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Exhibit 1

MINEFINDERS CORPORATION LTD. ANNUAL INFORMATION FORMYear ended December 31, 2011 February 22, 2012


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TABLE OF CONTENTS GLOSSARY AND DEFINED TERMS
        iNOTE REGARDING FORWARD-LOOKING STATEMENTS
        vCURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION
        1INCORPORATION OF FINANCIAL STATEMENTS AND MD&A
        1REFERENCE INFORMATION
        1CORPORATE STRUCTURE
        2GENERAL DEVELOPMENT OF THE BUSINESS
        3Financing
        6DESCRIPTION OF THE BUSINESS
        6Overview
        6PRINCIPAL PROPERTY – THE DOLORES PROPERTY
        7Mineral Resources
        7Mineral Reserves
        11Summary of Dolores Mine Production
        13Summary of Dolores Mine Operating and Capital Costs
        14Description and Location
        14Access and Local Conditions
        16History
        17Geology and Mineralization
        17Exploration
        18Drilling
        18Sampling and Assaying
        18Dolores Mine Upside Potential
        18SONORA PROPERTIES
        19Northern Sonora Projects
        19La Bolsa Property
        20Planchas de Plata and Real Viejo Properties
        26La Virginia Gold / Silver District
        27PROPERTY INTERESTS IN THE UNITED STATES
        30SPECIALIZED SKILL AND KNOWLEDGE
        30ENVIRONMENTAL PROTECTION
        30NUMBER OF EMPLOYEES
        30COMPETITION
        30RISK FACTORS
        30DIVIDEND RECORD AND POLICY
        43MANAGEMENT’S DISCUSSION AND ANALYSIS
        43CAPITAL STRUCTURE
        43MARKET FOR SECURITIES
        46PRIOR SALES
        46DIRECTORS AND OFFICERS
        50Shareholdings of Directors and Officers
        51Conflicts of Interest
        51AUDIT COMMITTEE
        52TRANSFER AGENT AND REGISTRAR
        53MATERIAL CONTRACTS
        53INTERESTS OF MANAGEMENT AND EXPERTS
        53ADDITIONAL INFORMATION
        54


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GLOSSARY AND DEFINED TERMS The following is a glossary of certain mining terms used in this Annual Information Form or in other filings or releases made by the Company. Adit
        A horizontal passage from the surface into the mine, also called a tunnel.Adularization
        Potassic alteration, introduction or replacement by adularia.Anomaly
        A geological feature distinguished by geophysical or geochemical means, which is different from the general surroundings and is often of potential economic value.Breccia
        A coarse–grained clastic rock composed of angular broken fragments.Cretaceous
        The final period of the Mesozoic era (after the Jurassic and before the Tertiary period), that covered the span of time between 65 and 144 million years ago.CIM
        The Canadian Institute of Mining, Metallurgy and Petroleum.CIM Standards
        The CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council from time to time.Dome
        A circular or elliptical uplift, typically volcanic in origin.Epithermal
        Hydrothermal mineral deposit formed within one kilometre of the earth’s surface, in the temperature range of 50–200°C.Gram
        0.0321507 troy ounces.gpt
        Grams per tonne.Graben
        An elongate downfaulted basin.Horst
        An elongate block of upfaulted rock.Hydrothermal
        Processes associated with heated or superheated water, especially mineralization or alteration.Igneous Rock
        Rock which formed directly by crystallization from magma.Interbedded
        Beds laid between or alternating with others of different character.Intrusive
        The process of, and rock formed by, intrusion.Jurassic
        The middle period of the Mesozoic era, above the Triassic and below the Cretaceous, that covered the span of time between 200 and 145 million years ago.Lithology
        The description of rocks in hand specimen and in outcrop, relative to such characteristics as color, mineralogic composition, and grain size.Mesozoic
        The era of geologic time above the Paleozoic and below the Cenozoic, approximately from 245 to 65 million years ago.Metamorphic
        Affected by physical, chemical, and structural processes imposed by depth in the earth’s crust.Metasediment
        Metamorphic rock of sedimentary origin.
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Mineral Reserve
          Probable Mineral Reserve
          Proven Mineral Reserve
        THE TERMS “MINERAL RESERVE”, “PROVEN MINERAL RESERVE”, AND “PROBABLE MINERAL RESERVE” USED IN THIS ANNUAL INFORMATION FORM ARE CANADIAN MINING TERMS AS DEFINED IN ACCORDANCE WITH NATIONAL INSTRUMENT 43-101 – STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS (“NI 43-101”). NI 43-101 ADOPTS THE MEANINGS ASCRIBED TO THESE TERMS IN THE CIM STANDARDS.
 MINERAL RESERVES ARE SUB-DIVIDED IN ORDER OF INCREASING CONFIDENCE INTO PROBABLE MINERAL RESERVES AND PROVEN MINERAL RESERVES. Under the CIM Standards, a “Mineral Reserve”is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined. IN THE UNITED STATES, UNDER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION’S INDUSTRY GUIDE 7 STANDARDS (“GUIDE 7”), A MINERAL RESERVE IS DEFINED AS A PART OF A MINERAL DEPOSIT WHICH COULD BE ECONOMICALLY AND LEGALLY EXTRACTED OR PRODUCED AT THE TIME OF THE RESERVE DETERMINATION. Probable Mineral Reserve:Under the CIM Standards, a “Probable Mineral Reserve” is the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. THE DEFINITION FOR “PROBABLE MINERAL RESERVES” UNDER THE CIM STANDARDS DIFFERS FROM THE GUIDE 7 STANDARDS IN THE UNITED STATES, WHERE PROBABLE RESERVES ARE DEFINED AS RESERVES FOR WHICH QUANTITY AND GRADE AND/OR QUALITY ARE COMPUTED FROM INFORMATION SIMILAR TO THAT USED FOR PROVEN RESERVES (UNDER UNITED STATES STANDARDS), BUT THE SITES FOR INSPECTION, SAMPLING AND MEASUREMENT ARE FURTHER APART OR ARE OTHERWISE LESS ADEQUATELY SPACED, AND THE DEGREE OF ASSURANCE, ALTHOUGH LOWER THAN THAT FOR PROVEN RESERVES, IS HIGH ENOUGH TO ASSUME CONTINUITY BETWEEN POINTS OF OBSERVATION. Proven Mineral Reserve:Under the CIM Standards, a “Proven Mineral Reserve” is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified. THE DEFINITION FOR “PROVEN MINERAL RESERVES” UNDER THE CIM STANDARDS DIFFERS FROM THE GUIDE 7 STANDARDS IN THE UNITED STATES, WHERE PROVEN OR MEASURED RESERVES ARE DEFINED AS RESERVES FOR WHICH (A) QUANTITY IS COMPUTED FROM DIMENSIONS REVEALED IN OUTCROPS, TRENCHES, WORKINGS OR DRILL HOLES; GRADE AND/OR QUALITY ARE COMPUTED FROM THE RESULTS OF DETAILED SAMPLING AND (B) THE SITES FOR INSPECTION, SAMPLING AND MEASUREMENT ARE SPACED SO CLOSELY AND THE GEOLOGIC CHARACTER IS SO WELL ii


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DEFINED THAT SIZE, SHAPE, DEPTH AND MINERAL CONTENT OFRESERVES ARE WELL ESTABLISHED. Mineral Resource,
          Inferred Mineral Resource
          Indicated Mineral Resource
          Measured Mineral Resource
        THE TERMS “MINERAL RESOURCE”, “INFERRED MINERAL RESOURCE”, “INDICATED MINERAL RESOURCE”, AND “MEASURED MINERAL RESOURCE” USED IN THIS ANNUAL INFORMATION FORM ARE CANADIAN MINING TERMS AS DEFINED IN ACCORDANCE WITH NI 43-101 WHICH ADOPTS THE MEANINGS ASCRIBED TO THESE TERMS BY THE CIM STANDARDS.
 THESE TERMS ARE NOT DEFINED TERMS UNDER GUIDE 7 STANDARDS IN THE UNITED STATES AND MAY NOT GENERALLY BE USED IN DOCUMENTS FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION BY US COMPANIES. AS SUCH, INFORMATION CONTAINED IN THIS ANNUAL INFORMATION FORM CONCERNING DESCRIPTIONS OF MINERALIZATION AND RESOURCES MAY NOT BE COMPARABLE TO INFORMATION MADE PUBLIC BY US COMPANIES SUBJECT TO THE REPORTING AND DISCLOSURE REQUIREMENTS OF THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Under the CIM Standards, a “Mineral Resource”is a concentration or occurrence of natural, solid, inorganic material, or natural solid or fossilized organic material including base and precious metals, coal and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource. Inferred Mineral Resource:Under CIM Standards, an “Inferred Mineral Resource” is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. Indicated Mineral Resource:Under CIM Standards, an “Indicated Mineral Resource” is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed. Measured Mineral Resource:Under CIM Standards, a “Measured Mineral Resource” is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity. iii


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Mineralization
        A mineralized body which has been intersected by sufficient closely spaced drill holes and/or sampling to support sufficient tonnage and average grade of metal(s) to warrant further exploration-development work. This mineralized body does not qualify as a commercially mineable ore body, as prescribed under the US Securities and Exchange Commission (“SEC”) standards, until a final and comprehensive economic, technical and legal feasibility study based upon the test results is concluded and supports Proven/Probable Reserves.Mineralized Deposit
        A mineralized body which has been delineated by drilling and/or underground sampling to support a sufficient tonnage and average grade of metal(s). Under SEC standards, such a deposit does not qualify as a reserve until comprehensive evaluation, based on unit cost, grade, recoveries and other factors, concludes economic feasibility.NI 43-101
        National Instrument 43-101 Standards of Disclosure for Mineral Projects.Opt
        Troy ounces per ton.Ore
        Naturally occurring material from which minerals of economic value can be extracted at a profit.Ounce or oz.
        One ounce troy measure ( 31.10348 grams).Paleozoic
        The era of geologic time from 570 to 245 million years ago, from the end of the Precambrian to the beginning of the Mesozoic.Placer
        A surficial mineral deposit formed by mechanical concentration of mineral particles from weathered rock.Porphyry
        An igneous rock characterized by visible crystals in a fine–grained matrix.Resistivity
        A geophysical technique which measures the electrical resistivity between a set of spaced electrodes to generate a profile of subsurface geology.Sedimentary Rock
        Rock formed by the process of erosion and deposition.Sericitization
        A hydrothermal or metamorphic alteration process involving the introduction of, or replacement by, sericite muscovite.Silicification
        Alteration process involving the introduction of, or replacement by, silica, generally resulting in the formation of fine–grained quartz, chalcedony or opal, which may fill
          pores and replace existing minerals.Stockwork
        A three–dimensional network of closely spaced planar to irregular veinlets.Tertiary
        The first period of the Cenozoic, after the Cretaceous and before the Quatenary, beginning about 65 million years ago.Tonne
        1,000 kilograms or 1.1023 short tons.tpd
        Tonnes per day.Tuff
        Consolidated or cemented volcanic ash. Sometimes used as a general term for all consolidated pyroclastic rocks.Volcaniclastic
        Refers to fragments derived from volcanic sources (which may be transported some distance from their place of origin.)
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NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Information Form (“AIF”) and the documents incorporated by reference into this AIF contain forward-looking statements, within the meaning of applicable Canadian and United States securities laws. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning mineral reserves and resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered if a property is developed. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as ‘‘expects,’’ ‘‘anticipates,’’ ‘‘plans,’’ ‘‘projects,’’ ‘‘estimates,’’ ‘‘assumes,’’ ‘‘intends,’’ ‘‘strategy,’’ ‘‘goals,’’ ‘‘objectives,’’ ‘‘potential’’ or variations thereof or stating that certain actions, events or results ‘‘may,’’ ‘‘could,’’ ‘‘would,’’ ‘‘might’’ or ‘‘will’’ be taken, occur or be achieved, or the grammatical and negative variations of any of these terms and similar expressions) are not statements of historical fact and may be ‘‘forward-looking statements.’’ Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation: risks related to the Company’s limited history of revenues from mining operations and risks relating to the Company’s ability to successfully produce precious metals profitably;uncertainty in the Company’s ability to fund and risks related to the availability of funding the development of its mineral properties or the completion of further exploration programs;risks related to the Company’s ability to successfully negotiate and maintain agreements with the Ejido Huizopa or its members;risks related to the Arrangement (as defined herein) with Pan American Silver Corp;risks related to accelerated payment obligations due to events of default under the revolving credit facility and/or the 4.50% convertible senior notes;risks related to uncertain and volatile economic conditions;risks related to changes in the market prices of gold, silver and other minerals which in the past have fluctuated widely and which could affect the profitability of the Company’s operations and financial condition;risks related to recent market events and conditions including the Company’s access to credit and capital;risks related to differences between US and Canadian practices for reporting resources and reserves;uncertainty as to actual costs, production and economic returns with no assurance of profitable mining operations;risks related to future drilling results which may not produce reserves and resources that can be mined or processed profitably;risks related to the Company’s reserves and resources figures being estimates based on interpretations and assumptions which may result in less mineral production under actual conditions than is currently estimated;risks related to currency fluctuations;risks related to the use of heap leaching and hazardous materials, such as sodium cyanide, in the production of gold and silver; v


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risks related to the inherently dangerous activity of mining, including conditions or events beyond the Company’s control;risks related to governmental regulations;risks related to the Company’s business being subject to environmental laws and regulations which may increase its costs of doing business and restrict its operations;risks related to the Company’s primary properties being located in Mexico, including political, economic and regulatory instability;uncertainty in the Company’s ability to obtain and maintain certain permits necessary to its current and anticipated operations;risks related to the Company’s land reclamation requirements which may be burdensome;uncertainty regarding future requirements to fund additional reclamation work during the course of the Company’s mining activities;uncertainty relating to the Company’s ability to attract and maintain qualified management to meet the needs of its anticipated growth, and risks relating to its ability to manage growth effectively;risks related to the Company’s mineral properties being subject to prior unregistered agreements, transfers, or claims and other defects in title;risks related to the Company’s history of losses, which may continue in the future;risks related to the fluctuation of interest rates and the leverage ratio under the revolving credit facility;risks related to increased competition that could adversely affect the Company’s ability to attract necessary capital funding or acquire suitable properties for mineral exploration and development in the future; andrisks related to the Company’s officers and directors becoming associated with other natural resource companies which may give rise to conflicts of interest. This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. A discussion of these and other factors that may affect the Company’s actual results, performance, achievements or financial position is contained under the heading “Risk Factors” and elsewhere in this AIF and in the documents incorporated and deemed to be incorporated herein. The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as may be required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements. vi


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CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION The Company uses the US dollar as its reporting currency. This AIF contains references to both US dollars and Canadian dollars. All dollar amounts, unless otherwise indicated, are expressed in US dollars and Canadian dollars are referred to as “CDN$”. The annual high, low, average and end of period exchange rates for the US dollar in terms of Canadian dollars for each of the periods indicated, being the noon exchange rates published by the Bank of Canada, were as follows: Company’s Fiscal Year Ended December 31, 2011
        2010
        2009
        2008
        2007High
        $1.0604
        $1.0778
        $1.3000
        $1.2969
        $1.1853Low
        $0.9449
        $0.9946
        $1.0292
        $0.9719
        $0.9170Average
        $0.9891
        $1.0299
        $1.1420
        $1.0660
        $1.0748Period End
        $1.0170
        $0.9946
        $1.0466
        $1.2246
        $0.9881
 On February 22, 2012, the exchange rate of Canadian dollars into United States dollars, being the noon exchange rate published by the Bank of Canada, was US $1.00 equals CDN$1.00. INCORPORATION OF FINANCIAL STATEMENTS AND MD&A The 2011 audited consolidated financial statements of the Company (the “Financial Statements”) include its consolidated statements of financial position as at December 31, 2011 and 2010 and the consolidated statements of income and comprehensive income (loss), shareholders’ equity and cash flows of the Company for the years ended December 31, 2011 and 2010, together with the notes thereon. The Financial Statements have been filed with Canadian securities regulatory authorities on SEDAR (available at www.sedar.com), and are incorporated by reference into this AIF. Also incorporated by reference into this AIF is Management’s Discussion and Analysis (“MD&A”) dated February 22, 2012, which has also been filed with Canadian securities regulatory authorities on SEDAR (available at www.sedar.com). As of January 1, 2011, financial results are prepared and reported in accordance with International Financial Reporting Standards (“IFRS”). All financial information in this AIF for periods before January 1, 2010 is reported in accordance with Canadian Generally Accepted Accounting Principles. Financial information in this AIF for periods commencing on or after January 1, 2010 is reported in accordance with IFRS. REFERENCE INFORMATION “Company” refers to Minefinders Corporation Ltd. alone unless the context indicates that it should refer to Minefinders Corporation Ltd. and one or more of its subsidiaries. Unless otherwise noted, the information contained in this AIF is given as of December 31, 2011. All documents referred to in this document as having been filed on SEDAR are available at www.sedar.com. 1


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CORPORATE STRUCTURE The Company was incorporated by articles of incorporation under the Business Corporations Act(Ontario) on February 4, 1975, under the name “Twentieth Century Explorations Inc”. Its articles were amended on May 10, 1979 to change its name from “Twentieth Century Explorations Inc.” to “Minefinders Corporation Ltd.”; to consolidate 3,075,445 issued shares without par value into 615,089 issued shares; and to increase the authorized capital of the Company to 3,000,000 shares without par value. The articles were further amended on August 25, 1989 to change the authorized capital to an unlimited number of shares; on September 21, 1995 to change the number of directors from a fixed Board consisting of five directors to a minimum number of three and a maximum number of nine directors; and on July 3, 1997 to remove the restrictions on business that the Company may carry on or the powers that it may exercise. On June 16, 2005 the Company adopted a new By-law No. 7 under the Business Corporations Act(Ontario), which is more in keeping with current corporate laws, securities regulation and business practices. All prior by-laws were repealed. By-law No. 7 is in most material respects the same as the previous by-law. The most significant change is an increase in the quorum requirement at a meeting of shareholders, from two persons present in person (each being a shareholder entitled to vote at such a meeting or a duly appointed proxy holder for an absent shareholder so entitled), to two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting. By-law No. 7 is attached to the Management Information Circular dated April 18, 2005 as Schedule “B”, and may be found on SEDAR at www.sedar.com or obtained from the Secretary at the address given in the following paragraph. The Company’s head and principal office is located at 2288 – 1177 West Hastings Street, Vancouver, British Columbia, Canada V6E 2K3. The Company maintains an exploration office in Reno, Nevada, United States of America, an operations office in Chihuahua, Mexico, an open pit heap-leach mine and processing plant in the State of Chihuahua, Mexico (the “Dolores Mine”), and a metals trading office in Barbados. The following table names each subsidiary of the Company, the jurisdiction of its incorporation and the Company’s direct or indirect percentage ownership. Name
        Place ofIncorporation
        PercentageOwnershipCompañía Minera Dolores, S.A. de C.V.
        Mexico
        100%Minera Minefinders, S.A. de C.V.
        Mexico
        100%Servicios Mineros Sierra, S.A. de C.V.
        Mexico
        100%Servicios Operativos Sierra, S.A. de C.V.
        Mexico
        100%Minefinders (USA.) Inc.
        Nevada
        100%MFL Metals Trading Ltd.
        Barbados
        100%Servicios Operativos La Bolsa, S.A. de C.V.
        Mexico
        100%
 The Company’s operations in Mexico, the USA and Barbados are conducted through these subsidiaries. The Company is a reporting issuer in all provinces and territories in Canada. The Company’s Common Shares are listed for trading on the Toronto Stock Exchange (“TSX”) under the symbol “MFL” and on the NYSE Amex Equities (“Amex”) (formerly the American Stock Exchange) under the symbol “MFN”. 2


