La Mancha Reports Its Third Quarter Results
PARIS, FRANCE -- (Marketwire) -- 11/09/10 -- La Mancha Resources Inc. (TSX: LMA) (hereinafter 'La Mancha' or the 'Company')
All amounts are in CA dollars, unless otherwise indicated.
Unaudited
THIRD QUARTER 2010 HIGHLIGHTS
-- Net earnings of $4.9 million
-- Production of 27,317 ounces of gold
-- Cash flow from operating activities of $9.6 million
-- Cash and short-term investments grow to $25.1 million
-- La Mancha's year end gold production expected to exceed 130,000 ounces
La Mancha Resources Inc. (TSX: LMA) (hereinafter 'La Mancha' or the 'Company') is pleased to report that it produced a total of 27,317 ounces of gold in the third quarter of 2010. This compares to gold production of 24,439 ounces in the same quarter last year. The increase is the result of higher production at both the Frog's Leg and Hassai mines and the start-up of the White Foil mine, which more than compensated for lower Ity mine production. It should also be noted that production is expected to significantly increase in the fourth quarter of 2010 in light of the cyclical volume effect of the Company's Australian toll- processing schedule.
Dominique Delorme, President and CEO of La Mancha, stated: 'With nearly 92,000 ounces of gold already produced in the first nine months of the year, we can now say that 2010 is shaping up to be a great year for La Mancha. It is, however, important to note that our results still do not fully reflect our achievements. With a massive fourth quarter Australian toll-milling campaign, we expect to boost our fourth quarter Australian gold production to approximately 28,000 ounces of gold. Once combined with our ongoing African production, La Mancha is set to increase its production to nearly 40,000 ounces of gold in the last quarter of the year, representing a gold production in excess of 130,000 ounces for the year.'
Consolidated cash costs for the third quarter of 2010 were US $687 per ounce of gold compared to US $422 in the corresponding period of 2009. Management is confident that the projected significant fourth quarter production increase at the Frog's Leg mine should have a positive impact on cash costs in the fourth quarter of 2010.
Despite a higher cost structure, increased gold production and higher gold prices helped La Mancha generate $9.6 million in cash flow from operating activities in the third quarter of 2010, compared to $8.8 million in the corresponding quarter of 2009. As of September 30, 2010, the Company was debt-free with a strong cash and short-term investments position of $25.1 million. This compares to cash and short-term investments of $21.5 million and a corporate debt of $13.3 million at the same date last year.
Mr. Delorme added: 'With a strong cash position, no debt, consolidated cash flow from operations of nearly $40 million just nine months into the year and what is bound to shape up as a solid fourth quarter, we are strategically positioned to finance our growth strategy.'
La Mancha's third quarter revenues rose to $32.3 million this year from $28.1 million last year. Net earnings for the third quarter of 2010 were $4.9 million, compared to $3.0 million in the third quarter of 2009. The 2009 figure includes a net loss of $1.3 million from the disposition of financial securities.
La Mancha is pleased to report record results for the nine-month period ended September 30, 2010, with net earnings of $16.6 million, cash flow from operating activities of $38.2 million and total attributable gold production of 91,827 ounces of gold. This compares to net earnings of $12.6 million, cash flow from operating activities of $26.4 million and total attributable gold production of 70,710 ounces of gold for the same period of 2009.
OPERATIONS
The Frog's Leg mine generated 13,871 ounces of gold net to La Mancha in the third quarter of 2010 compared to 12,283 ounces in the corresponding period of 2009. This increased production still does not fully reflect the mine's true performance due to the cyclical volume effect of toll-processing, as reflected by the discrepancy between the gold content mined and gold produced.
As shown in the table below, underground mining at Frog's Leg continued to evolve in line with expectations, as both the tonnage and grade extracted edged up to achieve new quarterly highs.
