EXPLORATION 1997 — Minefinders drills Dolores in Sierra Madre

Since taking the helm of Minefinders (MFL-V), following a corporate reorganization in August 1995, President Mark Bailey has remained focused on the exploration and development of the Dolores and Bolsa gold-silver properties in northern Mexico.

The Dolores property is situated in Chihuahua state, near the western border. It is accessible by a 51/2-hour drive along 87 km of gravel road from the town of Madera (population 35,000). By helicopter, the trip is substantially shortened to 15 minutes.

The Northern Miner, together with several mining analysts, recently visited the property, which lies in rugged terrain within the Sierra Madre moutain range. It centres on a past-producing gold mining camp, which produced 325,000 oz. between 1909 and 1929 from 550,000 tons of ore, mined by underground methods from narrow, high-grade veins.

The 100-150 people who reside in the area are centred around the remnants of the historic mine buildings.

When, in 1993, Minefinders acquired an option to a 100% interest, the property had undergone little modern exploration and had never been drilled.

The company felt the property had the right ingredients to contain a large bulk-tonnage, heap-leach deposit.

Epithermal system

The property hosts a large epithermal gold system. A comprehensive surface evaluation and chip sampling program revealed a north-northwest-trending zone of mineralization exceeding 4 km in strike length and 500 metres in width.

Anomalous gold-silver values were recorded along the entire length.

The mineralized trend occurs in a complex sequence of propylitically altered andesites cut by a series of north-northwest-trending latite dykes and overlain by weakly argillized tuffs. This older sequence is exposed in a dome or horst-like window through younger, unaltered volcanics.

Gold-silver mineralization is associated with intensely silicified, brecciated and stockwork-veined latite dykes in contact with the andesitic volcanic rocks. Mineralization is strongest at the contacts and appears to be fracture-controlled. The dykes are steeply dipping.

The historic high-grade mine workings follow the contact at the footwall of the latite dykes.

The main trend is divided into three zones: Norte to the north, Chabacan in the middle and Hondo to the south. Chabacan has been the primary target to date, where three subparallel mineralized zones are identified along a strike length of 1,000 metres. The area is north of the historic mining centre.

Surface sampling across the length of the Chabacan Main zone yielded values of: 15 metres averaging 3.12 grams gold per tonne; 100 metres of 0.72 gram gold (including a 45-metre interval averaging 1.1 grams); 55 metres of 1.34 grams gold; 40 metres of 0.89 gram gold; and 70 metres of 0.86 gram gold (including 25 metres averaging 2.06 grams).

Deal with Echo Bay

To fund exploration and development at Dolores, Minefinders formed an alliance with Echo Bay Mines (ECO-T) in mid-1996. Echo Bay initially subscribed to a private placement of 400,000 units of Minefinders at a price of $2.50 per unit. Each unit consisted of one share, one Series A warrant to acquire one additional share at $3, and one B warrant to acquire one further share at $4.

Echo Bay later purchased a second private placement of 480,000 units at $2.50 each. Each of these units consisted of one share and a half warrant, with a whole warrant entitling the owner to buy one additional share at $3 over a 2-year period.

Echo Bay has since exercised all the warrants for a total investment in Minefinders of $5.7 million. Minefinders is required to spend 75% of the first $3.4 million and 70% of the final $2.3 million on exploration at Dolores.

“It was a fair deal for us,” Bailey told The Northern Miner. The deal was struck before a single hole ever tested the property.

Echo Bay can earn a 60% interest in Dolores by spending a minimum of $25.5 million. The company is required to complete a bankable feasibility study within a 2-year period and is wholly responsible for the first $4 million of feasibility costs but will be entitled to recoup costs in excess of that amount from 75% of Minefinder’s share of production.

Upon completion of the study, Echo Bay can buy 60% of the proven and probable production reserve at a price of US$20 per oz. gold-equivalent, subject to a minimum purchase of US$12 million.

Minefinders commenced diamond drilling on the Chabacan zone in August 1996 and completed 30 holes totalling 6,609 metres by December. The first phase of drilling tested an 800-metre strike length of the Chabacan Main and West zones.

Eight of the holes encountered significant mineralization in a 500-metre section of the Main zone to depths exceeding 150 metres. Drill assay results are as follows: 101.9 metres averaging 2.5 grams gold and 18.86 grams silver (including 39.5 metres of 5.97 grams gold and 41.14 grams silver, which, in turn, include 2 metres grading 74.74 grams gold and 45.94 grams silver) in hole 96-1; 27.6 metres averaging 1.47 grams gold and 32.57 grams silver (including 12 metres of 2.13 grams gold and 35.66 grams silver) in hole 96-2; 29.9 metres averaging 1.37 grams gold and 11.31 grams silver in hole 96-9; 15.1 metres averaging 1.2 grams gold and 15.77 grams silver in hole 96-17; 42 metres averaging 2.88 grams gold and 26.06 grams silver (including 4.1 metres of 10.49 grams gold and 43.2 grams silver) in hole 96-19; 18.3 metres averaging 1.68 grams gold and 49.71 grams silver, plus 20.8 metres averaging 1.51 grams gold and 24 grams silver, in hole 96-21; 29.8 metres averaging 2.64 grams gold and 116.2 grams silver in hole 96-22; and 6.1 metres averaging 2.85 grams gold and 221.8 grams silver, plus 56.3 metres averaging 1.51 grams gold and 28.11 grams silver, in hole 96-25.

