Minefinders Corporation Ltd.

Minefinders Corporation Ltd.

September 07, 2005 09:00 ET

Minefinders Corporation Ltd.: Ongoing Optimization Continues to Improve Dolores Project Economics

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Sept. 7, 2005) - Minefinders Corporation Ltd. (the "Company" or "Minefinders") (TSX:MFL)(AMEX:MFN) updates progress on the optimization and development of its 18,000 tonne per day ("tpd") Dolores gold and silver mine. Company engineers and subcontractors are reviewing all aspects of the project to enhance the overall economics.

Improvements in Project Economics to Date

The following table sets out updated economics for the project, in both the new and leased equipment scenarios. At prices of US$400/oz gold and US$6/oz silver, the Dolores project now shows an internal rate of return ("IRR") of 22% to 24%, an undiscounted net present value ("NPV") of US$230 million to US$260 million (before tax), and a gold production cost of US$104 per ounce (net of silver credits).

Also presented are the economics for both scenarios using current precious metals prices, as at Sept. 1, 2005. This sensitivity analysis illustrates the high leverage of the project to increases in precious metals prices. The project IRR is estimated to increase to more than 30% and the NPV to more than US$340 million. Gold production costs are reduced to below US$70 per ounce (net of silver credits).

(US$ Gold
millions- Production
undiscounted, Cost
SENSITIVITY PRICE IRR pre-tax) per oz(i)
INITIAL OPTIMIZATION Au - $ 400 22.5% 258 $103.61
All New Equipment Ag - $6.00
INITIAL OPTIMIZATION Au - $ 400 23.6% 234 $103.61
Leased Equipment Ag - $6.00
(SEPT. 1, 2005) Au - $ 441 30.3% 365 $ 68.48
All New Equipment Ag - $6.96
(SEPT. 1, 2005) Au - $ 441 32.5% 341 $ 68.48
Leased Equipment Ag - $6.96
(i) Production cost per ounce of gold, net of silver credits

Basis of Project Optimization

Optimization efforts are directed towards maximizing the profitability of the NI 43-101 compliant, 18,000 tpd, mine plan reported by the Company in news releases dated June 28, 2005 and August 3, 2005 and filed on SEDAR July 22, 2005. The table above reflects net reductions, to date, of more than US$9 million in project capital costs, through more detailed vendor bids, ongoing subcontractor analyses, and additional information generated during the review process.

Improvements to Date

Optimization work to date has included a complete review of mine equipment utilization, a review of personnel requirements, and the incorporation of vendor bids into capital cost estimates. In particular, a review by Snowden Engineering, of Vancouver, British Columbia, has realized a 10% improvement in the utilization of mine equipment, thereby reducing the fleet size and the requirements for equipment purchase and replacement over the entire mine life. The initial capital required for the mining fleet during construction has been reduced from $31 million to approximately $18 million, with sustaining equipment capital being spread out over the first four years. Improvements in equipment utilization have produced corresponding reductions in personnel requirements.

Other capital cost improvements reflected in the above analysis include significant reductions in the costs of heap leach liner and drill material that were identified through direct vendor quotes.

The review of capital costs is ongoing. The improvements realized to date do not yet reflect the results of direct bid quotations being obtained from qualified engineering and construction firms in relation to other project areas, including the Merrill Crowe plant, conveyor and stacker system, leach pad installation, and pre-production earthworks costs.

Equipment Leasing

Equite Montevedeo Group ("EMG"), of Tucson, Arizona, has been retained to support the Company's optimization efforts. EMG assists both large and small mining companies in obtaining significant discounts on capital and leasing costs of mining fleets through its high volume purchases. Using equipment lease rates obtained from EMG for the Dolores mine fleet, the Company has determined that the use of leased mining equipment would improve the project IRR by approximately 3.3%, with a slight reduction in its NPV, resulting from the increased cost of leasing over the entire life of the project. A lease with an option to purchase the equipment after several years is being considered as a means of limiting long-term lease costs.

Contract Mining

Minefinders has solicited bids from several international firms for the contract mining of the Dolores project. Upon the receipt of bids, their economic impact upon the mine plan will be evaluated as an alternative to the purchase and/or leasing of mining equipment, and operation of the project, by the Company. Initial bids are expected this month.

