La Mancha Resources Inc.

La Mancha Resources Inc.

May 08, 2009 08:35 ET

La Mancha's Profits Surge as Australian Mine Turns Cash Flow Positive and Profitable

MONTREAL, QUEBEC--(Marketwire - May 8, 2009) - All amounts are expressed in CA dollars, unless otherwise indicated. Unaudited


- Cash flow from operating activities of $11.0 million

- Revenues of $24.7 million

- Net earnings of $3.5 million

- Cash and short term investments of $20.1 million

- 18,515 ounces of gold produced at an average cash cost of US $451 per ounce

- The Company elects to re-locate its corporate office to Paris while maintaining active investors' relation in Canada

La Mancha Resources Inc. (TSX:LMA)(hereinafter "La Mancha" or the "Company") produced 18,515 ounces of gold at an average cash cost of US $451 per ounce during the first quarter of 2009 compared to 16,260 ounces of gold at an average cash cost of US $534 per ounce in the same quarter last year. The increase in production is due to the start of production at the Australian Frog's Leg mine and an improved performance at the Ity mine in Africa, which together more than compensated for lower production from the Hassai mine and the gold recovered from the broken ore inventory at the White Foil pit in the first quarter of 2008.

Consolidated cash costs per ounce for the first quarter of 2009 were down 16% from the corresponding quarter of 2008 to US $451 per ounce. This decrease reflects the improved cash costs per ounce at the Ity mine and the commercial production from the Frog's Leg mine, which more than compensated for the slightly higher Hassai mine cash cost per ounce.

La Mancha's first quarter revenues totalled $24.7 million, due mainly to its stronger production and favourable changes in exchange rates. As shown in the following table, the Company's key financial indicators have strongly improved over the past twelve months. This first quarter of 2009 marks a milestone for La Mancha, with the Australian operation starting to contribute to the Company's operating cash flow capacity as the mine turned cash flow positive and profitable in the first quarter of 2009.

Table 1 below highlights the remarkable turnaround and consistent profitability for the last two consecutive quarters, starting in October 2008.

Table 1
Three-month Three-month Three-month Three-month
period ended period ended period ended period ended
June 30, Sept. 30, Dec. 31, March 31,
2008 2008 2008 2009
Revenues 13,132 12,151 14,935 24,660
Operating margin (1,741) (423) 1,293 6,229
Operating cash flow (1,756) 1,821 2,213 11,013
Net earnings (2,580) (1,638) 1,188 3,477

Michel Cuilhe, President and CEO of La Mancha, stated: "We are glad to report that all the pieces of the puzzle are finally falling into place for La Mancha. The combination of the improved performance from our African mines and the successful ramp-up of Frog's Leg, our new Australian mine, have allowed us to significantly increase our operating margin as our cash costs decreased. Consolidated cash costs of US $451 per ounce for the first quarter are 12% lower than the 2008 cash cost per ounce and 9% lower than the US $497 cash cost per ounce forecast for 2009. Moreover, it is important to note that we are on track to achieve our 2009 production target of 85,000 to 100,000 ounces, as our three producing mines achieved their first quarter targets. La Mancha is therefore well positioned to fast-track to the next level."

La Mancha's cash flows from operating activities rose to $11.0 million during the first quarter of 2009, up more than five-fold from the last quarter of 2008. Due to its improved ability to generate cash, the Company had increased cash and short-term investments to $20.1 million as of March 31, 2009.

"In light of La Mancha's newly-established cash flow generation capacity, we now seek new growth opportunities. In the meantime, cash on hand will be used to reduce the Company's indebtedness" added Mr. Cuilhe.

Given the $5.4 million improvement in its mine operating margin over last year, La Mancha recorded net earnings of $3.5 million during the first quarter of 2009, as each mine posted positive results. This compares to net loss of $2.4 million a year earlier. This performance was achieved despite a $0.5 million charge associated with the write-down of its commercial paper holdings, which was considered a "non-cash" item charge by nature.

In order to increase the efficiency of corporate support to its operations, the Company has elected to move its corporate office to Paris. The move, which will significantly improve the management's proximity to the mine sites, is expected to further streamline La Mancha's organisational and operational efficiencies. The Company intends to maintain active investors' relation in Canada.


The Frog's Leg mine, having achieved commercial production on January 1, 2009, generated 6,115 ounces of gold net to La Mancha at an average cash cost of US $386 per ounce in the first quarter of 2009. This represents a 12% increase compared to 5,469 ounces of gold generated in the fourth quarter of 2008.

As shown in Table 2, the Frog's Leg mine continued to gain pace with a steady increase in underground tonnage mined per quarter. It should be noted that 55,197 tonnes were mined in March, representing a new monthly record.