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GENERAL DEVELOPMENT OF THE BUSINESS The Company is in the business of exploration for, and development and mining of, precious and base metal properties. Interests in these properties are held directly and indirectly through exploitation and exploration concessions, leases, options and working interests. The Company’s properties are located in Mexico and the United States. The Company’s principal mineral property interest is the Dolores property, located in Chihuahua, Mexico. A feasibility study for the Dolores property was completed in 2006, followed by capital financing and the purchase of mining and processing equipment. Construction of an open pit heap leach mine was started in 2006 and largely completed during the fourth quarter of 2008. Mining operations began in late 2007 and commissioning of the plant and processing equipment was completed in the second half of 2008 with commercial production commencing May 1, 2009. In addition to constructing an operating open pit heap leach mine, the Company constructed a 92-kilometre long main access road, a 300-person operations camp, since expanded, including employee housing, water and sanitation systems, and service facilities including an office complex, assay laboratory, maintenance shops, and power stations. The Company also constructed community housing and infrastructure for local inhabitants. The Company also has property interests in Sonora, Mexico (the "Sonora Properties"). The Sonora Properties include the reserve and resource bearing La Bolsa gold and silver development project and the La Virginia gold and silver prospect, the Real Viejo silver prospect and the Planchas de Plata silver prospect, each at various stages of exploration. The Company has other mineral property interests in northern Mexico and in the United States which are in the early exploration stage. On January 22, 2012 Pan American Silver Corp. (“Pan American”) and the Company entered into a definitive agreement (the “Arrangement Agreement”) whereby Pan American will acquire all of the issued and outstanding common shares of the Company by way of a plan of arrangement (the “Arrangement”). Under the terms of the Arrangement Agreement, Minefinders shareholders will be entitled to elect to receive, in exchange for each Minefinders share held, either: (i) 0.55 shares of Pan American and CDN$1.84 in cash; or (ii) 0.6235 shares of Pan American; or (iii) CDN$15.60 in cash, subject to proration under total aggregate cash and share pools. The consideration represents a total offer value of CDN$15.60 per share of the Company based on the January 20, 2012 closing price of Pan American shares on the TSX. The Arrangement implies a total transaction value of approximately CDN$1.5 billion. Upon completion of the Arrangement, existing shareholders of the Company will own approximately 33% of Pan American on a fully diluted basis. The proposed transaction is subject to certain conditions, including court approval, the approval of not less than 66 2/3% of the votes cast by shareholders of the Company and 66 2/3% of the votes cast by shareholders and option holders, voting together as a single class at a special meeting that is expected to be held in March 2012, and not less than a majority of the votes cast in a special meeting of Pan American shareholders that is expected to be held on the same date. Pursuant to the Arrangement Agreement, the completion of the Arrangement is also subject to applicable stock exchange and regulatory approvals and the satisfaction of certain closing conditions. The Arrangement Agreement also provides for reciprocal termination payments of CDN$42 million and reciprocal expense reimbursement of payments of CDN$5 million in certain specified circumstances. The Arrangement is expected to be completed by the end of March 2012. The Arrangement Agreement may also be terminated in accordance with its terms. A copy of the Arrangement Agreement is available under the Company’s profile on SEDAR and is incorporated by reference herein. The Dolores Mine In June 2002, the Company initiated a drilling program designed to bring the Dolores property to final feasibility and lead to a production decision. This drilling program was expanded in 2003 through 2007 to include condemnation and geotechnical drilling. Other activities on the Dolores property included additional geological mapping and sampling, road construction, initiating the community relocation program and, from April 2006 through April 2009, construction and commissioning of an 18,000 tonnes per day, heap-leach, gold and silver mine. First production of gold and silver at the Dolores Mine occurred in the fourth quarter of 2008 with commercial production commencing on May 1, 2009. The initial economics for the Dolores Mine were established in an independent feasibility study in 2006. The report, entitled “Technical Report For the Dolores Heap Leach Project In Mexico”, is dated April 11, 2006, and is available 3


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on SEDAR at www.sedar.com. Based on interim conclusions made available to the Company, on February 23, 2006 the board of directors of the Company approved the construction, by its wholly-owned subsidiary Compañía Minera Dolores S.A. de C.V. (“CMD”), of a conventional open pit heap leach mine and processing plant, subject to obtaining all necessary permits and the required funding. Construction of the mine commenced at Dolores shortly thereafter. In April 2006, the Company completed an internal update of the resource model (see news release dated April 25, 2006 and the SEDAR filing of the NI 43-101 technical report) that incorporated all drilling results completed through 2005. In July 2006, the Company updated its estimated reserve base (reported in a news release dated July 25, 2006). An internal technical report on the internal mineral reserve update was filed on September 7, 2006 and is available on SEDAR. An updated resource model (“updated resource”), incorporating all drill results through December 2006, was reviewed and audited during the second quarter of 2007 and was reported by news release on June 12, 2007. An NI 43-101-compliant technical report in support of this updated resource audit dated July 26, 2007 was filed and is available on SEDAR. On February 14, 2008, the Company reported updated reserves and economics for the Dolores Mine taking into account the increase in operating and capital cost estimates, higher gold and silver prices and an increase in proven and probable reserves from those incorporated in previous reports. A NI 43-101 technical report dated March 25, 2008 (the “2008 report”) supporting the updated economics and reserves is filed on SEDAR. On May 4, 2011, the Company reported updated reserves and resources for the Dolores Mine. An NI 43-101 technical report dated September 30, 2011 (the “CAM report”) supporting the updated reserves and resources as at December 31, 2011 was prepared by Chlumsky, Armbrust and Meyer, LLC ("CAM") and filed on SEDAR. This is the first independent update of reserves and resources for Dolores since the 2008 report. The updated gold and silver reserves are current to December 31, 2010 and are sufficient to sustain open pit production for the next 16 years at current throughput rates. The open pit gold and silver reserves base at the Dolores Mine consists of 2.024 million ounces of gold and 114.52 million ounces of silver, or 4.226 million gold equivalent ounces using a 52 to one silver to gold ratio. The reserves are contained in 107.64 million tonnes of proven and probable ore having an average grade of 0.58 gpt gold and 33.1 gpt silver and using appropriate dollar value cut-off grades based on assumed metal prices of $1,200 per gold ounce and $23 per silver ounce. The total measured and indicated mineral resources used for estimation of the updated mineral reserves at Dolores incorporate all drilling through the end of 2010. At a 0.3 gpt gold equivalent cut-off grade, the resources are currently estimated at 2.647 million ounces of gold and 139.5 million ounces of silver contained in 151.9 million tonnes. An additional 326,214 ounces of gold and 16.1 million ounces of silver, contained in 27.6 million tonnes are classified as inferred resources. The estimation of the updated reserve and resource reflects several changes in methodology over the prior 2008 model. The most significant of these changes is the incorporation of mining dilution in the 2010 resource estimate to better predict dilution. The 2008 resource model was undiluted, with dilution applied in generating the reserve model. The Dolores property is open in all directions, and there is significant potential for underground resources to be identified. An internally updated reserve and resource for the Dolores property, including drill results not previously included in the estimation, is in process. Mining operations at the Dolores Mine began in late 2007 with pre-commercial production of gold and silver commencing in November of 2008. Pre-commercial production operating costs, net of sales revenue, were capitalized to mine development costs until the commencement of commercial production on May 1, 2009. Total production from Dolores to December 31, 2011 is as follows: In 2008 3,093 ounces of gold and 57,378 ounces of silver were produced, all in November and December.In 2009 77,264 ounces of gold and 1,318,245 ounces of silver were produced.In 2010 56,110 ounces of gold and 1,218,664 ounces of silver were produced.In 2011 74,193 ounce of gold and 3,572,357 ounces of silver were produced. 4


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For the 2012 year, the Company is forecasting production of between 75,000 and 80,000 ounces of gold and between 3.5 million and 4.0 million ounces of silver. Detailed discussion of 2011 operating results and the 2012 production forecast is included in the Company’s MD&A dated February 22, 2012, which has been filed on SEDAR (available at www.sedar.com). In April 2010, the Company reported results of a draft pre-feasibility study assessing the economic benefit of adding a mill to the Dolores Mine. On November 7, 2011 the Company reported by news release that the board of directors had approved the addition of a 6,500 tonne per day mill to complement the existing heap leach operation at Dolores. Concurrently, the Company is accelerating the development of an underground exploration program below the existing open pit at Dolores. This work will include engineering, procurement of underground equipment and upon receipt of final permits, construction of an underground portal and decline. The planned mill is expected to treat high-grade ore from the open pit, process additional underground ore and increase production capacity. Initial engineering has begun and a technical report on the addition of the mill is currently being prepared by an independent engineering firm. However, the Company is currently restricted from incurring significant expenditures on the addition of a mill at Dolores pursuant to the Arrangement Agreement with Pan American and, on completion of the Arrangement, the nature and timing of the planned mill addition and underground development program may change. A core and RC drill program has been conducted at Dolores during the last three years to investigate mineralized targets including expansion of the peripheral East Dike mineralization, extension of the mineralization south of the current open pit mine and mineralization beneath the open pit that could be mined from underground. Results of this drill program are encouraging with results confirming the potential to both expand the current open pit to the south and develop underground sources of ore below and peripheral to the open pit. Exploration and Development Other than in-pit and regional exploration at the Dolores Mine, exploration activities during the last three years have focused on the Sonora Properties with more recent exploration drilling primarily directed at the La Virginia property and initial development of a mine at La Bolsa. In July, 2010, the Company reported the results of an independently prepared pre-feasibility study for the La Bolsa property. The study contemplates conventional open-pit mining methods at La Bolsa with low-cost heap-leach processing. Throughput is projected at 8,500 tonnes of ore per day with two-stage crushing and gold and silver recovery achieved through a carbon absorption recovery system. The minable reserve, using prices of $825 per ounce of gold and $14 per ounce of silver contains 316,135 ounces of gold and 4.5 million ounces of silver. Assuming average recoveries of 72% for gold and 7% for silver, the total production from La Bolsa is estimated at 227,600 ounces of gold and 315,100 ounces of silver over a six year mine life. The life of mine reserve strip ratio is estimated at 1.9 to 1 waste to ore and the operating strip ratio is estimated at 1.5 to 1 waste to ore, net of capitalized pre-stripping. On November 7, 2011 the Company reported by news release that the Company had received the most significant permits required from the relevant Mexican authorities for the Board to approve, and for management to begin, the construction of a mine at La Bolsa. The construction decision is based on the previously reported positive pre-feasibility study results as well as detailed engineering which was substantially completed in the third quarter of 2011 by an independent engineering contractor retained by the Company. Initial site access and infrastructure as well as adequate water supplies needed to operate the mine are currently being established. The recruitment of senior personnel necessary to construct and operate La Bolsa has also commenced. However, the Company is currently restricted from incurring certain significant expenditures on the construction of a mine at La Bolsa pursuant to the Arrangement Agreement with Pan American and, on completion of the Arrangement, the timing of the construction of a mine at La Bolsa may change. In September 2010, the Company reported the discovery of a new gold and silver system at its La Virginia property. Mineralization occurs in epithermal quartz-chalcedony stockworks, veins and hydrothermal breccias with widths that can vary from one metre to greater than 30 metres. Drill intercepts in the highest portions of the system display high-level alteration and mineralogy including abundant chalcedony suggesting that for most of the zone the bonanza gold and silver portion of the system remains intact at depth. Sulfides, including occasional silver sulfides, are common in the mineralized zone with mixed oxidation occurring throughout most of the zone tested to date. Exploration drilling at La Virginia in 2011 continued to deliver encouraging results. Drilling in 2012 will continue 5


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to follow up on encouraging intercepts located in the three main zones and will also be extended to cover an area to the south of the existing zones. Additionally, Minefinders continued to acquire surface and mineral rights within additional areas in northern Mexico in conjunction with continued reconnaissance, evaluation, and detailed sampling and mapping. In total, approximately 135,000 hectares of mineral rights within the state of Sonora, Mexico are currently controlled by the Company. The Company is also reviewing other advanced opportunities throughout Mexico. Financing In the last three years, the Company has completed various financings primarily to fund the development, construction, commissioning and expansion of the Dolores Mine, for debt repayment, continued development of the La Bolsa project and to maintain adequate working capital. On September 29, 2009, the Company completed a CDN$66 million bought deal equity financing in which a syndicate of underwriters purchased 6,200,000 Common Shares from the Company for sale to the public at a price of CDN$10.65 per share for net proceeds of $56.7 million. On October 7, 2009, the underwriters exercised their overallotment option and purchased an additional 350,000 Common Shares from the Company at a price of CDN$10.65 for net proceeds of US$3.3 million. In November, 2010, the Company completed the exchange of an aggregate of $32.9 million of the principal due under the $85 million face value of 4.5% unsecured convertible senior notes maturing December 2011 (the “2011 Notes”) for consideration of new 4.5% convertible senior notes, due December 15, 2015 (the “2015 Notes”), in the aggregate principal amount of $36.2 million. Interest on the 2015 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2011. The 2015 Notes are convertible into Common Shares at approximately $11.97 per share. A total of 3,027,152 Common Shares are issuable upon conversion and additional shares may become issuable following the occurrence of certain corporate acts or events. On conversion, the Company has the option to settle all or a portion of the obligation in cash in respect of both the 2011 Notes and the 2015 Notes (together, the “Notes”). On December 9, 2010 the Company renewed its existing $50 million revolving three year term credit facility with the Bank of Nova Scotia for an additional three years. The facility is available for drawdown in US or Canadian dollars with repayment at any time at a bank base rate or a LIBOR-based rate (plus 200 to 400 basis points depending on type of loan and financial and operating measures), payable according to the quoted rate term. The facility is secured by a pledge of the Company’s shares in its US and Mexican subsidiaries and by physical assets at the Dolores Mine. At December 31, 2011, the facility is undrawn with $50 million available for drawdown. On December 20, 2010, the Company completed a CDN$151.5 million bought deal equity financing in which a syndicate of underwriters purchased 13,650,000 Common Shares from the Company for sale to the public at a price of CDN$11.10 per share for net proceeds of $141.4 million. During the fourth quarter of 2011, the Company settled in full convertible notes with a face value of its $52.1 million maturing in December 2011 in accordance with their terms.In settling the notes, the Company issued 4,202,199 common shares on the conversion of $45.7 million face value of the notes. The remaining notes with a face value of $6.3 million were held to maturity and settled by a cash payment of $6.3 million in respect of the principal and $0.14 million in respect of accrued interest. The notes, which were issued in October 2006, had an interest rate of 4.5% and were convertible at the election of the holders at a rate of 91.9118 common shares per $1,000 principal amount of notes equal to $10.88 per share. In addition to interest earned on bank deposits, the Company received net proceeds on exercise of stock options and warrants of $1.1 million in 2009, $1.3 million in 2010 and $18.6 million in 2011. DESCRIPTION OF THE BUSINESS Overview The information provided under this caption and under “Principal Property - The Dolores Property”; “Sonora Properties”; and “Property Interests in the United States” has been reviewed by Mark H. Bailey, M.Sc., P.Geo., 6


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President & CEO of the Company, who is a “Qualified Person” as defined in NI 43-101. The information has largely been derived from reports prepared by other “Qualified Persons” who are named in this AIF. The Company is an exploration, development and mining company. The Company’s principal mineral property is the Dolores property. The Dolores property contains an economically viable ore body on which a producing gold and silver mine is now commercially operating. The Company also has property interests in Sonora, Mexico (which include the reserve bearing La Bolsa development project, the La Virginia prospect, the Real Viejo prospect, the Planchas de Plata prospect and various grassroots properties). With the exception of the La Bolsa deposit, the Sonora Properties are without a known body of commercial ore and are not considered material to the Company. There is no surface plant or equipment on any of these properties. In the following discussions on the Company’s several properties and projects, the reader is cautioned that any statements pertaining to the results of an economic analysis of mineral resources that are not mineral reserves do not demonstrate their economic viability. PRINCIPAL PROPERTY – THE DOLORES PROPERTY In 2006, the Company received an independently prepared bankable-level feasibility study on its 100%-owned Dolores gold and silver deposit in Chihuahua, Mexico. On the basis of that study, in February 2006, the Company’s Board of Directors directed management to proceed with the development and construction of an 18,000 tonnes per day open-pit, heap leach mine at Dolores, subject to permits and financing, both of which were obtained. On February 14, 2008, the Company reported updated reserves and economics for the Dolores Mine taking into account the increase in operating and capital cost estimates, higher gold and silver prices and an increase in proven and probable reserves from those incorporated in previous reports. On May 4, 2011 the Company reported updated reserves and resources for the Dolores Mine. Details of the most recently updated reserves and resources are included in the CAM report. Construction of the Dolores Mine was completed in 2008, pre-commercial production of gold and silver commenced in November 2008 and commercial operations were achieved commencing May 1, 2009. At December 31, 2008, with construction of the Dolores Mine complete, $227.7 million had been capitalized to mineral property, plant and equipment related to the construction and commissioning of the Dolores Mine. Of this amount, approximately $8 million is non-cash stock-based compensation expense and currency translation adjustments and $9.7 million is capitalized acquisition costs. Pre-commercial production mining and processing expenses, net of associated revenue from gold and silver sales, were capitalized until commercial production for accounting purposes was achieved effective May 1, 2009. The operations are entirely conventional. Ore mined in the open pit is trucked to a three-stage crushing system, and then conveyed to and stacked on permanent pads where it is leached using a sodium cyanide solution. The resulting solution containing gold and silver is processed in a standard Merrill-Crowe recovery plant to recover the precious metals for smelting, and transportation to a refinery. The metals are sold to a refinery or to other participants in the world-wide commodity markets that exist to trade in these metals. Except as otherwise indicated, the information given in this section is derived from the CAM report dated September 30, 2011 entitled “NI 43-101 Technical Report, Dolores Gold-Silver Project, Chihuahua, Mexico”, which has been filed on SEDAR, is available at www.sedar.com, and which is incorporated in this AIF by reference. The principal author of the CAM report was Robert L. Sandefur P.E., who is an independent “Qualified Person” as defined in NI 43-101. The CAM report has not been updated to account for subsequent operating and production results. No technical reports on the Dolores Mine have been filed subsequent to the CAM report. Mineral Resources Mineral resources were been estimated as of December 31, 2010. Minefinders personnel prepared these estimates, with independent review by Robert L Sandefur, P.E. of CAM. Mr. Sandefur is the Qualified Person as defined by NI 43-101 for this mineral resource statement. 7


