LMA - the hidden treasureAug 06, 2010 07:16 ET
La Mancha Posts Record Quarterly Net Earnings as Gold ProductionRises More Than 50%
PARIS, FRANCE--(Marketwire - August 6, 2010) - La Mancha ResourcesInc. (TSX:LMA)
All amounts are in CA dollars, unless otherwise indicated.
Unaudited
SECOND QUARTER HIGHLIGHTS
-- Net earnings of $8.0 million
-- Cash flow from operating activities of $18.7 million
-- Corporate debt gets fully repaid while cash position remains strong at
$19.7 million
-- Record quarterly gold production of 42,857 ounces, up 54% year over year
-- Successful start-up of the White Foil mine operation with 5,959 ounces
of gold produced during the quarter
La Mancha Resources Inc. (TSX:LMA) (hereinafter "La Mancha" or the"Company") is pleased to report that its 2010 second quarter productiontotalled 42,857 ounces of gold compared to 27,755 ounces of gold for thesame quarter last year. This 54% increase in production is the resultof the continued growth in production rate at Frog's Leg, the start-upof the White Foil mine, which became La Mancha's fourth producing mineduring the quarter, and the improved performance of the Hassai mine.
Consolidated cash costs for the second quarter of 2010 were US $581per ounce of gold. This represents a 20% increase compared to the US$484 per ounce for the same quarter of 2009. The year-over-year increasein cash costs can be explained by an upward industry trend in operatingcosts and by the higher cost structure at the new White Foil mine. Itis worth noting, however, that the Company managed to buck the industrytrend during the second quarter, reducing its cash costs relative to thefirst quarter of the year at its two main producing mines, Frog's Leg(-14%) and Hassai (-10%).
Dominique Delorme, President and CEO of La Mancha, stated: "LaMancha met two other important milestones during the second quarter of2010. First, the White Foil mine officially became our fourth producingasset and the second mine put to production in less than two years.Second, the strong increase in gold production has allowed the Companyto take maximum advantage of current gold prices. With year-to-date cashflow from operations of $28.6 million, we managed to fully repay ourcorporate debt while maintaining a strong cash position, making us verywell placed for our next round of development."
La Mancha's second quarter revenues almost doubled to $54.5 millionthis year from $28.4 million last year, due mainly to significantlystronger production and, to a lesser degree, favourable changes in goldprices.
La Mancha generated a record $18.7 million in cash flow fromoperating activities in the second quarter of 2010, compared to $6.6million in the corresponding quarter of 2009. This cash influx, togetherwith the sale of non-strategic securities for $2.1 million during thequarter, enabled La Mancha to repay $13.9 million on the debt facilitycontracted with AREVA in 2007. As of June 30, 2010, the AREVA debtfacility was fully repaid but remained available for its full amount(AUD 22.0 million). The said AREVA facility is set to expire on December31, 2011. La Mancha's cash and short-term investments amounted to $19.7million as at June 30, 2010.
La Mancha recorded net earnings of $8.0 million for the secondquarter of 2010, as each mine continued to post positive results. Thiscompares to net earnings of $6.1 million for the second quarter of 2009.Net earnings were impacted by an $887,000 withholding tax provisionrecorded in anticipation of a tax payment made in July in relation tothe inter-company interest payments to be made by La Mancha Australia toLa Mancha Inc. This exceptional charge was partially mitigated by a$477,000 capital gain recorded on the sale of non-strategic securities.
For the first half of 2010, La Mancha posted net earnings of $11.7million while its attributable gold production totalled 64,511 ounces ofgold. This compares to net earnings of $9.6 million and gold productionof 46,451 ounces in the same period of 2009.
OPERATIONS
The Frog's Leg mine generated 24,706 ounces of gold net to La Manchaat an average cash cost of US $488 per ounce (AU $551 per ounce) duringthe second quarter of 2010 compared to 15,933 ounces at an average cashcost of US $467 per ounce (AU $615 per ounce) generated in thecorresponding period of 2009.
This record quarterly gold production represents a year-over-yearincrease of 55%, while the cash costs per ounce in Australian dollarsdecreased by 10% over the same period. This strong performance,supported by a ramp-up in underground ore extraction and increasedmilling capacity, reaffirms the mine's capacity to meet its 2010production target. During the first six months of the year, the minegenerated 34,495 ounces of gold for La Mancha, passing the halfway marktoward the objective of generating between 60,000 and 70,000 ounces ofgold for the year.