Based on preliminary resource estimates, the 500-metre section contains 4.5 million tonnes grading 1.78 grams gold.

The West zone was tested by 11 holes, which encountered lower-grade mineralization with local zones of high-grade. Intervals ranged from 56.6 metres averaging 0.38 gram gold and 18.17 grams silver (including 6.4 metres of 1.13 grams gold and 41.83 grams silver) in hole 96-7, to 8.6 metres averaging 8.19 grams gold and 21.26 grams silver (including 2.5 metres of 27.29 grams gold and 62.74 grams silver) in hole 96-14.

Minefinders added a second diamond drill rig when it resumed drilling in mid-January of this year. Several infill holes were drilled in the 500-metre portion of the Chabacan Main zone, the highlights being: hole 97-33, which returned 38 metres averaging 2.69 grams gold and 8.47 grams silver (including 4 metres of 15.43 grams gold and 8.47 grams silver), plus 36 metres averaging 1.84 grams gold and 29.14 grams silver (including 2 metres of 20.54 grams gold and 438.9 grams silver); hole 97-34, which returned 38 metres averaging 3.12 grams gold and 83.31 grams silver (including 4 metres of 20.74 grams gold and 680.6 grams silver); hole 97-36, which returned 96 metres averaging 2.06 grams gold and 32.23 grams silver (including 36 metres of 5.14 grams gold and 92.23 grams silver).

At the time of our visit, Minefinders had just completed hole 97-38, a 200-metre stepout south of hole 96-21, the southernmost hole in the Main zone of the Chabacan target area. Hole 97-38 intersected good-looking, well-mineralized breccia.

Recent geochemical sampling has extended the surface mineralization a distance of 500 metres south from hole 96-21 through the Hondo target area.

Rock-chip and soil lines returned anomalous assay values over a 90-metre width, including a 25-metre interval averaging 4.46 grams gold and 81.82 grams silver. A second line yielded anomalous gold values over 220 metres, with one zone of 45 metres averaging 2.51 grams gold.

Meanwhile, the second drill rig has been focused on testing the East zone in the Chabacan area, where surface sampling outlined a gold anomaly measuring more than 600 metres in strike length and 165 metres in width. The East zone is exposed as a ridge and is cut by a noticeable amount of old workings.

Grid sampling

Rock-chip and soil results across the zone returned: 95 metres averaging 1.53 grams gold and 38.06 grams silver, plus 140 metres of 0.55 gram gold and 3.77 grams silver in grid line 46; 135 metres of 0.41 gram gold and 19.89 grams silver in line 48; 75 metres of 0.64 gram gold and 21.26 grams silver in line 50; 165 metres of 0.48 gram gold and 3.43 grams silver, plus 20 metres of 1 gram gold and 9.26 grams silver, in line 51; and 55 metres of 0.74 gram gold and 3.09 grams silver.

Minefinders has tested the East zone to date with holes 97-40, -41, -42 and -44. Assay results are pending.

Drilling will continue uninterrupted until Minefinders has completed its spending requirements of almost $4.2 million, which Bailey anticipates will be by late April or early May. At that point, Echo Bay will have 30 days to elect to do a feasibility study and take over as operator.

According to Bailey, the objective of Minefinder’s current drill program is to upgrade the resource before Echo Bay gets hold of it. For the next several months, drilling will focus on stepping out to the south of the Chabacan Main zone to test some 2,000 metres of continuous strike length extending through the Hondo target area.

Minefinders will accelerate drilling in early March with the addition of a reverse-circulation (RC) rig.

Bailey doesn’t want any “blue sky” when it is time for Echo Bay to take over,

as the major is only required to perform feasibility work on what Minefinders has discovered. If there is any blue sky, he said, it will be the Norte zone, which will see only limited drilling, if any at all. Norte covers 1 km of strike length to the north of Chabacan. It is not as attractive as the 3 km of mineralized structure encompassing Chabacan and Hondo. The targets are more discrete.

La Bolsa

Elsewhere, at the Bolsa property in Sonora state, Minefinders plans to carry out further drilling once it has secured the surface rights over the main area of discovery. The property adjoins its Oro Blanco claim group, which lies on the American side of the border, in Arizona.

Between October 1995 and April 1996, Minefinders completed 42 RC holes totalling 4,835 metres and seven diamond drill holes comprising 614 metres.

The drilling partially delineated an oxide gold-silver resource of between 115,000 and 140,000 oz. at a grade of about 1.03 oz. gold-equivalent.

Stripping ratios are projected to range between 1-to-1 and 1.3-to-1, with initial metallurgical tests suggesting heap-leachable recoveries in the order of 80%.

Geological mapping and sampling have identified four new areas of anomalous gold-silver and base metal mineralization at the 155-sq.-km property.

Immediately south of La Bolsa, Minefinders acquired a 70% interest in a joint venture with USMX (USMX-Q) whereby the companies will explore the Correo and Reserva concessions, which cover more than 700 sq. km. Minefinders can acquire USMX’s 30% interest in any property brought to feasibility by paying $5 per oz. for the proven and probable recoverable ounces.

Minefinders holds a controlling interest in 16 separate mineral properties throughout North America. The junior currently has 9.2 million shares outstanding (or 10.8 million fully diluted), with $3.8 million in cash on hand. Echo Bay currently holds about a 20% interest in Minefinders.