La Mancha has a political edge

Sometimes it’s all in the timing.

La Mancha Resources (LMA-T) went from being just another junior exploration company trading on the TSX Venture Exchange, to a gold producer on the TSX with the weight of a global heavyweight behind it in the span of less than a year.

When La Mancha’s executive chairman Walter Berukoff approached Areva’s mining division about acquiring some of its gold exploration properties in Australia he had no idea that the company was getting serious about following rival Cameco‘s (CCO-T, CCJ-N) lead and forming a spinoff company whose focus would be squarely on gold.

Berukoff soon found La Mancha on the other side of acquisition equation — instead of acquiring Areva properties, he was being acquired by Areva in a reverse takeover.

With its listing on the TSX on Sept. 28, La Mancha became the newest gold producer listed in Toronto.

And while La Mancha’s current gold production is a respectable but not overwhelming 60,000 oz. this year having the weight of Areva behind it, increases its growth potential.

Speaking to a room of investors, La Mancha spokesperson JJ Jennex said now that the company has completed the reverse takeover, it is looking to grow.

Jennex describes La Mancha’s new president and chief executive, Michel Cuilh, as a mergers and acquisition specialist who was “handpicked to grow the company.”Cuilh has held executive positions at financial institutions in France.

In Toronto on Oct. 27, La Mancha shares were trading at $1.15. The company has roughly 140 common shares outstanding with 64% of them held by Areva, and a market capitalization of roughly $162 million.

In 2004 Cameco decided to spinoff its gold assets into the pureplay gold company, Centerra Gold (CG-T). Centerra’s shares were trading for $11.26 on Oct. 27. The company has roughly 216 million shares outstanding with a market capitalization of roughly $2.5 billion.

Coincidentally, La Mancha appears to be following Centerra’s lead into regions not known for their political stability.

Centerra has a stated intention of unlocking the gold mining potential of the former Soviet block and has producing mines in the Kyrgyz Republic and Mongolia.

La Mancha has its two producing mines in Sudan and Cte d’Ivoire and has the distinction of operating the only two producing mines in those respective countries.

While many investors may grow uneasy with the mere mention of the tragically maligned Sudan, the atrocities of Darfur are far from La Mancha’s partly owned Hassaї mine. While Darfur is in the southwestern region of the country, Hassaї is situated in the northeastern part of Africa’s largest country in terms of land mass.

Jennex says there have not been any work stoppages at the mine in its 15 years of operation.

Hassaї draws from a series of inter-connected open pits, and has a reserve of 657,000 oz. In 2005 the mine turned out roughly 155,000 oz.

La Mancha holds a 40% stake in the mine, and is the operator, while the government of Sudan owns 56%, and a private French entity owns the remaining 4%.

As for the Cte d’Ivoire, La Mancha has the Ity gold mine. While there was a shut down in 2004, Jennex says operations are now running smoothly.

Ity draws from the Flotouo and Zia deposits which produced 41,000 oz. gold in 2005 — 21,000 oz. of which are attributable to La Mancha.

La Mancha says roughly 600,000 oz. have thus far been produced and the current reserve is 531,000 oz. — 271,000 oz of which is attributable to La Mancha.

The Ity mine is an open pit projected to produce over 60,000 oz. a year through to 2012, with average life-of-mine grades estimated to be over 5 grams per tonne.

And lest investors be too weary of operations in countries with dubious political track records, La Mancha does have operations in the more politically stable Australia.

It’s has a 51% interest Frog’s Leg deposit in Western Australia, which has a resource of 1.2 million tonnes averaging 6.97 grams gold for 272,526 oz. gold — 139,000 oz. of which are attributable to La Mancha.

Staying in Western Australia, La Mancha has a 100% stake in White Foil — a past producer that is currently on care-and-maintenance while a 6 km pipeline is built to drain the pit of the water that halted mining.

The pipeline will cost roughly $3.15 million and will take one year to build. La Mancha says that operations are scheduled to resume in 2007.

The White Foil Project mine has a resource of 400,000 oz.

But perhaps La Mancha’s greatest-asset at this early stage is the company affiliation with the French government through the state owned Areva. Its mere operation in Sudan and Cte d’Ivoire is a testimony to how things can get done when the French government is in your corner.

It’s a point picked up by Jennex, who spoke to the growing trend of governments threatening to take ever bigger cuts of assets such as in Bolivia, Zimbabwe, Mongolia.

“In this environment, who do you want representing you?” Jennex asks rhetorically. “Some geologist or the French government?”