A subsidiary company of Minefinders, a precious metals mining and exploration company, has commenced a binding arbitration process seeking approximately $10 million in damages from Ausenco International. This was launched on May 22 by Cía Minera Dolores (CMD), before the International Centre for Dispute Resolution of the American Arbitration Association. In addition to the damages, CMD seeks to recover the costs of the arbitration and its legal fees. Separately, CMD has assumed responsibility for the final stages of commissioning the multi-million ounce Dolores gold and silver mine in Mexico. Minefinders continues to expect the mine will commence commercial production in mid-2008. Minefinders believes it has adequate funds in place and available from its revolving credit line to meet its cash needs for the commissioning of the Dolores Mine until the mine reaches full commercial production.
The claim for damages relates to breaches by Ausenco of contracts between CMD and the Ausenco companies, under which Ausenco Americas was to provide engineering and design services for the Dolores mine and Ausenco International was to act as construction manager. In the arbitration Minefinders alleges 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 compared with expectations prior to the February 14, 2008 study. A portion of this additional cost will be recouped should Minefinders be successful in the arbitration.
Minefinders says it is aware that Ausenco International filed a writ of summons in the Supreme Court of British Columbia on May 9, 2008, against Minefinders and CMD for allegedly not paying $1.9 million under the construction management agreement. The writ of summons has not been served, and all disputes under the construction management agreement and the engineering services agreement between the parties must be decided by binding arbitration. CMD has demanded that the writ against CMD be withdrawn based upon the mandatory arbitration clause and as against Minefinders because Minefinders is not a party to any of the relevant agreements. CMD intends to vigorously defend against any such claims by Ausenco International or Ausenco Americas.
Minefinders is in the final stages of commissioning the multi-million ounce Dolores gold and silver mine in Mexico. Construction at Dolores is substantially complete. Mining within the pit began last fall and, to date, more than 7.3 Mt of material has been moved and 700,000 t of development ore stockpiled. Ore is now being crushed and placed on the leach pad with the recently commissioned conveying and stacking system. The mine is expected to have a 15-year life as an open pit mine with additional potential as a high-grade underground mine in the future. The company continues its exploration efforts on several other prospective projects in Mexico to build a quality pipeline of precious metals projects for future growth.
