La Mancha Resources Inc.
TSX : LMA

La Mancha Resources Inc.

December 04, 2007 10:26 ET

La Mancha Completes Frog's Leg Feasibility Study

MONTREAL, QUEBEC--(Marketwire - Dec. 4, 2007) - All amounts are in CA dollars, unless otherwise indicated.

La Mancha Resources Inc. (TSX:LMA) (hereinafter "La Mancha" or the "Company") is pleased to announce the completion of a feasibility study for the Frog's Leg underground gold project located in Australia, approximately 25 kilometers West of Kalgoorlie, the center of the prolific mining district of the same name. La Mancha owns 51% of Frog's Leg with the remaining 49% owned by Dioro Exploration NL (AUX:DIO)(thereafter "Dioro"). The feasibility study and capital cost estimates were prepared by La Mancha with the support of independent engineering firms retained to provide specific technical expertise, including CRC Mining, Western Australian School of Mines and AMC Consultants Pty. Ltd. The key consultants involved in the studies and their respective areas of responsibility are described below under "Qualified Persons and Data Verification".



Highlights of the study include:

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Attributable to
La Mancha
100% 51%
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Production:
Gold reserves (in situ) 621,648 oz 317,040 oz
Ave Ore Mined per year, 456,167 t 232,645 oz
Gold recovered 589,944 oz 300,871 oz
Metallurgical recovery 94.9% 94.9%
Yearly Production Rate 73,743 oz 37,609 oz
Mine life 7.5 years 7.5 years
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Financials:
Initial capital cost CA$35.0 million CA$17.8 million
Total Sustaining capital CA$38.0 million CA$19.4 million
Total Cash Costs CA$295.1 million CA$150.5 million
Internal rate of return 47.5% 47.5%
Net Present Value @ 0% discount CA$93.4 million CA$47.7 million
Payback period from 2008,
months 31 months 31 months
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All financial calculations are based on a gold price of US$650/oz and an
USD/AUD exchange rate of 1.30 and inclusive of expenditures in 2007

- 3.65 million tonnes of ore at a fully diluted grade of 5.29 g Au/t.


MINERAL RESERVES

The Frog's Leg project will initially focus on three main orebodies. The Mist and the Rocket orebodies represent the main zone that is controlling the mineralization at Frog's Leg. The gold mineralization is hosted within the zone known as the Contact Shear Zone by silicified, quartz-veined zones. Adjacent to the Mist orebody is the Fog orebody. It occurs sub parallel to the main contact zone of mineralization. Mineralization is the same as the Mist and Rocket orebodies. Because of their proximity to each other, the Mist and Fog orebodies have been combined and represent 88% of the projects' proven & probable reserves and the Rocket orebody represents 12%. Appendix "A" provides more details on the project's geometry while the following table shows the proven and probable reserves associated to each of the three initial orebodies.



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100% Attributable to La Mancha
51%
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Ore bodies Ore Grade Ore Grade Ounces of gold
(000 t) g Au/t (000 t) g Au/t (000 oz)
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Mist/Fog 3,225 5.30 1,645 5.30 280
Rocket 430 5.22 219 5.22 37
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Total 3,655 5.29 1,864 5.29 317
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Frog's Leg Underground Reserve 100% project
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Ore, 000 t Ore Grade, g Au/t
-----------------------------------------------------
Proven 1,136 5.34
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Probable 2,519 5.27
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Total 3,655 5.29
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The mineral reserve estimates were evaluated in accordance with definitions and guidelines adopted by the Canadian Institute of Mining, Metallurgy and Petroleum. They have been calculated using a mining reserve cut-off-grade of 3.0g/t, standard dilution parameters applied to the resource based upon empirical knowledge within the Frog's Leg rock conditions and industry standards, mining methods, pillar and panel recoveries, standard assumptions on mine design made to suit operating equipment parameters and AMC Consulting benchmarks. An updated Technical Report will be filed with SEDAR within the next 45 days in accordance with National Instrument 43-101 for mining projects.

This proven and probable reserve estimate represents an 84% conversion rate from the measured and indicated resources published in July 2007.

