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La Mancha
Resources Inc. (TSX:LMA
- News)
All amounts are in CA dollars, unless otherwise indicated.
Audited
2010 HIGHLIGHTS
- Record
gold production of 122,571 ounces, up 30% compared to 2009
-
- Net
earnings more than double to reach $23.7 million
-
- Cash
flow from operating activities nearly doubles to reach $59.4 million
-
- White
Foil becomes La Mancha's fourth mine in production
-
- Positive
Preliminary Economic Assessment on VMS project paves the way for more
growth
-
- Corporate
debt is fully repaid while cash position increases by $16.9 million to
$38.4 million
-
The table below highlights La Mancha's improved performance since
2007, the Company's first full year of operation as a producer.
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Change:
Twelve-month
period ended Dec. 31, 2010 vs 2009
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2007
2008 2009 2010
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Attributable production
(in oz)
53,900 71,550 94,570 122,571 +30%
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Revenues ($'000)
48,456 53,639
105,424 164,693 +56%
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Gross cash margin (US
$/oz)*
215
358
457
578
+26%
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Operating income / loss
($'000)
(8,202) (43) 22,027 37,965 +72%
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Net earnings / loss
($'000)
(10,806) (5,408) 11,379 23,738 +108%
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Operating cash flow
($'000)
486 3,062 30,937 59,354 +92%
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*Realized sales price less total cash cost
Dominique Delorme, President and CEO of La Mancha, stated that:
"The achievements of 2010 clearly demonstrate the gains made over the
past four years. At nearly 123,000 ounces, gold production was up 30%
year-over-year and 125% from four years ago. Much of this increase is
attributable to Australia, where the March start-up of the White Foil mine,
La Mancha's fourth mine, completed the first phase of development of our
mining complex in this country. The resulting consolidated record gold
production generated net earnings of roughly $24 million and an operating
cash flow of nearly $60 million. With our successful track record, rapidly
growing cash position and geographic diversification, La Mancha is now much
stronger as we head into 2011 and our next growth phase. Bringing our VMS
project on stream should allow us to become an intermediate producer at
200,000 ounces of gold per year by 2013 and 350,000 ounces by 2015."
La Mancha Resources Inc. (TSX:LMA - News) (hereinafter "La
Mancha" or the "Company") is pleased to announce that its
consolidated gold production for 2010 reached a record 122,571 ounces,
compared to 94,570 ounces of gold for 2009. This 30% increase is due to the
steady production ramp-up at the Frog's Leg mine in Australia, along with the
successful start-up of the Company's fourth mine, White Foil, which more than
compensated for slightly lower African production. In 2010, 64% of La Mancha's
total gold production came from its Australian operations.
The 2010 consolidated cash costs amounted to US $653 per ounce of gold
compared to US $510 per ounce in 2009. The 2010 consolidated cash cost was
mostly impacted by the Australian operations, where the unfavourable
Australian dollar exchange rate against the USD, coupled with the higher cost
structure of the new White Foil mine, accounted for approximately 55% of the
consolidated year-over-year increase. Nevertheless, the continued strong performance
of the gold price over the course of 2010 enabled La Mancha to increase its
gross cash margin per ounce by 26% to US $578, compared to US $457 in 2009.
La Mancha's revenues increased from $105.4 million in 2009 to $164.7
million in 2010 on the strength of its enhanced production profile and
stronger gold prices.
Ongoing work on its highly prospective exploration tenements brought
La Mancha's exploration expense to $7.3 million in 2010, compared to $5.2
million in 2009. The exploration programs continued to bear fruit in 2010. In
Australia, resources at the Frog's Leg mine were significantly increased and
a new gold deposit, Kintore, was identified. In
Côte d'Ivoire, new resources were delineated at the Fetekro
property while strong gold potential was demonstrated at the Bondoukou property. Finally, in Sudan, a new gold project
was identified on the Nuba Mountains property.
Together, these holdings constitute a pipeline of projects with the potential
to feed our organic growth well into the future.
