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Minefinders Revenue Generation Gathers Pace Following Key Developments In Q3

Duel listed gold producer, Minefinders Corporation (TSX: MFL, NYSE Amex: MFN) released its financial and operating results for the third quarter and nine months ended September 30, 2009. During the third quarter Minefinders continued to ramp-up production and revenue generation appears to be gathering pace.

The company also updated its production guidance for 2009 announcing it has revised its 2009 production outlook to approximately 1.4 million ounces of silver and 80,000 ounces of gold. Minefinders also announced it has reached a settlement in its binding arbitration with Ausenco International. The claim was in relation to damages resulting from delays for which Minefinders believed Ausenco was responsible, according to the statement, Minefinders will receive a cash payment from Ausenco.

The Financial and operating results reflect the transition from pre-commercial operations to the commencement of commercial production which began at the Dolores Mine on the 1st May 2009.

Minefinders continues to make progress in its first revenue producing year, for the nine months ended 30 September, the company generated revenues of $47.4m following the sale of 69,545 gold-equivalent ounces. In the first three quarters Minefinders has more than halved last years losses to $8.6m ($0.15 per share) compared to $20m ($0.40 per share). Over the course of the nine months Minefinders has moved to positive cash flow of $0.1 million compared to 2008’s negative outflow of $8.4m.

In the context of the year to date, the Q3 figures show that Minefinders’ progress gathered pace in the third quarter. During the period, the company generated its largest revenues to date of $24.1 million from the sale of 24,689 gold-equivalent ounces.

Minefinders narrowed Q3 losses compared to 2008, with a $0.7m ($0.01 per share) loss versus $6.8m ($0.14 per share) last year. The newly generated revenues also led to positive operating cash-flow during the quarter, Minefinders attained positive cash-flows of $3.2m compared to a negative $3.7m in 2008.

From an operational perspective, the Minefinders statement noted several developments. Throughput from the Delores facility’s crusher increased following the summer’s screen remediation work. In September the crusher processed 16,000 tonnes per day, which was subsequently stepped up to a facility record of 17,700 tonnes per day in October.

The successful relocation of the ‘old village’ during the quarter enabled the start of Phase II pre-stripping, to expose the higher-grade central dome of the deposit. According to Minefinders, pre-stripping is well advanced and the first access to this higher grade ore is expected in November. The company anticipates that the associated higher production and lower cash costs will be attained in the second quarter of 2010.

Minefinders President and CEO, Mark Bailey commented on the progress made at the Delores property during the period:

"The relocation of the old Dolores village and the increase in crusher throughput to planned rates represent the resolution of the two most significant issues affecting the efficient operation of the mine ... With crusher throughput now at planned rates and pre-stripping well advanced in the heart of the Dolores deposit, production and cash costs should improve markedly going forward.”

Also during the quarter Minefinders made progress on its second low-cost mining prospect in Mexico, at the ‘La Bolsa’ property the company completed the first NI43-101 compliant resource estimate. The NI 43-101 resource estimate included a measured and indicated gold resource of 360,000 ounces.

With 5.9 million tonnes graded at 0.706 grams per tonne gold and 9.4 grams per tonne silver for a total 360,000 ounces of gold and 4.8 million ounces of silver. An additional 47,000 ounces of gold and 480,000 ounces of silver have been classified as inferred resource.

In September Minefinders said it expects to report the results of the ongoing pre-feasibility study of the economic viability before the end of the year.

Also this month, Minefinders reached a settlement with Brisbane based Ausenco International Pty Ltd concerning the binding arbitration process which commenced in May 2008. As a result of the settlement, Minefinders will receive a net cash sum and will not have to pay accrued monies to Ausenco.

The settlement agreement resolves and terminates all other claims between Minefinders and Ausenco that were contemplated by the arbitration. In May 2008, Minefinders commenced a binding arbitration process seeking approximately $10 million in damages from Ausenco International.

The claim for damages relates to breaches by Ausenco of contracts between Minefinders subsidiary Mexican subsidiary and the Ausenco companies, under which Ausenco Americas was to provide engineering and design services for the Dolores mine.

In the arbitration Minefinders alleged that the Ausenco companies were responsible for a number of engineering, design and construction problems and delays that increased the cost of developing the Dolores mine
At the end of September, Minefinders announced the successful completion of the ‘bought deal’ capital raising of approximately C$70 million. A syndicate of underwriters led by BMO Capital Markets and Scotia Capital Inc raised the money through the issue of 6.2 million common shares at price of C$10.65 each.

The net proceeds of the offering are being used for debt repayment, the mill construction at Dolores to increase production and other development projects. Minefinders also intend to some of the capital to fund the continued development of the ‘La Bolsa’ prospect, Sonora, Mexico.