La Mancha Posts Record Quarterly Net Earnings as Gold Production Rises More Than 50%
PARIS, FRANCE -- (Marketwire) -- 08/06/10 -- La Mancha Resources Inc. (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 production totalled 42,857 ounces of gold compared to 27,755 ounces of gold for the same quarter last year. This 54% increase in production is the result of the continued growth in production rate at Frog's Leg, the start-up of the White Foil mine, which became La Mancha's fourth producing mine during the quarter, and the improved performance of the Hassai mine.
Consolidated cash costs for the second quarter of 2010 were US $581 per 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 increase in cash costs can be explained by an upward industry trend in operating costs and by the higher cost structure at the new White Foil mine. It is worth noting, however, that the Company managed to buck the industry trend during the second quarter, reducing its cash costs relative to the first 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: 'La Mancha met two other important milestones during the second quarter of 2010. First, the White Foil mine officially became our fourth producing asset and the second mine put to production in less than two years. Second, the strong increase in gold production has allowed the Company to take maximum advantage of current gold prices. With year-to-date cash flow from operations of $28.6 million, we managed to fully repay our corporate debt while maintaining a strong cash position, making us very well placed for our next round of development.'
La Mancha's second quarter revenues almost doubled to $54.5 million this year from $28.4 million last year, due mainly to significantly stronger production and, to a lesser degree, favourable changes in gold prices.
La Mancha generated a record $18.7 million in cash flow from operating activities in the second quarter of 2010, compared to $6.6 million in the corresponding quarter of 2009. This cash influx, together with the sale of non-strategic securities for $2.1 million during the quarter, enabled La Mancha to repay $13.9 million on the debt facility contracted with AREVA in 2007. As of June 30, 2010, the AREVA debt facility was fully repaid but remained available for its full amount (AUD 22.0 million). The said AREVA facility is set to expire on December 31, 2011. La Mancha's cash and short-term investments amounted to $19.7 million as at June 30, 2010.
La Mancha recorded net earnings of $8.0 million for the second quarter of 2010, as each mine continued to post positive results. This compares to net earnings of $6.1 million for the second quarter of 2009. Net earnings were impacted by an $887,000 withholding tax provision recorded in anticipation of a tax payment made in July in relation to the inter-company interest payments to be made by La Mancha Australia to La 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 $11.7 million while its attributable gold production totalled 64,511 ounces of gold. This compares to net earnings of $9.6 million and gold production of 46,451 ounces in the same period of 2009.
OPERATIONS
The Frog's Leg mine generated 24,706 ounces of gold net to La Mancha at an average cash cost of US $488 per ounce (AU $551 per ounce) during the second quarter of 2010 compared to 15,933 ounces at an average cash cost of US $467 per ounce (AU $615 per ounce) generated in the corresponding period of 2009.
This record quarterly gold production represents a year-over-year increase of 55%, while the cash costs per ounce in Australian dollars decreased by 10% over the same period. This strong performance, supported by a ramp-up in underground ore extraction and increased milling capacity, reaffirms the mine's capacity to meet its 2010 production target. During the first six months of the year, the mine generated 34,495 ounces of gold for La Mancha, passing the halfway mark toward the objective of generating between 60,000 and 70,000 ounces of gold 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 grades increased to reach levels in line with the average grade of the reserve.
The following table shows the steady quarter-over-quarter increase in 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 put into operation, with the first stope filled in early May. The more effective mine stability that paste-fill provides over other backfill methods will enable higher extraction of ore at depths below the current resource. Exploration resource definition drilling is currently in progress to extend the Frog's Leg resource.
The 100%-owned White Foil mine officially became La Mancha's fourth producing asset and second mine to be put to production in less than two years, as the mine marked its first gold pour on April 16, 2010. During the second quarter, 5,959 ounces of gold were produced at a cash cost of US $882/oz.
Mining operations, which began on March 4, 2010, have generated a total of 192,246 tonnes of ore at an average grade of 2.03 g/t Au, while the first milling campaign at the Three-Mile-Hill treatment plant processed 89,678 tonnes of ore. Consequently, roughly 102,568 tonnes of ore at 1.85 g/t Au were stockpiled at quarter-end. While the next 100,000-tonne processing campaign at Three-Mile-Hill is scheduled for September, excess mill capacity at the nearby Greenfield plant may be filled with White Foil ore during the third and fourth quarter.
The Hassai mine's gold production remains in line with the 2010 forecast, as output totalled 20,021 ounces of gold (8,008 ounces attributable to La Mancha) at an average cash cost of US $658 per ounce for the second quarter of 2010. This compares to 16,280 ounces of gold (6,512 ounces attributable to La Mancha) produced in the second quarter of 2009 at a cash cost of US $593 per ounce. Gold output increased due to a significant increase in mill throughput, notably due to ongoing improvements at the quartz mill circuit, and an increase in the gold recovery rate.
The construction of the dust vacuum system on the quartz processing circuit was completed in July. The system is now in operation and should further increase production by helping to reduce downtime at the plant.
Cash costs per ounce increased over the corresponding period of 2009, due mainly to the inflation pressure felt on the price of most of the consumables used on site and, to a lesser degree, to the increased royalty charges arising from higher gold prices. It is worth mentioning, however, that the second quarter marked a trend reversal, as cash costs decreased 10% over the first quarter of 2010 mainly due to the better grade milled.
The Ity mine produced a total of 9,116 ounces of gold (4,184 ounces attributable to La Mancha) at an average cash cost of US $552 per ounce during the second quarter of 2010, compared to 11,568 ounces of gold the previous year (5,310 ounces attributable to La Mancha) at an average cash cost of US $398 per ounce. As anticipated, production decreased despite the higher gold grades milled, due to a production shutdown in May to replace the old heap leaching area. The benefits of the new leaching pads, in operation by quarter end, should start being felt in the third quarter when the first leaching cycle ends.
The cash cost per ounce for the quarter increased, due mainly to the lower production volume caused by the aforementioned production shutdown and, to a lesser degree, to the continued unfavourable copper- and sulphide-rich ore, which necessitates more cyanide spraying and longer leaching cycles. As mentioned earlier this year, gold production is expected to improve in the second half of the year as mining moves away from the current mining area and the new leach area is put into operation.
VMS DEVELOPMENT PROJECT
Management remains confident that the results of the upcoming Preliminary Economic Assessment ('PEA') for the VMS project will be released during the third quarter of 2010. The main purpose of the PEA is to provide a first look at the economic viability of a VMS project at the Hassai property based on a series of assumptions that include operating and development costs, and to provide a recommendation for the future of the project.
CORPORATE DEVELOPMENT
Investor Relations Calendar
September 20-22: Denver Gold Forum
Consolidated Financial Statements
The management discussion and analysis and unaudited consolidated financial statements with explanatory notes for the quarter ended June 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 (TSX) under the symbol 'LMA'. For more information on the Company, 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's strategic plans, future production and profitability, production targets and timetables; statements regarding the increase in production of Frog's Leg and the future benefits brought by the paste backfilling; 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 third quarter of 2010; statements regarding the positive impact of Ity's new leaching pads on production; statements regarding White Foil's production and the possibility to treat its ore at the Greenfields treatment plant. 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) 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
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