Three- Three- Three- Three- Three-
month month month month month
period period period period period
ended ended ended ended ended
Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
2009 2009 2010 2010 2010
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Underground
ore mined (t) 100% 169,400 148,235 174,532 177,753 178,928
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LMA share 86,394 75,600 89,000 90,654 91,253
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Apparent grade mined
(g Au/t) 5.16 5.28 4.82 5.51 5.55
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Apparent gold
content of
ore mined
(oz) 100% 27,609 25,178 27,050 31,460 31,946
LMA share 14,081 12,841 13,796 16,045 16,292
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In spite of the improving underground performance shown above, an ore handling restriction at the Greenfields treatment facility required that La Mancha feed lower-grade oversize ore, stockpiled from the commencement of mining operations, rather than high-grade material extracted during the quarter. This resulted in a total of 107,807 tonnes processed at a grade of 4.30 g/t Au, well below the current mine extraction grade of 5.55 g/t Au.
Gold production is expected to increase significantly in the fourth quarter as La Mancha's quarterly toll-milling campaign began on October 22 and will continue through to year end. A fourth quarter toll-milling capacity of around 183,200 tonnes has been reserved for La Mancha at the nearby Greenfields plant, allowing the Company to process its high-grade ore stockpile of 58,200 tonnes at 5.96 g/t Au by quarter-end. The Company plans to fill any excess capacity beyond the high-grade stockpile and the Frog's Leg high-grade ore mined during the fourth quarter with stockpiled White Foil ore. Given this large fourth quarter toll-milling campaign, management is confident that the operations should generate roughly 28,000 ounces of gold for La Mancha in the final quarter of the year.
La Mancha's forecast fourth quarter 2010 ore feed to the Greenfields treatment plant is presented in the table below.
Ore source attributable to LMA Tonnes / grade (g/t Au)
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Q3 Frog's Leg stockpile 58,200 t at 5.9
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Estimated Frog's Leg ore to be mined in Q4 85,650 t at 5.8
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White Foil stockpile ore top-off 39,350 t at 2.0
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Q4 2010 mill capacity at the Greenfields plant 183,200 t
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Cash costs per ounce for the third quarter of 2010 averaged US $631 per ounce, compared to US $358 per ounce in the corresponding period of 2009. Cash costs per ounce increased due the lower processed gold grade mentioned above, as well as an unfavourable change in currency exchange rates. As witnessed in the second quarter of 2010, cash costs per ounce are expected to decrease in the fourth quarter in light of the greater production volume and the higher expected processed gold grades.
In line with production targets, the Frog's Leg mine generated 48,365 ounces of gold for La Mancha in the nine months ended September 30, 2010, at a cash cost of US $546 per ounce, compared to 34,330 ounces of gold at a cash cost of US $414 per ounce for the first nine months of 2009.
The 100%-owned White Foil mine, inaugurated in April 2010, produced 3,230 ounces of gold at a cash cost of US $843 per ounce in the third quarter of 2010. The year's second Three Mile Hill plant toll-treatment campaign, totalling 55,000 tonnes at 2.0 g/t, was carried out in August and September. As previously mentioned, roughly 39,350 tonnes of the stockpiled White Foil ore are expected to be treated at the Greenfields facility during the fourth quarter. As at quarter-end, the White Foil stockpile stood at 156,700 tonnes grading 1.94 g/t Au.
In line with the scheduled toll-mining plan, a total of 282,104 tonnes have been extracted since mining operations began in March 2010, thereby successfully concluding the first bench mining operation. Contract mining is anticipated to resume in the first quarter of 2011.
The White Foil mine has generated 9,189 ounces of gold since its inauguration in April 2010, at a cash cost of US $868 per ounce.
Production at the Hassai mine totalled 15,517 ounces of gold (6,207 ounces attributable to La Mancha) at an average cash cost of US $803 per ounce for the third quarter of 2010. This compares to 12,435 ounces of gold (4,974 ounces attributable to La Mancha) produced in the third quarter of 2009 at an average cash cost of US $750. Gold output increased due to a higher processed gold grade and recovery rate, which more than compensated for the lower mill throughput. Cash costs during the quarter were negatively impacted by a higher stripping ratio and additional gold royalties arising from higher realized gold prices.
