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La Mancha Reports its 2007 Financial Results 2007 HIGHLIGHTS Revenues of $48.5 million Cash flow from operating activities of $0.5 million Net loss of $10.8 million 45% increase in reserves to 688,800 ounces Total production of 53,900 ounces (at US$485 per ounce) Positive feasibility study and start of development at Frog's Leg (Australia) Cash position of $13.1 million MONTREAL, QUEBEC--(MARKET WIRE)--Mar 31, 2008 -- All amounts are expressed in CA dollars, unless otherwise
indicated. Audited La Mancha Resources Inc. (Toronto:LMA.TO - News)(hereinafter "La Mancha" or the "Company") produced 53,900 ounces of gold at an average cash cost of US$485 per ounce in 2007, generating revenues of $48.5 million. This compares to production of 62,300 ounces at an average cash cost of US$352 the previous year, for revenues of $60.2 million. The decrease in production and revenues is due to lower gold output at both the Hassai and Ity mines and the reduction in La Mancha's interest in the Ity mine from 51% to 45.9% effective May 25, 2007, obliging the Company to cease consolidating 100% of Ity's results and begin consolidating them by the proportional method as of that date. La Mancha recorded a net loss of $10.8 million in 2007, compared to net earnings of $5.0 million for 2006. This performance can mainly be attributed to lower profitability at the Hassai and Ity mines, higher development and exploration costs associated with the relaunching of Australian and Argentinean activities, a $1.8 million write-down of ABCP investments and restructuring of corporate functions, which combined to offset the impact of the Company's higher average gold selling price. As anticipated, 2007 proved to be a capital-intensive year, as the Company devoted significant efforts to upgrading its operating mines while starting the development of its 51%-owned Frog's Leg mine. As a result, La Mancha's investing activities used cash flow of $33.2 million in 2007 compared to $9.9 million the previous year. As of December 31, 2007, La Mancha's cash position stood at $13.1 million and long-term investments in various securities amounted to an additional $14.6 million. RESERVE AND RESOURCE UPDATE At year-end 2007, La Mancha's attributable proven and probable reserves amounted to 688,000 ounces of gold contained compared to 472,000 ounces of gold contained at the end of 2006, representing a 45% increase. Most of this increase is due to a net gain of 621,630 ounces at the Frog's Leg mine (317,000 ounces attributable to La Mancha) that followed the completion of a favourable feasibility study in December 2007. A full description on La Mancha's mineral reserves and resources is provided in the table at the end of this press release. OPERATIONS The Hassai mine produced a total of 86,900 ounces of gold (34,760 ounces attributable to La Mancha) at an average cash cost of US$481 per ounce in 2007, compared to 101,520 ounces (40,600 ounces attributable to La Mancha) the previous year at an average cash cost of US$334 per ounce. The lower gold output in 2007 was essentially due to delays in the commissioning of the recently built quartz milling circuit, which had a negative impact on the tonnage and grade milled during the year. While limiting the capacity of the plant, the delay in starting up the quartz line also prevented the mine from milling the higher grade quartz ore stockpiled beside the plant. The increase in cash costs per ounce for 2007 can be mainly attributed to unfavourable fluctuations in currency exchange rates and the lower grade milled, respectively responsible for 29% and 27% of the increase in cash costs per ounce relative to 2006. To a lesser degree, cash costs per ounce were also impacted by an increase in the cost of consumables, responsible for 20% of the increase in the cash costs per ounce. The following table shows the quartz ore tonnage and grade milled through the quartz line over the past six months.
