Andean Resources Announces Fourth Quarter Results
FREMANTLE, WESTERN AUSTRALIA–(Marketwire – July 31, 2008) – Andean Resources Ltd. (TSX:AND)(ASX:AND) –
QUARTERLY REPORT
For the Quarter Ended 30th June 2008
(Dollars expressed in Australian dollars)
HIGHLIGHTS
– Release of updated resource estimate for Eureka West of 1.4 million ounces of gold and 23 million ounces of silver
– Closed a $42 million financing by issuing 25.8 million shares to institutional investors
– In June, Andean completed its Phase 4 drill program with results that continue to infill and expand the Eureka West high- grade deposit
– Discovery of the new Evita Vein, with results of 9m of 13.7 g/ t Au and 61 g/t Ag
– Extension drilling continues to define the 721 Vein, which remains open to the east and down-plunge
– Strengthening of senior management team in key areas of Operations and Investor Relations
– At quarter-end, cash balances were $37.7 million
– On schedule to complete the Pre-Feasibility study in September 2008
Wayne Hubert, Managing Director, commented: “With the recent capital raising and additions to the management team, Andean is well prepared to continue exploring and developing Cerro Negro. Our flagship, 100% owned Cerro Negro project will strongly position us as one of the industry’s lowest cost gold producers with tremendous growth potential.”
Completed Phase 4 Drill Program Eureka West Veins
The majority of the holes drilled into the Eureka West vein during the quarter to complete the Phase 4 drill program were infill holes; however, the grades and widths were significantly higher in the inferred areas of the resource than had been previously estimated, including: – EDD-813: 11m of 11.7 g/t gold and 110 g/t silver from 300m
– EDD-816: 38m of 17.0 g/t gold and 335 g/t silver from 280m
– ERC-843: 14m of 8.7 g/t gold and 99 g/t silver from 37m
– EDD-853: 7.0m of 84.4 g/t gold and 573 g/t silver from 309m
– ERC-867: 12.0m of 12.6 g/t gold and 838 g/t silver from 382m
The Company is also pleased to report final assays from the Phase 4 drilling (see Table 1 for detailed drill data); including the more significant results detailed below:
– ERC-865 which intersected mineralization 50m up-dip from previously released ERC-813 (main intersection 11m, 11.7 g/t Au, 112 g/t Ag) on the western end of Eureka West with: 3m of 4.7 g/t Au and pending Ag from 270m 4m of 10.7 g/t Au and pending Ag from 277m
Eureka West Resource Upgrade
Based on all the infill and exploration drilling completed at Eureka through drill-hole ERC-812, Andean released an updated JORC and NI 43-101 compliant resource estimate for the Eureka West Veins on April 16th, which included the following highlights:
– Infill drilling confirmed continuity of the high gold and silver grades
– Gold and silver grades more than doubled from the previous October 2007 resource estimate
– Total mineral resource tonnage up 15% from the prior estimate
– Contained ounces of gold increased by 119% to more than 1 million ounces of gold and 18 million ounces of silver; with grades of 12.9 g/t gold and 235 g/t silver in the Indicated category together with 0.34 million ounces of gold and 4.9 million ounces of silver (at a grade of 10.7 g/t gold and 157 g/t silver) in the Inferred category
The CIMM- and JORC-compliant resource estimate was completed by Reno Pressacco, P.Geo., a Senior Associate Geologist with Micon International Limited, who is a Qualified Person as defined by NI 43- 101. This resource estimate for Eureka West will be used in the Pre- feasibility Study which is nearing completion. The results are summarized in the table below:
——————————————————————- ——————————————————————- Category____________ Tonnes Au g/t Contained Oz Ag g/t Contained Oz ——————————————————————- ______________________________Indicated ——————————————————————- 1.0 Vein__________1,805,000__15.79______916,400 297.84__ 17,286,200 ——————————————————————- 1.1 Vein____________683,000__ 5.18______113,800__69.87____1,534,500 ——————————————————————- Total, Indicated__2,488,000__12.88____1,030,200 235.26__ 18,820,700 ——————————————————————- ______________________________ Inferred ——————————————————————- 1.0 Vein____________728,000__12.80______299,600 188.31____4,408,000 ——————————————————————- 1.1 Vein____________245,800__ 4.57______ 36,100__62.44______493,400 ——————————————————————- Total, Inferred____ 973,800__10.72______335,700 156.53____4,901,400 ——————————————————————- ——————————————————————-
Eureka Main Vein
Since the first eight holes were drilled into the Eureka Main Vein in early 2007, this area had not received any drilling until the final stages of the Phase 4 program, as the exploration focus had previously been on the Eureka West Vein. Six holes were drilled into this target, with the results demonstrating similar high grade values to those found in the Eureka West vein, including:
– EDD-834: 8m of 7.8 g/t gold and 177 g/t silver from 186m
– EDD-849: 2.7m of 29.8g/t gold and 164 g/t silver from 83m
Recently completed drill hole, ERC-856 was drilled to test an outcrop on one section of the Eureka vein and intersected a wide zone of quartz veining with low gold values. ERC-856 intersected 2m averaging 4.8 g/t Au, 4 g/t Ag from 217m, and additional low grade mineralization to 232m. Clearly, this hole did not intersect a mineralized ore shoot and further holes are planned in the new Phase 5 program to explore for additional ore shoots within the Eureka Vein south-east extension.
