MINEFINDERS CORPORATION (TORONTO:MFL)
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A HIGHLY SUCCESSFUL PRECIOUS METALS EXPLORATION COMPANY
Business Summary
Minefinders Corporation Ltd. has been involved in full-scale minerals exploration since early 1995. These efforts have resulted in discovery of 3 million ounces of gold and 165 million ounces of silver resource. Ongoing exploration work on the portfolio of properties in the US and Mexico has the potential to contribute new multi-million ounce deposits to the resource base.
Dolores Discovery
Minefinders' Dolores deposit has become one of the largest undeveloped gold-silver resources in the world. Infill drilling, silver reanalysis, resource calculations, and economic modeling of the deposit conducted during 2000-2002 continued to increase the size, grade, and overall positive economics of the property.
Management is confident that the deposit can be profitably mined at $ 275 gold and $ 4.50 silver, and that additional exploration work is likely to increase the size of the deposit and improve project economics.
La Bolsa Discovery
The La Bolsa Resource, currently over 208,000 ounces of gold and 2 million ounces of silver, has excellent expansion potential. In the immediate resource area, surface mineralization three times the area of the anomaly which defines the existing resource has been delineated through grid sampling. Further drilling will focus on expanding the resource toward this additional surface mineralization.
Sonora Properties
Minefinders controls 388 square kilometers of concessions southeast of La Bolsa. At least 11 separate areas of outcropping gold and silver mineralization and numerous historic mine workings have been found. Advanced prospects include Real Viejo and La Dura, high-grade silver vein systems, and El Malacate, recently under a joint-venture agreement with Placer Dome Exploration, where a very large gold system has been located.
La Recompensa, Tio Flaco, and Alcaparosso (on the La Reserva portion of the Sonora Properties) are porphyry-related copper-gold prospects under discussion with prospective joint venture partners.
San Antonio Project
High-grade gold and silver surface mineralization (up to 4.22 g/pt Au and 675.4 g/pt Ag) at San Antonio has been shown to outcrop over 25 hectares of grid sampling. This sampling defines a low-angle gold-silver zone. The property is located in the historic silver mining state of Zacatecas and is in the drill permitting stages.
Nevada Properties
Minefinders controls three properties in northern Nevada, all within prolific gold trends. Geologic mapping, geophysics, surface sampling, and initial drilling have been completed, and drill targets have been delineated. Each of these properties is a potential host to a large gold deposit.
Oro Blanco Project
Minefinders controls a large portion of the historic Oro Blanco gold-silver district in Southern Arizona, adjacent to the La Bolsa Concessions. Preliminary drilling on these claims produced encouraging results, including a small resource.
Recent News
New Drilling Adds to Dolores Underground Resource Minefinders' President and CEO, Mark H. Bailey, reported that recent drilling has identified additional high-grade gold resources that are likely to be produced from underground operations at its Dolores Project in Mexico. In addition, with this drilling, over 98% of in-pit gold and silver resources at Dolores has now been classified as "measured and indicated" for the purposes of the final open-pit feasibility study.
The Dolores feasibility study is based on large-scale, open-pit mining using standard heap-leach and flotation/mill recovery processes. Production is expected to be 15,000 to 18,000 tons of ore per day, over a mine life of 12 to 15 years. It is expected that ores from underground mining will supplement the open-pit production schedule and enhance the overall project economics by increasing mine life and/or annual production. However, in order to expedite existing project development work, the open-pit feasibility study currently being completed will not be re-worked at this time to reflect the economic impact of underground operations.
The most recent measured and indicated Dolores resource is 2.75 million ounces of gold and 128 million ounces of silver, with an additional inferred resource of .65 million ounces of gold and 28 million ounces of silver. Measured and indicated material comprises 97.3 million tons at an average gold-equivalent grade of 1.54 grams per ton with an additional 30 million tons designated as inferred. This estimate was based upon parameters approved in previous audited resource estimates (e.g. Company News Release dated August 21, 2002) and the current estimated resource, block model, and database have been submitted to Roscoe Postle Associates of Toronto, Ontario for final review, audit, and approval, prior to their incorporation into the final feasibility study.
Feasibility work, based on prices of $ 350/oz. for gold and $5.50/oz. for silver, indicates that approximately 80% of the measured and indicated ("M&I") gold and silver resource can be produced from the planned open pit (70-80 million tons). The new drilling expands in-pit measured and indicated resource by 5-8%, while reducing the percentage of in-pit inferred resource to about 2% of the M&I ounces. The company's analysis indicates that the pit will extend over 2 kilometers in length, and have a maximum width of 750 meters, at an overall waste- to-ore strip ratio of less than 3.5 to 1. The western highwall is up to 400 meters high, with the eastern highwall up to 325 meters. Additional zones of near-surface mineralization are expected to be mined from separate smaller pits. The final optimized pit geometry and parameters will be presented upon completion of the final feasibility study.
Drilling completed to date at Dolores (including more than 100,000 meters of core drilling and 35,000 meters of reverse-circulation drilling) has identified additional zones of high-grade mineralization that fall beyond the projected pit boundaries, and it is thought that these may be mined from underground. Selected mineralized intercepts from both north and south of the main dome that occur beyond the limits of the projected pit are shown on the accompanying table:
Fundamental Considerations
Minefinders' Dolores deposit has become one of the largest undeveloped gold-silver resources in the world. Infill drilling, silver reanalysis, resource calculations, and economic modeling of the deposit conducted during 2000-2002 continued to increase the size, grade, and overall positive economics of the property. Management is confident that the deposit can be profitably mined at $ 275 gold and $ 4.50 silver, and that additional exploration work is likely to increase the size of the deposit and improve project economics.
Opportunities for growth
The Dolores Project, which has already been shown to be an economically viable gold-silver deposit at current metal prices, is open to expansion along strike to the north and south, down dip in high-grade feeders, and in parallel structural zones. The La Bolsa resource is open down dip to the east, and to the south along the strike of the surface anomaly.
In addition to the resources already drilled, Minefinders controls a strong portfolio of properties in Nevada, Arizona and Mexico which have the potential to host new multi-million ounce discoveries over the next few years.
Construction of the mine at Dolores will be undertaken in 2005 with production expected to start in 2006, which should then lead to a higher valuation of the company.
Technical Considerations
After the severe correction of the Gold Bugs Index which started at the beginning of this year, the up-trend was resumed at the beginning of August and has risen by 30% since.
It may take some time to overcome the resistance level shown above. We nevertheless remain confident that we shall make new highs this or early next year at the latest.
With $ 68 worth of precious metals per fully diluted share and the transition to production taking shape, we believe that the share price will not remain within the trading range as shown above for long.
Our recommendation: Buy!
Peter Zihlmann
www.pzim.com
investment@pzim.com
forex@pzim.com
October 18, 2004
Disclosure: The author has not been paid to write this article, nor has he
received any other inducement to do so. The author is a shareholder in the
company and will benefit from any increase in the company's share price.
Disclaimer: The author's objective in writing this article is to invoke an
interest on the part of potential investors in this stock to the point where
they are encouraged to conduct their own further diligent research. Neither
the information, nor the opinions expressed should be construed as a
solicitation to buy or sell this stock. Investors are recommended to obtain
the advice of a qualified investment advisor before entering into any transactions
in the stock.
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