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The mineral resources in this estimate were calculated using the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM"), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on November 27, 2010. The total measured and indicated resources at Dolores (which include the mineral reserves) at December 31, 2010, are estimated at 2.646 million ounces of gold and 139.5 million ounces of silver, contained in 151.9 million tonnes grading 0.542 gpt gold and 28.6 gpt silver, at a gold equivalent ("AuEq") cutoff grade of 0.3 gpt. An additional 326,214 ounces of gold and 16.1 million ounces of silver, contained in 27.6 million tonnes, are classified as "inferred resources". Mineral ResourcesResources(1)
        Tonnes
        Gold Grade(gpt)
        Gold Ounces
        SilverGrade(gpt)
        SilverOunces
        AuEq Grade( gpt)Measured
        80,050,610
        0.595
        1,530,279
        30.8
        79,241,979
        1.187Indicated
        71,856,401
        0.483
        1,116,743
        26.1
        60,272,682
        0.985Measured +indicated
        151,904,139
        0.542
        2,646,975
        28.6
        139,478,988
        1.092Inferred
        27,632,397
        0.367
        326,214
        18.2
        16,133,009
        0.717(1) Cutoff or 0.3 gptAuEq based on gptAuEq at 75:1 silver to gold ratio, having regard to metallurgical recoveries. AuEq grade is based on a silver to gold ratio of 52 to one
 Resources at various cut-off grades are summarized in the following tables. Note that because of the estimation method, the resource includes diluted ore reserves. 8


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Mineral Resources – MeasuredCut-off(gptAuEq)(i)

  Tonnes

  GoldOunces

  GoldGrade(gpt)

  SilverOunces

  SilverGrade(gpt)

  AuEq Grade (gpt)(i)0.2

  96,587,826

  1,605,129

  0.517

  83,718,850

  27.0

  1.0360.3

   80,050,610

   1,530,279

   0.595

   79,241,979

   30.8

   1.1870.4

   61,857,757

   1,415,775

   0.712

   72,508,982

   36.5

   1.4140.5

   46,836,549

   1,293,629

   0.859

   65,502,085

   43.5

   1.6960.6

   36,734,441

   1,194,358

   1.011

   59,652,930

   50.5

   1.9821.0

   21,765,502

   989,672

   1.414

   48,087,568

   68.7

   2.7351.5

   14,558,872

   823,659

   1.760

   39,004,084

   83.3

   3.3622.0

   9,291,428

   652,792

   2.185

   83,718,850

   99.9

   4.106(i) Gold-equivalent (AuEq) mine cut-off grades are based on a silver to gold ratio of 75 to one.

   (ii) AuEq grade is based on a silver to gold ratio of 52 to one.
  Mineral Resources – IndicatedCut-off(gpt AuEq)(i)

  Tonnes(million)

  GoldOunces(million)

  GoldGrade(gpt)

  SilverOunces(million)

  SilverGrade(gpt)

  AuEq Grade (gpt)(i)0.2

  90,584,324

  1,203,357

  0.413

  65,206,084

  22.4

  0.8440.3

   71,856,401

   1,116,743

   0.483

   60,272,682

   26.1

   0.9850.4

   52,033,568

   988,672

   0.591

   53,231,017

   31.8

   1.2030.5

   37,090,620

   865,371

   0.726

   46,434,526

   38.9

   1.4740.6

   28,057,187

   775,032

   0.859

   41,331,407

   45.8

   1.7401.0

   14,534,863

   589,634

   1.262

   30,790,123

   65.9

  2.529
  9


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Mineral Resources – IndicatedCut-off(gpt AuEq)(i)
  Tonnes(million)
  GoldOunces(million)
  GoldGrade(gpt)
  SilverOunces(million)
  SilverGrade(gpt)
  AuEq Grade (gpt)(i)1.5
  9,219,244
  463,983
  1.565
  24,506,244
  82.7
  3.1552.0
   5,671,306
   351,683
   1.929
   18,134,789
   99.5
   3.842(i) Gold-equivalent (AuEq) mine cut-off grades are based on a silver to gold ratio of 75 to one.
   (ii) AuEq grade is based on a silver to gold ratio of 52 to one.  Mineral Resources – Measured + IndicatedCut-off(gpt AuEq)(i)
  Tonnes(million)
  GoldOunces(million)
  GoldGrade(gpt)
  SilverOunces(million)
  SilverGrade(gpt)
  AuEq Grade (gpt)(i)0.2
  187,168,418
  2,808,351
  0.467
  148,932,250
  24.8
  0.9340.3
   151,904,139
   2,646,975
   0.542
   139,478,988
   28.6
   1.0920.4
   113,889,315
   2,404,534
   0.657
   125,737,334
   34.3
   1.3170.5
   83,925,445
   2,159,102
   0.800
   111,948,445
   41.5
   1.5980.6
   64,789,904
   1,969,472
   0.946
   100,983,618
   48.5
   1.8791.0
   36,299,504
   1,579,224
   1.353
   78,879,494
   67.6
   2.6531.5
   23,777,543
   1,287,636
   1.684
   63,510,340
   83.1
   3.2822.0
   14,962,161
   1,004,446
   2.088
   47,963,848
   99.7
   4.005(i) Gold-equivalent (AuEq) mine cut-off grades are based on a silver to gold ratio of 75 to one.
   (ii) AuEq grade is based on a silver to gold ratio of 52 to one.  10


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Mineral Resources – InferredCut-off(gptAuEq)(i)
  Tonnes(million)
  GoldOunces(million)
  GoldGrade(gpt)
  SilverOunces(million)
  SilverGrade(gpt)
  AuEq Grade (gpt)(i)0.2
  40,786,301
  388,139
  0.296
  19,459,389
  14.8
  0.5810.3
   27,632,397
   326,214
   0.367
   16,133,009
   18.2
   0.7170.4
   17,359,931
   256,959
   0.460
   12,764,245
   22.9
   0.9000.5
   11,089,833
   202,514
   0.568
   10,118,552
   28.4
   1.1140.6
   7,451,842
   164,086
   0.685
   8,219,877
   34.3
   1.3451.0
   2,755,033
   96,750
   1.092
   4,788,327
   54.1
   2.1321.5
   1,323,119
   62,140
   1.461
   3,223,125
   75.8
   2.9192.0
   668,668
   40,646
   1.891
   2,087,209
   97.1
   3.758(i) Gold-equivalent (AuEq) mine cut-off grades are based on a silver to gold ratio of 75 to one.
   (ii) AuEq grade is based on a silver to gold ratio of 52 to one.
  Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. The quantity and grade of reported inferred resources in this estimation are conceptual in nature. Mineral Reserves Proven and probable reserves have been estimated as of December 31, 2010. Minefinders personnel prepared these estimates, with independent review by Robert L Sandefur, P.E. of CAM. Mr. Sandefur is a Qualified Person as defined by NI 43-101 for this mineral reserve statement. Note that because of the estimation method, the resources reported above include diluted ore reserves. The updated gold and silver reserves are current to December 31, 2010 and are sufficient to sustain open pit production for the next 16 years at current throughput rates. The open pit gold and silver reserves base at the Dolores Mine consists of 2.024 million ounces of gold and 114.52 million ounces of silver, or 4.226 million gold equivalent ounces using a silver to gold ratio of 52 to one. The reserves are contained in 107.64 million tonnes of proven and probable ore having an average grade of 0.58 gpt gold and 33.1 gpt silver. A standard methodology for pit limit analysis was followed by Minefinders using the Whittle software package which applies an implementation of the Lerchs-Grossmann (LG) algorithm. The parameters for pit optimization 11


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include a gold price of $1,200/oz and a silver price of $23/oz. Initial block dimensions were 3.0 m X 5.0 m X 7.5 m vertically. The Whittle LG pit shell selected for the reserves statement corresponding to a revenue factor of 0.720, or $864 gold and $16.56 Silver. An ultimate pit plan including haul roads and safety berms was created using MineSight software by the Dolores planning engineering department. This 'ultimate pit' was used for reporting of reserves. For the purpose of reporting mine reserves, the value of gold and silver in each block, net of recovery are stored (recoveries vary according to alteration for each block). An internal value cutoff grade (excluding mining cost) is used for separation of ore from waste based on a cost of $ 7.50/tonne. Minable reserves for the Dolores Mine as of December 31, 2010 are summarized in the following table. Dolores Mine ReservesCategory

   Tonnes

   Gold Grade

   Silver Grade

   Gold Ounces

   Silver Ounces(gpt)

   (gpt)

   (million)

   (million)Probable

   62,430,655

   0.62

   34.2

   1.254

   68.552Proven

   45,212,669

   0.53

   31.6

   0.770

   45.972Total

   107,643,324

   0.58

   33.1

   2.024

   114.524(1) Gold equivalent grade is based on a 52 to one silver to gold ratio without regard to metallurgical recoveries.
  12


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Summary of Dolores Mine Production The Company commenced commercial production effective May 1, 2009. Based on December 31, 2010 proven and probable reserves and current throughput rates, the Dolores Mine has an expected mine life of 16 years from that date. Production to date has all been sourced from the heap leach operation. However, the Company is working on a planned mill expansion that will increase throughput and, as a result, will increase production of gold and silver but may reduce the expected mine life. Production from the Dolores Mine, as reported by the Company, from commencement of operations to December 31, 2011 is presented in the table below: 2008

   

   

   2009

   

   

   2010

   

   

   2011Ore tonnes mined

   

   2,928,975

   

   

   6,373,148

   

   

   5,888,752

   

   

   8,343,791Waste tonnes mined

   

   15,645,277

   

   

   17,778,746

   

   

   12,346,052

   

   

   14,938,316Pre-strip waste tonnes mined (capital)

   

   -


   

   

   2,388,428

   

   

   9,410,347

   

   

   7,648,823Total tonnes mined

   

   18,574,252

   

   

   26,540,332

   

   

   27,645,151

   

   

   30,930,930Strip ratio, including pre-strip

   

   5.34

   

   

   3.16

   

   

   3.69

   

   

   2.71Strip ratio, excluding pre-strip

   

   5.34

   

   

   2.79

   

   

   2.10

   

   

   1.79Ore tonnes stockpiled (removed from stockpile)

   

   1,804,801

   

   

   804,415

   

   

   339,442

   

   

   2,342,686Ore tonnes stacked on the pad

   

   1,124,174

   

   

   5,545,592

   

   

   5,554,293

   

   

   6,041,410Average gold grade per tonne stacked

   

   0.43

   

   

   0.70

   

   

   0.48

   

   

   0.53Average silver grade per tonne stacked

   

   23.5

   

   

   20.58

   

   

   40.91

   

   

   45.38Gold ounces produced

   

   3,093

   

   

   77,264

   

   

   56,110

   

   

   74,193Silver ounces produced

   

   57,378

   

   

   1,318,245

   

   

   1,218,664

   

   

   3,572,357Gold ounces sold

   

   2,440

   

   

   75,126

   

   

   55,977

   

   

   74,372Silver ounces sold

   

   42,800

   

   

   1,285,721

   

   

   1,153,547

   

   

   3,552,031
  13


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Summary of Dolores Mine Operating and Capital Costs Operating and capital costs for the Dolores Mine, as reported by the Company, for the three years ended December 31, 2011 is presented in the table below: 2009

   

   

   2010

   

   

   2011Total mining costs

   $

   25.4

   

   $

   25.2

   

   $

   40.3Total processing costs

   

   20.9

   

   

   22.9

   

   

   32.9Total mine general and administrative costs

   

   13.5

   

   

   14.9

   

   

   18.1Share based compensation included in production costs (non-cash)

   

   -

   

   

   0.5

   

   

   0.2Change in inventory

   

   (7.7)

   

   

   (18.7)

   

   

   (19.1)Total operating expenses

   

   52.1

   

   

   44.8

   

   

   72.4Mining cost per tonne mined (ore and waste)

   

   1.05

   

   

   1.38

   

   

   1.73Mining cost per ore tonne mined

   

   3.99

   

   

   4.29

   

   

   4.83Processing cost per ore tonne stacked

   

   3.77

   

   

   4.12

   

   

   5.45Mine general and administrative costs per ore tonne stacked

   

   2.43

   

   

   2.68

   

   

   3.00Operating cash cost per gold equivalent ounce sold

   

   550

   

   

   585

   

   

   464Operating cash cost per gold ounce sold, net of silver credit

   

   435

   

   

   345

   

   

   (711)Capitalized pre-stripping (in millions)

   

   2.9

   

   

   14.8

   

   

   13.2Capitalized property, plant and equipment, net of pre-commercial production revenue (in millions)

   

   6.3

   

   

   23.4

   

   

   34.7
  Description and Location The Dolores Mine is located in the Sierra Madre Occidental Range in the State of Chihuahua, northern Mexico at Latitude 29° 00’ North, Longitude 108°32’ West. It is in the Municipality of Madera, about 94 km by road (45 km by air) southwest of the town of Madera, and 250 km west of the city of Chihuahua (Figure 1). 14


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FIGURE 1 Mineral rights to the Dolores Mine are controlled by three mining concessions shown in Table 1 and Figure 2, below. The Company, through its wholly owned Mexican subsidiary CMD, directly owns the Dolores, Silvia and Unificacion Real Cananea concessions. The total area of concessions under control of the Company is 27,700 hectares. As of September 2006, payment for the several smaller concessions was completed and full title transfers were duly registered and recorded by November of 2006, giving the Company 100 percent interest in all of the properties. A Net Smelter Return (NSR) royalty of 2 percent on silver and 3.25 percent on gold production is payable to Royal Gold, Inc. This royalty ownership only applies to the Dolores deposit contained within the confines of the Unificacion Real Cananea concession. There is no royalty on the other two concessions, which at this time do not contain reserves. 15


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Table 1 Dolores Mineral Concessions

   Title No.

   Area (ha)

   Expiry DateSilvia

   217587

   2,866

   August 20, 2052Unificacion Real Cananea

   227028

   1,920

   December 12, 2039Dolores

   221593

   22,914

   March 3, 2054Total

   

   27,700
  The three concessions shown on Figure 2 and listed in Table 1 are contiguous and cover the Mineral Resource defined in this study. All claims, license fees and taxes for property owned or under the control of the Company, have been fully paid and are up to date. All concessions have been converted to exploitation status and the Company has the access and the right to carry out exploration activities up to and including all mining operations.  FIGURE 2 Access and Local Conditions The property is accessed via a 92-km access road suitable for truck traffic from Yepachi, Chihuahua. Alternative access is via dirt roads from Madera or light aircraft landing on a dirt landing strip located about 8 km from the mine 16


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site. Topography is rugged, with elevations ranging from 1,200 to 2,000 metres. Vegetation is characteristic of the Sierra Madre, with thorny plants and cacti, replaced by oak and pine forests at higher elevations. The climate is typical of the Sierra Madre with an average temperature of 18° C, lows of -10° C and highs of 45° C. Precipitation averages 250 mm, most of it occurring from July to September as brief heavy rainstorms. Snowfall is common in December and January but does not remain on the ground for long. Water is available from a small local reservoir, from underground workings, and from Rio Tutuaca. The original village of Dolores occupied an area directly over the southern extent of the mineral resource. The agreement between the Company and the Ejido Huizopa allows for the relocation of the village which was completed in 2009. New homes for the villagers have been completed about three kilometres from the mine site. Residents of the old village have relocated to either the new Dolores village or elsewhere. History Mining in the Dolores region started in the 1800s. Mechanized production occurred between 1915 and 1929, with no records of any production since that time. Incomplete mining records from 1922 to 1931 indicate that total production during this time was about 372,000 tonnes of ore containing over 116,000 ounces of gold and 6 million ounces of silver. Most of this production came from several underground mine stoping operations within and beyond the Dolores resource study area. The district then remained idle until 1993 when the Company began acquiring a land position. Drilling started in 1996, with a total of over 200,000 metres of combined core and reverse circulation drilling in 850 holes to June of 2007. Several independent mineral resource estimates of the Dolores property were prepared between 1997 and 2007, showing an increasing mineral inventory as drilling progressed. A complete bankable level feasibility study for the project was prepared in 2006, and project construction started shortly thereafter. Additional exploration drilling was completed in 2006 with the objective of obtaining data that would further enhance the quality of the Mineral Resource estimate. CAM was engaged in May 2007 to prepare a new audit of the updated resource estimation that integrated the newly acquired data. An independent engineering firm was retained in November of 2007 to prepare a reserve estimate and production schedule based on the audited Dolores April 2007 mineral resource. First gold and silver production began in November 2008 with commercial production commencing May 1, 2009. CAM audited the updated reserve and resource estimation in 2011. Geology and Mineralization The Dolores gold-silver deposit in the Sierra Madre Occidental is a low- to medium-sulfidation epithermal deposit hosted in andesitic volcanic rocks of the Lower Volcanic Series of Tertiary age. Mineralization is present in a NNW-striking, steeply-dipping structural zone, and is concentrated in fractures and stock works that lie within and adjacent to latite dikes. The deposit shows characteristics similar to economic deposits in volcanic rocks of Tertiary age in Mexico, South America, Indonesia and elsewhere. Gold and silver mineralization is present in veins, silica stockworks, breccias and replacements. Deeper mineralization tends to be preferentially concentrated in high-grade structurally controlled zones that evolve into wider stockworks, veinlets and disseminations at higher elevations. Mineralization is limited to the lowermost portion of the less competent, more permeable, latite flows and tuffs that overlie the andesitic host rocks. Minerals present include galena, sphalerite, stibnite, arsenopyrite, pyrite, silver sulfides, native silver and visible gold. Clay-illite-hematite alteration with no significant gold or silver values (commonly referred to as “steam heated” alteration) also is present above and lateral to mineralized zones and is a characteristic feature of this type of epithermal mineralization. Mineralization occurs in an area over 4,000 metres long and up to 1,000 metres wide, with over 700 metres of vertical extent. The extent of mineralization at depth has not been fully defined. The bulk of the deposit is high in the system where feeders widen into breccias and stockworks up to a few hundred metres wide that form halos around the main structures. Grades in the feeders are in the ranges of 10 to 30 gpt gold and 300 to more than 1,000 gpt silver. Disseminated mineralization that lies adjacent to high grade feeder structures at upper levels has lower grades in the range of 0.3 to 2 gpt gold and up to 150 gpt silver. The width of coherent mineralization commonly is about 200 to 300 metres wide, and lies in zones that trend NNW and dip steeply to the west. Some vein and disseminated gold-silver mineralization is known to extend in a NNW and SSE direction beyond the limits of the resource estimate area. This mineralization may be considered to have exploration potential and may eventually be classed as resource. 17


