La Mancha Resources has "world class" deposit at H
Fri 10:34 am by
Junior gold producer La Mancha Resources ()has "world class" volcanic massive sulphide (VMS) deposits at itsHassaï gold mine in Sudan, Africa, said Ocean Equities Friday.
The capital markets firm said La Mancha is trading at a significantdiscount to its peers in relation to operating cash flow multiples andenterprise value/resource multiples, and offers equity exposure to goldwith significant expansionary developments in the pipeline.
Quebec-based La Mancha operates four mines in Australia and Africaas well as exploration projects in those nations, as well as inArgentina. It produces gold from its mines in Sudan, Australia and theIvory Coast.
Following a recent site visit to La Mancha's African mine, OceanEquities confirmed the significant economic potential of the large VMSdeposits.
Development of the deposits is part of a wider plan by La Mancha tolift the group's attributable annual gold equivalent production to350,000 ounces by 2015.
The current inferred VMS resource at Hassaï are 50 million tonnes at1.33 grams per tonne (g/t) gold and 1.19 percent copper, OceanEquities said.
La Mancha has set an exploration objective to grow the resource to100 million tonnes from the current 100,000 metre drilling campaign,70 percent of which has already been completed.
The company plans to release an updated resource estimate inFebruary 2012, and early indications suggest the resource maypotentially be the largest in the area, with the possibility of aresource in excess of 10 million ounces of gold equivalent, Oceansaid.
Ocean Equities visited three pits at Hassaï that are currently underVMS exploration, Hassaï South, Hadal Awatib East and Hadayamet. TheVMS deposit at Hadal Awatib East has multiple lenses sloping atapproximately 65 degrees.
New drill results suggest a thickening of the lens, which supports alarger resource at Hadal Awatib East with the potential to double theexisting resource of 31.3 million tonnes.
Drilling at Hadal Awatib East has also intersected chalcopyrite, acopper iron sulphide mineral considered to be the most important type ofcopper ore.
At Hassaï South, drilling suggests the deposit remains open atdepth, and the drilling campaign at Hadayamet has identified elevatedvalues of gold and silver.
The VMS drilling campaign at Hassaï is part of La Mancha’s two-phasedevelopment strategy to significantly lift production in the Sudan.The first phase will see an upgrade of the current heap leachingoperation, with the development of a 3 million tonnes per annum capacitycarbon-in-leach (CIL) plant scheduled for 2013.
The CIL plant will enable the processing of remaining reserves - the11.6 million tonnes at 1.7 g/t gold tailings pile - and the acidicstockpiles of 530,000 tonnes at 6.1 g/t gold - that have accumulatedover the mining operation at Hassaï.
Combined, there is currently 729,000 ounces of gold in stockpilesthat are unable to be processed through the current heap leachingoperation.
Phase one of the Hassaï expansion is considered to be a relativelylow risk and low cost operation as the stockpiles will only requirerehandling to deliver the ore to the new CIL plant, Ocean said.
The capital estimate determined in the Definitive Feasibility Study(DFS) for the phase one development is US$187 million, consisting ofthe upgrading of the current heap leaching operation with theinstallation and commissioning of a carbon in leach (CIL) plant, a 165kilometre water pipeline from the Nile River and power facilities.
With current cash on hand and expected free cash flow through toMarch 2012, La Mancha is estimating a total funding requirement at itsSudanese subsidiary of $99 million to fund the first phase ofdevelopment, which is estimated to bring production at Hassaï to161,000 ounces per year.
The second phase of the development consists of the construction of a5 million tonnes per annum plant, with a floatation unit that willenable the exploitation of copper-gold VMS mineralization from 2015.
Production after the second phase is forecasted to increase total output to 435,000 ounces of gold in 2015.
A 2010 preliminary economic assessment (PEA) based on only two pits ofthe 16 on the property, with a conservative mining inventory of only30 million tonnes, estimated the initial capital for phase two at$319.4 million.
The PEA on the phase two VMS development produced a net presentvalue on the project of $123 million, assuming a 5 percent discountrate, a constant gold price of $950 per ounce, a copper price of $2.19per pound, and a mining inventory of 30 million tonnes.
La Mancha was created in 2006 after the merger of the gold assets ofFrench nuclear power firm AREVA, with the exploration properties heldby La Mancha Resources.
In early November, La Mancha said its third-quarter profits morethan doubled, largely due to higher revenues stemming from higherrealized gold prices.
For the three months that ended September 30, the gold miner postednet income of $13.16 million, or $ 0.09 per share, more than doubleover the $4.92 million, or $ 0.03 per share, it earned a year ago.Analysts polled by Bloomberg Businessweek had anticipated earnings of14-cents per share.
Revenues rose over 61 percent to $52.15 million, from $32.32 million in the same period last year.
For the year to date, shares of La Mancha are up 15 percent.