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Quartz Ore Milled
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Tonnage Grade
(tonnes per day) (g Au/t)
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Jul-07 658 5.28
Aug-07 653 6.10
Sep-07 615 4.97
Oct-07 540 5.30
Nov-07 910 6.13
Dec-07 1,255 5.74
--------------------------------------------------------------The start-up of the quartz line helped increase both the average tonnage and average grade milled per day during the last quarter. A twelve month VMS drilling program started in February 2008 at a cost of $2.9 million (1.2 million attributable to La Mancha) is aimed at further exploring the VMS potential of an area considered to be one of the world's main prospects for that type of deposit. VMS potential was first identified 20 years ago by the former owners. However, the first 15 years of mine operation focused on the more easily-minable surface SBR and quartz-type ore, leaving the VMS deposit insufficiently explored. The VMS drilling program consists of a 7000 meters of diamond drilling conducted from the bottom of the existing SBR pits aiming at better understanding the base metal distribution. Indication suggesting the presence of 5 to 10 million tonnes of enriched ores with grades of in the order of 2% Cu, 3% Zn and 1 g/t Au would trigger the completion of a scoping study. Initial drill results are expected to be released during the second quarter of 2008. A first synthesis, including a preliminary economic assessment, can be expected during the third quarter of 2008. The Ity mine produced a total of 39,960 ounces of gold (19,135 ounces attributable to La Mancha) at an average cash cost of US$491 per ounce in 2007, compared to 42,570 ounces (21,700 ounces attributable to La Mancha) the previous year at an average cash cost of US$387 per ounce. The decrease in La Mancha's attributable gold production was mainly due to the overall decrease in mine production coupled with the reduction of the Company's ownership in the mine. La Mancha's participation in the Ity mine decreased from 51% to 45.9% in May 2007 on renewal of the Ity mining permit for the next five years. Despite an increase in tonnage due to the implementation of a third milling shift and higher grades milled, the Ity mine produced less gold than in 2006, mainly due to lower gold recovery. Even though more reagents were used over a longer period of time, the higher sulphide content ore found at the bottom of the Zia pit did not respond well to the cyanidation process, thus explaining the lower recovery rate observed. The lower recovery rate is also responsible for more than 50% of the increase in cash costs in 2007. Other main elements impacting cash costs per ounce in 2007 were: diseconomies of scale caused by lower gold output, an increase in the cost of consumables, unfavourable changes in currency exchange rates, and expensed development costs for the new Mount Ity pit. DEVELOPMENT PROJECTS La Mancha invested $20.1 million in the development and/or upgrading of its properties over the course of 2007. The following table illustrates the main project investments:
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Main Project Investment (in millions of $)
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Frog's Leg Project Development 10.3
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White Foil Project Development 3.0
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Hassai Plant Optimization 1.5
Hassai Other 2.0
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Ity Dam and Water Pumping System 1.6
Ity Other 1.4
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Other 0.3
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Total 20.1
-------------------------------------------------------------The development of the Frog's Leg mine, which started in August 2007, remains on track with the timeline and budget in the feasibility study. The details of the feasibility study are available in the technical report filed on SEDAR on January 18, 2008. Highlights of the feasibility study are as follows:
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100% Attributable to
La Mancha (51%)
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Production:
Gold reserves (contained) 621,648 oz 317,040 oz
Avg ore mined per year 456,167 t 232,645 t
Gold recovered 589,944 oz 300,871 oz
Metallurgical recovery 94.9% 94.9%
Yearly production rate 73,743 oz 37,609 oz
Mine life 7.5 years 7.5 years
Financials(i):
Development capital cost $35.0 million $17.8 million
Total sustaining capital $38.0 million $19.4 million
Total cash costs US$399/oz US$399/oz
Internal rate of return 47.5% 47.5%
Net present value @ 0% discount $0.34/share
Payback period from 2008 31 months 31 months
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(i) All financial calculations are based on a gold price of US$650/oz and a
