Doubling of resource creates buzz about La Mancha

Visual outcrops of sulphide can be seen at the bottom of twelve of the sixteen oxide pits that make up La Mancha Resources‘  (LMA-T) Hassai mining complex in the remote desert of northern Sudan. And a new resource estimate based on drilling at just three of the twelve open pits historically mined on the property has doubled Hassai’s sulphide resource.

The updated resource La Mancha reported for its 40%-owned Hassai complex measures 80.7 million tonnes grading 1.26 grams gold per tonne and 1.12% copper for 3.26 million ounces of contained gold and 900,350 tonnes of copper in the indicated category and an additional 37 million tonnes grading 1.17 grams gold and 1.09% copper for 1.4 million ounces of gold and 401,800 tonnes of copper in the inferred.  

The global resource now stands at 4.64 million ounces of gold, up 114% from the previous resource estimate completed in 2009, and 1.30 million tonnes of copper, an increase of 112%. The new resource was based on 100,000 metres of drilling in the Hassai South pit, the Hadal Awatib East pit and the Hadayamet pit, although most of the resource comes from just the first two pits. (The gold-rich oxide caps of the twelve open pits have been mined over the last twenty years.)

Analysts believe the larger resource at Hassai will justify a higher mining rate and a larger processing plant than the 5 million tonne per year plant called for in a preliminary economic assessment completed in 2010.

“The total quantum and grade of the deposit ranks the resource at Hassai as one of the largest and richest VMS deposits in the world,” mining analyst Adam Lucas and his team at Ocean Equities in London wrote in a research note to clients. “The combined indicated and inferred result is an exceptional result for La Mancha. The shear size of VMS resources … will extend the mine life of operations in Sudan, as well as potentially increasing total production from increasing the mill size which [was] potentially analyzed in the PFS.

Nicholas Campbell, a mining analyst at Canaccord Genuity has raised his 12-month target price on La Mancha from $4.80 per share to $5.30 per share and has a speculative buy rating on the stock. At presstime in Toronto La Mancha’s shares were trading at a new 52-week high of $3.63 apiece.

“Hassai is shaping up as one of the most significant VMS discoveries in decades, potentially comparable to the giant VMS deposits such as Kidd Creek (mined by Xstrata for over forty years) and the Iberian pyrite belt (famous for its Rio Tinto mine),” mining analyst Andrei Kroupnik of Collins Stewart comments in a research note to clients, adding that the company has been one of his top picks for some time. “With sulphides identified at the bottom of at least eight more oxide pits, the resource expansion remains enormous. [A] Hassai type of discovery has the potential to turn a junior into a major—think the discovery of gold in Nevada.”

But Sudan—a crisis-torn nation at war with itself for most of its post-colonial history—isn’t much like Nevada. In 2010, its president,  Omar Hassan al-Bashir, was charged by the International Criminal Court with crimes against humanity.  And the country is bordered by a number of other troubled nations, including Ethiopia and Eritrea to the east, Egypt to the north, Libya to the northwest, Chad and the Central African Republic to the west, and Uganda, Kenya and the Democratic Republic of Congo to the south.

Martin Amyot, La Mancha’s senior vice president, dismisses geo-political concerns about the project and argues that with the Government of Sudan holding a 56% stake in the project, its interest in seeing it succeed is aligned with that of La Mancha, which holds a 40% stake. (A French company owns the remaining 4%.)

“It’s a comfort to have the government involved,” he explains. “They want the project to be as successful as we do so if there was any threat, they have as much interest in protecting the project as we do. The fact that they own 56% is the best guarantee we have that the investment will be protected.”

According to a June 2011 technical report on the project, the Hassai mine is the only significant mining venture in Sudan and the Ariab Mining Company, which holds the exploration and mining concessions on Hassai, “maintains a strong working relationship with the Sudanese Government.” AMC’s chairman, H.E. Dr. Abdel Bagi el Gelani, is also Sudan’s Minister of Minerals. AMC was incorporated as a Sudanese company in September 1990 and runs the heap-leach operation at Hassai that has produced about 2.3 million ounces of gold from multiple deposits since 1991.   

Amyot also emphasized that mining at Hassai has continued uninterrupted for the last two decades. “Sudan has had issues,” he concedes in a telephone interview from Paris, “nevertheless the mine has never stopped producing. There aren’t that many mines in Africa where the operation has not been stopped even once…It can be partly explained by the fact that it is very isolated, lost in the middle of the desert. There’s not much around in a 250-km radius and therefore despite what is going on in Darfur or in South Sudan the mine has always been in a position to continue its operation.”

The project lies in the remote Red Sea State of Sudan, about 450 km northeast of Khartoum and about 200 km away from the deep-water Port of Sudan on the Red Sea.

“Sometimes nature makes things pretty easy for mine operations and in this case this is almost as good as it gets,” he continues. “In terms of location you’re conveniently located not far away from infrastructure but far enough away to be shielded from anything going on in the country.”

The River Nile, 165 km from site, is the only major water source and the company plans to build a pipeline to supply water to the proposed carbon-in-leach and VMS concentrator plants. The Sudanese Government has granted approval for the company to extract water from the Nile, the technical report confirms.

As for the geology at Hassai and the potential to add more ounces, Amyot believes the project has the potential to get much bigger. “We’re just at the start of exploration so it’s pure speculation but from the feel of it and the regularity observed from one pit to another and the fact that the sulphides are already identified at the bottom [of twelve pits] there is a reasonable likelihood we will be able to significantly add to the resource we have,” he says. “We are really in a situation where the results that have been provided over the last three years are probably bringing a lot of comfort to people who have been following our story.”