La Mancha Resources Inc.
TSX : LMA

La Mancha Resources Inc.

March 29, 2010 13:01 ET

La Mancha Swings to Profit in 2009

PARIS, FRANCE--(Marketwire - March 29, 2010) - La Mancha Resources Inc. (TSX:LMA) -

All amounts are in CA dollars, unless otherwise indicated. Audited

HIGHLIGHTS

  • Production of 94,570 ounces of gold, up 32% compared to 2008
  • Cash costs per ounce stable at US$510 per ounce
  • Net earnings of $11.4 million
  • Cash flow from operating activities of $30.9 million
  • Cash and short term investments strong at $21.5 million
  • Fourth mine started up in March 2010

La Mancha Resources Inc. (TSX: LMA, hereinafter "La Mancha" or the "Company") is pleased to announce that its consolidated gold production for 2009 reached a record 94,570 ounces of gold at an average cash cost of US$510 per ounce, compared to 71,550 ounces of gold produced in 2008 at an average cash cost of US$512 per ounce. This 32% production increase is due to the steady ramp- up of production at the Frog's Leg mine in Australia, which more than compensated for lower African production. Consolidated cash costs per ounce remained stable year over year, and were in line with the initial guidance, with the positive influence of lower cash costs at the Frog's Leg mine and improvement at the Ity mine offsetting higher cash costs at the Hassaï mine.

Due to the enhanced production profile, stabilized cash costs and stronger gold prices, revenues almost doubled to $105.4 million, yielding a mine operating income of $22.0 million compared to a mine operating loss of $0.04 million in 2008.

The table below highlights La Mancha's improved performance since 2007, the Company's first full year of operation as a producer.

  Twelve-month period ended Dec. 31, Variation   
  2007   2008   2009 2009 vs 2007  
Attributable production (in oz) 53,900   71,550   94,570 +75 %
Revenues ($'000) 48,456   53,639   105,424 +118 %
Realized sales price (US$/oz) 700   870   967 +38 %
Cash cost (US$/oz) 485   512   510 +5 %
Operating income / loss ($'000) (8,202 ) (43 ) 22,027 +++  
Net earnings / loss ($'000) (10,806 ) (5,408 ) 11,379 +++  
Operating cash flow ($'000) 486   3,062   30,937 +++  

Dominique Delorme, President and CEO of La Mancha, stated: "The record numbers for 2009 speak for themselves. Revenues nearly doubled, net earnings reached $11.4 million, and over $30 million was generated through operating cash flows. Although our financial statements have strengthened significantly, boosting our ability to pursue value creation opportunities, our true measure of success lies in our track record. With the first full year of production at the Frog's Leg mine, our consolidated production grew for the third consecutive year, almost doubling since 2007. Furthermore, within a three-year span, we have added 0.9 million Measured and Indicated ounces of gold to our resource base, obtained successful results from the Bondoukou property, and identified over 2 million Inferred ounces of gold at the Hassaï VMS project. Due to our strengthened cash generating ability, our highly prospective exploration properties and our dedicated team of experts, I remain confident that La Mancha has the right ingredients to propel itself to the next level."

With significantly increased production and improved gross margins, La Mancha's three gold mines were profitable, recording a consolidated net earnings of $11.4 million, net of a loss of $1.3 million from the disposition of financial securities. This compares to a net loss of $5.4 million recorded in 2008.

In 2009, La Mancha increased its consolidated cash flow from operating activities to $30.9 million despite exploration expenses of $5.2 million. This compares to a consolidated cash flow from operating activities of $3.1 million in 2008. Due to the strong performance of the Frog's Leg mine, the Australian subsidiary has quickly become an important cash generating asset within the Company's portfolio. In 2009, its first full year of production, the mine generated $17.4 million in cash flow from operating activities, while the Company's African mines contributed a combined total of $21.5 million to La Mancha's consolidated cash flow from operating activities.

The Company's cash and cash equivalents and short-term investments stood at $21.5 million as of December 31, 2009, marking an increase of $9.3 million since December 31, 2008. Over the same period, the corporate debt, held by its Australian subsidiary, increased from $13.3 million to $16.1 million, due to an unfavourable evolution of the Canadian dollar with respect to the Australian dollar and to the fact that an additional $1.6 million was drawn to finance a cash treasury imbalance at the subsidiary level.