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Exploration Since 1993 all exploration work, including mapping, sampling, drilling and geophysical studies have been under direct supervision of Minefinders personnel. No assays determined prior to 1993 on the property have been used in preparation of the most recent reserve and resource. The Company initially carried out more than six square kilometers of detailed mapping and 12 square kilometers of reconnaissance mapping at Dolores. Geophysical surveys have included 14.9 kilometers of induced polarization, resistivity surveys, and magnetic surveys. Since November 1995, the property has been subject to extensive geological, geochemical and geophysical surveys and exploratory drilling to identify drilling targets to define a mineralized gold and silver system. Drilling is discussed in Section 11 of this report. Additionally, surface and underground sampling has exceeded 10,000 rock-chip samples. This exploration has defined a series of mineralized veins and stockworks which form the basis for the Dolores Mine. Subsequent exploration drilling at Dolores has been oriented toward expanding the resource below and peripheral to the open pit mine. Drilling Drilling and logging procedures have not changed materially since 2007. Recent drilling at Dolores has been oriented toward expanding the resource below and peripheral to the open pit mine. Additional in-resource drilling since 2007 has totaled 125 holes, in addition to the 803 holes used in the 2008 report. Only 29 of the additional 125 holes, were used in resource estimation, the remainder being geotechnical, outside the resources area, or otherwise excluded. Assay results from some of the additional holes were not available at the time of preparation of the resource estimate. Sampling and Assaying No changes to the sample preparation, analysis procedures or security have occurred since previous technical reports. There have been no major changes in the QA/QC routines and no changes in the drilling or sampling routine for the new drillholes. The sample database used for the resource has been maintained by Minefinders Exploration group using industry-standard GEMS software. Assay data are acquired and loaded electronically, while geologic information is hand-keyed into spreadsheets prior to loading. CAM uses automated data processing procedures as much as possible in constructing and auditing geologic databases to assure consistency and minimize errors and costs. These procedures depend heavily on consistent alphanumeric attribute codes and consistent and non-duplicated field labels and drillhole IDs. While many of the issues flagged by these automated procedures are obvious to a human, CAM requires a clean and consistent database before proceeding with geological modeling. On the basis of these statistical checks, and the checks done in the past, CAM believes that the Dolores exploration database has been prepared according to industry norms and is suitable for the development of geological and grade models. CAM’s standard check procedures did find both errors and possible errors. The results were provided to the Company although none of these issues or possible errors would have an overall impact on the global resource. Dolores Mine Upside Potential The information and forward looking statements in the following paragraph provides information not specifically included in the CAM report. The current Dolores open-pit operations and mine plan do not take into account the East Dike deposit or other significant high-grade gold and silver mineralization that lies below and up to one kilometre peripheral to the proposed pit or increased gold and silver production that would result from processing high grade open pit ore through a mill. The Company reported the results from a draft pre-feasibility study in 2010 that assessed the economic viability of adding a mill, results of which indicate that addition of a mill at Dolores could enhance recoveries from high-grade 18


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ore in the open pit, process additional underground ore and increase annual production capacity. On November 7, 2011 the Company reported by news release that the board of directors had approved the addition of a 6,500 tonne per day mill to complement the existing heap leach operation at Dolores. The planned mill is expected to treat high-grade ore from the open pit, process additional underground ore and increase production capacity. Initial engineering has begun and a technical report on the addition of the mill is currently being prepared by GBM Minerals Engineering Consultants Limited, an independent engineering firm based in Twickenham, England. However, the Company is currently restricted from incurring significant expenditures on the addition of a mill at Dolores pursuant to the Arrangement Agreement with Pan American. Drilling at Dolores has continued to confirm sufficient underground high-grade resource to support development of an exploration/production decline which would provide access to further define and develop reserves in conjunction with initiating underground mining operations. With an aggressive budget, it is anticipated that these resources could be brought into production within a three to four year period. Accordingly, the Company is accelerating the development of an underground exploration program below the existing open pit at Dolores. This work will include engineering, procurement of underground equipment and upon receipt of final permits, construction of an underground portal and decline. SONORA PROPERTIES The Sonora concessions are located within several different prospective precious metals mineralized trends within the state of Sonora, Mexico and include the Company’s La Bolsa and La Virginia projects. Northern Sonora Projects The Company’s Northern Sonora Project area encompasses over 28,000 hectares and includes the resource bearing La Bolsa gold development project in the northwest corner of the block, the Real Viejo silver project in the central portion of the concessions, and the Planchas de Plata silver project located to the southeast. Several less explored additional precious metals prospects and porphyry-related base metal prospects also occur within the project area as indicated in Figure 5. The advanced project areas have been the site of substantial exploration drilling and analysis by the Company and the Company has obtained all required permits to conduct exploration drilling on the projects through the next several exploration programs as well as surface rights to all known areas of mineralization and potential waste disposal, tailings storage, heap leach pads and plant sites. Since 1994 the Company has taken more than 10,000 surface samples over the project areas, drilled 267 holes at La Bolsa, 61 holes on the Real Viejo prospect, 136 holes on the Planchas de Plata prospect, and completed extensive geological mapping and airborne geophysical surveys over the entire claim block. All assays were completed by Bondar Clegg, ALS Chemex or Inspectorate under the same quality assurance regime as for the Dolores property. The properties are not subject to any environmental liabilities. The climate in the area is high desert, semi–arid with average annual precipitation of approximately 20 cm. Most of the precipitation falls during the wet season lasting from July to mid-September. Temperatures range from 5 degrees Celsius in winter to 48 degrees Celsius in summer. Exploration can be undertaken throughout the year. Skilled and unskilled labour is abundantly available from nearby Nogales (population of more than 100,000). Water for drilling is available from local sources including ponds and water wells. Site topography is characterized by low to moderately rugged terrain with elevations ranging from 1,000 to 1,800 metres above sea level. The project area is serviced by narrow, winding, dirt and paved roads from Nogales. A network of roads to provide access for drilling has been established on several of the more advanced prospects located on the properties. Modern services are available at Nogales, within 30 kilometres of most of the prospects. 19


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Figure 5 La Bolsa Property The La Bolsa property is the Company’s most advanced near-term project and is located on the ABE concession in the northern part of Sonora State, Mexico, approximately 29 kilometres west of the Mexican city of Nogales, and 100 kilometres SSW of Tucson, Arizona. The property is easily accessed from both Nogales and Hermosillo, Mexico. Information under this caption “La Bolsa Property”, unless otherwise identified, is largely drawn or summarized from the NI 43-101 compliant technical reports titled “Technical Report on the La Bolsa Property, Sonora, Mexico” by Sacrison Engineering dated October 16, 2009 and “Technical Report, La Bolsa Project, Pre-Feasibility Study” by Sonoran Resources, LLC and The Mines Group, Inc. dated January 10, 2011. Both reports are incorporated by reference into this AIF and are available on SEDAR at www.sedar.com. Description and Location The La Bolsa property is located in a semi-isolated part of the northern Sonora State of the Republic of Mexico approximately 29 km west of Nogales, Edo. Sonora, Mexico, and 100 km south-southwest of Tucson, Arizona, USA. Access to the property from Nogales is by Highway 15D south for about 7 km then west for about 12 km on a maintained unpaved road to the La Bellatosa Ranch. The road then continues west through a locked gate for about 17 km on a ranch road to the El Cumaral Ranch where the Company has built a 5 kilometre long road north to the property. Alternate access is from the south through the village of Saric and then for approximately 20 kilometres north and east through several gates and the Rancho Nuevo. The international border with the United States is approximately 0.5 km north from center of the main resource. Map coordinates for the project are: 31o23’ 86” north latitude 111o14’ 31” west longitude. The concession named ABE encompasses the whole of the La Bolsa resource and covers an area of approximately 5.6 km north-south by 4.0 km east-west. It abuts the US-Mexico border to the north. This concession (Title # 202521) originally covered 2,090.6647 hectares as originally staked under the direction of the Company in 1994. The concession has since been reduced to 996.6642 hectares and converted to exploitation concession status (Title # 216305) with an expiration date of April 29,2052. The ABE concession is in good legal standing and 100% owned by Minera Minefinders S.A. de C.V. (“Minera Minefinders”), a wholly-owned Mexican subsidiary of the Company. Surface rights covering both exploration and mining within a 540 hectare area that is inclusive of the necessary anticipated area of operations for the project were granted in an agreement between Señor Roberto Pierson Suarez (owner of the La Cumaral Ranch) and Minera Minefinders, dated October 13, 1997. Terms of the agreement called for an initial annual rental payment of US$20,000 per year that increases at a rate of 10% for every year the contract is in force. An additional payment of US$200.00 per hectare of disturbance is accrued for each hectare of ground disturbed by the activities of the Company. Under terms of the agreement an additional payment of US$500,000 is to be paid when the project enters commercial production. There are no other legal or monetary obligations other 20


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than payment of the normal governmental concession fees and permitting requirements that relate to or are associated with the La Bolsa project area. Access and Local Conditions The elevations within the concession range from 975 to approximately 1,300 metres. The terrain consists of rolling to moderately steep hills with interspersed alluvial valleys. Vegetation in the area consists of numerous varieties of cactus (saguaro, ocotillo, cholla, prickly pear, and organ pipe), cottonwood, paloverde, mesquite, ironwood, creosote bush, various shrubs and minor grasses. Local fauna include deer, coyote, bobcat, puma, javelina, foxes, jackrabbit, and various rodents. Reptiles and a wide variety of insects also are evident. Regional temperatures range from a minimum of about -5oC in the winter to a daytime maximum of 43oC in summer. Occasional snow can occur during winter. The majority of the precipitation occurs during the monsoon season from July into September. The La Bolsa property is located within a sparsely populated area consisting solely of large privately held ranches found within the confines of the municipality of Nogales. The large town of Nogales, Mexico and the village of Saric both occur within 40 kilometres of the project area. At present transport to and from the property is by utility truck or 4-wheel drive vehicle. Power for exploration operations is supplied by gas-powered generators. A large 40 kVa power line is located approximately 20 km southwest of the property. Water for future mining operations potentially could be sourced from large drainages occurring less than 5 kilometres from the project area. Personnel to run the operation are likely to be available from nearby Saric and Nogales. There is sufficient area within the ABE exploitation concession to conduct mining operations of the type and size envisioned by the Company for the La Bolsa property. Surface rights inclusive of exploration, processing and mine infrastructural development within a 540 hectare area is granted in the agreement between Señor Roberto Pierson Suarez (owner of the La Cumaral Ranch) and Minera Minefinders, dated October 13, 1997 Existing facilities at La Bolsa are few. The exploration camp located approximately 2 km to the south consists of several tents and tables amongst the trees of a nearby ranch. Non-potable water is pumped from an open exploration drill hole on the eastern side of the project site. Potable water is supplied in bottles. History No historical records have been located describing the limited prospecting completed on La Bolsa hill. It is believed that this activity took place at approximately the same time as initial mining in the Oro Blanco District north of the Mexican border (second half of the 19thcentury). No modern day exploration had occurred at La Bolsa prior to property acquisition by the Company. Initial identification of mineralization on La Bolsa hill was made by Mark Bailey (currently President and CEO of the Company). Initial field work was carried out during the summer of 1994 by the Company, followed by detailed geologic mapping, rock chip sampling and completion of a sample grid covering much of the current resource area in the fall. Results of the surface work were sufficient to warrant drilling. In the fall of 1995 the first round of drilling was initiated. Additional drill campaigns followed in 1998, 2003, 2004, 2008, 2009 and 2010. Continued work at La Bolsa focused on extending the rock chip sample grid, sampling of road cuts, and expanding geologic mapping across the project as well as regionally. Environmental baseline studies, metallurgical work, and internal scoping analyses also were completed. There are no historical records of prior mineral rights ownership regarding the La Bolsa property. There is no previous NI 43-101 compliant mineral resource for the La Bolsa Project. While several small prospects and digs have been identified across the property, no historic production numbers are available. The extremely limited extent of these workings suggests that prior production on the property is inconsequential with respect to the current resource. Geology and Mineralization The gold-silver mineralization at La Bolsa occurs within stockwork and disseminations that are generally located within a low-angle north-south trending structural zone that dips moderately eastward from its exposure along a north-south-trending ridge. Mineralization is in the form of an oxidized blanket that is sub-parallel to topography 21


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and then dips shallowly below surface from the base of the ridge. Mineralization has been traced for approximately 1,000 metres (3,300 feet) in length and up to 800 metres (2,600 feet) in width with thicknesses that range from 10 to 50 metres (30 to 165 feet). Recent drilling at La Bolsa continues to extend that zone, and the known mineralization remains open both down-dip and along strike. Gold and silver enrichment at La Bolsa typically occurs in association with disseminated iron-oxides and quartz –calcite and quartz – adularia veins and stockwork. Quartz veins are finely crystalline to chalcedonic while calcite veins tend to be coarsely crystalline, vuggy, or locally massive. Red, orange, and brown iron-oxides and brown to dark gray manganese oxides are often associated with the veining. Alteration of the volcaniclastic sediments, flows, and intrusive rocks consists of silicification, adularization, local argillic alteration, and iron oxides after less than 5 percent sulfides. The hydrothermal fluids that deposited the gold-silver mineralization are interpreted to have been of epithermal low-sulfidation character. Exploration Since 1994 the Company has been actively exploring in and around La Bolsa. During this time frame the Company’s personnel have evaluated more than 700 square kilometres within the area of La Bolsa via stream sediment surveys, reconnaissance rock chip and rock chip grid sampling, road cut sampling, geologic mapping, reverse circulation (RC) and core drilling, airborne geophysics, aerial photo interpretation and satellite imagery review. Geologic understanding both at La Bolsa and regionally has been integrated to develop a complete understanding of stratigraphy, structure and mineralization. The down-dip eastern extension of the La Bolsa mineralized zone remains open and was drill tested as part of the 2009 phase of drilling. Previous drill intercepts on the east indicated a general weakening of the zone in this direction. Holes completed further to the east in 2009 and 2010 indicated local thickening of the zone as well as a significant increase in grades. Drilling A total of 267 completed drill holes, represented by 37,524 metres of drilling, including 15,781 sample intervals have been incorporated into the resource at La Bolsa. Samples were collected from splits of 21,068 metres of core recovered from 153 core holes, and from drill chips recovered from 16,456 metres of reverse-circulation drilling. The overall ratio of core to reverse circulation drilling was 1.3:1, or 56%:44%. All sample intervals have been analyzed for gold and silver while all 2008 core holes and 6 mineralized sections from 1995 holes also have been analyzed for additional trace elements. Evaluation of core – RC twins (10 twins completed on the property) indicates a discrepancy between the two methods, commonly as an understatement of grade in the RC holes. Upon reviewing three early twinned holes, Mine Development Associates came to the conclusion that ‘Gold found in the core holes above a .01 oz Au/ton cutoff averaged about 35% more than in the RC holes’ (Havenstrite, and Ristorcelli, 1996). Due to this discrepancy efforts have been made to utilize more core within the resource area and restrict RC to outside exploration targets. Despite the possible downgrading effect of the RC data, all RC holes that have not been twinned by core holes have been left in the database with their original assays. The first 12 holes completed in 1995 were angle holes oriented to the east or northeast as a result of the numerous steeply west-dipping mineralized fractures mapped at surface. Once drilling indicated the presence of a gentle east-dipping mineralized zone the preferred drill orientation became west to southwest (S60W) oriented with angles varying from 45° to 65°. Additional holes have since been completed utilizing a range of other orientations to test fault intersections and possible feeders or where lack of permitted pads has dictated alternative orientations. Initial drilling at La Bolsa (1995-96 programs) focused on the top two-thirds of La Bolsa hill where the highest grades occur and where trench sampling identified significant widths of mineralization. Subsequent drill programs continued to expand the mineralization along strike to the south and down-dip to the east. The 2004 drill program was able to close off mineralization to the south. Limited drilling in 2008 focused on infill holes and provided material for metallurgical testing. In 2009 further infill drilling was completed as well as exploration of the eastern 22


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down-dip extension of mineralization. Final infill and peripheral drill holes were completed in early 2010 and were added to the resource database. Sampling and Assaying Sampling methods at La Bolsa have followed standard industry practices for both RC and core drilling. No special sampling techniques have been deemed necessary at La Bolsa, suggesting a rather homogenous, disseminated nature to the gold. Variations in gold recoveries have been observed between RC and core holes. Core samples were photographed and then split with a hydraulic splitter. One half-split was bagged and stored at the camp until transport to the assay lab. The remaining half-split was stored in the original core boxes at the camp until sufficient volumes were accumulated and transported in a 5 ton truck to the Company’s archival warehouse in Hermosillo. For RC samples, at the end of each drill shift the main split samples were brought to the camp by the Company’s personnel where they were stored until transport to the assay lab. Split samples remained at the drill site until the original sample assays were received. Unmineralized intervals then were destroyed while mineralized intervals were collected and stored in camp for other test work. All reported analyses are fire assay analyses for gold and multi-acid digestion with AA analyses or fire assay analyses for silver. The assays were completed by either Chemex Labs of Vancouver, British Columbia, or Inspectorate Labs of Sparks, Nevada. Samples from these intervals were comprised of either HQ or NQ core or reverse-circulation cuttings. All samples were representatively split prior to analysis and transported by the labs to sample preparatory facilities in Hermosillo, Edo. Sonora (Chemex) or Durango, Edo. Durango (Inspectorate). As part of their overall quality control measures, the Company routinely re-assays all values above 1,000 ppb gold using fire assay with a gravimetric finish. Mineral Resource Estimation The gold and silver resources at La Bolsa were modeled and estimated by evaluating the drill data statistically. Three-dimensional geologically constrained zone solids were used to interpret the mineral zones into individual domain polygons on cross-sections spaced at 15-metre intervals. The interpreted sections were then used to form the 3-D zone solids. The formed zone solids flagged the drill hole samples contained within the zones. Estimation parametres were then formulated from the flagged samples, followed by estimation of grades by inverse-distance methods into a block model with 5 metres (width) x 5 metres (length) x 3 metres (height) blocks that were coded to the mineral domains by the 15-metre mineral domain solids. All modeling of the resources was performed using Gemcom® software. Categorization of the resource estimate was undertaken in accordance with the criteria laid out in NI 43-101. A combination of Measured and Indicated Mineral Resources have been defined using definitive criteria determined during the validation of the grade estimates, with detailed consideration of the NI 43-101 categorization guidelines. The measured and indicated mineral resource reported at a 0.25gpt Au cutoff grade totals 18.73Mt with an average grade of 0.676gpt Au, and 9.74 gpt Ag for a total of 0.407 million ounces of gold and 5.87 million ounces of silver. The categorized mineral resources for the La Bolsa Project are stated at various cutoff grades as shown below. 23