Second quarter underground gold ounces extracted increased by 55%year over year due to the mine's continued ramp-up while gold gradesincreased to reach levels in line with the average grade of the reserve.
The following table shows the steady quarter-over-quarter increasein both underground tonnage mined and gold grades.
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Three- Three- Three- Three- Three-
month month month month month
Data provided for period period period period period
100% of the mine ended ended ended ended ended
June 30, Sept. 30, Dec. 31, March 31, June 30,
2009 2009 2009 2010 2010
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Underground ore
mined (t) 149,764 169,400 148,235 174,532 177,753
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Apparent grade mined
(g Au/t) 4.23 5.11 5.28 4.82 5.51
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Apparent gold
content of ore
mined (oz) 20,349 27,808 25,178 27,060 31,460
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During the quarter, the paste backfill plant was completed and putinto operation, with the first stope filled in early May. The moreeffective mine stability that paste-fill provides over other backfillmethods will enable higher extraction of ore at depths below the currentresource. Exploration resource definition drilling is currently inprogress to extend the Frog's Leg resource.
The 100%-owned White Foil mine officially became La Mancha's fourthproducing asset and second mine to be put to production in less than twoyears, as the mine marked its first gold pour on April 16, 2010. Duringthe second quarter, 5,959 ounces of gold were produced at a cash costof US $882/oz.
Mining operations, which began on March 4, 2010, have generated atotal of 192,246 tonnes of ore at an average grade of 2.03 g/t Au, whilethe first milling campaign at the Three-Mile-Hill treatment plantprocessed 89,678 tonnes of ore. Consequently, roughly 102,568 tonnes ofore at 1.85 g/t Au were stockpiled at quarter-end. While the next100,000-tonne processing campaign at Three-Mile-Hill is scheduled forSeptember, excess mill capacity at the nearby Greenfield plant may befilled with White Foil ore during the third and fourth quarter.
The Hassai mine's gold production remains in line with the 2010forecast, as output totalled 20,021 ounces of gold (8,008 ouncesattributable to La Mancha) at an average cash cost of US $658 per ouncefor the second quarter of 2010. This compares to 16,280 ounces of gold(6,512 ounces attributable to La Mancha) produced in the second quarterof 2009 at a cash cost of US $593 per ounce. Gold output increased dueto a significant increase in mill throughput, notably due to ongoingimprovements at the quartz mill circuit, and an increase in the goldrecovery rate.
The construction of the dust vacuum system on the quartz processingcircuit was completed in July. The system is now in operation and shouldfurther increase production by helping to reduce downtime at the plant.
Cash costs per ounce increased over the corresponding period of2009, due mainly to the inflation pressure felt on the price of most ofthe consumables used on site and, to a lesser degree, to the increasedroyalty charges arising from higher gold prices. It is worth mentioning,however, that the second quarter marked a trend reversal, as cash costsdecreased 10% over the first quarter of 2010 mainly due to the bettergrade milled.
The Ity mine produced a total of 9,116 ounces of gold (4,184 ouncesattributable to La Mancha) at an average cash cost of US $552 per ounceduring the second quarter of 2010, compared to 11,568 ounces of gold theprevious year (5,310 ounces attributable to La Mancha) at an averagecash cost of US $398 per ounce. As anticipated, production decreaseddespite the higher gold grades milled, due to a production shutdown inMay to replace the old heap leaching area. The benefits of the newleaching pads, in operation by quarter end, should start being felt inthe third quarter when the first leaching cycle ends.
The cash cost per ounce for the quarter increased, due mainly to thelower production volume caused by the aforementioned productionshutdown and, to a lesser degree, to the continued unfavourable copper-and sulphide-rich ore, which necessitates more cyanide spraying andlonger leaching cycles. As mentioned earlier this year, gold productionis expected to improve in the second half of the year as mining movesaway from the current mining area and the new leach area is put intooperation.
VMS DEVELOPMENT PROJECT
Management remains confident that the results of the upcomingPreliminary Economic Assessment ("PEA") for the VMS project will bereleased during the third quarter of 2010. The main purpose of the PEAis to provide a first look at the economic viability of a VMS project atthe Hassai property based on a series of assumptions that includeoperating and development costs, and to provide a recommendation for thefuture of the project.
CORPORATE DEVELOPMENT
Investor Relations Calendar
September 20-22: Denver Gold Forum
Consolidated Financial Statements
The management discussion and analysis and unaudited consolidatedfinancial statements with explanatory notes for the quarter ended June30, 2010, are available in PDF format on La Mancha's website at www.lamancha.ca andthrough SEDAR at www.sedar.com.
