Minefinders Corp. Ltd.

When the long bear market in gold and silver was drawing to a close in 2001 HRA went looking for survivors; companies with superior gold/silver resources that we thought could lead the junior gold sector out of the wilderness. One of our first choices was Minefinders Corp. Minefinders had a good looking resource at its Dolores project in Mexico. The dollar value of the resource was about evenly split between gold and silver so we expected it to respond well to price gains for either metal. More importantly, the resource had room to grow and had high grade targets that were virtually untested. The technical management of the company was good and it was one of the few juniors that had managed to get through the horrible market of 1997-2002 without completely blowing out its share structure. It had all the pieces in place to gain value in a precious metal bull market.

1. Early in this gold cycle HRA was seeking out successful explorers that had been ground down during the preceding multiyear bear market. One of our early choices was Minefinders Corp. We liked MFL because the main project Delores had a resource of 2.5MM ounces gold and 130MM ounces silver and was the type of deposit that had the potential for high grade at depth which the company planned to test. MFL had done a good job of preserving its share structure though the tough times and had very experienced and talented management. We completed a review in December 2001 at $1.80 and introduced it to Special Delivery readers at $2.

2. We knew one ace in the hole Minefinders had was older analytical techniques had understated the silver resource (Dolores is about 50/50 gold/silver in term of value). In early 2002 MFL completed re-analysis of its core and reported a new resource estimate. We noted in the April 2002 Dispatch that " we feel that MFL has moved from good to excellent gold-hedge status, and target a double from this level with further gains to gold and silver prices from current levels." MFL was trading at $3.30 then and the double would not be long in coming.

3. One of the main attractions for HRA in the Dolores project was the fact that deep drilling had not yet tested for a deeper "bonanza zone" of high grade material that are common features of this deposit type. In late 2003 MFL started deep drill testing and succeeded in finding deeper high grade gold/silver zones beneath the Dolores resource. We flagged the importance of this development in Special Deliver #148 when the stock was in the $5.50 range.

4. MFL released a positive but still disappointing pre-feasibility study. Many sold but HRA suggested holding for revisions to the study that were produced in late 2005. The updated versions of the study improved the economics substantially and the stock responded, tripling by the end of 2006.

5. Minfinders moved Dolores towards production but that didn't stop the stock from getting massacred along with everything else in the market during the debt crisis. With construction nearing completion at Dolores in late 2008 that if Dolores lived up to its promise there was plenty of upside from the market crash depressed price levels. We added a major multi-page update as Dolores entered commercial production in early 2009.

Dolores had its share of hiccups through its first two years of production but HRA stuck with the stock. That loyalty paid off in early 2012 when Pan American Silver made a takeover offer that was accepted by MFL's management team. HRA recommended taking the gain as the stock traded at takeover value leading up to the shareholder meeting to approve the transaction. The stock was then trading above $16, a 700%+ gain from the time coverage was initiated.

Shouldn't you be getting these kinds of gains?


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