Fine Crushing

A review of gold and silver recoveries by the Company suggests that crushing to a size of 80% passing 4.4 millimeters, rather then the current project size of 80% passing 6.3 millimeters, will increase gold recovery by up to 3% and silver recovery by approximately 7%. In addition, finer crushing is expected to shorten the recovery curve, permitting a shorter leach cycle and shorter recovery time. New, detailed column leach metallurgical work will start in mid-September to further confirm these improvements.

Following an analysis of available crushing equipment and existing mining operations, the Company has determined to focus on incorporating any fine crushing component at Dolores into the currently proposed, tertiary crushing system. Cost and maintenance issues that were identified with quaternary crushing systems were viewed as prohibitive.

Dolores Reserves and Resources

The 18,000 tpd mine plan estimates production of 72.5 million tonnes of proven and probable ore reserves at an average grade of 0.84 g/t gold and 44.5 g/t silver, with a strip ratio of 3.7:1. The mine would place approximately 1.95 million ounces of gold and 103.6 million ounces of silver on the heap leach pad and recover 1.445 million ounces of gold and 53.2 million ounces of silver (2.25 million ounces gold equivalent ("AuEq")) over a 12 year life.

The total audited measured and indicated resources at Dolores (which include the reserves), based on the resource block model completed in October 2004, are 2.73 million ounces of gold and 132.7 million ounces of silver, contained in 101 million tonnes grading 0.84 g/t gold and 40.8 g/t silver, at a cutoff grade of 0.3 g/t AuEq. An additional 696,000 ounces of gold and 25.3 million ounces of silver, contained in 28.1 million tonnes, are classified as "inferred resources" (see news release dated December 6, 2004 and SEDAR filings for NI 43-101 technical reports).

Minefinders is updating the Dolores resource and block models to include new drilling data completed since October 2004. The current drilling program is directed to converting resources that are currently outside the proposed mine plan into additional surface and/or underground mineable reserves and condemn areas outlined for the plant and pad facilities. Results from this program will be reported when they are available.

Dolores Permitting

Permitting of the Dolores mine is ongoing with the Manifestacion de Impacto Ambiental ("MIA") scheduled to be submitted to the Mexican authorities in late September. MIA review and approval time is, typically, four to five months. No issues are expected with the approval of this or the remaining permits required for the Dolores mine. Most required permits have already been received. Remaining applications will be submitted on a timely basis to facilitate the construction and operation of the mine.

New Personnel

The Company is pleased to announce the addition of the following full-time personnel to support the development and construction of the Dolores project:

Todd S. Fayram - Todd has consulted to the Company as project manager for the optimization study for the past six months. With this appointment, he will now oversee the construction and management of the Dolores Mine. Todd comes to Minefinders with 17 years of experience in the development, construction, operation, and management of several base and precious metals projects in North and South America, including the construction and management of the La Choya Mine in Sonora, Mexico. He has worked for Hecla Mining Company, Rea Mining Corp., and Wharf Resources, and as an independent consulting engineer.

Rene L. F. Mladosich - Rene has been appointed Administrative Manager, in Chihuahua, for Compania Minera Dolores, after consulting to that company since early this year. His responsibilities include community and governmental relations, non-environmental permitting, import/export programs, and other logistical requirements. Rene has 12 years of experience working in logistics at several heap leach gold mining operations in Mexico.

Mark Bailey MSc., P.Geo. is the "qualified person" with overall responsibility for the Dolores project and is responsible for the contents of this news release. Technical reports summarizing the Dolores feasibility and initial optimization studies are available for inspection online at www.sedar.com.


Mark H. Bailey, President and Chief Executive Officer

Safe Harbor Statement under the United States Private Securities Litigation Act of 1995: Statements in this release that are forward-looking, including statements relating to the size, and potential growth in size, of the Company's mineral reserves and resources, the economic feasibility of, and commencement of mine construction and mining operations at, the Company's Dolores project and the timing of the further exploration and development of the Company's mineral projects, are subject to various risks and uncertainties concerning the specific factors identified above and in the Company's periodic filings with the Ontario Securities Commission and the U. S. Securities Exchange Commission ("SEC"). Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not intend to update this information and disclaims any legal liability to the contrary.

Cautionary Note to U.S. Investors: The SEC permits mining companies to disclose only those mineral deposits that can be extracted or produced economically in their filings with the SEC. This news release uses the term "inferred resource" that the SEC guidelines prohibit from inclusion in filings with the SEC.

Contact Information

  • Minefinders Corporation Ltd.
    Mark H. Bailey
    (604) 687-6267 (FAX)