AUD/USD exchange rate of 1.30, and are inclusive of 2007 expenditures.La Mancha's Australian crew had completed the development of more than 2.3km of decline, cross-cut and ore development by the end of February 2008. One development highlight is that the underground magazine, which was excavated and fitted out and is now in use. Level development on the Rocket ore is well advanced and stoping is expected to commence on the upper parts of this orebody during April 2008 after commissioning of the airway and escape way. At the end of February, the mine had stockpiled 42,000 tonnes of ore grading 3.38 g/t on the surface. Ore transportation to the Jubilee processing plant will begin in late March in anticipation of a milling campaign commencing in May. With respect to infrastructure, the new office complex is largely complete and in use, an 11-km potable water line has been installed, the 11-kV power network was completed and is now in use, and the main power should be connected in late April 2008. The workshop is being completed and is now being used by maintenance personnel. A refurbished long-hole rig was commissioned and is now in use, at considerable cost savings compared to new. Negotiations have commenced to purchase a third twin-boom Jumbo. An ejector tray truck has been sourced and will commence operation in the coming weeks. Some 81 personnel now work at the Frog's Leg mine, and there are recruitment plans to increase the workforce up to levels flagged in the feasibility study. Management remains confident that the mine will start contributing to La Mancha's production by June 2008. As indicated in the feasibility study, La Mancha expects Frog's Leg to contribute 43,970 ounces of gold (22,400 ounces attributable to La Mancha) at a cash cost of US$667 per ounce during the last six months of 2008. Putting the White Foil project back into production remains a priority for La Mancha, and profitable strategies to support this are being investigated. Pit dewatering has been completed and maintenance pumping is being carried out. The recent re-assessment of the wall conditions is forcing the Company to seek new alternatives to the existing mining plan. A grade-control drilling program and a reserve definition drilling campaign are currently taking place with that objective in mind; the results of these initiatives will be used to update and verify the White Foil resource. These results and the findings of other relevant studies and associated designs will be used to complete a new feasibility study. CONSOLIDATED FINANCIAL STATEMENTS The management discussion and analysis, audited consolidated financial statements and explanatory notes for the year ended December 31, 2007, are available in PDF format on La Mancha's website at www.lamancha.ca or through SEDAR at www.sedar.com. RECORD DATE SET FOR LA MANCHA'S ANNUAL GENERAL MEETING OF SHAREHOLDERS La Mancha announces that its board of directors has approved a resolution fixing the close of business on April 9, 2008, as the record date for the purpose of determining shareholders entitled to receive notice of its Annual General Meeting of Shareholders. The Annual General Meeting of Shareholders of La Mancha will be held at the Auditorium of the Montreal Exchange, in Montreal, on Wednesday, May 14, 2008, at 11:00 am (local time). LA MANCHA AT NEW YORK HARD ASSETS INVESTMENT CONFERENCE The Company will be exhibiting at the New York Hard Assets Investment Conference in New York, held on May 12 and 13, 2008, at the New York Marriott Marquis Time Square. Members of the management team will be present at Booth 315. 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, development and construction of mine and production targets and timetables, mine operating costs; development plans, objectives; statements regarding the assumptions underlying the White Foil feasibility study; statement regarding the accuracy of our resources and our ability to file the appropriate technical reports; statements regarding the re-commencement of White Foil production. 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 licences, risks of delays in construction and production and other risks referred to in La Mancha's 2007 Annual Information Form filed with the Securities Commissions, as well as the Toronto Stock Exchange.
HIGHLIGHTS
(audited) Year ended
(All amounts are in CDN dollars unless December 31,
otherwise noted) 2007 2006
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RESULTS (consolidated, in thousands of $)
Revenues 48,456 60,186
Cash flow from operating activities 486 14,591
Net earnings (loss) (10,806) 5,021
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PER SHARE ($)
Net earnings (loss) (0.076) 0.049
Basic weighted average number of 141,935 103,531
common shares outstanding (in thousands)
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ATTRIBUTABLE GOLD PRODUCTION
Number of ounces produced 53,900 62,300
Cash costs (US$ per ounce) 485 352
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Year ended
December 31,
2007 2006
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FINANCIAL POSITION (in thousands of $)
Cash and short-term investments 13,062 47,991
Total assets 131,579 159,833
Shareholders' equity 104,679 119,983
Total number of shares outstanding (in thousands) 142,007 141,693
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Year ended
GOLD PRODUCTION STATISTICS December 31,
2007 2006
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Hassai (40%)
Attributable production (ounces) 34,760 40,600
Tonnage milled (t) 888,620 937,000
Grade milled (g Au/t) 4.05 4.43
Recovery rate (%) 75% 76%
Cash costs (US$ per ounce) 481 334
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ITY (45.9%)
Attributable production (ounces) 19,140 21,700
Tonnage milled (t) 435,280 419,000
Grade milled (g Au/t) 3.63 3.55
Recovery rate (%) 79% 89%
Cash costs (US$ per ounce) 491 387
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MINERAL RESERVES AND RESOURCES (1)(2)
La Mancha Resources share
GOLD OPERATIONS Tonnes (t) Grade (g/t) Ounces
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Hassai Mine (40%)(3) resources shown inclusive of reserves
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Proven Reserves 721,266 5.19 120,308
Probable Reserves 481,087 4.45 68,854
Subtotal 1,202,353 4.89 189,162
Measured Resources 721,266 5.19 120,308
Indicated Resources 1,294,264 4.67 194,486
Total Measured and
Indicated 2,015,531 4.86 314,794