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Measured Resources GRADEGROUP

  TonnesX1,000

  Au

  Aggpt

  Ounces

  gpt

  Ounces0.20

   10,834

   0.697

   242,657

   10.17

   3,542,3820.25

   9,705

   0.751

   234,464


   10.84

   3,383,9520.30

   8,572

   0.814

   224,454

   11.64

   3,207,7360.40

   6,518

   0.961

   201,447

   13.52

   2,833,0440.50

   4,976

   1.121

   179,320

   15.56

   2,488,7500.60

   3,940

   1.272

   161,078

   17.37

   2,200,4190.75

   2,894

   1.489

   138,574

   20.02

   1,862,7721.00

   1,859

   1.837

   109,816

   24.32

   1,453,346
  Indicated Resources GRADE GROUP

  TonnesX 1,000

  Au

  Aggpt

  Ounces

  gpt

  Ounces0.20

   10,636

   0.539

   184,475

   7.87

   2,689,8500.25

   9,028

   0.596

   172,866

   8.56

   2,483,9600.30

   7,643

   0.654

   160,642

   9.32

   2,290,8270.40

   5,413

   0.780

   135,797

   11.10

   1,930,9860.50

   3,903

   0.909

   114,111

   12.97

   1,628,1250.60

   2,857

   1.042

   95,725

   14.80

   1,359,4710.75

   1,817

   1.256

   73,360

   17.90

   1,045,5691.00

   1,030

   1.560

   51,677

   23.35

   773,296
  Inferred Resources GRADE GROUP

  TonnesX 1,000

  Au

  Aggpt

  Ounces

  gpt

  Ounces0.20

   13,663

   0.506

   222,445

   7.61

   3,342,9260.25

   11,020

   0.574

   203,528

   8.64

   3,061,2750.30

   9,263

   0.631

   188,037

   9.46

   2,816,4660.40

   6,602

   0.747

   158,457

   11.18

   2,372,9890.50

   4,394

   0.897

   126,785

   12.26

   1,732,3480.60

   3,199

   1.028

   105,711

   13.84

   1,423,0910.75

   2,060

   1.227

   81,280

   16.55

   1,095,9361.00

   1,166

   1.508

   56,548

   21.49

   805,898
  24


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Measured + Indicated Resources **GRADE GROUP**

   TonnesX 1,000

   Au

   Aggpt

   Ounces

   gpt

   Ounces0.20

   21,470

   0.619

   427,132

   9.03

   6,232,2320.25

   18,734

   0.676

   407,330

   9.74

   5,867,9120.30

   16,215

   0.739

   385,095

   10.55

   5,498,5630.40

   11,931

   0.879

   337,243

   12.42

   4,764,0300.50

   8,879

   1.028

   293,432

   14.42

   4,116,8750.60

   6,797

   1.175

   256,803

   16.29

   3,559,8890.75

   4,711

   1.399

   211,935

   19.20

   2,908,3411.00

   2,889

   1.739

   161,493

   23.97

   2,226,642
 Mineral Reserve Estimation Smoothed pit designs that include appropriate pit access ramps, wall slope angles, catchment berm designs and minimum mining widths for the selected mining equipment were produced by XVE for one mining phase as guided by the Lerch-Grossmann $825 pit shell. The mineral reserve estimates for La Bolsa consist of the inventory of the proven and probable blocks (ie. the reblocked/diluted measured and indicated mineral resource) contained within the final design pit. There is a high proportion of proven (60.5%) to probable (39.5%) reserve within the pit; very few inferred blocks are found within the pit design and no attempt has been made to report them. The resulting internal cutoff grade based on operating process costs, G&A cost, metallurgical recovery and gold price of US$825/oz is 0.194 gpt. Using a generalized 0.2 gpt gold only cutoff results in the total and categorized proven and probable reserve estimates as displayed below. Estimated Mineral Reserve (Proven and Probable) **Reserves**

   Tonnes

   Gold Grade(gpt)

   Gold OuncesContained

   SilverGrade (gpt)

   SilverOuncesContainedProven

   9,461,535

   0.667

   203,045

   10.1

   3,079,309Probable

   6,169,633

   0.570

   113,090

   7.2

   1,422,228Total P & P Reserve

   15,631,168

   0.629

   316,135

   9.0

   4,501,537
 La Bolsa Mine and Economics The “Technical Report, La Bolsa Project, Pre-Feasibility Study” by Sonoran Resources, LLC and The Mines Group, Inc dated January 10, 2011 contemplates conventional open-pit mining methods at La Bolsa with low-cost heap-leach processing. Throughput is projected at 8,500 tonnes of ore per day with two-stage crushing and gold and silver recovery achieved through a carbon adsorption recovery system. Assuming average recoveries of 72% for gold and 7% for silver, the total production from La Bolsa is estimated at 227,600 ounces of gold and 315,100 ounces of silver over a six year mine life. The life of mine reserve strip ratio is estimated at 1.9 to 1 waste to ore and the operating strip ratio is estimated at 1.5 to 1 waste to ore, net of capitalized pre-stripping. 25


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Base case metal price assumptions of $850 per ounce of gold and $14 per ounce of silver were used in the economic analysis. The initial capital cost is $31.4 million, which includes $7.0 million of initial working capital with life of mine sustaining capital costs of $12.5 million or $2.3 million net of $10.2 million of capital recoveries. A comparison showing gross revenues, net present values, and internal rates of return for both the base case and at approximate spot prices in mid-2010 for gold and silver are as follows: Base Case

   Spot CaseGold price

   $850

   $1,200Silver price

   $14

   $18Life of mine gold production (ounces)

   227,600

   227,600Life of mine silver production (ounces)

   315,100

   315,100Gross revenues

   $197.9 million

   $278.8 millionTotal cash cost per ounce, silver by-product

   $516

   $510NPV 0% discount, pre-tax

   $42.3 million

   $123.2 millionNPV 5% discount, pre-tax

   $28.2 million

   $91.3 millionIRR, pre-tax

   34%

   95%
 Planchas de Plata and Real Viejo Properties The Real Viejo and Planchas de Plata properties are located approximately 10 kilometres from each other in northern Sonora approximately 10 kilometres southeast of the La Bolsa property (see Figure 5). Work on these properties from 1996 through 2010 included regional and detailed geologic mapping, geochemical sampling programs, both reverse-circulation and core drill programs, and airborne and ground geophysical surveys. Exploration Activity Historic mining activity took place on both properties with the most extensive workings developed on silver mineralization. The mid-1700’s discovery of exceptional large ‘plates of silver’ that weighed up to 240 kilograms initiated mining activities within the Planchas de Plata district, although only sporadic mining is known to have occurred since the late 1800s. There are no historic records for workings within the Real Viejo area even though some past production is evident. Exploration work since 2002 has focused on the systematic drill testing of the more prospective zones. As of December 31, 2011, the Company has completed a total of 61 drill holes at Real Viejo, and a total of 136 drill holes at Planchas de Plata. Drilling in the last three years at Real Viejo continued to investigate large-scale stockworks and geological targets down-dip of near surface ore-grade silver-lead-zinc resources previously identified by the Company. Similarly, drilling at Planchas de Plata continued to focus on investigating the silver mineralized system that is now believed to extend over a strike length of 10 kilometres and contains multiple mineralized horizons within an approximate width of two kilometres. The high-grade near-surface resource drilled on the northwest end of the system plunges beneath cover to the southeast but is of variable grade along strike. Reconnaissance and sampling extends to the far southeast of the system and has identified some of the strongest surface mineralization sampled to date and confirms the continuity of the system in this area. Difficulties in targeting high-grade mineralization within this concealed mineralized system remain despite the overall potential of the district being confirmed. Limited targeted drilling is anticipated for both projects during the course of 2012. Geology and Mineralization Mineralized systems at Planchas de Plata and Real Viejo are dominantly silver-rich and are believed related to underlying porphyry-style systems. Primary controls on the silver mineralization are related to specific stratigraphic horizons occurring along northwest-trending structural zones. Other porphyry-style systems, such as the Company’s El Fiero and La Recompensa targets (see Figure 5) represent large base-metal (Cu-Mo-Zn-Pb) targets located within 26


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the eastern portion of the claim block. Alteration at each of these systems includes square kilometres composed of strong iron oxides, sericitic and argillic alteration, and scattered quartz tourmaline stockworks in Jurassic to Cretaceous felsic volcanics that are intruded by a series of rhyolite, granodiorite, and diorite dikes and plugs. Ownership The concessions were staked and are 100% controlled by Minera Minefinders. Surface rights in the area belong to various ranchers. Agreements have been executed between the Company and several surface rights owners. The agreements provide for surface rights for exploration, development, and mining within the properties, in return for annual payments of $10,000 to $35,000, and lump-sum compensation of $350,000 to $550,000 for any mine to go into production on these properties. La Virginia Gold / Silver District In 2009, the Company completed the consolidation of all mineral rights and surface rights necessary to drill and test the La Virginia gold/silver district in Sonora, Mexico. Recognition of a geologic setting very similar to that of the Company’s Dolores deposit, located 100 kilometres to the southeast in Chihuahua State, led to the effort to consolidate the district. The Company has staked mineral rights over more than 32,000 hectares of land and has also optioned an additional 2,100 hectares of mineral rights. More than 2,500 hectares of surface rights covering the main target areas have been leased allowing for exploration and exploitation within the district. Consolidation of these holdings allows the Company to test mineralized targets within the historically producing district and explore additional targets from within the overall land package. Mineralization occurs in epithermal quartz-chalcedony stockworks, veins and hydrothermal breccias with widths that can vary from one metre to greater than 30 metres. Drill intercepts in the highest portions of the system display high-level alteration and mineralogy including abundant chalcedony suggesting that for most of the zone the bonanza gold and silver portion of the system remains intact at depth. Sulfides, including occasional silver sulfides, are common in the mineralized zone with mixed oxidation occurring throughout most of the zone tested to date. Exploration to date within the overall La Virginia area has defined several mineralized trends that extend for a total strike length of over 20 kilometres. Seven target areas have been defined to date and the central La Virginia zone is the only one that has been drill tested. The drilling program, the first ever conducted on this zone, commenced in April 2010 and focused on testing the potential depth extent of high-grade mineralization exposed within several structures over a strike length of 7 kilometres within the main La Virginia zone. 27


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Exploratory drilling began in 2010 in the Con Virginia Zone (central area of the La Virginia zone) and then moved to additional targets in the El Campo Santo Zone (located to the north) and the Las Huatas Zone (located to the south). The main focus of the drilling program in 2011 was at the Las Huatas Zone. In the Las Huatas Zone, located 1,200 metres to the south of the Con Virginia Zone, high grades of gold and silver mineralization have been intercepted at elevations ranging from approximately 1,810 metres (near surface) down to the lowest tested portion of the system at 1,470 metres. This represents a minimum of 340 metres of vertical extent of high-grade gold and silver mineralization. Step-out drill holes are targeting this mineralized system on 40 to 50 metre centres to establish continuity and extent of grades. Grades of mineralization greater than 3.0 grams per tonne (gpt) gold-equivalent (AuEq) in this area are carried within multiple mineralized structures. Intercepts in the El Campo Santo Zone, located one kilometre north of the Con Virginia Zone, are similar to those observed above the 1,800 metre elevation in the Las Huatas Zone but this part of the drill program is still in the early stages. New drilling in this zone will test the potential of deeper levels of the system throughout. 28


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As of December 31, 2011, the Company had completed 74 core holes totaling 22,868 metres on mineralized structures of the central La Virginia Zone. All potentially significant intercept results reported to date are categorized by zone in the tables included at the end of the news releases dated June 28, 2011 and October 17, 2011 which are available on the Company’s website. The La Virginia project is located approximately 220 kilometres east-northeast of Hermosillo, Sonora, Mexico and is 100 kilometres north-northwest of the Company's Dolores mine. The land package encompasses more than 34,000 hectares within a geologic environment similar to that of the Dolores gold and silver deposit. All analyses reported are fire assay analyses for gold and multi-acid digestion with AA analyses or fire assay analyses for silver, and completed by either Chemex Labs of Vancouver, British Columbia, or Inspectorate Labs of Sparks, Nevada. All samples were transported to sample preparatory facilities in Hermosillo, Mexico (Chemex) or Durango, Mexico (Inspectorate) prior to analysis. 29


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PROPERTY INTERESTS IN THE UNITED STATES The Company has interests in claim areas in the United States including the Dottie property in the State of Nevada, and the Oro Blanco property in the State of Arizona. These properties are not sufficiently advanced to make them material to the Company’s asset base. The Dottie property is located in Elko County, Nevada, approximately eight miles west of Queenstake Resources’ Jerrit Canyon operations. The Company’s Oro Blanco property in Arizona adjoins the La Bolsa property in northern Sonora. SPECIALIZED SKILL AND KNOWLEDGE The Company entered commercial production at the Dolores Mine in May 2009 and is engaging many employees with special skills, including senior managers with project management skills, mining and processing engineers, mine geologists, assayers, fleet maintenance engineers, machine operators and mechanics. There is great competition for such personnel. The Company has an active recruitment program, has highly qualified management personnel on staff, and anticipates that it will not have significant difficulty in recruiting other personnel at the Dolores Mine as needed. Training programs are in place for workers who are recruited locally. ENVIRONMENTAL PROTECTION Discussion of the Company’s environmental responsibilities at the Dolores Mine and at the La Bolsa property are discussed in the applicable technical reports referenced herein. The Company intends to comply fully with the highest international environmental protection standards and any that may be imposed by regulation or otherwise. In its Financial Statements for 2011 the Company has recorded $10.1 million for future reclamation costs arising from the construction and operating activities to December 31, 2011. NUMBER OF EMPLOYEES As at December 31, 2011, the Company had approximately 460 employees. In addition, there are a number of contractors in place at the Company’s various projects. The Company's mine employees belong to a union and are subject to a collective agreement. The Company considers its employee relations to be good. COMPETITION The Company competes with other mining companies for the acquisition of mineral claims, permits, concessions and other mineral interests as well as for the recruitment and retention of qualified employees. There is significant competition for the limited number of gold acquisition opportunities and, as a result, the Company may be unable to acquire attractive gold mining properties on terms it considers acceptable. RISK FACTORS The Company’s securities should be considered a speculative investment due to the nature of its business. Investors should carefully consider all of the information disclosed in this AIF, including all documents incorporated by reference, before making an investment in the Company’s securities. The following risk factors could materially affect the Company’s business, financial condition or results of operations and could cause actual events to differ materially from those described in forward-looking statements. In such an event, the market prices of the Company’s securities could decline and investors could lose all or part of their investments. The risks include but are not limited to those risks set forth below. Limited history of revenue from mining operations. The Company is a gold and silver production company with additional mineral exploration properties in various stages of development. The Company initiated production from its Dolores gold and silver mine in November 2008 and generated its first cash receipts from the sale of gold and silver in December of 2008. The Company has no history of producing metals from its current portfolio of mineral properties except for the Dolores Mine. Advancing 30


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the Company’s other projects will be subject to successful exploration, completing positive feasibility studies, completing construction of mines, processing plants, roads, and other related works and infrastructure. As a result, the Company is subject to all of the risks associated with establishing new mining operations and business enterprises including: the timing and cost, which can be considerable, of the construction of mining and processing facilities;the availability and costs of skilled labour and mining equipment;the availability and cost of appropriate smelting and refining arrangements;compliance with environmental and other governmental approval and permit requirements;the availability of funds to finance additional construction and development activities;potential opposition from non-governmental organizations, environmental groups, local groups or local inhabitants which may delay or prevent development activities; andpotential increases in operating costs due to changes in the cost of fuel, power, materials and supplies. The costs, timing and complexities of mine development can increase due to the remote location of some mining properties such as the Dolores Mine. It is common in new mining operations to experience unexpected problems and delays in development and mine start-up. In addition, delays in the commencement of mineral production often occur. For example, production at the Dolores mine was significantly affected in the third quarter of 2010 by the cessation of the leaching of the majority of the phase 1 leach pad as a result of a tear identified in the liner. Remediation work was initially expected to be completed by the end of August 2010, however, significant rainfall in the Dolores region during the third quarter of 2010 exacerbated the damage and work in 2011 indicates the liner may be damaged upslope from the area where remediation activities had been focussed. The Company has yet to remediate the liner and various options to accomplish this are currently under review. Accordingly, the Company cannot assure investors that its activities will result in profitable mining operations or that the Company will successfully establish mining operations or profitably produce metals at any of its properties. Other than the Dolores Mine, its properties are in the development and/or exploration stage. Mineral exploration involves significant risk because few properties that are explored contain bodies of ore that would be commercially economic to develop into producing mines. If its current exploration programs do not result in the discovery of commercial ore, the Company may need to write-off part or all of its investment in those particular properties and will seek to acquire additional properties. The determination of whether any mineral deposits on its properties are economic is affected by numerous factors beyond its control, including: the metallurgy of the mineralization forming the mineral deposit;market fluctuations for metal prices;the proximity and capacity of natural resource markets and processing equipment; andgovernment regulation of prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. Disputes with members of the Ejido Huizopa. The members of the local commune, Ejido Huizopa, have surface rights to an area that exceeds 84,000 hectares, which includes and surrounds the area where the Dolores Mine is located. To bring the Dolores Mine into production, the Company executed a long-term surface rights agreement in 2006 with the Ejido and its members allowing for access, mining and processing operations and the associated surface disturbances. Commencing in May of 2008, a group claiming to represent the Ejido intermittently blockaded the access road to the Dolores mine and threatened violence toward the Company’s employees and contractors. In response to these 31