ABOUT LA MANCHA RESOURCES INC.:
La Mancha Resources Inc. is an international gold producer based inCanada with operations, development projects and exploration activitiesin Africa, Australia and Argentina. La Mancha's shares trade on theToronto (TSX) under the symbol "LMA". For more information on theCompany, visit 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'sstrategic plans, future production and profitability, production targetsand timetables; statements regarding the increase in production ofFrog's Leg and the future benefits brought by the paste backfilling;statements regarding the future production level of the quartz line inSudan and the positive impact that will have the upcoming dust vacuumsystem; statements regarding the Company's ability to deliver a scopingstudy on the VMS project during the third quarter of 2010; statementsregarding the positive impact of Ity's new leaching pads on production;statements regarding White Foil's production and the possibility totreat its ore at the Greenfields treatment plant. Forward-lookingstatements express, as at the date of this press release, the Company'splans, estimates, forecasts, projections, expectations or beliefs as tofuture events and results. Forward-looking statements involve a numberof risks and uncertainties, and there can be no assurance that suchstatements will prove to be accurate. Therefore, actual results andfuture events could differ materially from those anticipated in suchstatements. Risks and uncertainties that could cause results or futureevents to differ materially from current expectations expressed orimplied by the forward-looking statements include, but are not limitedto, factors associated with fluctuations in the market price of preciousmetals, mining industry risks, exploration risks, risks associated withforeign operations, environmental risks and hazards, uncertainty as tocalculation of mineral reserves, requirement of additional financing oradditional permits, authorizations or licenses, risks of delays inconstruction and production and other risks referred to in La Mancha's2009 Annual Information Form filed with the Securities Commissions, aswell as the Toronto Stock Exchange.
HIGHLIGHTS
(unaudited) Second Quarter ended First 6 months
(All amounts are in CDN June 30 ended June 30,
dollars unless otherwise noted) 2010 2009 2010 2009
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RESULTS (consolidated, in
thousands of $)
Revenues 54 541 28 365 82 381 53 025
Cash flow from operating
activities 18 703 6 624 28 651 17 637
Net earnings (loss) 8 046 6 100 11 709 9 577
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PER SHARE ($)
Net earnings (loss) 0,06 0,04 0,08 0,07
Basic weighted average number of
common shares outstanding (in
thousands) 142 237 142 035 142 211 142 035
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ATTRIBUTABLE GOLD PRODUCTION
Number of ounces produced 42 857 27 755 64 511 46 451
Mine operating costs (US$ per 581 484 592 464
ounce)
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June 30, December
2010 1, 2009
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FINANCIAL POSITION (in thousands
of $)
Cash and short-term investments 19 714 21 535
Total assets 152 469 167 704
Shareholders' equity 117 411 115 832
Total number of shares 142 374 142 184
outstanding (in thousands)
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Second Quarter ended First 6 months
June 30 ended June 30,
GOLD PRODUCTION STATISTICS 2010 2009 2010 2009
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Australian Operations
Frog's Leg (51%)
Attributable Production 24 706 15 933 34 495 22 226
(ounces)
Tonnage milled (t) 152 828 119 089 208 492 155 667
Grade milled (g Au/t) 5,4 4,5 5,5 4,8
Recovery rate (%) 94 93 94 93
Cash costs (US$ per ounce) 488 467 511 431
White Foil (100%)
Attributable Production 5 959 N/A 5 959 N/A
(ounces)
Tonnage milled (t) 89 678 N/A 89 678 N/A
Grade milled (g Au/t) 2,2 N/A 2,2 N/A
Recovery rate (%) 93 N/A 93 N/A
Cash costs (US$ per ounce) 882 N/A 882 N/A
African Operations
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Hassai (40%)
Attributable Production 8 008 6 512 15 107 13 002
(ounces)
Tonnage milled (t)(1) 211 357 184 745 435 957 348 552
Grade milled (g Au/t) 4,3 4,3 3,9 4,6
Recovery rate (%) 68 63 68 63
Cash costs (US$ per ounce) 658 593 694 581
ITY (45.9%)
Attributable Production 4 184 5 310 8 950 11 223
(ounces)
Tonnage milled (t)(1) 65 439 116 920 164 571 240 327
Grade milled (g Au/t) 5,9 3,8 5,0 3,9
recovery rate (%) 73 80 73 80
Cash costs (US$ per ounce) 552 398 538 393
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(1) On a 100% basis