La Mancha sees rise in production, costs

While gold production is on the rise for La Mancha Resources (LMA-T, LACHF-O), so, too, are its costs, and its recent first-quarter results were unable to generate positive momentum on the market.

The company reported gold production for the quarter of 16,250 oz. at an average cash cost of US$534 per oz.

While that beats last year’s first quarter tally of 14,060 oz., La Mancha’s cash costs have also risen, from just US$434 per oz. in the same period of 2007.

La Mancha credits the increase in production to better performance at its partially held Hassai and Ity mines in Sudan and Cte d’Ivoire, respectively.

Helping boost overall gold production was nearly 2,000 oz. generated from preproduction at the company’s White Foil pit in Australia. Dewatering of the past-producing pit was finished in September and the company is currently pushing towards completion of a feasibility study on the project.

The gold from White Foil helped to offset the company’s reduced interest in the Ity mine — which was cut to 45.9% from 51% last May by government decree.

But better production and higher gold prices didn’t translate into higher revenues, as they fell to $13.4 million from $13.6 million for the year previous.

La Mancha attributes the slight decline to its reduced position at Ity. The move below a 51% interest means it can no longer consolidate 100% of Ity’s results — it must now do so proportionally.

The loss in revenue was mirrored by a larger net loss. The company reported a net loss of $2.4 million for the first quarter compared with $1.4 million for the same period a year earlier.

La Mancha blames a $1.5-million writedown from commercial paper it was holding and a $1.2-million loss connected with a gold-denominated loan contracted on a non-recourse basis by its Argentinean subsidiary.

Operating activities generated cash flow of $1 million during the first quarter of 2008, compared with $44,000 in the corresponding quarter of 2007.

As of March 31, 2008, La Mancha had cash and short-term investments of $11.2 million.

La Mancha’s president and chief executive, Michel Cuilhe, said in a statement thatthe moves to improve operational performance are starting to pay off as evidenced by a $2.1-million improvement in its mine operating margin.

“Not only is production starting to increase, but first-quarter net earnings for our two producing mines, Hassai and Ity, grew by 285% year over year,” Cuilhe said.

Cuilhe also pointed out that expenses have increased this year thanks to the launch of the company’s Frog’s Leg mine in Australia.

The first gold pour at Frog’s Leg took place on May 12 — almost two months ahead of schedule.

In Toronto on the first-quarter results, Montreal-based La Mancha’s shares closed at 52. The company has 73 million shares outstanding.