How Minefinders Lived Up To Its Name

About 15 years ago, Mark Bailey, then a consulting geologist for Minefinders (MFL-T, MFN-X), walked away from the company and its grassroots La Bolsa silver-gold project in northern Sonora, Mexico, because he felt management was more concerned with promoting the stock than pursuing a discovery.

After much sampling and mapping and developing of drill targets, Bailey, who is now the president and CEO of Minefinders, found himself at a frustrating standstill.

“The company was able to raise a lot of money, a lot of new investors came in and the stock price moved up substantially based on the work at La Bolsa,” Bailey says. “They were promoters and they didn’t want to take a chance of someone drilling and killing the promotion.”

Bailey left but it wasn’t long before the new shareholders caught on that management wasn’t going to follow up on the targets, Bailey says. They held a proxy battle, ousted management and the board and lured Bailey back to run the company.

Bailey got right to work, drilling on La Bolsa and soon enough a grassroots gold-silver project called Dolores in Chihuahua state. That work has paid off — in May this year, Dolores, an 18,000-tonne-per- day heap-leach operation, reached commercial production. The project has a 15.5-year mine life and production is expected to total nearly 1.8 million oz. gold and 64.3 million oz. silver in that time. The company expects to sell 50,000-60,000 oz. gold and 1.2-1.3 million oz. silver in the second half of 2009 at a cash cost of US$420- 475 per gold-equivalent oz., assuming a 71:1 silver to gold ratio.

As for La Bolsa, in September, Minefinders reported its first National Instrument (NI) 43-101 resource estimate, and is in the midst of finishing a prefeasibility study to be released in January (the last resource estimate was done in 1999, prior to NI 43-101).

Measured and indicated resources stand at 17.7 million tonnes grading 0.658 gram gold per tonne and 8.9 grams silver for 373,000 oz. gold and 5 million oz. silver (using a cutoff grade of 0.2 gram gold per tonne).

Inferred resources stand at 4 million tonnes grading 0.4 gram gold and 4.2 grams silver for 56,000 oz. gold and 558,000 oz. silver.

Bailey says this new resource estimate is of better quality with 160 drill holes, about twice as many as the previous estimate. Drilling has continued at the site to bolster the resource, though the company plans to finish up soon so a potential mine schedule can be developed for the prefeasibility study. The study is looking at building an open-pit heap-leach operation. Bailey says the ore would be “very easy to mine — it’s all oxide.” Metallurgical and leach tests have all been done with solid results.

“The goal is to make a determination if we want to build a mine ourselves or do something else with it,” Bailey says. “We’ll make that decision in the first quarter of next year.”

That’s not the only decision Minefinders will be making in the first quarter. At the Dolores mine, the company is doing a prefeasibility study to consider the potential for a flotation mill to enhance recoveries from high-grade ore in the open pit, to mine underground and to increase production capacity. There are two drills focused on mineralization found in the past but not included in the mine plan — peripheral targets outside of the resource.

The company is well funded to move ahead, having just completed a $66-million bought-deal financing. Minefinders will use about $20 million to repay debt, and the rest to develop La Bolsa, expand Dolores and explore its other properties.

In total, Bailey says the company has about $100 million in working capital due largely to a recent bought-deal financing for $66 million. The company offered 6.2 million shares at $10.65 apiece. Bailey says the company will pay down its line of credit to about $30 million (originally $60 million).

Bailey has watched both of these projects grow. He went straight to work on La Bolsa, when he became president, doing the work that he “was not allowed to do” under the previous management.

“None of (the projects) had been drilled, and fortunately, we made a significant discovery on both of them,” Bailey says, noting that Dolores took over the spotlight and La Bolsa was put on the back burner. “We drilled the first hole at Dolores in September of ’96 and that was the discovery hole — 102 metres at 2.5 grams gold.”

The road to production was not easy, Bailey says. The company endured the downturn in the late 1990s and early 2000s and also had to deal with moving a village that consisted of about 70-80 buildings before getting Dolores into production.

The new village has about 40 new houses, a school, a community centre and a church. About half of the village took the cash option and moved elsewhere. Some of the people who lived there were the descendents of miners from the early 1900s. Others had relocated there to work for Minefinders. The conditions were pretty primitive, as well as isolated. The nearest town was 90 km away, an eight-hour journey, Bailey says, because of the location deep in the mountains.

“Now it’s a different area,” he says, due to the $250-million development of Dolores, which employs close to 500 workers. The mine is a 24-hour operation and miners work at the camp on a two-weeks- on, one-week-off rotation.

Bailey and his Minefinders team are still busy looking to find other potential mines. The company is exploring some earlier-stage projects in Sonora near La Bolsa, where there’s been no modern exploration. Still, Bailey is proud of his accomplishments so far.

“It’s very satisfying to have taken a grassroots discovery from just an anomaly at the surface to a producing mine and not many geologists get to experience that,” Bailey says.