La Mancha’s Partnership With Areva Pays Off

In the span of less than a year, La Mancha Resources (LMA-T, LACHF-O) has gone from just another junior exploration company trading on the TSX Venture Exchange, to a TSX-listed gold producer with the influence of a global heavyweight behind it.

The ball was set rolling in 2004, when La Mancha’s executive chairman, Walter Berukoff, approached Areva’s (ARVCF-O) mining division about acquiring some of its gold exploration properties in Australia and Africa. At the time, Berukoff had no idea that the French energy giant was getting serious about following rival Cameco’s (CCO-T, CCJ-N) lead and forming a spinoff company which would focus squarely on gold.

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

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

While the company’s current gold production is a respectable (but not outstanding) 60,000 oz. this year, having Areva behind it increases its growth potential.

Speaking to investors recently in Toronto, La Mancha spokesperson J.J. Jennex said that the company is looking to grow now that it has completed the reverse takeover.

Jennex describes La Mancha’s new president and CEO, 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.

La Mancha shares have recently traded at around $1.20. The company has roughly 140 million common shares outstanding with 64% held by Areva and a market capitalization of roughly $162 million.

Time will tell if it can achieve the level of success achieved by Centerra Gold (CG-T, CAGDF-O), created in 2004 to hold Cameco’s gold assets. Centerra’s shares recently traded at around $11.45. The company has 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’s aim is to unlock the gold mining potential of the former Soviet bloc; the company has producing mines in Kyrgyzstan and Mongolia.

La Mancha’s two producing mines are in Africa; the company has the distinction of operating the only producing mines in Sudan and Cte d’Ivoire (one in each country).

While many investors grow uneasy at the mere mention of the civil war-ravaged Sudan, the atrocities of Darfur — in the southwestern region of the country — are far from La Mancha’s partly owned Hassa mine, situated in the northeast.

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

Hassa consists of a series of interconnected open pits, and has a reserve of 657,000 oz. gold. In 2005, the mine produced roughly 155,000 oz. gold.

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

Ity gold mine

In Cte d’Ivoire, La Mancha has a 51% interest in the Ity gold mine, projected to produce over 60,000 oz. gold per year through to 2012 with average life-of-mine grades estimated at over 5 grams gold per tonne. The government holds the remaining 49% of the open-pit project.

Ity comprises 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 about 600,000 oz. gold have been produced at Ity since it opened in 1991; current reserves total 531,000 oz. gold, with attributable reserves at 271,000 oz.

While there was a shutdown in 2004, Jennex says operations are now running smoothly. And lest investors be wary of operations in countries with dubious political track records, La Mancha also has operations in the more politically stable Australia.

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

Also in Western Australia, the company has a 100% stake in the White Foil open-pit gold mine, a past-producer on care and maintenance. A $3.15-million, 6-km pipeline is currently being built to drain water from the pit. Resources at White Foil, where operations are scheduled to restart next year, stand at 400,000 oz. gold.

But perhaps La Mancha’s greatest asset at this stage is the company’s affiliation with the French government through state-owned Areva. That it can even operate in Sudan and Cte d’Ivoire is a testimony to the value of having the French government in its corner.

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

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