Table 2
Data provided for 100% Three-month Three-month Three-month
of the mine period ended period ended period ended
Sept. 30, Dec. 31, March 31,
2008 2008 2009
Underground ore mined (t) 75,154 116,861 142,834
Apparent grade mined (g Au/t) 3.86 4.46 4.23
Apparent gold content of ore
mined (oz) 9,325 16,753 19,403

It is also important to outline that during the first quarter of 2009, as underground ore extraction ramped up, La Mancha's share of underground ore mined amounted to 72,840 tonnes while only 38,595 tonnes were milled, in line with the processing schedule of the toll-milling agreement. Therefore, production is expected to significantly increase in the next quarter as La Mancha had stockpiled 77,175 tonnes of high grade ore by the end of the quarter. In line with expectations, the most recent 30-day milling campaign, which began at the Greenfields Mill on April 1st, had treated a total of 60,391 tonnes of high grade ore as of April 30th. An additional toll milling campaign of around 28,000 tonnes was negotiated and commenced on May 4th at Dioro's Jubilee Mill.

Management awaits the new Frog's Leg mining plan, scheduled for completion at the end of the second quarter of 2009, which is expected to increase the mine's future production, in line with the published resources increase published in March, 2008.

The Hassai mine production totalled 16,220 ounces of gold (6,485 ounces attributable to La Mancha) at an average cash cost of US $568 per ounce for the first quarter of 2009. This compares to 23,150 ounces of gold (9,260 ounces attributable to La Mancha) produced in the first quarter of 2008 at a cash cost of US $538 per ounce. The decrease in gold output was essentially due to a lower tonnage milled and lower gold recovery rates. The addition of two new water wells during the quarter should improve leaching kinetics in the next quarter, thus helping to increase recovery rates.

The transition from siliceous-baritic rock (SBR) to quartz ore continued successfully during the first quarter as quartz mill throughput increased 58% over the previous quarter, corresponding to a 71% increase over the corresponding quarter of 2008. This record quarterly quartz ore mill throughput was achieved despite a nine-day maintenance shutdown in March. Management will keep building on this improved performance to gradually increase the rate of the quartz line to its design capacity of 2,000 tonnes per day. It is worth noting that the quartz ore mill throughput exceeded the 2,000 tonnes per day mark for 25 days in the first quarter of 2009.

The following table shows the improvement in tonnage milled through the quartz ore line over the past 12 months:

Table 3
Data provided Three-month Three-month Three-month Three-month
for 100% period ended period ended period ended period ended
of the mine June 30, Sept. 30, Dec. 31, March 31,
2008 2008 2008 2009
Quartz ore
milled (t) 63,715 68,960 109,072 119,458
Apparent grade
milled (g Au/t) 5.06 5.11 4.98 4.83
Apparent gold
content of ore
milled (oz) 10,361 11,338 17,471 18,538

The higher gold grades and favourable fluctuations in currency exchange rates did not sufficiently offset the diseconomies of scale factor, the lower tonnage milled and a lower recovery rate. Cash costs per ounce during the first quarter of 2009 increased 6% over the corresponding period of 2008.

The Ity mine produced a total of 12,885 ounces of gold (5,915 ounces attributable to La Mancha) at an average cash cost of US $388 per ounce during the first quarter of 2009, compared to 11,080 ounces of gold the previous year (5,090 ounces attributable to La Mancha) at an average cash cost of US $527 per ounce. This 16% increase in production at Ity was essentially the result of higher heap recovery rates due to the lower sulphide content currently mined in the new Mount Ity pit.

In the first quarter of 2009, the cash cost decreased 26% compared to the same period of 2008 due to higher gold recovery rates and favourable fluctuations in currency exchange rates, which together compensated for slightly higher mining costs.


On February 17, 2009, La Mancha announced its intention to put the first phase of the Australian White Foil project into production, which is expected to yield 69,160 ounces of gold production over a 27-month period. As the first phase of the project is already fully permitted and requires minimal development, White Foil is expected to start production as soon as a satisfactory milling agreement is signed. Over the last few months, discussions have been progressing well with four different mill operators.


On April 14, 2009, La Mancha reported that preliminary drill results for the second of six targets where volcanogenic massive sulphides (VMS) have been identified at its African Hassai property indicated the presence of a second conceptual deposit of 40 million tonnes of VMS at 1.1 - 1.3 g/t Au and 0.6 - 0.8% Cu. This potential deposit adds to the 20 million tonne deposit identified in July 2008, for a total potential to date of 60 million tonnes at 1.15 - 1.35 g/t Au and 0.9 - 1.3% Cu.

