Minefinders sees growth despite delays at Dolores

VANCOUVER — Continued delays in repairing a leach pad have set back production at Minefinders’ (MFLT, MFLT, MFN-N) Dolores gold-silver mine in northern Mexico.

In early August the company reported a tear in the heap-leach pad that it expected to repair by the end of the month, but heavy rains worsened the damage and forced a temporary halt to repair efforts. Minefinders is now reporting that production in both the third and fourth quarters will be affected by the disruption without giving particulars.

The company expects the disruption to be temporary, thanks in part to the accelerated development of this leach pad. Leaching on the phase-two pad started in mid-September and Minefinders expects it to provide enough capacity for the next three years of growth at the mine. Gold and silver production in 2011 should not be affected by the complications.

Meanwhile the longer-term outlook on Dolores got a boost in August with the discovery of a new mineralized zone on the North Dome target. Minefinders hit the new zone 250 to 400 metres northeast of the main deposit, with initial drilling demonstrating a well-mineralized area over 600 metres of strike length.

Intercepts included intervals of disseminated and stockwork mineralization between 25 and 80 metres long. Hole 372 hit 27.4 metres grading 0.7 gram gold per tonne and 23.1 grams silver per tonne from 26 metres depth; hole 382 cut 80.8 metres averaging 0.28 gram gold and 32 grams silver from 25 metres; and hole 375 intercepted 38.1 metres carrying 0.56 gram gold and 30.1 grams silver from 47 metres down-hole.

Minefinders is considering adding a mill to its production line at Dolores to boost recovery rates on higher-grade materials. An April prefeasibility study envisioned adding a 6,500-tonne-per-day mill to the existing 18,000-tonne-per-day heap-leach operation for roughly US$163 million in capital costs. The company is still considering whether to move forth with a full feasibility study.

Minefinders started commercial production at Dolores in the second quarter of 2009 while a 2008 report established reserves of 99.3 million tonnes grading 0.77 gram gold and 39.67 grams silver for 2.44 million contained ounces gold and 126.65 million contained ounces silver.

Elsewhere in Mexico, the company is looking at advancing its La Bolsa project and recently released encouraging results from its La Virginia project, with both projects in Sonora.

At the historic La Virginia project, the company’s first drill program on the La Virginia zone hit a gold and silver mineralized system. The 11-hole, 2,800-metre drill program targeted 3 km of the system, while early exploration on the historical workings defined a mineralized trend up to 15 km long.

In the program, hole 10-4C hit 2 metres grading 12.17 grams gold and 51.5 grams silver from 113 metres depth; hole 10-7C hit 27 metres carrying 1.01 grams gold and 89.9 grams silver from 121 metres; and hole 10-8C cut 1.1 metres averaging 5.75 grams gold and 434.3 grams silver from 182 metres depth.

At La Bolsa, the company had a prefeasibility study completed in July that outlined an 8,500-tonne-per- day open-pit gold and silver mine. The study established reserves of 15.6 million tonnes grading 0.63 gram gold and 9 grams silver, using US$850 per oz. gold and US$14 per oz. silver.

Factoring in average recoveries of 72% for gold and 7% for silver, the study established a 6-year mine life producing 227,600 oz. gold and 315,100 oz. silver with an initial capital cost of US$31.4 million.

The financial outlook, using the same base case metal prices, estimated a pretax net present value of US$28.2 million with a 5% discount, and a pretax internal rate of return of 34%. Cash costs per ounce were pegged at US$516 with silver by-product.

Minefinders’ stock price dropped 94¢ or 8.5% to $10.13 on the day the heap leach update was released, with 1.1 million shares traded. The company has a 52-week trading range of $8.51-$12.49 and 66 million shares outstanding.

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