Considered a potential takeover candidate,
A 30,000-metre drilling program, under way since June, has consisted primarily of infill holes designed to convert inferred resources within the proposed pit area to the measured and indicated categories in preparation for a bankable feasibility study. With three diamond drill rigs and one reverse-circulation rig at its disposal, Minefinders has begun to step out from the main zone of mineralization to test the potential of other targets, such as the West Flank, La Bohemia and southwest mineralized zones. Drilling is expected to continue until the Christmas break.
Dolores is a multi-million-ounce deposit. Company-prepared resource estimates have evaluated the deposit using a wide spectrum of cutoff grade proposals ranging from 0.3 to 3 grams gold-equivalent per tonne. Using a base-case cutoff grade of 0.6 gram gold-equivalent, which is in keeping with the current mine plan, Dolores contains almost 2.4 million oz. gold and 138 million oz. silver in a total resource of 65.4 million tonnes grading 1.13 grams gold and 65.7 grams silver.
The measured and indicated portion alone stands at 43 million tonnes grading 1.16 grams gold and 67.9 grams silver, equivalent to 1.6 million oz. gold and 93.8 million oz. silver. The inferred category contains 22.5 million tonnes grading 1.07 grams gold and 61.6 grams silver, or 772,000 oz. gold and 44.5 million oz. silver.
To the end of last year, Minefinders had completed more than 61,000 metres of drilling in 292 holes at Dolores. The resource estimate incorporates the results of 53,900 metres of drilling in 245 holes, along with some 11,200 surface chip samples and 500 underground samples taken from old workings. An independent audit performed by the engineering firm Pincock, Allen & Holt (PAH) confirmed the resource estimates. PAH reviewed procedures followed by Minefinders in sampling RC cuttings and drill core, logging, sample preparation and assaying, and data compilation to develop the exploration database, as well as the geological interpretation and controls of mineralization.
PAH’s chief statistician conducted geostatistical analysis to validate capping grades and assay compositing (2-metre composites were capped at 30 grams gold and 1,000 grams silver), and variographic analysis to evaluate grade interpolation. To validate the resource model, PAH ran a “nearest-neighbour” check using 2-metre drill hole composites with no geological constraints out to a radius of 60 metres, and found that Minefinders had slightly underestimated the contained metal.
Even though PAH did not conduct a thorough review of the exploration potential on the Dolores property, it concluded there is “considerable potential” to increase the measured and indicated resources in the Main zone between sections 1150 and 3400. “The greatest potential for the discovery of additional measured and indicated resources is in the extension of mineralization at depth in the Main zone,” concludes PAH.
The Dolores project is set in the rugged terrain of the Sierra Madre Occidental range in the west-central part of the state, 250 km west of the city of Chihuahua, near the Sonora border. The property can be reached by a 4-hour drive along 90 km of rough dirt logging roads from the town of Madera (pop. 35,000). A small local landing strip lies close to the property.
The property centres on a historic mining camp, which is believed to have originated with placer mining in the 1860s. Organized lode mining began in the area in the late 1890s. Incomplete mining records indicate that more than 116,000 oz. gold and at least 6 million oz. silver were produced between 1922 and 1931 from fissure-vein and stockwork ore averaging a grade of 9.8 grams gold and 563 grams silver per tonne. After fire destroyed the mill in 1929, sporadic mining continued for another couple of years.
Most of the production came from underground stope mining operations developed along three main sub-parallel vein structures that occur in and beyond the main resource area.
When Minefinders began acquiring a land position in the area in 1993, there was no indication the property had ever been drilled. The Dolores property consists of nine concessions totalling 277 sq. km. Seven of the concessions comprise 19 sq. km covering the core of the Dolores district. Minefinders can purchase a 100% interest in these concessions by paying a total of US$1.5 million at the rate of US$25,000 each calendar quarter.
Through September of 2002, the company has paid a total of US$942,000. The vendor retains a 2% net smelter return (NSR) royalty on gold and silver production. An additional 1.25% NSR is payable on gold only to another party. Minefinders staked the other two peripheral mineral concessions.
The Dolores deposit is a low-sulphide, epithermal, quartz-adularia-sericite system structurally controlled by north-northwest striking, high-angle shear zones. The mineralized trend occurs in a series of volcanic rocks dominated by andesite flows, flow breccias and tuffs that are conformably overlain by felsic volcaniclastics and intercalated latitic flow rocks.
Various north-northwest striking latite porphyry dykes and sills intrude the lower volcanic series, which is exposed in a broad anticlinal uplift through a window of younger, unaltered volcanics. The dominant structural features are regional, sub-parallel, north-northwest-striking faults, which dip steeply to the west.