As with the first target reported in December 2008, estimates of the second target's conceptual tonnage and grade is based on the manual polygonal method using parallel cross-sections spaced at 100m. The following table summarizes the scope of the information collected so far:

Table 4
Target #1 Target #2 Hassai property
(Hassai pit) (Hadal Awatib (first 2 of 6
pit - eastern targets)
Number of drill
holes completed
(current + historical) 19 8

Estimated length of greater than
the structure (m) 1,000 500

At least 2
Number of VMS lens folded and
(es) intersected 1 faulted

Average width of the Up to 130 - 70
lenses (m) 14 - 17 in average

Maximum depth
intersected(i) 350 300
Metals intersected
(and grade)(ii) Au 3.3 - 1.5 g/t Au 1.1 - 1.3 Au 1.15 -
g/t 1.35 g/t

Cu 1.5 - 2% Cu 0.6 - 0.8% Cu 0.9 -

Ag insignificant Ag 5 - 7 g/t Ag 3 - 5 g/t

Zn insignificant Zn 0.5 - 0.7% Zn 0.3 - 0.7%
Conceptual tonnage greater than
estimate (t) 20,000,000 40,000,000 60,000,000
(i) below pit

(ii) not including enriched supergene zone

As was mentioned on April 14, the VMS exploration program will continue to progress as planned, with results disclosed as they become available. The following table outlines the VMS program's expected news flow along with expected news release dates.

Table 5
VMS Program Expected News Flow Date
Target 1 First NI 43-101 compliant resource calculation
(Hassai pit) for the deposit Q2
Metallurgical tests Early Q3
Target 2 Supergene drill results for the western part
(Hadal Awatib of the pit, "Zone A" (44 holes totalling End of
pits) 4,160 meters have been drilled) Q2

First NI 43-101 compliant resource calculation
for the enriched zone Q3
End of
Target 1 and 2 Scoping study Q3


La Mancha will be present at the New York Hard Assets Investment Conference in New York, to be held on May 11 and 12, 2009, at the New York Marriott Marquis Time Square. Members of Management will be present at Booth 802.

La Mancha will also present at the NYSSA Conference in New York, to be held on June 2 and 3, 2009, at the New York Society of Security Analysts, 1177 Avenue of the Americas.

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

Toronto May 19, 2009, 12:00 pm, at the Suite, 1 King street West

Laval May 20, 2009, 12:00 pm, at the Hilton Laval, 2225 des
Laurentides Highway

Ste-Foy May 21, 2009, 12:00 pm, at Au petit coin Breton, Place de
la Cite, 2600 Laurier Blvd

Longueuil May 26, 2009, 12:00 pm, at Sandman Hotel, 999 de Serigny

Sherbrooke May 28, 2009, 12:00 pm, at Restaurant DaToni,
15 Belvedere Street North

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


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


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 and objectives; statements regarding the start of production of the White Foil mine and the Company's chances to sign a milling agreement; statement regarding the accuracy of our resources and our ability to file the appropriate technical and scoping reports. 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.


(All amounts are in CDN dollars First Quarter ended March 31,
unless otherwise noted) 2009 2008
RESULTS (consolidated, in thousands of $)
Revenues 24,660 13,421
Cash flow from operating activities 11,013 1,007
Net earnings (loss) 3,477 (2,378)



Net earnings (loss) 0.024 (0.017)
Basic weighted average number of
common shares outstanding (in thousands) 142,035 142,008


Number of ounces produced 18,515 16,260 (1)
Mine operating costs (US$ per ounce) 451 534

March 31, March 31,
2009 2008

FINANCIAL POSITION (in thousands of $)

Cash and short-term investments 20,109 11,248
Total assets 159,708 141,375
Shareholders' equity 109,980 111,657
Total number of shares outstanding
(in thousands) 142,035 142,008

GOLD PRODUCTION STATISTICS First Quarter ended March 31,
2009 2008

Frog's Leg (51%)(2)
Attributable production (ounces) 6,115
Tonnage milled (t) 38,595
Grade milled (g Au/t) 5.4
Recovery rate (%) 92
Cash costs (US$ per ounce) 386


Hassai (40%)
Attributable Production (ounces) 6,485 9,260
Tonnage milled (t)(3) 163,800 237,870
Grade milled (g Au/t) 4.6 4.0
Recovery rate (%) 67 75
Cash costs (US$ per ounce) 568 538


ITY (45.9%)
Attributable Production (ounces) 5,915 5,090
Tonnage milled (t)(3) 123,400 121,086
Grade milled (g Au/t) 3.8 3.9
recovery rate (%) 86 72
Cash costs (US$ per ounce) 388 527

(1)Including 1,910 ounces of pre-production following the de-watering of
the White Foil mine

(2)Frog's Leg mine was not in operation for the quarter ended March
31st, 2008

(3)On a 100% basis

Contact Information

  • La Mancha Resources Inc.
    Martin Amyot
    Vice President Corporate Development