La Mancha rises on prospect of auction

La Mancha Resources (LMA-T) is putting it self up for sale, and the market likes its chances of attracting a healthy premium.

La Mancha shares climbed 19% or 61¢ to $3.87 on 291,762 shares traded in Toronto on March 15. The upward march came on the first day of trading after the company announced it was setting up a special committee to conduct an auction.

The decision to sell comes at the bequest of its majority shareholder, French based nuclear conglomerate AREVA and the committee is being advised by BMO Nesbitt Burns. BMO has already told La Mancha that there have been several verbal expressions of interest in the company.

The company has a stake in four operating mines: Frog’s Leg in Australia (51%), White Foil in Australia (100%), Hassai in Sudan (40%) and Ity in Cote D’Ivoire (46%). The four mines accounted for 130,000 oz. of attributable gold production to the company last year.

But any acquisition interest will be centered on its flagship project: the Hassai mine in Sudan. The site hosts a VMS deposit beneath existing open pits, and the deposit will add considerable production ounces.

La Mancha is currently negotiating a new ownership structure with the government so that it can increase its stake in the mine. Provided those negotiations go favourably, the company will push ahead on drilling out the highly prospective ground.

A feasibility study on the project recommended the construction of a CIL plant for the first phase of expansion, a move that would bring production at Hassai up to 161,000 oz. at cash cost of US$571 per oz over a 4.7 year mine life.

The second phase, however, is the key, and is where Hassai can go from solid project, to world class mine. That phase would see the construction of a processing plant built to handle the VMS ore identified at the bottom of the open pits which have been mined over the last 20years.

La Mancha has currently only drilled 3 of the 12 VMS targets, no doubt waiting for negotiations with government to conclude before it pushes further, but it has already outlined indicated resources of 80.7 million tonnes grading 1.26 grams gold and 1.12% copper for 7.2 million gold equivalent ounces. Inferred resources came in at 37 million tonnes grading 1.17 grams gold and 1.09% copper for 3.15 million gold equivalent ounces.