Upgrading to CIL positive for Hassai, La Mancha says (May 30, 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 km. 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 heap leaching, and it increases the mine’s reserves by 233% to 1.09 million oz. gold, the company stated.

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

La Mancha’s board plans to approve development of 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 also the mine operator. Ideally the CIL plant could start operating as soon as late 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 said.

Hassai, about 450 km north of Khartoum, is Sudan’s first and only producing modern gold mine. It has been in operation since 1992. The property has 18 mined pits, six of which have visually identified volcanogenic massive sulphide (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 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 have 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 Hassai could significantly increase Hassai’s mine life. As of March 31, 2011, an extra 1.2 million tonnes of heap leach residue grading 2.06 grams gold for 79,475 oz. 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.