La Mancha rises on prospect of auction

La Mancha Resources (LMA-T) is putting itself up for sale, and the market likes its chances of attracting a healthy premium.

La Mancha shares climbed 19%, or 61¢, to $3.87 on 291,762 shares traded on March 15. The rise came on the first day of trading after the company announced it was setting up a special committee to conduct an auction.

The selling comes at the behest of its majority shareholder, French nuclear conglomerate Areva, and the committee will be advised by BMO Nesbitt Burns. BMO has already told La Mancha that there have been several verbal expressions of interest in the company.

The company has a stake in four operating mines: Frog’s Leg in Australia, 51%; White Foil in Australia, 100%; Hassai in Sudan, 40%; and Ity in Côte d’Ivoire, 46%. The four mines accounted for 130,000 attributable oz. gold production to the company last year.

But any acquisition interest will be centered on its flagship project: the Hassai mine in Sudan. The site hosts volcanogenic massive sulphide (VMS) mineralization beneath existing open pits, and the deposits could add considerable production ounces.

La Mancha is negotiating a new ownership structure with the government so that it can increase its stake in the mine. Provided these negotiations go favourably, the company will push ahead on drilling out the highly prospective ground.

A feasibility study on the project recommended building a carbon-in-leach plant for the first phase of expansion, in a move that could bring production at Hassai up to 161,000 oz. at US$571 per oz. cash costs over a 4.7-year mine life.

The second phase, however, is where Hassai can go from a solid project to world-class mine. This phase would usher in a processing plant built to handle the VMS ore identified at the bottom of the open pits, which have been mined over the last 20 years.

La Mancha has only drilled three of the 12 VMS targets — perhaps waiting for negotiations to conclude with the government before it pushes further — but it has already outlined indicated resources of 80.7 million tonnes grading 1.26 grams gold and 1.12% copper for 7.2 million equivalent oz. gold. Inferred resources came in at 37 million tonnes grading 1.17 grams gold and 1.09% copper, for 3.15 million equivalent oz. gold.