Minefinders buys back Echo Bay’s option on gold project in Chihuahua — Major gets cash, shares in return for interest in Dolores gold project

Echo Bay Mines (ECO-T) has relinquished its option to acquire a 60% interest in the Dolores gold project in Mexico’s Chihuahua state. In return, the property owner, Minefinders (MFL-V), will transfer to Echo Bay $4 million in cash and 1.25 million of its shares.

The property was previously considered one of Echo Bay’s most promising exploration prospects.

The company was responsible for funding all exploration costs through completion of a bankable feasibility study within a 2-year period. After that period, it would have had the option of paying Minefinders a minimum of $12 million to buy 60% of the proven and probable gold-equivalent ounces at US$20 per oz.

“We are focusing more on projects and properties that have the ability to contribute in the shorter term,” says Echo Bay spokesman Robbin Lee. “We will still maintain an interest in Minefinders through our 25% equity position, so if, in two or three years, Dolores turns out to be a producing mine, we’ll have the benefit of that equity position.”

The sale of Dolores comes at a time when Echo Bay is being hit hard by low gold prices and forced to adopt company-wide cost-cutting measures.

The company recently deferred mine construction plans of two new gold mines — the wholly owned Aquarius project in the Timmins camp of Ontario, and the 60%-held Paredones Amarillo project on Mexico’s Baja California Peninsula. It also deferred further development at Ulu, a satellite gold deposit to the company’s Lupin gold mine in the Northwest Territories.

States Minefinders President Mark Bailey: “We are delighted to regain an undivided 100% interest in our Dolores project. Recent interim resource calculations by an independent engineering company have confirmed a large precious metals deposit with significant upside potential.”

.SOpen-pit potential

Representing a potential open-pit, bulk-tonnage prospect, the Dolores property is centred on a 4-km-long gold-silver trend of mineralization that is divided into three target areas: Chabacan, Hondo and Norte.

Drilling has tested about 2,500 metres of the 4,000-metre strike length. Based on the 107 drill holes completed to the end of June and using a cutoff grade of 0.5 gram gold per tonne, Nevada-based Humboldt Mining Services estimates a drill-indicated and inferred resource of 25.3 million tonnes grading 1.3 grams gold and 47.3 grams silver.

The resource is equivalent to 1.1 million contained ounces gold and 38.4 million contained ounces silver.

Lowering the cutoff to 0.27 gram gold, the resource is estimated to be 39.4 million tonnes grading 0.96 gram gold and 36 grams silver, or 1.2 million oz.

gold and 45.8 million oz. silver.

Metallurgical tests indicate the mineralization is amenable to heap-leach processing.

Minefinders plans to continue infill and stepout drilling at Dolores using three rigs, and Echo Bay is in the process of winding down a 56-hole program.

After the scheduled closing of the Dolores sale on Oct. 2, 1997, Minefinders will have 14 million shares outstanding, of which Echo Bay will own 25%, or 21.7% if fully diluted at 16.1 million shares. Minefinders will have $12 million remaining in working capital.