For the fourth quarter ended December 31, 2009, La Mancha produced 23,683 attributable ounces of gold while generating revenues of $24.2 million, compared to production of 20,985 attributable ounces of gold and revenues of $14.9 million for the corresponding period in 2008. For the fourth quarter ended December 31, 2009, the Company recorded a net loss of $1.2 million, which included a $1.1 million deferred tax expense adjustment at its Australian subsidiary, compared to net earnings of $1.2 million for the corresponding period of 2008.

RESERVE AND RESOURCE UPDATE

As of December 31st, 2009, La Mancha's Measured and Indicated resources ("M&I resources") had increased to 1.85 million ounces of gold, as the Company was able to delineate more ounces than it mined during the year. Proven and Probable reserves ("P&P reserves") increased by more than 55,700 ounces of gold to 766,200 ounces at the end of 2009. The most spectacular year-over-year change was in inferred resources, which, boosted mainly by the volcanogenic massive sulphides (VMS) discovery, surged to over 1.4 million ounces of gold and 230,400 tonnes of copper. As of December 31st, 2008, the Company's P&P reserves and M&I resources stood respectively at 710,500 and 1.77 million ounces of gold.

AUSTRALIAN OPERATIONS

Completing its first full year of production in 2009, the Frog's Leg mine generated 46,120 ounces of gold net to La Mancha at a cash cost of US$457 per ounce, compared to 15,375 ounces generated from May 2008 (its inauguration) to December 31, 2008. Cash costs per ounce for 2009 were in line with the Company's initial guidance despite the strengthening of the Australian dollar against the US dollar throughout the year. No cash costs were reported in 2008, as the mine entered its commercial production phase on January 1, 2009.

Despite this significant year-over-year increase in production, the mine's performance was negatively impacted by its limited milling capacity, as evidenced by the 61,000 tonnes of ore stockpiled at the mine site as at December 31, 2009. The gold content of the ore accumulated at year-end totalled 9,800 ounces. The new mining plan tabled in July 2009 should generate an increase in average monthly tonnage mined from 50,844 tonnes in 2009 to 65,965 tonnes in 2010 (for 100% of the mine). An upgraded 500,000-tonne-per-annum milling agreement was signed with the nearby Greenfields plant in the first quarter of 2010 to accommodate La Mancha's share of the mine's rapidly increasing ore extraction capacity.

Consequently, La Mancha expects its share of Frog's Leg 2010 mine production to be up to 31% higher than in 2009, at 62,000 to 70,000 ounces of gold at an estimated cash cost of US$502 per ounce. The backfilling required by the new mine design is the main reason for the expected cash cost increase over 2009.

The 100%-owned White Foil project became La Mancha's fourth gold mine when Phase 1 mining operations began on 4th March 2010. Mining operations are running on schedule to deliver ore for milling campaigns in April and September.

In January 2010, La Mancha announced that it had secured toll-milling capacity at the nearby Three- Mile-Hill treatment plant, located 26 km from the White Foil pit. The milling agreement provides La Mancha with a minimum milling capacity of 200,000 tonnes in 2010, shared equally between two milling campaigns scheduled for April and September. In parallel, the Company also secured a mining contract for the first bench of the pit, representing 279,000 tonnes of ore at an average grade of 2.65 g Au/t. The Company will look at the possibility of using a portion of its excess capacity at the Greenfields plant to process the portion of White Foil ore that could not be processed at the Three Mile Hill treatment plant. Gold production at White Foil for 2010 is expected to be between 13,000 and 16,000 ounces of gold at an estimated cash cost of US $634 per ounce.

AFRICAN OPERATIONS

The Hassaï mine produced a total of 61,790 ounces of gold in 2009 (24,715 ounces attributable to La Mancha) at a cash cost of US$724 per ounce, compared to 73,175 ounces of gold in 2008 (29,270 ounces attributable to La Mancha) at a cash cost of US $603 per ounce.

As anticipated, the transition from SBR-type ore to quartz ore continued in 2009, marked by a 60% increase in quartz mill throughput. However, this improvement was not enough to compensate for A) the 43% decrease in SBR-type material processed and B) the lower grade of the quartz and SBR- type ore processed throughout the year. The increase in cash cost per ounce is mainly due to the decrease in production as the fixed operating cost were absorbed by a smaller production.

Production at the Hassaï mine is expected to be in the range of 62,500 to 75,000 ounces of gold (25,000 to 30,000 ounces attributable to La Mancha) in 2010 at an estimated cash cost of US $689 per ounce. Due to the construction of the dust vacuum system, La Mancha expects to process the quartz ore at a rate of 2,000 tonnes per day in 2010, in line with the processing rates in the fourth quarter of 2009. To fill the excess SBR-line mill capacity, La Mancha expects to continue to supplement the freshly mined SBR-type ore with stockpiled tailings material.

