Some good and some not so good for La Mancha’s q1

While gold production is on the rise for La Mancha Resources (LMA-T) so too are its costs, and its first quarter results were unable to generate positive momentum on the market on Wednesday.

The company reported gold production for the quarter of 16,250 oz. at an average cash cost of US$534 per oz.

While the amount beats last years first quarter tally of 14,060 oz., so too does the cash costs, which came in at just US$434 per oz in 2007.

La Mancha credits the increase in production to better performance at its partially held Hassai and Ity mines in Sudan and Cte d’Ivoire respectively.

Helping boost overall gold production was nearly 2,000 ounces generated from pre-production at its White Foil pit in Australia. De-watering of the past producing White Foil pit was finished in September of last year and the company is currently pushing towards completion of a feasibility study on the project.

The gold from White Foil helped to offset the company’s reduced interest in the Ity mine which was cut to a 45.9% interest compared with 51% back in May last year by government decree.

But better production and higher gold prices didn’t translate into higher revenues as they fell to $13.4 million compared with $13.6 million for the year previous.

La Mancha attributes the slight decline to its reduced position at Ity. The move below a 51% interest means it can no longer consolidate 100% of Ity’s results it must now do so proportionally.

The loss in revenue was mirrored by a larger net loss. The company reported losses of $2.4 million compared to net loss of $1.4 million a year earlier.

La Mancha blames a $1.5 million write down from commercial paper it was holding and a $1.2 million loss connected to a gold-denominated loan contracted on a non-recourse basis by its Argentinean subsidiary.

Operating activities generated cash flow of $1 million during the first quarter of 2008, compared to $44,000 in the corresponding quarter of 2007.

As of March 31, 2008, La Mancha had cash and short-term investments of $11.2 million.

La Mancha’s president and chief executive, Michel Cuilhe, said in a statement that the moves to improve operational performance are starting to pay off as evidenced by a $2.1 million improvement in its mine operating margin.

“Not only is production starting to increase, but first quarter net earnings for our two producing mines, Hassai and Ity, grew by 285% year over year,” Cuilhe said.

Cuilhe also pointed out that expenses have increased this year thanks to the launch of its Frog’s Leg mine in Australia.

The first gold pour at Frog’s Leg took place on May 12 — almost 2 months ahead of schedule.

In Toronto on May 14 Montreal-based La Mancha’s shares finished the day flat at 52. The company has 73 million shares outstanding.