The identified, Mist, Rocket and Fog orebodies are open at depth and to the North. Drilling is ongoing to further delineate the deposit. Management is confident that the program will be successful in to further increasing the quantity and quality of the Frog's Leg reserve/resource base. A new mineral resource estimate integrating all holes drilled since the June 2007 update will be completed in Quarter 1, 2008.

The effective date of the mineral reserves is June, 2007. To La Mancha's knowledge, the reserve estimates are not materially affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.

PRODUCTION

From a Proven and Probable reserve the feasibility study shows the extraction of 3.65 million mined tonnes at a fully diluted grade of 5.29 g/t Au for 589,944 oz recovered over a 7.5 year mine life. The Frog's Leg production profile, based on the previously mentioned mineral reserves, is as follows:



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Year Tonnage Milled Head grade Ounces Cash Costs
(100 % (000 tonnes) (g Au/t) Recovered (US$/oz)
Frog's Leg)
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2008 300 4.80 43,970 oz $478
2009 700 5.27 112,600 oz $362
2010 600 5.51 100,936 oz $386
2011 600 5.96 109,134 oz $331
2012 500 5.96 77,580 oz $423
2013 500 4.73 72,115 oz $438
2014 400 5.29 64,570 oz $456
2015 55 5.40 9,040 oz $542
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Total 3,655 kt 5.29 g/t 589,944 oz $399
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Access to the Frog's Leg underground mine would be by decline with a portal located within the Frog's Leg pit, as shown in Appendix "A". The decline layout provides access to stoping areas in the Rocket, Mist and Fog orebodies. The proposed mining method utilises longhole open stoping with sublevel at 20m vertical intervals. Stoping will be a combination of open stoping and back filled with cemented waste rock material. Zero grade was applied to all mined blocks (included dilution) outside the measured and indicated categories. The Frog's Leg underground mine design was based on resource estimate block modeling information provided by La Mancha and CSA Australia Pty Ltd.

The Feasibility Study is based on toll processing of ore at the Jubilee Mill south of Kalgoorlie. The mill is expected to be purchased by Dioro. Completion of the purchase of the plant by Dioro and an agreement between the MEJV (Frog's Leg JV) and Dioro are expected to be complete by quarter 1, 2008. A processing and haulage cost of AUD25/tonne (AUD19/tonne for milling and AUD6/tonne for haulage) has been estimated in the feasibility study. Metallurgical recovery is expected to average 94.9%, based on the results of metallurgical testwork completed by Damian Connelly, Mineral Engineering Technical Services Pty. LTD. (METS).



CAPITAL EXPENDITURE

The initial capital cost of CA$ 34.99M can be broken down as follows:

------------------------------------------------
Initial Capital Cost (100% Frog's Leg)
(CA$, 000)
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Decline and Cross Cuts $ 3,656
Capital Devel to 31 Dec 2007 $20,666
Capital Devel to 30 Apr 2008 $7,067
Infrastructure from 2008(ii) $1,510
Mining equipment from 2008(ii) $1,552
Support facilities from 2008(ii) $254
Others from 2008(ii) $287

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Total $34,992
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(ii) until the first ore is milled


Underground mine development started in July 2007 and is progressing at a steady pace. To date, more than 1000 meters of decline and cross cut have been completed. By January 2008, management expects that the underground development team will have advanced the decline and cross cut by another 500 meters, at which time they should be in a position to start preparing the first stope for the Rocket orebody. In the meantime, mining equipment purchases and workforce development are being managed to ensure an orderly start to production in accordance with the planned schedule.

PROJECT ECONOMICS

Based on the results of the feasibility study and using a long term gold price of US$650 and a USD/AUD exchange rate of 1.30, the feasibility study shows an Internal Rate of Return ("IRR") of 47.55% and a Net Present Value ("NPV") attributable to La Mancha of C$47.7 million or $0.33 per share at a 0% discount.