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blockades and threats of violence from the protestors, mine operations were periodically suspended between May and mid-August of 2008 out of concern for the safety of the Company's employees and contractors. During this period, operations were suspended for approximately 55 days and the Company was forced to delay the first gold and silver production. The blockade was removed after intervention by Mexican authorities. In August 2008, the Company and its employees and contractors received written guarantees from the Chihuahua state government providing for ongoing safe access to the Dolores mine as well as a police presence onsite to deter further disruptions of mine operations. The state and federal governments have continued to guarantee the Company’s safe access to the mine. However, future blockades and threats of violence at the mine are possible in violation of the Chihuahua government guarantee and such actions could adversely affect or cause suspension of operations or production. In May of 2008, a group claiming to represent the Ejido commenced an action in a Mexican agrarian court seeking annulment of the surface rights agreement with the Company, restitution of land and damages of up to US$20 million. The Company filed a defense to the action and a counter-claim, with an opinion from its Mexican counsel that the original 2006 agreement with the Ejido was in good standing, properly executed, legally binding and that the claim made by these individuals was without legal merit. After a period of negotiations, the parties agreed by treaty to resolve the conflict, and entered into a settlement agreement dated as of October 25, 2009. The agreement was approved by the agrarian court on March 2, 2010. If the Company cannot maintain an agreement with the Ejido, or if the settlement agreement is found to be unenforceable, it may be unable to operate the Dolores Mine. The Arrangement Agreement may be terminated in certain circumstances, including in the event of a change having a material adverse effect on Minefinders. Each of Minefinders and Pan American has the right to terminate the Arrangement Agreement and Arrangement in certain circumstances. Accordingly, there is no certainty, nor can Minefinders provide any assurance, that the Arrangement Agreement will not be terminated by either Minefinders or Pan American before the completion of the Arrangement. For example, Pan American has the right, in certain circumstances, to terminate the Arrangement Agreement if changes occur that, in the aggregate, have a material adverse effect on the Company. There is no assurance that a change having a material adverse effect will not occur before the transaction closes, in which case Pan American could elect to terminate the Arrangement Agreement and the Arrangement would not proceed. There can be no certainty that all conditions precedent to the Arrangement will be satisfied. The completion of the Arrangement is subject to a number of conditions precedent, certain of which are outside the control of Minefinders. There can be no certainty, nor can Minefinders provide any assurance, that these conditions will be satisfied or, if satisfied, when they will be satisfied. If the Arrangement is not completed, the market price of the Minefinders shares may decline to the extent that the current market price reflects a market assumption that the Arrangement will be completed. If the Arrangement is not completed and the Minefinders board of directors decides to seek another merger or arrangement, there can be no assurance that it will be able to find a party willing to pay an equivalent or more attractive price than the total consideration to be paid pursuant to the Arrangement. Minefinders will incur costs related to the Arrangement and may have to make a termination or expense payment. Certain costs related to the Arrangement, such as legal, accounting and certain financial advisor fees, must be paid by Minefinders even if the Arrangement is not completed. Minefinders and Pan American are each liable for their own costs incurred in connection with the Arrangement. In addition, if the Arrangement is not completed, in certain circumstances Minefinders must pay a termination or expense payment of $42 million or $5 million, respectively. See the Arrangement Agreement for details. The market price for the Minefinders shares may decline if the Arrangement is not completed. If the Arrangement is not approved by the Minefinders securityholders or the Pan American shareholders or any of the other conditions to completion of the Arrangement are not satisfied or waived, the market price of the Minefinders shares may decline to the extent that the current market price of the Minefinders shares reflects a market assumption that the Arrangement will be completed. If the Arrangement Agreement is terminated and the Minefinders board of directors decides to seek another merger or arrangement, there can be no assurance that it will 32


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be able to find a party willing to pay an equivalent or more attractive price than the total consideration to be paid pursuant to the Arrangement. Funding to develop mineral properties and to complete exploration programs. The Company has limited financial resources. It had working capital of approximately $310.9 million at December 31, 2011 and had cash, cash equivalents and short-term investments of $239.2 million at that date. In addition, the Company has established a $50 million revolving credit facility which is undrawn at December 31, 2011. The Company intends to fund its operations from working capital, the revolving credit facility and revenue from production at the Dolores Mine. Its ability to continue future exploration and development activities, if any, will depend in part on its ability to generate material cashflow from production at the Dolores Mine or to obtain additional external financing. The sources of external financing that the Company could use for these purposes might include public or private offerings of equity and debt. In addition, the Company could enter into one or more strategic alliances or joint ventures, or could decide to sell certain property interests, and it might utilize a combination of these sources. External financing may not be available on acceptable terms, or at all. If the Company is unable to generate sufficient funds from its operations and is also unable to secure external financing to continue exploration and development, it may have to postpone the development of, or sell, its properties. There can be no assurance that the Company will generate sufficient revenues to meet its obligations as they become due or obtain necessary financing on acceptable terms, if at all. Failure to meet its obligations on a timely basis could result in the loss or substantial dilution of its property interests. In addition, should the Company incur significant losses in future periods, it may be unable to continue as a going concern, and realization of assets and settlement of liabilities in other than the normal course of business may be at amounts significantly different from those included in this AIF. An event of default under the 4.5% convertible senior notes. As at December 31, 2011, the Company had outstanding $36.2 million aggregate principal amount of its 2015 Notes. Under the indentures governing the Notes, the Company has made various covenants to the trustee on behalf of the holders of the Notes, including to make payments of interest and principal when due and, upon undergoing a fundamental change, to offer to purchase all of the outstanding Notes. If there is an event of default under the Notes, the principal amount of the Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable. As is the case with a default under the credit facility, if such an event occurs, the Company could lose its properties, including the Dolores Mine, and the Company’s shareholders could lose their entire investment. General economic conditions. The unprecedented events in global financial markets during 2008 have had a profound effect on the global economy. Many industries, including the gold and silver mining industry, may continue to be affected by these market conditions. Some of the key effects of the financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect the Company’s growth and profitability. Specifically: the global credit/liquidity crisis could affect the cost and availability of financing and our overall liquidity;the volatility of gold and silver prices affects our revenues, profits and cash flow;volatile energy prices, commodity and consumables prices and currency exchange rates affect our production costs; and 33


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the devaluation and volatility of global stock markets affect the valuation of the Common Shares. These factors could have a material adverse effect on the Company’s financial condition and results of operations. Prices of gold and silver fluctuate widely, affecting profitability and financial condition. The Company’s profitability and long-term viability depend, in large part, upon the market prices of gold, silver and other metals and minerals produced from its mineral properties. The market prices of gold, silver and other metals are volatile and are affected by numerous factors beyond the Company’s control, including: expectations with respect to the rate of inflation;the relative strength of the U.S. dollar and certain other currencies;interest rates;global or regional political or economic conditions;supply and demand for jewellery and industrial products containing metals; andtransactions by central banks and other holders, speculators and producers of gold and other metals in response to any of the above factors. The Company cannot predict the effect of these factors on metal prices. Gold and silver prices have fluctuated widely during the last several years. On December 31, 2011, the London pm fix price for gold was $1,574.50 per ounce and for silver was $28.18 per ounce. Historically, gold prices have ranged from $1,319.00 to $1,895.00 per ounce in 2011, $1,058.00 to $1,421.00 per ounce in 2010 and $810.00 to $1,212.50 per ounce in 2009; and silver prices have ranged from $26.16 to $48.70 per ounce in 2011, $15.14 to $30.70 per ounce in 2010 and $10.51 to $19.18 per ounce in 2009. A decrease in the market price of gold and silver could affect the commercial viability of the Dolores Mine and its sustained development and production assumptions. Lower prices could also adversely affect the Company’s ability to finance future development at the Dolores Mine and the exploration and development of its other mineral properties, all of which would have a material adverse effect on its financial condition and results of operations. There can be no assurance that the market prices will remain at current levels or that such prices will improve. Recent market events and conditions. In 2007 and into 2008, the U.S. credit markets began to experience serious disruption due to a deterioration in residential property values, defaults and delinquencies in the residential mortgage market (particularly, sub-prime and non-prime mortgages) and a decline in the credit quality of mortgage backed securities. These problems led to a slow-down in residential housing market transactions, declining housing prices, delinquencies in non-mortgage consumer credit and a general decline in consumer confidence. These conditions continued and worsened in 2008, causing a loss of confidence in the broader U.S. and global credit and financial markets and resulting in the collapse of, and government intervention in, major banks, financial institutions and insurers and creating a climate of greater volatility, less liquidity, widening of credit spreads, a lack of price transparency, increased credit losses and tighter credit conditions. Notwithstanding various actions by the U.S. and foreign governments, concerns about the general condition of the capital markets, financial instruments, banks, investment banks, insurers and other financial institutions caused the broader credit markets to further deteriorate and stock markets to decline substantially. In addition, general economic indicators deteriorated, including declining consumer sentiment, increased unemployment and declining economic growth and uncertainty about corporate earnings. While improvements have been noted in the credit and financial markets, significant uncertainty remains. While these conditions appear to have improved in 2011, unprecedented disruptions in the current credit and financial markets had a significant material adverse effect on a number of financial institutions and have limited access to capital and credit for many companies. These disruptions could, among other things, make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. The Company’s access to additional capital may not be available on terms acceptable to it or at all. 34


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Differences in U.S. and Canadian reporting of reserves and resources. The Company’s reserve and resource estimates are not directly comparable to those made in filings subject to SEC reporting and disclosure requirements, as the Company generally reports reserves and resources in accordance with Canadian practices. These practices are different from those used to report reserve and resource estimates in reports and other materials filed with the SEC. It is Canadian practice to report measured, indicated and inferred resources, which are not permitted in disclosure filed with the SEC by United States issuers. In the United States, mineralization may not be classified as a "reserve" unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. United States investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Further, "inferred resources" have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Disclosure of "contained ounces" is permitted disclosure under Canadian regulations; however, the SEC permits issuers to report "resources" only as in-place tonnage and grade without reference to unit of metal measures. Accordingly, information concerning descriptions of mineralization, reserves and resources contained in this AIF, or in the documents incorporated herein by reference, may not be comparable to information made public by United States companies subject to the reporting and disclosure requirements of the SEC. Actual costs, production and economic returns may differ significantly from those anticipated with no assurance of profitable mining operations. The Company has estimated operating and sustaining capital costs for the Dolores Mine based on information available, and believes that these estimates are accurate. However, costs for labour, regulatory compliance, energy, mine and plant equipment and materials needed for mine operations and development have increased significantly industry-wide. In light of these factors, actual costs related to mine operations and development may differ from, and in some cases exceed the Company’s estimates. The Company has limited operating history upon which it can base forecasts of estimated future production and operating costs for the Dolores Mine. Such forecasts derive estimates of production and cash operating costs from, among other things: anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;anticipated recovery rates of gold and other metals from the ore;cash operating costs in prior periods and of comparable facilities and equipment; andanticipated climatic conditions. Capital and operating costs, production and economic returns, and other estimates contained in production and cost forecasts may differ significantly from actual costs, and there can be no assurance that actual capital and operating costs will not be higher than currently anticipated or disclosed. In addition, the Company’s calculations of cash costs and cash cost per ounce may differ from similarly titled measures of other companies and are not intended to be an indicator of projected operating profit. Risks related to future drilling results. The results of future drilling programs may not produce reserves and resources that can be mined or processed profitably. The results of drilling programs are, by their very nature, uncertain. Reserves and resources are estimates and may yield less actual production. Unless otherwise indicated, mineralization figures presented in filings of the Company with securities regulatory authorities, press releases and other public statements that may be made from time to time are based upon estimates made by independent geologists and the Company’s geologists. When making determinations about whether to 35


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advance any of its projects to development, the Company must rely upon such estimates as to the mineral reserves and grades of mineralization on its properties. Until ore is actually mined and processed, mineral reserves and grades of mineralization must be considered as estimates only. These estimates are imprecise and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. The Company cannot assure investors that: the estimates will be accurate;reserve, resource or other mineralization estimates will be accurate; orthis mineralization can be mined or processed profitably. Any material changes in mineral reserve estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital. As the Company has only recently commenced production at the Dolores Mine, mineralization estimates, including reserve and resource estimates, for its properties may require adjustments or downward revisions based upon actual production experience. In addition, the grade of ore mined may differ from that indicated by its feasibility studies and drill results. The resource estimates contained in public filings of the Company have been determined and valued based on assumed future prices, cut-off grades and operating costs that may prove to be inaccurate. Extended declines in market prices for gold and silver may render portions of the mineralization, reserve and resource estimates uneconomic and result in reduced reported mineralization or adversely affect the commercial viability of the Dolores Mine and other projects. Any material reductions in estimates of mineralization, or of the Company’s ability to extract this mineralization, could have a material adverse effect on its results of operations or financial condition. Some of the Company’s properties, including the Northern Sonora properties, are in the exploration stage, which means that the Company has not established the presence of any proven and probable reserves. There can be no assurance that subsequent testing or future studies will establish proven and probable reserves on these properties. The Company cannot assure investors that mineral recovery rates achieved in small scale tests will be duplicated in production scale. Currency exchange rates affect financial performance and forecasts. Gold is priced in U.S. dollars, but the Dolores Mine is located in Mexico, which results in revenues in U.S. dollars and certain costs priced in Mexican pesos. If the Mexican peso strengthens against the U.S. dollar, there would be an effect on the Dolores Mine cost structure (after translating into U.S. dollars), driving up costs while revenues would remain the same in U.S. dollar terms. The Company is also exposed to the Canadian dollar because its head office operations are located in Canada. As a result of these exposures, the Company’s financial performance and forecasts may be significantly affected by changes in international exchange rates. Heap leaching is inherently subject to risk, including the risk of unintended discharge of hazardous materials, such as sodium cyanide, into the environment. Mining companies often employ sodium cyanide, which is a hazardous material, to extract metals from ore. In addition, mining companies often use heap leaching as a means of applying sodium cyanide to metal-bearing ore and collecting the resulting metal-bearing solution. There is an inherent risk of unintended discharge of hazardous materials in the operation of leach pads. Mined ore at Minefinders’ Dolores Mine is crushed and heaped on an impermeable plastic lined leach pad where it is irrigated with a sodium cyanide leach solution to dissolve silver and gold from the ore. The leach solution containing the dissolved minerals percolates through the heap and is then collected, treated in a Merrill-Crowe process plant to recover the silver and gold, and then recycled to the heap after reagent levels are adjusted. 36


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A tear in the phase 1 leach pad at the Dolores mine occurred towards the end of June 2010. The remediation work required cessation of leaching on the leach pad. Remediation work on the phase 1 leach pad to date has included excavation of approximately 2.2 million tonnes to fully expose the affected area. Recent assessment of the excavated area on the phase 1 leach pad shows more damage to the liner than anticipated and indicates the liner may be impaired upslope from the excavated area. Accordingly, Minefinders is assessing various options to fully remediate the liner. The remaining low grade material on the phase 1 leach pad consists of approximately 8.3 million tonnes containing an estimated 3,800 recoverable gold ounces and 575,000 recoverable silver ounces. This material will be reserved for future processing, the manner of which will be determined based on the resolution of a remediation plan for the phase 1 pad. In the third quarter of 2011, the west side of the phase 2 leach pad suffered a crushed collection pipe that prevented collection of solution in one of two collection pipes. In order to maintain the bulk of production while accessing the affected area for remediation, the east side of the pad was prepared for stacking. While no metal was lost as a result of this event, metal production was delayed during the changeover while new patios were prepared for irrigation. Leach solution continues to be diverted to other collection areas of the phase 2 leach pad while remediation of the affected area continues. Should sodium cyanide escape from the leach pad and collection infrastructure or otherwise be detected in the downstream surface and ground water points, Minefinders may become subject to liability for remediation costs, which could be significant and may not be insured against. In addition, metal production could be delayed or halted to allow for remediation, resulting in a reduction or loss of cash flow for Minefinders. While Minefinders takes appropriate steps to prevent discharges of sodium cyanide and other hazardous materials into the ground water, surface water and the downstream environment, there is inherent risk in the operation of leach pads and there can be no assurance that a release of hazardous materials will not occur. Mining is inherently dangerous and subject to uncontrollable conditions or events that may have material adverse effects. Mining is subject to various types of risks and hazards, including: environmental hazards;power outages;metallurgical and other processing problems;unusual or unexpected geological formations;structural cave-ins or slides;flooding, fire, explosions, cave-ins, landslides and rock-bursts;inability to obtain suitable or adequate machinery, equipment, or labour;metals losses; andinterruptions due to inclement or hazardous weather conditions. These risks could result in damage to, or destruction of, mineral properties, production facilities and other properties, personal injury, environmental damage, delays in mining, increased production costs, monetary losses and possible legal liability. The Company may not be able to maintain or obtain insurance to cover these risks at economically feasible premiums. Insurance against certain environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production, is not generally available to the mining industry. The Company may suffer a material adverse effect on its business if it incurs losses related to any significant events that are not covered by its insurance policies. 37


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The Company is subject to significant government regulation. The Company’s primary properties, operations and exploration and development activities are in Mexico and are subject to extensive federal, state, territorial and local laws and regulations governing various matters, including: environmental protection;management and use of toxic substances and explosives;management of natural resources;exploration, development of mines, production and post-closure reclamation;export controls;price controls;regulations concerning business dealings with indigenous groups;labour standards, occupational health and safety, and mine safety; andhistorical and cultural preservation. Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining or curtailing operations or requiring corrective measures, installation of additional equipment or remedial actions, any of which could result in the Company incurring significant expenditures. The Company may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or a more stringent enforcement of current laws and regulations, could cause additional expense, capital expenditures, restrictions on or suspensions of the Company’s operations and delays in the development of its properties. Activities are subject to environmental laws that may increase costs and restrict operations. All of the Company’s exploration and production activities are in Mexico and the United States and are subject to regulation by governmental agencies under various environmental laws. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Environmental legislation in many countries is evolving and the trend has been towards stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations and future changes in these laws and regulations may require significant capital outlays and may cause material changes or delays in the Company’s operations and future activities. It is possible that future changes in these laws or regulations could have a significant adverse effect on the Dolores Mine or some other portion of the Company’s business, causing a re-evaluation of those activities. All significant properties are located in Mexico, which may be subject to political, economic, and regulatory instability. Most of the Company’s activities occur in Mexico and its business may be affected by possible political, economic, or regulatory instability in that country. The risks include, but are not limited to, political instability and violence, terrorism, military repression, extreme fluctuations in currency exchange rates, labour unrest, changing fiscal regimes, changes to royalty and tax regimes, uncertainty regarding enforceability of contractual rights and judgments and high rates of inflation. Changes in resource development or investment policies or shifts in political attitude in Mexico may adversely affect the Company’s business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, 38