In 2010, La Mancha's consolidated net earnings more than doubled to
reach $23.7 million, as all four gold mines continued to be profitable. This
compares to net earnings of $11.4 million in 2009.
Despite increased exploration expenditures, La Mancha's 2010 cash flow
from operating activities nearly doubled over the previous year to reach a
record $59.4 million. Due to the strong performance of the Frog's Leg mine
and the start-up of White Foil, the Australian subsidiary's cash flow from
operating activities increased from $17.4 million in 2009 to $43.4 million in
2010, thereby solidifying its importance within the Company's portfolio.
In the first half of 2010, this cash influx enabled La Mancha to fully
repay the outstanding $16.1 million on the debt facility contracted with
AREVA in 2007. At year end, this fully repaid AREVA debt facility remained
available for its full amount (AUD 22.0 million). The Company's cash and cash
equivalents and short-term investments stood at $38.4 million as of December
31, 2010, marking an increase of $16.9 million since December 31, 2009.
During the fourth quarter ended December 31, 2010, La Mancha produced
30,744 attributable ounces of gold while generating revenues of $50.0
million, compared to production of 23,683 attributable ounces of gold and
revenues of $24.2 million for the corresponding period in 2009. During the
fourth quarter ended December 31, 2010, the Company recorded net earnings of
$7.1 million, compared to a net loss of $1.2 million for the corresponding
period in 2009, which had included a $1.1 million deferred tax expense
adjustment at its Australian subsidiary.
AUSTRALIAN OPERATIONS
In line with the upgraded mine plan and increased
milling capacity, the Frog's Leg mine continued to rapidly ramp-up
production, generating 66,444 ounces of gold net to La Mancha in 2010 at a
cash cost of US $602 per ounce compared to 46,120 ounces in 2009 at a cash
cost of US $457 per ounce. Approximately half of the year-over-year cash cost
per ounce increase was due to unfavourable foreign
exchange rate fluctuations, while the remaining half was due to an increase
in mining unit costs, which was expected in light of the increased mining
depth, as well as toll milling cost increases.
As shown in the table below, underground mining activities continued
to improve in 2010, with tonnage and gold grades increasing by 11% and 17%
respectively year over year. It should be noted that underground gold grades
mined during the fourth quarter of 2010 averaged a record 6.35 g/t Au.
Table: La Mancha's 51% share of Frog's Leg Underground Mining Schedule
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(on a 51% basis)
2009A
2010A
2011 E
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Underground tonnage mined (t)
311,219 344,153 300,000 -
340,000
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Gold grade (g/t Au)
4.73
5.52
5.91
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Gold content (oz)
47,297 61,077 57,000 - 64,600
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As shown in the table above, the Frog's Leg mine performance should
remain strong, with gold grades expected to increase further in 2011.
With the toll treatment of year end stockpiles, La Mancha expects its
2011 share of Frog's Leg mine production to be in the range of 65,000 to
70,000 ounces of gold at an estimated cash cost of US $617 per ounce.
In 2010, an extensive underground resource drilling program was
conducted, involving 35,000 metres of diamond
drilling across the entire 1,200-metre strike length of the deposit. This exploration
program significantly surpassed expectations, as it allowed a total of
348,000 Measured and Indicated ounces of gold (177,480 ounces attributable to
La Mancha)(1) to be added, significantly more than the 150,000 ounces (76,500
ounces attributable to La Mancha) originally targeted. The focus of the
upcoming months will be to develop a new reserve and life-of-mine plan to
demonstrate the potential to develop the mine down to the level of 600 metres below surface.
The 100%-owned White Foil mine, inaugurated in April 2010,
became La Mancha's fourth producing asset and second mine to be put to
production in less than two years. For its first year of operation, the mine
produced 11,713 ounces of gold at a cash cost of US $928 per ounce. Cash
costs per ounce were higher than expected, mainly due to unfavourable
foreign exchange rate fluctuations and slightly lower-than-expected gold
grades.