721 Vein
During the final stages of the Phase 4 drill program, Andean continued to test the 721 Vein, of which the discovery hole, EDD- 721, intersected 17m of 9.2 g/t gold and 69 g/t silver in June 2007. The results of the recent drilling campaign included:
– ERC-863: 5m of 13.9 g/t gold and 77 g/t silver from 235m
– EDD-855: 15.0m of 5.6 g/t Au and 13.0 g/t Ag from 41m
Post the end of the quarter; on July 7th, 2008 Andean released results for the first intercept for EDD-866 with 2m of 8.1g/t gold and 168 g/t silver from 111m. Subsequently, assays for two additional intercepts for that drill-hole have been received:
2m of 4.6g/t gold and 107 g/t silver from 123m and;
1m of 17.8 g/t gold and 79 g/t silver from 223m
Assays have now also been received for EDD-871 which tested the western extent of the 721 Vein, 130m down-dip from EDD-855 (15m of 5.6 g/t Au and 13 g/t Ag) with the following results near the ignimbrite contact: 14.1m of 5.7 g/t Au and pending Ag from 166.2m
The drill holes testing the depth of the 721 Vein indicated that the mineralisation is truncated at depth by a similar ignimbrite sequence as is intersected below the West Vein. Encouragingly however; the 721 Vein remains open to the east and down-plunge.
Evita Vein
On July 7, the Company announced the discovery of the new Evita Vein, with drill hole EDD-868 intersecting 9.0m of 13.7 g/t Au and 61 g/t silver, discovered at 190m below surface in the hanging wall of the Eureka West Vein at its eastern end. ERC-873 may have intersected the Evita Vein 350m further to the west with a shallower intersection of 1m of 9.8 g/t Au and 72 g/t silver from 120m. Further drilling on this vein is warranted and is scheduled to commence in September, when the new Phase 5 drill program begins.
Pre-Feasibility Study
The pre-feasibility study (PFS) for Andean’s Cerro Negro project is on schedule to be completed in September 2008, with the results to be released in October. The PFS has been designed to enable a smooth transition to a bankable feasibility study (BFS) to be conducted over the remainder of 2008 and completed during the first half of 2009. Andean continues to utilize leading industry consultant specialists for all technical areas of the study to ensure the Company has a high level of confidence in the results generated. To date, no material issues have been identified that would compromise the development of an economic project at Cerro Negro based upon the current mineral resource estimates and projected operating parameters. A summary of the work completed during the quarter is as follows:
Resource Modeling:
– The Vein Zone resource modelling continues to be refined and should be completed by the end of August – an ongoing re-evaluation of all geological data has resulted in a better understanding of the eastern end of the deposit, and the definition of a previously- unrecognized flexure of the vein system into unexplored ground.
Metallurgical Testwork
– Metallurgical testwork is more than 90% complete with more representative samples being sent to AMMTEC in Perth Australia to validate the recoveries being determined by PRA Labs of Vancouver.
– Plant design criteria have been determined based on the blending of two different ore types from Eureka and Vein Zone.
– Optimizing recoveries including lead nitrate addition, oxygen addition, and increasing cyanide concentration
Mine Planning
Mine Development Associates of Reno, NV, were selected for open pit and underground mine planning work.
– A preliminary exploration decline design was selected and a Request for Quotation was prepared for the construction of the decline.
– The resource block models developed by Micon will be used for all mine planning work.
– Golder Associates, Argentina are developing the geotechnical model and have collected all data and rock samples.
– Hidroar S.A. has completed the hydrology study and determined six likely locations for production water wells to be used for processing.
Infrastructure
– A power options study has been completed by Technolatina S.A. outlining the capital cost and expected operating costs for the generation of electricity for several combinations of options.
– A general alignment of three possible access roads has been scoped; ongoing work will define the preferred access option.
– Construction of a wind tower has begun for the collection of wind data to be used in determining the feasibility of wind generators.
– A conceptual design of a tailings facility has been awarded to DE Cooper and Associates of Perth Australia and tailings samples have been sent to labs in Australia for ARD and Geotechnical test work.
– Vector Argentina continues sampling and data collection necessary for the Environmental Baseline Study (EBS).
