled (18,602 meters) from the bottom and the surface of the Hassai and Hadal Awatib pits.

The Company intends to table a scoping study by the end of the first quarter of 2010.

CORPORATE DEVELOPMENT

As of September 1st, La Mancha's main place of business is now located in Paris, France, at the following address: 1 Tour Areva, BFI Business Center, Place Jean Millier, F-92084 Paris - La Defense Cedex, France.

North American investors, however, still have the option to address their questions or comments to the Company's contact point in the Montreal area at (514) 987-5115 or by email at info@lamancha.ca.

Investor Relations Calendar

La Mancha will be present at the San Francisco Hard Assets Investment Conference held on November 21 and 22, 2009, at the San Francisco Marriot Hotel.

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

Vancouver on November 18, 2009

Calgary on November 19, 2009

These presentation seminars are open to the public, and La Mancha invites all investors to attend. For event details and reservations, please contact 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, 2009, are available in PDF format on La Mancha's website at www.lamancha.ca and through SEDAR at www.sedar.com.

ABOUT AGORACOM:

For all La Mancha investor relations needs, investors are asked to visit the La Mancha IR Hub at http://www.agoracom.com/IR/lamancha where they can post questions and receive answers within the same day, or simply review questions and answers posted by other investors. Alternatively, investors can email all questions and correspondence to lma@agoracom.com, where they can also ask to be added to the investor email list to receive all future press releases and updates in real time.

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, production targets and timetables. 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 licenses, risks of delays in construction and production and other risks referred to in La Mancha's 2008 Annual Information Form filed with the Securities Commissions, as well as the Toronto Stock Exchange.



HIGHLIGHTS

(unaudited) Third Quarter ended First 9 months ended
(All amounts are September 30, September 30, September 30, September 30,
in CDN dollars 2009 2008 2009 2008
unless otherwise
noted)
--------------------------------------------------------------------------
RESULTS (consolidated,
in thousands of $)

Revenues 28 162 12 151 81 187 38 704
Cash flow from
operating
activities 8 829 1 821 26 466 986
Net earnings (loss) 3 045 (1 638) 12 622 (6 596)
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PER SHARE ($)

Net earnings (loss) 0,02 (0,01) 0,09 (0,05)
Basic weighted
average number
of common shares
outstanding (in
thousands) 142 051 142 030 142 051 142 015
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ATTRIBUTABLE GOLD
PRODUCTION

Number of ounces
produced 24 439 15 390 70 710 50 565(1)
Mine operating costs
(US$ per ounce) 422 529 454 557

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September 30 December 31
2009 2008
--------------------------------------------------------------------------

FINANCIAL POSITION
(in thousands of $)

Cash and short-term
investments 21 531 12 204
Total assets 165 965 151 039
Shareholders' equity 120 052 106 777
Total number of
shares outstanding
(in thousands) 142 084 142 008
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For the 3rd quarter ended For the 9 months ended
GOLD PRODUCTION September 30 September 30 September 30 September 30
STATISTICS 2009 2008 2009 2008
--------------------------------------------------------------------------

Frog's Leg (51%)(2)
Attributable
Production (ounces) 12 283 3 630 34 330 9 905
Tonnage milled (t) 67 530 78 060 225 214 113 761
Grade milled (g Au/t) 6,1 3,2 5,2 2,9
Recovery rate (%) 93 90 93 92
Cash costs
(US$ per ounce) 358 n/a 414 n/a

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Hassai (40%)
Attributable
Production (ounces) 4 974 5 560 17 975 22 280
Tonnage milled (t)(3) 164 997 190 100 513 552 596 220
Grade milled (g Au/t) 3,5 3,1 4,0 4,0
Recovery rate (%) 68 73 68 73
Cash costs
(US$ per ounce) 750 677 627 629

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ITY (45.9%)
Attributable
Production (ounces) 7 182 6 200 18 405 16 470
Tonnage milled (t)(3) 96 794 108 730 337 121 342 600
Grade milled (g Au/t) 6,3 4,8 4,6 4,0
recovery rate (%) 80 81 80 81
Cash costs
(US$ per ounce) 303 396 358 462

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(1) Including 1,910 ounces of pre-production following the de-watering of
the White Foil mine
(2) Frog's Leg mine started its operations in May 2008
(3) On a 100% basis


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