The Ity mine produced a total of 51,710 ounces of gold in 2009 (23,735 ounces attributable to La Mancha) at a cash cost of US$389 per ounce, compared to 54,460 ounces of gold in 2008 (24,995 ounces attributable to La Mancha) at a cash cost of US$406 per ounce. Despite the higher gold grades from the new Mount Ity pit, production decreased slightly from the previous year due to a reduction in mill throughput and a lower gold recovery rate.

Production at the Ity mine is expected to be in the range of 43,570 to 52,285 ounces of gold (20,000 to 24,000 ounces attributable to La Mancha) in 2010 at an estimated cash cost of US$402 per ounce. An investment of $9.9 million ($4.5 million attributable to La Mancha) is planned in the second quarter of 2010 to replace the old heap leaching area. This investment is necessary as the current heap leaching area limits the volume of ore that can be processed. As previously explained, La Mancha expects Ity mine production to remain stable in 2010, with strong performance offsetting the one-month production halt needed to replace the heap leaching pads.

CORPORATE EVENTS

The Board of Directors, today, confirmed Dominique Delorme as President and CEO of La Mancha; a role that he had been filling since August 7th, 2009.

The Company will be attending the following upcoming conferences:

European Gold Forum (Zurich, Switzerland) held from April 13-16.

Management of La Mancha will be available for meetings on April 14 & 15 and will present at 3:55pm on Thursday, April 15.

NYSSA (New York Society of Security Analysts) 10th Annual Metals & Mining Industry Conference (New York, USA) held on June 2 & 3. Management of La Mancha will present at 1:45pm on Thursday, June 3.

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/.

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 and profitability, development and construction of mine and production targets and timetables; statements regarding the increase in production of Frog's Leg and the start-up of the White Foil mine; statements regarding the future production level of the quartz line in Sudan and the positive impact that will have the upcoming dust vacuum system; statements regarding the Company's ability to deliver a scoping study on the VMS project during the second quarter of 2010; statements regarding the positive impact of Ity's new leaching pads on production. 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 2009 Annual Information Form filed with the Securities Commissions, as well as the Toronto Stock Exchange.

Highlights      
(audited)      
(All amounts are in CDN dollars unless otherwise noted)      
  Year ended December 31,    
  2009 2008     
         
RESULTS (consolidated, in thousands of $)        
Revenues 105,424 53,639    
Cash flow from operating activities 30,937 3,062    
Net earnings (loss) 11,379 (5,408 )  
         
PER SHARE ($)        
Net earnings (loss) 0.08 (0.04 )  
Basic weighted average number of 142,073 142,020    
common shares outstanding (in thousands)        
         
ATTRIBUTABLE GOLD PRODUCTION        
Number of ounces produced 94,570 71,550 ¹  
Mine operating costs (US$ per ounce) 510 512    
         
         
  December 31, December 31,    
  2009 2008    
         
FINANCIAL POSITION (in thousands of $)        
Cash and short-term investments 21,535 12,204    
Total assets 167,704 149,468    
Shareholders' equity 115,832 106,777    
Total number of shares outstanding (in thousands) 142,184 142,034    
       
GOLD PRODUCTION STATISTICS Year ended December 31,    
  2009 2008    
         
Frog's Leg (51%)²        
Attributable Production (ounces) 46,120 15,375    
Tonnage milled (t) 298,024 159,370    
Grade milled (g Au/t) 5.2 3.3    
Recovery rate (%) 93 92    
Cash Cost (US$/oz) 457 N/A    
         
         
Hassaï (40%)        
Attributable Production (ounces) 24,715 29,270    
Tonnage milled (t)³ 725,303 809,285    
Grade milled (g Au/t) 3.8 4.1    
Recovery rate (%) 70 69    
Cash Cost (US$/oz) 724 603    
         
         
ITY (45.9%)        
Attributable Production (ounces) 23,735 24,995    
Tonnage milled (t)³ 449,050 469,580    
Grade milled (g Au/t) 5.0 4.4    
recovery rate (%) 72 82    
Cash Cost (US$/oz) 389 406    
  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

Contact Information

  • La Mancha Resources Inc.
    Martin Amyot
    Vice President Corporate Development
    514-987-5115
    info@lamancha.ca
    or
    Nicole Blanchard
    Investor Relations
    514-961-0229