The construction of the dust vacuum system on the quartz processing circuit, which necessitated a 16-day plant shutdown, was completed and successfully commissioned during the third quarter. Put in place to help reduce plant downtime, the system was already having a positive impact towards the end of the third quarter. Total mill throughput decreased over the corresponding period of 2009, most notably due to the plant shutdown. It is important to note the successful transition to quartz ore, with the quartz processing circuit accounting for nearly 70% of the total milled volume in the third quarter.
In line with production targets, the Hassai mine produced 53,287 ounces of gold (21,315 ounces attributable to La Mancha) in the nine months ended September 30, 2010, at a cash cost of US $725 per ounce, compared to 44,937 ounces of gold (17,975 ounces attributable to La Mancha) at a cash cost of US $627 per ounce for the first nine months of 2009.
The Ity mine produced a total of 8,733 ounces of gold (4,008 ounces attributable to La Mancha) at an average cash cost of US $577 per ounce during the third quarter of 2010, compared to 15,647 ounces of gold (7,182 ounces attributable to La Mancha) produced in the corresponding quarter of 2009 at an average cash cost of US $303 per ounce. The cash cost increase is directly linked to the lower production volume caused by a decrease in processed gold grades, a lower gold recovery rate and, to a lesser degree, a slight reduction in mill throughput.
Gold production during the quarter was negatively impacted by frequent heavy rainfalls that restricted access to the higher-grade clay ore, resulting in the processing of lower-grade stockpiled ore. Mill throughput increased by nearly 40% over the previous quarter as the plant started to regain momentum after the installation and commissioning of the new leaching pads. Gold production is expected to improve in the fourth quarter as mill throughput continues to increase, while the end of the rainy season should allow easier access to the aforementioned high-grade clay ore.
The Ity mine produced 28,233 ounces of gold (12,959 ounces attributable to La Mancha) in the nine months ended September 30, 2010, at a cash cost of US $550 per ounce, compared to 40,098 ounces of gold (18,405 ounces attributable to La Mancha) at a cash cost of US $358 per ounce for the first nine months of 2009.
VMS PROJECT
On September 7, 2010, La Mancha announced a positive Preliminary Economic Assessment for its Volcanogenic Massive Sulphide ('VMS') project at its 40%-owned Hassai mine in north- eastern Sudan. The technical report was filed on SEDAR (www.sedar.com) on October 22, 2010.
Highlights of the study include:
Phase 1: CIL Phase 2: VMS Global
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Commissioning 2013 2015 --
Yearly production(i)
Gold (oz) 155,880 59,355 --
Copper (t) -- 51,516
Initial capital cost $185.6 M $319.4 M $505.0 M
$ 1.24/lb
Average cash costs $ 482/oz Au Cu(iii) -
Internal rate of return 30% 11% 17%
NPV @ 5% discount(ii) $149.8 M $122.7 M $238.7 M
(i)CIL: Excludes low production projected for the last year of operation, VMS: Rate for the first 5 years of operation (when project is running at design run-rate) (ii)Using a gold price of US $950 per ounce and a copper price of $2.19 per pound. (iii)Including gold credit
The robust economic indicators for the Carbon-in-Leach ('CIL') phase justified the immediate commencement of feasibility work for the first phase of the project, while the promising VMS upside potential justified the launch of an $18 million VMS exploration program with 100,000 metres planned over a 12-month period ending at the end of the third quarter of 2011.
La Mancha was pleased to demonstrate the project's upside to analysts and institutional investors through a site visit that took place in mid-October.
