DOLORES

We are on track to commence commercial production at our wholly owned Dolores gold and silver mine in the second quarter of 2008. 

About the Mine

The Dolores Mine is located in the Sierra Madre Occidental Range of northern Mexico.

The project area is approximately 250 km west of the city of Chihuahua.

The Dolores mine has a well-defined deposit and an open-pit mine life of 15.5 years.
 

		Mining activities commenced at the 18,000 tonne-per-day heap leach facility in the fourth quarter of 2007.
		New mining equipment, such as this 100 tonne Komatsu haul truck, is in place at Dolores. Sustaining capital additions will be made on an ongoing basis as required.
		New crushing and processing equipment is in place at Dolores, including the Merrill Crowe processing facility shown here.
		The on-site camp and facilities have capacity for over 300 employees
		A new village has been constructed at Dolores including housing and additional facilities such as a school, medical clinic and church.

For more pictures please visit our Dolores gallery 

Mine Economics

The original economics for the Dolores mine were established in an independent feasibility study prepared by Kappes, Cassiday & Associates of Reno, Nevada (the “KCA report”). The KCA report is dated April 11, 2006 and is available at www.sedar.com.

An updated NI 43-101 technical report dated March 25, 2008 was prepared by the independent engineering firm of Gustavson and Associates of Denver, Colorado (the “Gustavson report”).  The Gustavson report is also available at www.sedar.com.

Highlights of the Gustavson report include:

• Proven and probable reserves increased 37% from the KCA report to 99.3 million tonnes containing 2.44 million ounces of gold and 126.64 million ounces of silver.

• Life of mine production has increased to 1,765,606 ounces of gold and 64,354,508 ounces of silver or 3,005,027 ounces of gold-equivalent silver at base case prices of $675 per ounce of gold and $13.00 per ounce of silver. 

• Total average cash operating costs per ounce of gold and ounce of gold-equivalent silver, based on a ratio of silver to gold of 52:1, are estimated at $297 for the life of the mine.  The updated economics indicate a pre-tax undiscounted net present value of $831 million and a pre-tax internal rate of return of 26% using the base case prices. Sustaining capital costs are estimated at $50 million.

• Initial capital and pre-commercial production operating costs are estimated at $192 million, including a $10 million contingency.

• Current prices for gold and silver are significantly higher than those used in the Gustavson report, suggesting a shorter payback and higher rate of return.

• For information about current gold and silver prices, click here

Dolores Reserves and Resources

Proven and Probable Reserves

NI 43-101 technical report filed on SEDAR on March 25, 2008:

1. Proven and probable reserves have been estimated as of December 31, 2007 in accordance with definitions adopted by the Canadian Institute of Mining, Metallurgy and Petroleum on November 14, 2004.  Gustavson has prepared and audited these estimates.  William J. Crowl of Gustavson is the “Qualified Person” as defined in NI 43-101 for this mineral reserve statement.  Some numbers may not sum due to rounding.
2. Using $600 per ounce gold; $10.00 per ounce silver.
3. Gold equivalent ounces (“AuEg”) are based on a 60:1 silver to gold ratio, without regard to metallurgical recoveries.

Measured and Indicated Resources and Inferred Resources

NI 43-101 technical report filed on SEDAR on July 27, 2007

1. Measured and indicated resources and inferred resources estimates were prepared by employees of the Company under the supervision of Mark H. Bailey, P. Geol., President and Chief Executive Officer, and audited by CAM. Some numbers may not sum due to rounding.
2. 0.4 gpt AuEq cutoff; cutoff based on gpt AuEq at 75:1 silver to gold ratio, having regard to metallurgical recoveries
3. Based on updated 60:1 silver to gold ratio, without regard to metallurgical recoveries

Ongoing Development At Dolores

The Dolores mine has significant exploration upside and the potential to enhance recoveries from high-grade ore in the open pit and from ore underground below the planned pit.

Exploration Upside

The Company continues to conduct additional drilling beyond the pit boundaries.   This drilling has uncovered extensive high-grade mineralization below the proposed pit as well as surface mineralization extending up to 1km from the pit.   This mineralization has potential to be incorporated into the current mine plan or mined through possible underground operations.   To unlock this value we are actively pursuing a down-stream enhancement program.

Enhanced Recoveries

We are exploring the potential for the addition of a floatation mill to enhance recoveries from high-grade ore in the open-pit, to process additional underground ore (see exploration upside) and increase production capacity.   Mill recoveries for the high-grade ores at Dolores have been demonstrated to be substantially higher than leach recoveries, particularly for less oxidized material that will be encountered during years 3 through 14 of the open pit mine life.   Processing the highest-grade ore material through a mill circuit could significantly improve cash flows and profitability.   A feasibility study on the creation of a float mill at Dolores is expected to be complete in 2008 and will determine the optimum size of the mill and costs and benefits of the project.