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expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. The effect of these factors cannot be predicted. Failure to obtain permits, or failure to comply with permits that the Company has obtained, would adversely affect its business. The Company’s current and anticipated future operations, including further exploration, development activities and commencement of production on mineral properties, require permits from various governmental authorities. All required permits for the Dolores Mine are in place and current. However, there can be no assurance that all future permits that the Company requires for its operations, including any construction of mining facilities or conduct of mining, will be obtainable or renewable on reasonable terms, or at all. Delays or a failure to obtain required permits, or the expiry, revocation or failure to comply with the terms of any such permits that the Company has already obtained, would adversely affect its business. Land reclamation requirements may be burdensome. Although variable depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance. Reclamation may include requirements to: control dispersion of potentially deleterious effluents; andreasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations arising from exploration and potential development activities, the Company must allocate financial resources that might otherwise be spent on further exploration and development programs. The Company has set up a provision for reclamation obligations for the Dolores Mine, but this provision may prove to be inadequate when the reclamation eventually takes place. If the Company is required to carry out unanticipated reclamation work, its financial position could be adversely affected. The Company may be required to fund additional reclamation work during the course of its mining activities. In connection with its mining operations at the Dolores Mine, the Company has set up a plan and provision for reclamation work to actively remediate the property during operation of the mine. The Company has estimated expenditures to carry out this work as part of its overall development plan. There can be no assurance, however, that the Company will not be required to fund additional reclamation work at Dolores or other sites which could have a material adverse effect on its financial position. Potential failure to attract and retain qualified management for anticipated growth. The Company is dependent on the services of highly skilled and experienced key executives and personnel focused on production at the Dolores Mine and managing its interests and on-going exploration programs on other properties. Management is also responsible for the identification of new opportunities for growth and funding. The Company is relatively small, and the loss of these persons or an inability to attract and retain additional highly skilled employees required for development activities may have a material adverse effect on the Company’s business or future operations. The failure to hire and retain qualified employees could adversely affect operations of the Dolores Mine. The Company does not maintain key-man life insurance on any of its key management employees. Mineral properties may be subject to defects in title. The Company owns, leases, or has under option, unpatented and patented mining claims, mineral claims or concessions which constitute its property holdings. The ownership and validity or title of unpatented mining claims and concessions are often uncertain and may be contested. The Company also may not have, or may not be able to obtain, all necessary surface rights to develop a property. The Company cannot guarantee that title to its properties 39


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will not be challenged. Title insurance is generally not available for mineral properties and the Company’s ability to ensure that it has obtained secure claim to individual mineral properties or mining concessions may be severely constrained. Its mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. The Company may incur significant costs related to defending the title to its properties. A successful claim contesting its title to a property will cause the Company to lose its rights to explore and, if warranted, develop that property. This could result in the Company not being compensated for its prior expenditures relating to the property. Company profitability. The Company had no material operating revenue prior to 2009 and 2011 was the first year the Company reported a profit. The Company’s net income or loss during each of the following periods is as follows: $91.1 million net income for the year ended December 31, 2011;$4.0 million net loss for the year ended December 31, 2010; and$4.3 million net loss for the year ended December 31, 2009; The Company had an accumulated deficit of $62.6 million as of December 31, 2011, and an accumulated deficit of $153.7 million as of December 31, 2010. The Company may incur additional losses in the future. The Company has committed and plans to continue to commit substantial capital and other resources to the operation and ongoing development of the Dolores Mine. The amount and timing of future expenditures will depend on a number of factors, including the progress of ongoing development and operations, the timing of development, the commercial viability of production and other factors, some of which are beyond the Company’s control. The Company cannot assure investors that it will ever achieve consistent profitability. Intense competition exists for capital funding, and for producing and prospective properties. The mining industry is intensely competitive. Significant competition exists for the acquisition of properties that produce, or are capable of producing, gold or other metals. The Company may be at a competitive disadvantage in acquiring additional mining properties because it must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities. The Company may also encounter increasing competition from other mining companies in its efforts to hire experienced mining professionals. Competition for exploration resources at all levels is intense, particularly affecting the availability of manpower, drill rigs, mining equipment and production equipment. Increased competition could adversely affect the Company’s ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future. Fluctuation of interest rates and leverage ratio under the revolving credit facility. Interest payments under the Company’s revolving credit facility with the Bank of Nova Scotia are subject to fluctuation based on changes to specified interest rates (Prime Rate, Base Rate Canada and LIBOR) and/or the Company’s leverage ratio, which is currently set at the credit facility’s maximum limit. The Company’s leverage ratio is the ratio of (i) the Company’s total indebtedness as of the end of each fiscal quarter, compared to (ii) its net earnings for such period before interest, taxes, depreciation and amortization. The Company’s leverage ratio affects interest rates under the credit facility by adding from 200 to 300 basis points to loans for Prime Rate and Base Rate Canada loans, and from 300 to 400 basis points for LIBOR loans. There is no guarantee that the Company will produce sufficient income to reduce its leverage ratio from the maximum limit under the credit facility. Factors affecting LIBOR, including the credit and financial markets, are beyond control of the Company. However, an increase in interest rates together with the Company’s continued maximum leverage ratio limit under the credit facility could significantly affect the costs to the Company of servicing debt under the credit facility. Such increased costs could strain the Company’s available working capital, forcing the Company to focus on servicing debt rather than production and development. Further, if the Company is unable to meet its obligations under the credit facility, 40


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the Company may be forced to sell some of its assets or face default, which could result in the Company’s shareholders losing their investment. An event of default under the revolving credit facility may accelerate our payment obligations. Under the terms of the Company’s revolving credit facility, the Company made various covenants including prompt payment of amounts due, the maintenance of leverage and interest coverage ratios within specified limits, cumulative gold and silver production within specified periods, and a guarantee that at all times proven and probable gold equivalents would meet specified limits. Any default under the credit facility including breach of such covenants, non-payment of any amounts due, or commencement of a proceeding for dissolution would give the lender the right to terminate the credit facility and declare all accrued and unpaid interest, fees and indebtedness immediately due and payable. The credit facility is secured by shares in the Company’s U.S. and Mexican subsidiaries, which hold the Company’s properties, including the Dolores Mine, and by its tangible and intangible assets, including all equipment and inventory at the Dolores Mine. In the event of default by the Company, if the Company is unable to immediately pay all accrued and unpaid interest, fees and principal debt, the lender is entitled to enforce the security agreement and settle the Company’s amounts due by taking possession of the pledged collateral and selling, leasing, or disposing of the collateral. If such an event occurs, the Company could lose its properties, including the Dolores Mine, and the Company’s shareholders could lose their entire investment. Potential conflicts of interests of directors and officers. Mark H. Bailey, President, Chief Executive Officer, and a director of the Company and certain other officers and directors of the Company are directors of other publicly listed natural resource companies. Any conflicts that may arise will be dealt with as disclosed below. Such associations may give rise to conflicts of interest from time to time. The Company’s directors are required by law to act honestly and in good faith with a view to the best interest of the Company and to disclose any interest which they may have in any project or opportunity of the Company. If a conflict of interest arises in a matter to be discussed at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter. All such matters involving senior management must be dealt with by the board of directors regardless of immateriality. Difficulty bringing actions and enforcing judgments against the Company, its directors, its executive officers and some of the experts named in this AIF. The Company is organized under the laws of Ontario, Canada and its principal executive office is located in the Province of British Columbia. A majority of its directors and officers, and some of the experts named in this AIF and the documents incorporated by reference herein, are residents of Canada, and all or a substantial portion of their assets, and a substantial portion of the Company’s assets, are located outside the United States. As a result, it may be difficult for investors in the United States or outside Canada to bring an action against directors, officers or experts who are not resident in the United States. It may also be difficult for an investor to enforce a judgment obtained in a United States court predicated upon the civil liability provisions of federal securities laws or other laws of the United States or any state thereof against those persons or the Company. Adequacy of internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act. The Company documents and tests its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act ("SOX"). SOX requires an annual assessment by management of the effectiveness of the Company’s internal control over financial reporting and an attestation report by the Company’s independent auditors addressing this assessment. The Company may fail to achieve and maintain the adequacy of its internal control over financial reporting as such standards are modified, supplemented, or amended from time to time, and the Company may not be able to ensure that it can conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 of SOX. The Company’s failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm the Company’s business and negatively affect the trading price of the Common Shares or market value of its other securities. In addition, any failure to implement required new or improved 41


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controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies may provide the Company with challenges in implementing the required processes, procedures and controls in its acquired operations. Acquired companies may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to the Company. No evaluation can provide complete assurance that the Company’s internal control over financial reporting will detect or uncover all failures of persons within the Company to disclose material information required to be reported. The effectiveness of the Company’s control procedures could also be limited by simple errors or faulty judgments. In addition, as the Company continues to expand, the challenges involved in implementing appropriate internal control over financial reporting will increase and will require that the Company continue to improve its internal control over financial reporting. Although the Company intends to devote substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, the Company cannot be certain that it will be successful in complying with Section 404 of SOX. As a foreign private issuer, we are subject to different United States securities laws and rules than a domestic United States Issuer, which may limit the information publicly available to our United States shareholders. The Company is a foreign private issuer under applicable United States federal securities laws and, therefore, it is not required to comply with all the periodic disclosure and current reporting requirements of the United States Securities Exchange Act of 1934, as amended and related rules and regulations (the"U.S. ExchangeAct"). As a result, the Company does not file the same reports that a United States domestic issuer would file with the SEC, although it will be required to file with or furnish to the SEC the continuous disclosure documents that it is required to file in Canada under Canadian securities laws. In addition, as a foreign private issuer the Company is exempt from the proxy rules under the U.S. Exchange Act. Potential dilution of present and prospective shareholdings. In order to finance future operations and development efforts, the Company may raise funds through the issue of Common Shares or the issue of securities convertible into Common Shares. The Company cannot predict the size of future issues of Common Shares or the issue of securities convertible into Common Shares or the effect, if any, that future issues and sales of the Common Shares will have on the market price of Common Shares. Any transaction involving the issue of previously authorized but unissued Common Shares, or securities convertible into Common Shares, would result in dilution, possibly substantial, to present and prospective holders of Common Shares. As at December 31, 2011, the Company had outstanding $36.2 million aggregate principal amount of its 2015 Notes, convertible into an aggregate of 3,027,152 Common Shares. Holders of the Notes may convert their Notes into Common Shares at the applicable conversion rate at their option at any time prior to maturity. Upon conversion, the Company will have the option to deliver cash, Common Shares or a combination of cash and Common Shares. If the Company chooses to issue Common Shares upon conversion, such issuances may adversely affect the prevailing market prices for the Common Shares. The Company does not intend to pay cash dividends in the foreseeable future. The Company has not declared or paid any dividends since its incorporation. The Company intends to retain earnings, if any, to finance the growth and development of its business and does not intend to pay cash dividends on the Common Shares in the foreseeable future. Any return on an investment in the Common Shares will come from the appreciation, if any, in the value of the Common Shares. The payment of future cash dividends, if any, will be reviewed periodically by the board of directors and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors. The Common Shares are publicly traded and are subject to various factors that have historically made the Company's share price volatile. The trading price of the Common Shares has been, and may continue to be, subject to large fluctuations and, therefore, the value of any of the Company's securities convertible into, or exchangeable for, Common Shares may also fluctuate significantly, which may result in losses to investors. The trading price, if applicable, of the Common 42


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Shares and any securities convertible into, or exchangeable for, Common Shares may increase or decrease in response to a number of events and factors, including: the Company's operating performance and the performance of competitors and other similar companies;volatility in metal prices;the public's reaction to the Company's press releases, other public announcements and the Company's filings with the various securities regulatory authorities;changes in earnings estimates or recommendations by research analysts who track the Common Shares or the shares of other companies in the resource sector;changes in general economic and/or political conditions;the number of Common Shares to be publicly traded after any securities offering;the arrival or departure of key personnel; andacquisitions, strategic alliances or joint ventures involving the Company or its competitors, which, if involving the issue of Common Shares, or securities convertible into Common Shares, would result in dilution to present and prospective holders of Common Shares. In addition, the market price of the Common Shares is affected by many variables not directly related to the Company's success and are, therefore, not within the Company's control, including other developments that affect the market for all resource sector securities, the breadth of the public market for the Common Shares, and the attractiveness of alternative investments. The effect of these and other factors on the market price of the Common Shares on the exchanges on which the Common Shares trade has historically made the Company's share price volatile and suggests that the Company's share price will continue to be volatile in the future. DIVIDEND RECORD AND POLICY The Company has not paid any dividends since incorporation and intends to retain earnings to finance the growth and development of its business. It does not intend to pay dividends on Common Shares in the immediate future. The payment of dividends in future will depend, among other factors, on earnings, capital requirements, and operating and financial condition. If dividends or similar distributions are made to holders of Common Shares, there will be an adjustment to the conversion rate applicable to the Notes (see “Capital Structure”) such that additional Common Shares will be issued upon conversion of the Notes into Common Shares. MANAGEMENT’S DISCUSSION AND ANALYSIS Reference is made to “Management’s Discussion and Analysis”, dated February 22, 2012, which has been filed on SEDAR at www.sedar.com and is incorporated by reference in this AIF. CAPITAL STRUCTURE Common Shares The authorized capital of the Company consists of an unlimited number of Common Shares without par value. As at February 22, 2012, the Company had a total of 89,770,791 Common Shares issued and outstanding, all of which are fully paid and not subject to any future call or assessment. The holders of the Common Shares are entitled to receive notice of all meetings of shareholders and to attend and vote the shares at the meetings. Each Common Share carries the right to one vote. 43


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Warrants On December 11, 2008, the Company closed a CDN$40.02 million bought deal financing in which a syndicate of underwriters purchased 9,200,000 units from the Company for sale to the public at a price of CDN$4.35 per unit. Each unit consisted of one Common Share of the Company and one-half of one Common Share warrant. Each whole warrant entitles the holder to purchase one Common Share of the Company, at a price of CDN$5.00 per Common Share, on or before December 31, 2011. As December 31, 2011 fell on a Saturday, the final date to exercise the warrants was January 3, 2012. At December 31, 2011 there were 2,828,500 warrants outstanding. Subsequent to December 31, 2011, 2,825,500 warrants were exercised and 3,000 warrants expired unexercised. Accordingly, at February 22, 2012 there were no warrants outstanding. Convertible Notes In October, 2006 the Company issued $85 million of 2011 Notes, convertible into Common Shares at 91.9118 shares per $1,000 note (a conversion price of approximately $10.88 per share), or 7,812,500 shares in aggregate. In November, 2010, the Company completed the exchange of an aggregate of $32.9 million of the principal due under the $85 million face value of the 2011 Notes for consideration of new 2015 Notes, in the aggregate principal amount of $36.2 million. In the fourth quarter of 2011, the Company settled in full the 2011 Notes in accordance with their terms. In settling the 2011 Notes, the Company issued 4,202,199 common shares on the conversion of $45.7 million face value of the 2011 Notes. The remaining 2011 Notes with a face value of $6.3 million were held to maturity and settled by a cash payment of $6.3 million in respect of the principal and $0.14 million in respect of accrued interest. Interest on the 2015 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2011. The 2015 Notes are convertible into Common Shares at approximately $11.97 per share. A total of 3,027,152 Common Shares are issuable upon conversion and additional shares may become issuable following the occurrence of certain corporate acts or events. On conversion, the Company has the option to settle all or a portion of the obligation in cash. The amount of cash to be paid will be equal to the number of Common Shares in respect of which the cash payment is being made multiplied by the daily volume-weighted average price of the Company’s shares for the 10 trading days commencing one day after the date of the Company’s notice of election to deliver all or part of the conversion consideration in cash if there has been no notice of redemption or the conversion date in the case of conversion following notice of redemption specifying the Company’s intention to deliver cash upon conversion. The Notes are senior unsecured debt and rank on parity with all other existing and future senior unsecured debt and prior to all subordinated debt, of which, at December 31, 2011 and February 22, 2012 there is none. The Company may repurchase Notes in open market purchases or negotiated transactions without prior notice to holders. The holders of the Notes are not afforded protection in the event of a highly leveraged transaction or a change in control except to the extent described below. Additional shares may be issuable upon conversion following the occurrence of certain corporate acts or events to compensate the Note holders for any such occurrence that causes economic loss to them. Such possible events include issue by the Company of Common Shares as a dividend or other distribution of Common Shares; the issue of warrants (or similar rights) to purchase Common Shares for less than market price; the distribution to holders of the Company’s Common Shares, of assets, securities, debts receivable and the like, whether or not part of a “spin-off” transaction; payment of cash dividends; and purchase of the Company’s Common Shares for prices in excess of market prices. If the Company is a party to a consolidation, amalgamation, merger, binding share exchange, statutory arrangement, sale of all or substantially all of its assets or other combination, in each case pursuant to which its Common Shares are converted into cash, securities, or other property, then at the effective time of the transaction, the right of a holder of Notes to convert will be changed into a right to convert them into the kind and amount of cash, securities and other property which holders of the Notes would have received if those holders had converted their Notes immediately prior to the transaction. 44


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In the event of a fundamental change in the affairs of the Company, it shall be required to offer to purchase for cash all of the outstanding Notes. A “fundamental change “will be deemed to have occurred when any of the following occurs: (1)

   a “person” or “group” has become the “beneficial owner” of more than 50% of the voting power of the Company’s common equity;(2)

   consummation of any share exchange, consolidation, amalgamation, merger, statutory arrangement or other combination pursuant to which the Company’s Common Shares will be converted into cash, securities or other property or any sale, lease or other transfer of all or substantially all of the Company’s consolidated assets;(3)

   continuing directors cease to constitute at least a majority of the Company’s board of directors; or(4)

   the Company’s shareholders approve any plan or proposal for liquidation or dissolution. A change in control will not be deemed to have occurred, however, if at least 90% of the consideration, in the transaction constituting the fundamental change consists of Common Shares or American Depository Shares that are traded or will be traded on a U.S. national exchange or on the TSX. As a result of the Arrangement, holders of Notes will be entitled to receive additional shares upon conversion of the notes following completion of the Arrangement. The number of additional shares is calculated in accordance with the terms of the indenture governing the Notes. The Arrangement will also constitute a fundamental change requiring the making of an offer to purchase the Notes for cash following the completion of the Arrangement. Stock Options As at February 22, 2012, the Company also had a total of 2,887,049 options outstanding. The options are exercisable for up to five years from the dates of grant at prices ranging from CDN$9.52 to CDN$15.40. 45


MARKET FOR SECURITIES The Company’s Common Shares are listed and posted for trading on the TSX under the stock symbol “MFL”, and on the Amex under the symbol “MFN”. The following table gives the monthly trading ranges for the Company’s Common Shares and the daily average number of shares traded (“Volume”). Toronto Stock Exchange(prices in Canadian dollars)

