Minefinders to build heap-leach mine at Dolores

Vancouver — Management of Minefinders (MFL-T, MFN-X) plans to spend about US$131.6 million to build an 18,000-tonne-per-day, open-pit heap-leach mine at the Dolores gold-silver property in the heart of Mexico’s Sierra Madre mining district.

Minefinders has carried out intensive geological and engineering studies in recent months, including reworking previous mine plans to optimize project economics in light of increased costs for energy, reagents, steel and mining equipment. The go-ahead decision was based on a new bankable feasibility study from the engineering firm Kappes, Cassiday and Associates (KCA).

“The Dolores gold and silver deposit has always been commercially attractive,” says president Mark Bailey. “However, we believe that the plan upon which we will now break ground best reflects its true potential.”

In late 2005, Minefinders awarded BNP Paribas the exclusive rights to arrange and underwrite a loan for up to US$100 million for the construction, startup and operation of a mine at Dolores. The company expects to start construction in April — once a new mine road is completed — with a view to reaching full production by mid-2007.

Minefinders holds other gold and silver projects in the Sierra Madre district, with the Dolores project in Chihuahua state being the most advanced. A new resource model for the project that will incorporate results from exploration and infill drilling completed to the end of 2005 is expected this spring.

The proposed mine plan for Dolores is based on previously estimated proven and probable reserves of 72.4 million tonnes grading 0.84 gram gold and 44.46 grams silver per tonne, or about 1.9 million contained ounces gold and 103.5 million oz. silver. The KCA study estimated a strip ratio of 3.7:1 waste-to-ore, and used a cutoff grade of about 0.3 gram gold. The heap-leach mine would recover 1.45 million oz. gold and 53.2 million oz. silver over a 12-year mine life, based on projected recoveries of 74% for gold and 51% for silver.

Dolores has total measured and indicated resources (including reserves) of 101 million tonnes grading 0.84 gram gold and 40.8 grams silver, or about 2.6 million oz. gold and 128.1 million oz. silver. A further 28.1 million tonnes containing another 696,000 oz. gold and 25.3 million oz. silver are classified as inferred.

The KCA study found ways to limit cost increases for mine-construction components, but assumed the purchase of new equipment and current pricing for all components.

Direct capital costs were estimated at US$98.5 million, which, combined with indirect costs of US$33.2 million, brought total capital costs to US$131.6 million. Sustaining capital costs over the life of the mine add another US$29 million.

The two largest capital-cost items are the plant and related facilities at US$59 million, and mining equipment at US$31.6 million.

Payback of capital costs would take about 3.3 years, while the after-tax cash flow has an estimated undiscounted net present value of US$276.8 million and a 24.3% internal rate of return.

Cash operating costs are estimated at US$224.25 per oz. gold and gold-equivalent silver, based on a 63:1 gold-silver ratio, or US$86 per oz. gold, net of silver credits. Total cash costs are estimated at US$237 per oz. gold and gold-equivalent silver.

The mine-plan reserves were calculated using a gold price of US$375 per oz. and a silver price of US$5.75 per oz. The economic analyses were calculated using a US$475-per-oz. gold price and US$7.50-per-oz. silver.

The mine plan does not include high-grade gold mineralization below the proposed pits. Drilling to test several of these high-grade structures returned encouraging results, including a recent hole that averaged 33.46 grams gold and 17.4 grams silver per tonne over 16 metres. This mineralization was intersected about 60 metres below the proposed open-pit mine, and included a 6-metre interval grading 84.25 grams gold and 31.4 grams silver.

More drilling is planned to test the potential of the high-grade mineralized structures.