In accordance with the toll-milling capacity available, 282,104 tonnes were mined between March and August 2010, thereby
successfully concluding the first bench mining operation. At year-end, the
White Foil stockpile stood at 108,998 tonnes
grading 1.94 g/t Au.
Production at the White Foil mine is expected to be in the range of
14,000 to 17,000 ounces of gold in 2011 at an estimated cash cost of US
$1,082 per ounce. La Mancha expects to tender a mining contract in second
quarter for the second bench of the pit, representing approximately 310,000 tonnes of ore at an average grade of 2.0 g/t Au. All of
La Mancha's excess mill capacity at the nearby Greenfields plant is expected
to be filled by the White Foil ore.
AFRICAN OPERATIONS
In line with expectations, the Hassaï
mine produced a total of 68,434 ounces of gold in 2010 (27,374 ounces
attributable to La Mancha) at a cash cost of US $731 per ounce, compared to
61,790 ounces of gold in 2009 (24,715 ounces attributable to La Mancha) at a
cash cost of US $724 per ounce. While cash costs per ounce remained fairly
stable, production increased notably due to improved mill throughput
following the successful optimization of the quartz ore processing circuit.
No major change in production is expected at the Hassaï
mine until the first phase of the volcanogenic massive sulphide
("VMS") project is commissioned in 2013. Consequently, Hassaï's production is expected to range from 60,000
to 70,000 ounces of gold (24,000 to 28,000 ounces attributable to La Mancha)
in 2011 at an estimated cash cost of US $660 per ounce.
The Ity mine produced a total of
37,125 ounces of gold in 2010 (17,040 ounces attributable to La Mancha) at a
cash cost of US $540 per ounce, compared to 51,710 ounces in 2009 (23,735
ounces attributable to La Mancha) at a cash cost of US $389 per ounce. Ity's operations were affected by a number of negative
factors over the course of 2010.
Most of Ity's 2010 production shortfall was
due to 1) the scheduled construction of the new heap leaching pads and the
related plant relocation which necessitated a one-month suspension of milling
activities and a several-month-long plant commissioning period, and 2) the
extensive downtime caused by unusual amounts of heavy precipitation during
the period from July to October. Furthermore, the forced temporary
interruption of the mine's activities on December 17, 2010, due to the
agitation surrounding the country's uncertain political future impaired the
results of a quarter that was originally on track to be the mine's best
quarter of the year.
The mine's cash costs per ounce were impacted by the lower production
volume, caused by the aforementioned negative factors, along with lower
processed gold grades and higher processing costs associated with treating
ore from the recently-commissioned Mount Ity pit,
which has characteristics that necessitate more cyanide spraying and longer
leaching cycles.
Due to the higher capacity of the mine's recently-commissioned
leaching pads, Ity could increase production to up
to 52,290 ounces of gold in 2011 (24,000 ounces attributable to La Mancha).
However, Ity's 2011 performance remains vulnerable
to the country's political situation, changing security conditions around the
mine and difficulties securing access to mine supplies. Consequently, the
Company issued a production guidance of 26,140 to 43,570 ounces of gold
(12,000 to 20,000 ounces attributable to La Mancha) for 2011 at an estimated
cash cost of US $519 per ounce.
La Mancha's ability to quickly suspend and restart activities at the Ity mine gives it the flexibility to quickly adapt to an
evolution of the political situation in Ivory Coast that would provide for
satisfactorily financial arrangements and physical securities for employees.
The mine was therefore able to resume production between mid-January and
February 24, 2011, generating approximately 4,300 ounces of gold (2,000
ounces attributable to La Mancha) during that period.
VMS PROJECT
On September 7, 2010, La Mancha announced a positive
Preliminary Economic Assessment ("PEA") for its Volcanogenic
Massive Sulphide ("VMS") project at its
40%-owned Hassaï mine in north-eastern Sudan,
in the highly-endowed Arabian-Nubian shield. The technical report was filed
on SEDAR (www.sedar.com)
on October 22, 2010.