The sensitivity of the IRR/NPV per share respectively to changes in the gold price and exchange rate assumptions is as follows:



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Attributable to LMA
Gold price (AUD) 0% NPV (AUD) 0% NPV 0% NPV 0% NPV IRR
(AUD) (CAD) per
share
(CAD)
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720 (USD 600 X 1.2fx rate) 85,989,425 43,854,607 40,606,117 0.286 15.74%
840 (USD 600 X 1.4fx rate) 100,320,995 51,163,708 47,373,803 0.334 46.35%
980 (USD 700 X 1.4fx rate) 117,041,161 59,690,992 55,269,437 0.389 79.16%
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Upon the completion of the feasibility study, Michel Cuilhe, President and Chief Executive officer of La Mancha, stated: "We are very pleased that Frog's Leg is proving to be a profitable project. This mine will not only provide La Mancha with geographical diversification and important growth, it also create significant value for the shareholders. Moreover, the positive drill results obtained to date indicates that much more value remains to be unlocked from the project. We are committed to delivering the mine before the end of the second quarter, on track with our original schedule and budget".

QUALIFIED PERSONS AND DATA VERIFICATION

The independent Qualified Persons (QPs) for the purpose of National Instrument 43-101, Standards of Disclosure for Mineral Projects for the feasibility study are:

Gary MacSporran, MSc. Mine Eng. P.Eng., AusIMM, CIM, Principle Mine Eng. of SRK Consulting, Reviewed the feasibility study results in preparation of compiling a NI43-101 report. Gary's responsibility included the evaluation of the mining modification factors for the creation of an Ore Reserve from the Mineral Resource; the financial model included Measured and Indicated Resource material as ore only and a review of the financial model calculations.

Daniel Guibal, BSc. Mine Eng, FAusIMM, MMICA, Corporate Consultant (Geostatistics & Resources), SRK Consulting, reviewed Resource estimate

Denis Grubic, BEng. Mine Eng, AusIMM, Senior Mine Eng., AMC Consulting, Mine Design and Plan

Professor Ernesto Villaescusa, PhD Mine Eng, SME, Industry Chair of Rock Mechanics, Western Australia School of Mines, Rock Mechanics of Frog's Leg Underground


Damian Connelly, B. App. Sc (Met), AusIMM, AIMMPE, CIMM, SAIMM,
Director/Principle Consulting Eng., Mineral Engineering Technical Services, conducted Metallurgical Testing and Response Estimation.

La Mancha Qualified Persons are:

Martin Bennett Bsc. Hons. (Geol.), MSc. (ODG), M.AIG, Exploration Manager of La Mancha Resources Australia, Supervised Drilling program and was responsible for the quality control and verification of the drill hole data used by La Mancha Resources Australia in making the resource estimates. Details of the procedures for logging, sampling, density determinations, assaying and quality control measures are given on La Mancha's web site: www.lamancha.ca; please refer to Investor Info/ Technical reports/ Frogs Leg Report/ Page 39

Trevor Eddie Bsc.(Geol) MAusIMM, Chief Geologist, La Mancha Resources Australia, conducted Resource Estimation and supervised geostatistical analysis of the drill data.

William F. Plyley, BSc. Met. Eng., AusIMM, Chief Operating Officer of La Mancha Resources Inc., supervised the study and all of the information contained in this release.

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 Stock Exchange (TSX) under the symbol "LMA". For more information, visit the Company's website at www.lamancha.ca.

Caution Concerning Forward-Looking Statements

This press release contains certain "forward-looking statements", including, but not limited to, statements regarding the Company's strategic plans, future commercial production, sales and financial results, development, construction and production targets and timetables, mining costs; statements regarding capital expenditures, development plans, and exploration programs, objectives and budgets; statements regarding the Company's expectations to conclude a toll milling agreement; statements regarding the capital costs associated to the development of Frog's Leg, its economic viability and profitability. 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 2006 Annual Information Form filed with the Securities Commissions, as well as the Toronto Stock Exchange.

An appendix is available at the following address:

http://www.ccnmatthews.com/docs/appA.pdf

Contact Information

  • La Mancha Resources Inc.
    Jean-Jacques Kachrillo
    Vice President Exploration
    514-987-5115
    514-987-5119 (FAX)
    info@lamancha.ca