CORPORATE DEVELOPMENT
Investor Relations Calendar
La Mancha will be at the following upcoming events:
Mines and Money London 2010 on November 30 and December 1, 2010, at the Business Design Centre, 52 Upper Street, Islington, London
Toronto CFA Society Breakfast Presentation on Dec. 1, 2010, in the Large Boardroom of the Toronto CFA Society, 130 Adelaide Street West, Suite 902, Toronto
La Mancha will also be hosting corporate presentation seminars in the following locations:
Vancouver on December 2, 2010
Calgary on December 3, 2010
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 of Renmark at (514) 939-3989 or 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, 2010, 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 Stock Exchange (TSX) under the symbol 'LMA'. More information on the Company can be found on its website at 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 production and profitability, production targets and timetables; statements regarding an expected increase in Australian toll-milling capacity and its positive impact on La Mancha's fourth quarter production and cash costs; statements regarding the Frog's Leg mine's ore mill schedule and grades; statements regarding White Foil's production and the possibility to treat its stockpiled ore at the Greenfields treatment plant; statements regarding the resumption on White Foil toll-milling in the first quarter of 2011; statements regarding the future production level of the quartz line in Sudan; statements regarding the positive impact of Ity's new leaching pads on production and the possibility to mine high-grade clay ore once the rainy season ends. 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
(unaudited)
(All amounts are in CDN dollars Third Quarter First 9 months
unless otherwise noted) ended September 30, ended September 30,
2010 2009 2010 2009
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RESULTS (consolidated, in
thousands of $)
Revenues 32,320 28,162 114,701 81,187
Cash flow from operating
activities 9,592 8,829 38,243 26,466
Net earnings (loss) 4,922 3,045 16,631 12,622
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PER SHARE ($)
Net earnings (loss) 0.04 0.02 0.12 0.09
Basic weighted average number of 142,503 142,051 142,310 142,051
common shares outstanding (in
thousands)
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ATTRIBUTABLE GOLD PRODUCTION
Number of ounces produced 27,317 24,439 91,827 70,710
Mine operating costs (US$ per
ounce) 687 422 620 454
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September December
30, 2010 31, 2009
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FINANCIAL POSITION (in thousands
of $)
Cash and short-term investments 25,066 21,535
Total assets 165,154 167,704
Shareholders' equity 132,837 115,832
Total number of shares outstanding
(in thousands) 142,641 142,184
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Third Quarter First 9 months
ended September 30, ended September 30,
GOLD PRODUCTION STATISTICS 2010 2009 2010 2009
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Australian Operations
Frog's Leg (51%)
Attributable production (ounces) 13,871 12,283 48,365 34,330
Tonnage milled (t) 107,807 67,530 316,299 225,214
Grade milled (g Au/t) 4.3 6.1 5.1 5.2
Recovery rate (%) 94 93 94 93
Cash costs (US$ per ounce) 631 358 546 414
White Foil (100%)
Attributable production (ounces) 3,230 N/A 9,189 N/A
Tonnage milled (t) 55,026 N/A 144,704 N/A
Grade milled (g Au/t) 2.0 N/A 2.1 N/A
Recovery rate (%) 93 N/A 93 N/A
Cash costs (US$ per ounce) 843 N/A 868 N/A
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African Operations
Hassai (40%)
Attributable production (ounces) 6,207 4,974 21,315 17,975
Tonnage milled (t)(1) 152,265 164,997 588,222 513,552
Grade milled (g Au/t) 4.4 3.5 3.9 4.0
Recovery rate (%) 72 68 72 68
Cash costs (US$ per ounce) 803 750 725 627
ITY (45.9%)
Attributable production (ounces) 4,008 7,182 12,959 18,405
Tonnage milled (t)(1) 90,055 96,794 254,626 337,121
Grade milled (g Au/t) 4.3 6.3 4.9 4.6
Recovery rate (%) 70 80 70 80
Cash costs (US$ per ounce) 577 303 550 358
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(1) On a 100% basis
Contacts:
La Mancha Resources Inc.
Martin Amyot
Vice President Corporate Development
514-987-5115
info@lamancha.ca
La Mancha Resources Inc.
Nicole Blanchard
Investor Relations
514-961-0229
nblanchard@lamancha.ca
www.lamancha.ca
