MineFinders (MFN)

Beyond Dolores: The company has no clearly defined reserves to develop, only prospects that may become reserves after further exploration and delineation. With the company focused on bringing Dolores online and then possibly adding a mill to boost recovery rates, it may be some time before management can focus on the other prospective plays.

Once Dolores is brought online, MFN will be a one-mine company for quite some time. Any delays or major setbacks at Dolores could seriously endanger the company. $58M of long-term debt (32% debt-to-equity) sat on the balance sheet as of Q3 2007 and without Dolores, the company generates no income from operations. If Dolores is seriously impaired for any length of time, expect the stock to be drastically marked down.

Minefinders has no proven track record of being able to operate a mine successfully. Even the best and biggest miners like Barrick are having trouble containing costs. There is nothing to suggest that MFN will fare any better. They are already late with their flagship Dolores project and over budget with initial capital costs (US$192M) exceeding 45% of previous forecast and sustaining capital at $50M, 72% higher than previously projected.

Any correction to the precious metals market that many consider frothy may delay market price appreciation on the common stock. The juniors to date have largely missed out on the run to $1000 gold. A severe correction could mean they just sit this round out.