Anomalous gold and silver mineralization has been traced at surface over an area measuring 4 km long by 1 km wide at elevations ranging from 1,400 to 1,700 metres above sea level. Drilling has tested the Main zone over a strike length of 1,800 metres. The zone remains open in all directions. At depth, the mineralization extends to 1,250 metres in elevation, indicating a 450-metre vertical extent.
A halo of lower-grade mineralization is disseminated in breccias and stockworks over broad areas surrounding relatively narrow, 5-to-10-metre-wide, high-grade structural feeder zones deep in the system that often occur along, but are not confined to, intrusive contacts. Bonanza grades are common in these feeders and can range from 10 to 200 grams gold and 300 to 5,000 grams silver per tonne. Precious metals occur as native gold, native silver, electrum, silver sulphides, silver sulfosalts and silver halides, with associated quartz, adularia, sericite, pyrite and lesser amounts of epidote, chlorite, calcite, fluorite, galena, sphalerite and minor chalcopyrite.
At intermediate levels in the system, mineralized feeders widen into breccias containing cavities, comb structures, crustifications and symmetrical banding in silica veins and veinlets. Strong hydrothermal brecciation is common, overprinting original tectonic features. The upper extent of mineralization is generally confined to a few tens of metres above the contact of the latitic volcaniclastic tuffs and the underlying intermediate andesitic volcanics.
Results from recent infill drilling in the southern end of the deposit encountered higher-grade gold-silver values in feeder structures surrounded by broader zones of disseminated mineralization.
Hole 146 intersected 6 metres of 1.65 grams gold and 30.7 grams silver, followed further down-hole by 323.4 metres of 0.74 gram gold and 31.7 grams silver, including 155.6 metres grading 1.34 grams gold and 51.6 grams silver. The hole encountered two historical mined-out workings, a 3-metre-wide opening at 217.5-220.5 metres down-hole and a 2.4-metre-wide cut at 313.4-315.8 metres.
A higher-grade 5.5 metres preceded the first working for an average 3.57 grams gold and 423 grams silver. Assays for a 4-metre intercept immediately before the second mine working ran 5.69 grams gold and 188 grams silver.
Hole 148 cut the southern portion of the Main zone 75 metres updip of hole 146, hitting 4 metres of 7.54 grams gold and 51.5 grams silver per tonne, followed by a 209-metre-wide intercept averaging 0.63 gram gold and 52.7 grams silver. Within this broad zone, a 30-metre section ran 1.9 grams gold and 106 grams silver, including 2 metres of 19.2 grams gold and 915 grams silver.
The results from what is anticipated to be about 70 new holes drilled this year will be incorporated into an updated resource model, following which, a new open-pit mine plan and economic model will be completed. Environmental baseline studies are ongoing. Also, a preliminary geotechnical study and preliminary engineering studies were completed in November 1998.
Current open-pit mine modeling uses gold-equivalent cutoff grades of 0.5 and 0.6 gram per tonne. Minefinders envisions developing the Main zone initially using two starter pits to take advantage of the higher-grade mineralization — about 35% of the potential open-pit resource — which will be processed separately through a mill grinding circuit and subject to cyanidation utilizing a Merrill-Crowe recovery process. The tailings will be agglomerated and mixed with lower-grade ore (approximately 65% of the open-pit resource) that is placed directly on heap-leach pads.
Gold recoveries of more than 95% and silver recoveries exceeding 80% are predicted for the higher-grade material. Column leach tests on pulp-agglomerated material, performed by McClelland Laboratories of Sparks, Nev., project overall recoveries of 86-89% for gold and 57-65% for silver.
MRDI completed a preliminary scoping study on Dolores in 1998, which was updated in late 2000 by Minefinders. Based on an annual production of 138,359 oz. and 6.3 million oz. silver, or 249,000 oz. gold-equivalent, an open-pit mine could operate for a life of 13 years, with cash costs coming in at under US$150 per oz. gold-equivalent and total costs of US$184 per oz. gold-equivalent. Estimated capital costs of US$77 million yielded an internal rate of return of 22.6% based on metal prices of US$275 per oz. gold and US$4.75 per oz. silver. At higher prices of US$325 per oz. gold and US$5.50 per oz. silver, the internal rate of return rises to 32.7%.
A recent research report by Craig Miller, an analyst with BMO Nesbitt Burns, suggests that a 14,500-tonne-per-day, open-pit mine could produce 166,576 oz. gold and 7.8 million oz. silver for 12.5 years at a cash cost of US$11 per oz. gold, taking silver as a byproduct credit.
Minefinders has 24 million shares outstanding, or 29.9 million on fully diluted basis.
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