   NYSE Amex(prices in US dollars)2011

   High

   Low

   Close

   Daily Avg.Volume

   High

   Low

   Close

   DailyAvg.VolumeJanuary

   $10.73

   $9.53

   $9.68

   302,625

   $11.20

   $9.61

   $9.69

   615,030February

   $11.34

   $9.78

   $11.29

   338,474

   $11.59

   $9.93

   $11.52

   591,758March

   $12.79

   $9.93

   $12.79

   307,404

   $13.17

   $10.19

   $13.17

   860,100April

   $16.03

   $12.48

   $15.91

   457,825

   $16.95

   $12.95

   $16.76

   954,050May

   $14.94

   $12.18

   $12.91

   323,910

   $15.69

   $12.52

   $13.36

   821,786June

   $12.81

   $11.28

   $12.52

   125,645

   $13.14

   $11.51

   $13.01

   452,200July

   $14.47

   $12.53

   $13.96

   218,145

   $15.14

   $12.46

   $14.61

   498,790August

   $16.81

   $13.89

   $15.91

   354,491

   $16.95

   $14.19

   $16.22

   814,117September

   $18.33

   $14.13

   $14.47

   362,205

   $18.45

   $13.68

   $13.92

   967,295October

   $15.25

   $13.34

   $14.13

   276,640

   $14.81

   $13.07

   $14.17

   610,743November

   $16.06

   $11.51

   $12.26

   373,018

   $15.87

   $10.95

   $11.99

   994,233December

   $12.16

   $9.98

   $10.83

   281,195

   $12.03

   $9.80

   $10.60

   636,867
 The Company's outstanding warrants were listed for trading on the TSX under the symbol "MFL.WT" prior to their expiry on January 3, 2012. PRIOR SALES During 2011, the Company has issued the following securities: Date of Grant/ Issuance

   Price per Security(C$)

   Number of SecuritiesIssuedCommon Shares issued onexercise of Warrants:January 6, 2011

   $5.00

   100March 10, 2011

   $5.00

   5,000April 14, 2011

   $5.00

   10,000
 46


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Date of Grant/ Issuance

   Price per Security(C$)

   Number of SecuritiesIssuedMay 26, 2011

   $5.00

   15,700July 15, 2011

   $5.00

   100July 18, 2011

   $5.00

   391,400August 12, 2011

   $5.00

   100August 22, 2011

   $5.00

   5,300September 8, 2011

   $5.00

   10,000September 14, 2011

   $5.00

   2,000October 3, 2011

   $5.00

   12,500November 15, 2011

   $5.00

   500November 29, 2011

   $5.00

   12,000November 30, 2011

   $5.00

   630,400December 2, 2011

   $5.00

   35,900December 7, 2011

   $5.00

   6,000December 12, 2011

   $5.00

   631,800December 13, 2011

   $5.00

   750December 21, 2011

   $5.00

   300Stock options granted:September 27, 2011

   $15.40

   1,195,000Common Shares issued onexercise of stock options:January 12, 2011

   $10.02

   20,000January 12, 2011

   $9.76

   20,000March 1, 2011

   $9.00

   20,000March 23, 2011

   $9.00

   15,000
 47


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Date of Grant/ Issuance

   Price per Security(C$)

   Number of SecuritiesIssuedMarch 24, 2011

   $9.57

   135,000March 24, 2011

   $10.58

   50,000March 24, 2011

   $9.76

   80,000March 25, 2011

   $9.76

   10,000March 31, 2011

   $9.00 (cashless)

   21,138March 31, 2011

   $9.00

   30,000March 31, 2011

   $9.57

   15,000April 1, 2011

   $9.00 (cashless)

   42,824April 4, 2011

   $9.76

   10,000April 4, 2011

   $10.02

   10,000April 5, 2011

   $10.58

   10,000April 5, 2011

   $9.00

   28,000April 5, 2011

   $10.94

   5,000April 5, 2011

   $10.02

   10,000April 6, 2011

   $9.76

   10,000April 6, 2011

   $10.58

   10,000April 7, 2011

   $9.00

   32,000April 7, 2011

   $9.76

   20,000April 7, 2011

   $10.58

   30,000April 7, 2011

   $9.57

   40,000April 7, 2011

   $10.02

   20,000April 8, 2011

   $9.00

   44,000April 11, 2011

   $10.02

   10,000April 11, 2011

   $9.00 (cashless)

   63,048
 48


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Date of Grant/ Issuance

   Price per Security(C$)

   Number of SecuritiesIssuedApril 13, 2011

   $8.76

   40,000April 14, 2011

   $10.02

   10,000April 14, 2011

   $9.00 (cashless)

   3,764April 18, 2011

   $9.00 (cashless)

   29,074April 19, 2011

   $12.46

   30,000April 20, 2011

   $9.00

   31,000April 28, 2011

   $10.58

   10,000May 2, 2011

   $9.00 (cashless)

   32,188May 2, 2011

   $9.57 (cashless)

   5,895May 3, 2011

   $9.00 (cashless)

   6,370May 6, 2011

   $9.00

   20,000May 11, 2011

   $9.00 (cashless)

   9,838May 11, 2011

   $9.00

   5,000May 11, 2011

   $9.57

   10,000May 11, 2011

   $9.76

   10,000May 19, 2011

   $10.02

   10,000May 19, 2011

   $10.58

   10,000August 12, 2011

   $8.76

   20,000August 15, 2011

   $8.76

   20,000August 18, 2011

   $9.32 (cashless)

   10,398August 18, 2011

   $9.76 (cashless)

   7,767August 26, 2011

   $10.02 (cashless)

   7,357August 26, 2011

   $12.46 (cashless)

   3,209September 9, 2011

   $9.57

   10,000
 49


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Date of Grant/ Issuance

   Price per Security(C$)

   Number of SecuritiesIssuedSeptember 9, 2011

   $10.58 (cashless)

   7,774September 13, 2011

   $9.57

   2,000September 15, 2011

   $9.32 (cashless)

   11,741September 20, 2011

   $9.57

   48,000September 21, 2011

   $9.57

   10,000September 29, 2011

   $9.57

   3,000October 25, 2011

   $9.57

   4,400November 2, 2011

   $9.57

   6,687Common Shares issued onconversion of convertiblenotes:November 3, 2011

   $10.88

   919,118December 14, 2011

   $10.88

   3,283,081
 See the "Capital Structure" section of this AIF for discussion of convertible notes. DIRECTORS AND OFFICERS Each director is elected by the shareholders at the annual general meeting and holds office until the first annual general meeting following the director’s election (or appointment by the board to fill a vacancy). Each officer holds office at the pleasure of the board of directors. Directors and Officers Name and Place ofResidence

   Position with theCompany

   Principal Occupation

   Director or Officer SinceMark H. BaileyWashington,USA.

   President, Chief Executive Officer and Director

   President and Chief Executive Officer of the Company

   President - July 27, 1995CEO – Oct. 31, 1995Director – July 27, 1995James M. Dawson(1)(2)(4)British Columbia, Canada

   Director

   President, Dawson Geological Consultants Ltd., a geological consulting company

   Director - March 18, 1996W. Robert Gilroy(2)(3)(4)Alberta, Canada

   Director

   Advisor to the miningindustry

   Director – November 8, 2010
 50


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Name and Place ofResidence

   Position with theCompany

   Principal Occupation

   Director or Officer SinceH. Leo King(1)(2)(3)(4)British Columbia, Canada

   Director

   President, H. Leo King & Associates Inc., a geological consulting services company

   Director -May 15, 1996Robert L. Leclerc(1)(2)(3)Nevada, USA.

   Director & Non-ExecutiveChairman

   Business Consultant, Non- Executive Chairman of the Company

   Director - March 27, 1997Chairman - June 10, 2004Tench C. PageNevada, USA

   Vice President,Exploration

   Vice President, Exploration of the Company

   Vice President - July 27, 1995Greg D. SmithBritish Columbia, Canada

   Vice President, Financeand Chief Financial Officer

   Vice President, Finance and Chief Financial Officer of the Company

   CFO – November 15, 2006Vice President – May 20, 2009Laurence MorrisStaffs, England

   Vice President, Operations

   Vice President, Operations of the Company

   Vice President- September 1, 2010Lois-Ann L. BrodrickAlberta, Canada

   Corporate Secretary

   Business Consultant

   Corporate Secretary - March 10, 2008
  (1)

   Member of the Audit Committee.(2)

   Member of the Compensation Committee.(3)

   Member of the Nominating Committee.(4)

   Member of the Technical and Commercial Oversight Committee. Further information on directors and committees of directors will be contained in the Management Information Circular when filed on SEDAR. Each of these individuals has been engaged in the principal occupation set forth opposite his name during the past five years except for Laurence Morris, who from July 2005 to September 2010 was employed by First Quantum Minerals in several positions, most recently as Mine Manager of the Kansanshi Copper Mine in Zambia; H. Leo King, who until October 2009 was also President of International Barytex Resources Ltd.; and W. Robert Gilroy who, from May 2003 to July 2008 was Vice President, Operations for Nuna Logistics Limited, a private company providing heavy construction services in Northern Canada. Shareholdings of Directors and Officers To the best of the Company’s knowledge, as at February 22, 2012, directors and officers, as a group, beneficially owned, directly or indirectly, or exercised control over 1,518,954 Common Shares (not including Common Shares issuable upon the exercise of stock options) of the Company, representing 1.69% of the then outstanding Common Shares. Conflicts of Interest To the best of the Company’s knowledge, there are no existing or potential conflicts of interest between the Company and any director or officer of the Company, except that certain of the directors and officers serve as directors, officers and members of management of other public companies and, therefore, it is possible that a 51


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conflict may arise between their duties as a director or officer of the Company and their duties as a director or officer of such other companies. (See “Risk Factors – Conflicts of Interest”). The directors and officers of the Company are aware of the existence of laws governing accountability of directors and officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and the Company will rely upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors or officers. All such conflicts will be disclosed by such directors or officers in accordance with the Business Corporations Act(Ontario) and they will govern themselves in respect thereof to the best of their abilities in accordance with the obligations imposed upon them by law. AUDIT COMMITTEE The Audit Committee comprises Robert L. Leclerc, James M. Dawson and H. Leo King, all of whom, in the opinion of the directors, are independent and are financially literate. Mr. Leclerc is a lawyer, and was the chief executive officer of a large law firm from 1993 to 1996. From 1997 to 2003 he was chief executive officer of a public company in the business of mining precious metals that was listed for trading in Canada and the USA. In those capacities he was ultimately responsible for the activity and authority of the chief financial officers who reported to him, and for the implementation and maintenance of internal control systems and for compliance with the required public reporting. Mr. Dawson has been a professional geologist for over thirty years, and has been a director of public companies in the mineral resource industry for twenty years. Also, he has managed his own consulting geological firm for many years. In these capacities he has acquired knowledge and understanding of the financial issues and accounting principles that are relevant in assessing this Company’s financial disclosures and internal control systems. Mr. King is a professional geologist and has twenty years of experience in senior executive positions within the base and precious metals mining industry. He is the president and a director of a public company, and his responsibilities have included the operation of internal control systems and compliance with public financial disclosure requirements. In discharging these responsibilities Mr. King has acquired the requisite skill and knowledge in understanding the accounting principles, and their application, adopted by this Company in its financial disclosures. The members of the Audit Committee do not have fixed terms and are appointed and replaced from time to time by resolution of the directors. The Audit Committee meets with the President and Chief Executive Officer and the Chief Financial Officer of the Company, and the independent auditors, to review and inquire into matters affecting financial reporting, the system of internal accounting and financial controls as well as audit procedures and audit plans. The Audit Committee also recommends to the Board of Directors the auditors to be appointed. In addition, this Committee reviews and recommends to the Board for approval the annual financial statements and the MD&A, reviews and approves the interim financial statements and MD&A, and undertakes other activities required by regulatory authorities. The full text of the Audit Committee Charter is attached to this AIF as an Appendix. The following table shows the aggregate fees in United States dollars billed to the Company by KPMG. Audit fees

   2011

   2010Audit fees were paid for professional services rendered by the auditors for the audit of the Company’s annual consolidated financial statements and review of quarterly consolidated financial statements and financial statements of subsidiaries.

   $386,939

   $281,289Audit related feesServices provided for statutory and regulatory filings or engagements.

   4,946

   39,991
 52


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Tax feesTax compliance, taxation advice and tax planning for international operations.

   61,483

   38,228All other feesOther fees paid for products and services other than the services reported above.

   -

   -
 TRANSFER AGENT AND REGISTRAR The Company’s Transfer Agent and Registrar for its Common Shares is Computershare Investor Services Inc. at its offices in Vancouver, British Columbia and Toronto, Ontario. MATERIAL CONTRACTS With the exception of the Arrangement Agreement with Pan American described elsewhere in this AIF, the Company is not a party to any contract outside the ordinary course of its business or on which it is substantially dependent. INTERESTS OF MANAGEMENT AND EXPERTS Mark H. Bailey, M.Sc., P.Geo., a director and President and Chief Executive Officer of the Company is a "Qualified Person" as defined in NI 43-101. Mr. Bailey has authored or co-authored a number of internally prepared technical reports with respect to the Company’s mineral properties. He is also noted in several news releases issued by the Company as having supervised the preparation of the technical information contained in those releases. Mr. Bailey expects to stand for re-election as a director when his term expires. He owns 572,053 Common Shares of the Company and 380,000 options to purchase Common Shares as at February 22, 2012. On October 21, 2009, the Company filed a NI 43-101 compliant technical report titled “Technical Report on the La Bolsa Property, Sonora, Mexico” by Sacrison Engineering dated October 16, 2009 and available on SEDAR at www.sedar.com. The principal authors of the report are Ralph R. Sacrison and David Linebarger, each of whom is a "Qualified Person" as defined in NI 43-101. To the best of the Company’s knowledge, neither Ralph Sacrison nor David Linebarger held any interest in the Company at the time the report was prepared. On January 14, 2010, the Company filed an amended and restated NI 43-101 compliant technical report titled “Technical Report, La Bolsa Project, Pre-Feasibility” by Sonoran Resources, LLC and The Mines Group, Inc. dated January 10, 2011 and available on SEDAR at www.sedar.com. The principal authors of the report are Anthony E.W. Crews, Joel Primitivo Sanchez Campos, Juan Rafael Sanchez Campos, Kenneth L. Myers and Laurence J. O’Connor, each of whom is a "Qualified Person" as defined in NI 43-101. To the best of the Company’s knowledge, none of the principal authors held any interest in the Company at the time the report was prepared. On October 25, 2011 the Company filed an independent study by Chlumsky, Armbrust & Meyer, LLC (herein “CAM”) entitled "N43-101 Technical Report Dolores Gold-Silver Project, Chihuahua State, Mexico", which is available on SEDAR at www.sedar.com. The principal author of the report was Robert L. Sandefur, who is an independent "Qualified Person" as defined in NI 43-101. To the best of the Company’s knowledge, neither CAM nor Robert L. Sandefur, held any interest in the Company at the time the report was prepared. KPMG LLP, our independent auditors, have audited our consolidated financial statements for the year ended December 31, 2011. As of the date hereof, KPMG LLP has confirmed they are independent with respect to the Company within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of British Columbia and the professional and independence requirements of the United States Securities and Exchange Commission. 53


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None of the aforementioned persons, nor any director, officer, employee or partner, as applicable, of the aforementioned companies or partnerships, is currently expected to be elected, appointed or employed as a director, officer or employee of the Company or of any associate or affiliate of the Company, except as disclosed above. ADDITIONAL INFORMATION Additional information about the Company may be found on SEDAR at www.sedar.com Further information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and options to purchase securities, if applicable, is contained in the Company’s Management Information Circular filed in connection with its most recent annual meeting of shareholders. Additional financial information is provided in the Company’s comparative consolidated financial statements and MD&A for the year ended December 31, 2011, which may be found on SEDAR at www.sedar.com. 54


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Appendix  to Annual Information Form dated February 22, 2012  MINEFINDERS CORPORATION LTD. CHARTER OF THE AUDIT COMMITTEE The Committee shall: (a)

   recommend annually to the Board the independent auditors to be appointed by the shareholders of the Corporation and the compensation of the independent auditors;(b)

   review with the independent auditors the annual audit plan including, but not limited to, the scope of the work to be carried out by the independent auditors, any significant problems that the auditors are able to foresee, the impact on the financial statements and the Corporation of any new or proposed changes in accounting standards and principles;(c)

   review the annual financial statements, including notes, with the independent auditors and recommend them to the Board for approval prior to release to the public or filing with securities regulatory authorities;(d)

   review the quarterly financial statements with the independent auditors prior to release to the public or filing with securities regulatory authorities;(e)

   review financial statements, management’s discussion and analysis, and annual and interim earnings press releases before the Corporation publicly discloses this information;(f)

   report immediately to the Board any instances of fraud or misappropriation of assets that come to the attention of the Committee;(g)

   receive from the independent auditors a formal written statement delineating all relationships between the auditors and the Corporation, consistent with applicable accounting standards, and actively engage in a dialogue with the auditors with respect to any disclosed relationships or services that may have an impact on their objectivity and independence;(h)

   take, or recommend that the full Board take, appropriate action to oversee the independence of the auditors;(i)

   as to management of the Corporation generally: (1) ensure that an adequate internal control structure and procedures for financial reporting are established and maintained; (2) periodically assess the effectiveness of such structures and procedures, as well as secure appropriate reports or attestations from the independent auditors in respect thereof; and (3) review budgets and periodically assess actual spending compared with budgeted amounts;(j)

   be directly responsible for overseeing the work of the independent auditors, including the resolution of disagreements between management and the independent auditors regarding financial reporting;(k)

   pre-approve all non-audit services to be provided to the Corporation or its subsidiaries by the independent auditors; 55


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(l)

   satisfy itself that adequate procedures are in place for the review of the Corporation’s public disclosure of financial information extracted or derived from the Corporation’s financial statements, and periodically assess the adequacy of such procedures;(m)

   establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters;(n)

   review and approve the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and former independent auditors of the Corporation; and(o)

   undertake and perform such other duties as may be required of the Committee by applicable law or regulation.In performing its functions and duties:(aa)

   the Committee shall meet at least quarterly with management and the independent auditors to discuss the accounts, records and financial position of the Corporation;(bb)

   the members of the Committee may inspect all the books and records of the Corporation;(cc)

   the Committee may, in its discretion and at the expense of the Corporation, engage independent counsel and financial and other advisors; and(dd)

   the Committee shall have the authority to communicate directly with the internal and independent auditors.The Committee is responsible for the duties set forth in this charter but is not responsible for either the preparation or audit of the financial statements. Management has the responsibility for preparing the financial statements and the independent auditors have the responsibility for auditing the financial statements. The review of the financial statements by the Committee is not of the same quality as the audit performed by the independent auditors. _____________________________________________________________ The charter of the Audit Committee of the Board of Directors of Minefinders Corporation Ltd. was established at a meeting of the Board of Directors held November 3, 2011. 56


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