The PEA defines two distinct phases of development. The first phase
involves optimizing the operation by replacing the current heap leaching
plant with a carbon-in-leach (CIL) plant. This should allow for higher gold
recovery, lower production costs and a significantly longer mine life, due to
the CIL plant's capability to economically reprocess the gold tailings
accumulated since the mine's start-up, along with the large quantities of
high-grade ores not easily treatable by the current plant. The second phase
involves the construction of a flotation unit to enable the processing of the
gold-copper VMS ore located under current open pits. Two pits have already
been shown to host VMS deposits, forming the basis of the PEA VMS mining
inventory, while at least four more targets are thought to have VMS
potential.
Highlights of the study include:
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All amounts are in US dollars Phase 1: CIL Phase 2: VMS Global
and for 100% of the project
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Commissioning
2013
2015
--
Yearly production* Gold (oz)
155,880
59,355
--
Copper (t)
--
51,516
Initial capital cost
$185.6 M $319.4
M
$505.0 M
Average cash costs
$ 482/oz Au $ 1.24/lb Cu*** -
Internal rate of return
30%
11%
17%
NPV @ 5% discount**
$149.8 M $122.7 M $238.7 M
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*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) **Using a gold price of US $950 per ounce and a
copper price of $2.18 per pound. ***Including gold credit
The robust economic indicators for the 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. This program is aimed at converting the majority of the Inferred
resource to the Measured and Indicated category while further increasing the
resource.
The feasibility study for the first phase of the project is expected
to be released within the coming weeks.
RESERVE AND RESOURCE UPDATE
As of December 31, 2010, La Mancha's Measured and
Indicated resources ("M&I resources") had increased to 1.94
million ounces of gold and 14,720 tonnes of copper,
as the Company was able to delineate more gold ounces than it mined during
the year, while Proven and Probable reserves ("P&P reserves")
stood at 612,835 ounces of gold. At December 31, 2009, the Company had
P&P reserves of 766,200 ounces of gold while its
M&I resources stood at 1.89 million ounces of gold and 14,720 tonnes of copper.
La Mancha's consolidated M&I resources are expected to reach 4
million ounces by year end in light of the drilling campaign, currently in
progress, on the Company's VMS project.
CORPORATE EVENTS
The Company will be attending the European Gold
Forum (Zurich, Switzerland) held from April 12 to 15. Management of La Mancha
will be available for meetings and will present at 5:10 p.m. on Thursday,
April 14.
Consolidated Financial Statements
The management discussion and analysis and audited consolidated financial
statements with explanatory notes for the year ended December 31, 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 http://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 commercial
production and its related production and cash costs targets, its ability to
increase its resources and its associated timetable, statements regarding
development plans for the Company's VMS project along with statements
regarding the project's economic viability, profitability, its ability to
reach commercial production, associated development schedule, and its impact
on the Company's global production; statements regarding the progression of
Frog's Leg and the Company's view on higher mined gold grades in 2011,
statements regarding the Company's ability to toll-treat the mined ore at the
Greenfields plant along with the Company's ability to upgrade its current
toll-milling agreement; statements regarding the positive impact of the new
leaching pads at the Ity mine and its ability to
increase future production; statements regarding the Company's ability to
operate the Ity mine at normal capacity.
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 upcoming
development with respect to Côte d'Ivoire's political future and
stability, 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
2010 Annual Information Form filed with the Securities Commissions, as well
as the Toronto Stock Exchange.
(1) Measured and Indicated resources of 1.75 MT at 6.2 g/t Au for
348,000 ounces (177,480 attributable to LMA)
(see table in attachment)
http://hugin.info/145163/R/1501205/436546.pdf
Contact:
For additional information, please contact:
La Mancha Resources Inc.
Martin Amyot
Vice President Corporate Development
Tel: (514) 987-5115
Email: Email
Contact
Nicole Blanchard
Investor Relations
(514) 961-0229
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