Upgrading to CIL positive for Hassai, La Mancha says (May 16, 2011)

La Mancha Resources’ (LMA-T) producing Hassai gold mine may be in the middle of the Red Sea Hills desert in northeastern Sudan, but upgrading its current heap-leach plant to carbon-in-leach technology still makes sense, a definitive feasibility study has concluded.

Of the $191.2 million capital cost estimate for the upgrade to CIL, $44 million has been earmarked to build a pipeline necessary to bring water to the site over a distance of 160 kilometres. Water pipeline permits were granted in April 2010 and no additional permits are necessary, the company says.

“Strict management of the underground water sources found around the mine have met the water requirements of the existing heap leaching operation but would not be sufficient for a CIL plant,” the company noted in a press release. “With a projected capacity of 7.7 million cubic metres of water per year, the pipeline is designed to provide sufficient water for an eventual addition of the 7 million tonne per annum flotation plant required to process Hassai’s VMS deposits, which would consume 4.1 million cubic metres of water per year.”

The proposed CIL plant should allow the processing of ore that currently cannot be economically processed using the heap-leach method and increase the mine’s reserves by 233% to 1.09 million ounces of gold, the company stated.

The upgraded plant’s greater capacity of 3 million tonnes per year compared with the current 800,000 tonnes per year should also boost average gold production by 136% to 161,647 ounces of gold a year while cutting average cash costs per ounce to about US$571, the company added.

La Mancha’s board plans to start developing the new project in the third quarter of this year, once an agreement on project financing and ownership is finalized. La Mancha owns 40% of the mine through a subsidiary and is the mine operator. Ideally the CIL plant could start operating as soon as the fall of 2012, with full commissioning in early 2013.

As of Dec. 31, 2010, La Mancha held $38.4 million in cash and was debt free. It also has the option of monetizing its $7.2 million investment in long-term notes, it says.

Hassai, about 450 km north of Khartoum, is Sudan’s first and only producing gold mine. It has been in operation since 1992. The property has eighteen mined pits, six of which have visually identified VMS potential, and La Mancha intends to develop them.

Currently the VMS inferred resource delineated in the VMS lenses underneath the  Hassai South and Hadal Awatib pits contains 51.4 million tonnes (20.6 million tonnes attributable to La Mancha) grading 1.31 grams gold per tonne and 1.23% copper.

In September 2010 the company began a 12-month, 100,000-metre drill program to upgrade the inferred resource to the measured and indicated categories, and so far 41,715 metres has been drilled. Seven drill rigs are in operation.

In addition, the company believes that the tailings accumulated during the first 15 years of operation at HassaÏ could significantly increase Hassaï’s mine life. As of Mar. 31 2011, an extra 1.2 million tonnes of heap leach residuce grading 2.06 grams gold for 79,475 oz. of contained gold, remained in the inferred category.

At presstime, La Mancha was trading at $2.37 per share and over the last year has traded in a range of $1.47 and $3.05. The company has 142.2 million shares outstanding.