Inferred Resources 563,366 4.58 82,956
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Ity Mine (45.9%)(4) resources shown inclusive of reserves
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Proven Reserves 989,145 5.15 163,642
Probable Reserves 102,357 5.78 19,037
Subtotal 1,091,502 5.21 182,679
Measured Resources 1,303,101 5.12 214,510
Indicated Resources 119,340 6.67 25,589
Total Measured and
Indicated 1,422,441 5.25 240,099
Inferred Resources 204,714 3.78 24,851
GOLD PROJECTS
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Frog's Leg (51%)(5) resources shown inclusive of reserves
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Proven Reserves 579,449 5.34 99,483
Probable Reserves 1,284,521 5.27 217,642
Subtotal 1,863,970 5.29 317,019
MeasuredFrog's LegResources 495,720 7.10 113,220
Indicated Resources 1,146,990 6.90 255,510
Total Measured and Indicated 1,642,710 7.00 368,730
Inferred Resources 579,360 5.70 106,590
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White Foil (100%)(6) resources shown inclusive of reserves
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Measured Resources 3,680,000 2.32 274,490
Indicated Resources 1,981,000 1.97 125,470
Total Measured and Indicated 5,661,000 2.20 399,960
Inferred Resources 2,303,000 2.16 159,933
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Fetekro (65%)(7) resources shown inclusive of reserves
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Inferred Resources 2,388,104 2.43 186,574
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TOTAL GOLD resources shown inclusive of reserves
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Proven and Probable Reserves 4,157,826 5.15 688,860
Measured and Indicated
Resources 10,741,682 3.84 1,323,584
Inferred Resources 6,038,544 2.89 560,904
(1) Reported mineral reserves have been calculated in accordance with
definitions and guidelines adopted by the Canadian Institute of Mining,
Metallurgy and Petroleum. Unlike proven and probable mineral reserves,
mineral resources (of all categories) do not have demonstrated economic
viability.
(2) In mining operations, measured and indicated resources are considered
uneconomic at the price used for reserves calculations.
(3) Dated 12/31/2007
(4) Dated 12/1/2007
(5) Dated September 2007
(6) Dated 12/31/2007
(7) Dated 12/31/2006MINERAL RESERVES AND RESOURCES Mineral reserves and resources have been estimated by La Mancha's technical personnel for each property in accordance with definitions and guidelines adopted by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM "Standards on Mineral Resources and Reserves"). There are numerous uncertainties inherent in estimating proven and probable mineral reserves, including many factors beyond the Company's control. Reserve estimation is a subjective process, and the accuracy of any reserve estimate is a function of the quality of available data and engineering and of geological interpretation and judgment. Results from drilling, testing and production, as well as material changes in metal prices subsequent to the date of an estimate, may justify revision of such estimates. La Mancha qualified persons(1) responsible for the mineral reserve and resource calculations for each mine or project are as follows:
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Name Title
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GOLD OPERATIONS
- Hassai Eddie, Trevor Senior Mine Geologist, La Mancha
Resources Australia
Bosc, Remi Independent Geologist
- Ity Camus, Yann Consultant Geologist, Systemes Geostat
International Inc.(Geostat)
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GOLD PROJECTS
- Frog's Leg Guibal Daniel Corporate Consultant, SRK Consulting
MacSporran, Gary Corporate Consultant, SRK Consulting
- White Foil Guibal, Daniel Corporate Consultant, SRK Consulting
- Fetekro Eddie, Trevor Senior Mine Geologist, La Mancha
Resources Australia
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(1) Qualified person: an individual who is an engineer or geoscientist with
at least five years of experience in mineral exploration, mine
development or operation, mineral project assessment, or any
combination of these, has experience relevant to the subject matter of
the mineral project and the technical reports, and is a member in good
standing of a professional association.MINERAL RESERVES AND MINERAL RESOURCES Metallurgical Recovery and Cut-off Grade In calculating mineral reserves, cut-off grades are established using long-term gold price and foreign exchange assumptions, the average metallurgical recovery rates and estimated production costs over the life of the related operation. For an underground operation, a cut-off grade is calculated for each mining method, as production costs vary from one method to another. For a surface operation, production costs are determined for each block included in the relevant operation. The following table indicates the cut-off grade calculations and the average metallurgical recoveries at La Mancha's gold mining operations of the proven and probable mineral reserves.
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Mine Average Cut-off Gold Price Used
Metallurgical Grades ($ / oz)
Recovery (g Au / t)
(Gold %)
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- Hassai Mine 63 to 89(i) 1.5 US650
- Ity Mine 80 2.0 US650
- Frog's Leg project 94.9 3.5 AUD845
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(i) Varies depending on ore typeContact: Contacts:
La Mancha Resources Inc.
Martin Amyot,
Vice President Corporate Development
514-987-5115
info@lamancha.ca
Source: La Mancha Resources Inc.
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