– All major chapters of the Environment Base Line Study are in draft form and undergoing review.
– Ongoing permitting work focuses on the access road and exploration decline.
2008 Cerro Negro Timeline
– August – Initiate EIS (Environmental Impact Study) permitting process
– September
— Completion of Pre-Feasibility Study
— Phase 5 exploration drilling commences
– October – December
— Release of updated Resource estimate
— Commencement of Bankable Feasibility Study
MANAGEMENT
Andean continued to strengthen its management team in both the operational and investor relations functions throughout the quarter. In April, Stabro Kasaneva, who was previously the General Manager of Yamana’s El Peon mine, joined the Andean team as the Vice President of Operations. Stabro had spent most of the last ten years working with Meridian Gold, starting as an underground mine geologist and working his way up to the General Manager of El Peon. Also joining the Andean team was Krista Muhr, who joined in June as the Director of Investor Relations. Krista gained invaluable experience while managing the investor relations functions for both North American Palladium and Meridian Gold prior to and during its takeover by Yamana Gold.
CORPORATE
Financings and Liquidity
During the quarter, the Company expended approximately A$ 3.2 to advance the Cerro Negro project. At quarter-end, Andean had cash balances of approximately A$37.7 million. During April 2008 additional funds of approximately A$40 million, net of fees and expenses, were received from a public offering of 25.8 million shares.
Share Capital
At quarter-end the Company’s issued securities were as follows:
– 399.8 million ordinary shares
– 21.4 million unlisted options (at various strike pieces between A$0.25 and A$1.70)
Table 1: Latest Drill Results ——————————————————————– ——– Hole__Zone______ E______ N__Az Dip__ From____ To__Width____Au______ Ag____TD ——————————————————————– ——– ERC- EK-SE 2395680 4807437__30 -70____217____219______2__ 4.8________4__ 366 856 ——————————————————————– ——– EDD-__ EKW 2393852 4808345__45 -62____346____348______2__ 6.5______143__ 395 864 ——————————————————————– ——– ERC-__ EKW 2393941 4808327__45 -55____270____273______3__ 4.7__Pending__ 348 865____————————————————————- —
____________________________________277____281______4__10.7__Pending ——————————————————————– ——– EDD-__ 721 2394700 4807850 360 -60____111____113______2__ 8.1______168 269.5 866____ HW__________________________ ——————————- — ______________________________________123____125______2__ 4.6______107 ____ —–__________________________ ——————————- — ______ 721____________________________223____224______1__17.8______ 79 ——————————————————————– ——– ERC-__ EKW 2393790 4808315__45 -55____382____394____ 12__12.6______382__ 394 867 ——————————————————————– ——– EDD- Evita 2394450 4807800 360 -60____204____213______9__13.7______ 61__ 350 868 ——————————————————————– ——– EDD-__ EKW 2393870 4808327__45 – 65____370____374______4__25.5______120__ 399 869 ——————————————————————– ——– ERC-__ 721 2394650 4807700 360 -60______ No intersections greater than__ 433 870________________________________________________________ 2.5 g/t Au ——————————————————————– ——– EDD-__ 721 2394500 4807800 360 -60__166.2__180.3__ 14.1__ 5.7__Pending__ 400 871 ——————————————————————– ——– ERC-__ 721 2394800 4807800 360 -60____308____309______1__ 2.8________4__ 336 873 ______ ————————————————————- — ______ 721 2394800 4807800 360 -60____120____121______1__ 9.8______ 72 ____________________________________ ——————————- — ________HW____________________________233____234______1__ 3.6________9 ——————————————————————– ——– (1) Intersections are drilled widths, not true widths. True widths are less ____than drilled intersections and can be determined from the Eureka cross- ____sections provided (2) Some coordinates and elevations are approximate and subject to final ____survey by a licensed surveyor
In the above table, the Gauss Kruger coordinate system and the Campo Inchauspe datum are used to define drill hole collar positions. However on the longitudinal projection of the Eureka West Vein, the coordinate system refers to a local grid established for drilling the Eureka West Vein.
Quality Control and Assurance
The analytical results quoted in this release are derived from half drill core in the case of diamond drill holes, or from cuttings in the case of reverse circulation holes. Samples are prepared on site and a 200 gram sample crushed to 85% -200 mesh is sent to Alex Stewart Argentina in Mendoza, Argentina, for gold and silver determination on a 50 gram split of the assay sample.
Gold is determined initially by fire assay with AA finish. Samples assaying more than 30 ppm gold are re-assayed using a gravimetric finish.
Silver is determined initially by ICP, and samples assaying more than 100 ppm silver are re-assayed by fire assay with gravimetric finish.
Quality control of the analytical results is maintained by inserting standards, blanks, and duplicates into the sample run, approximately every twenty samples. Additional quality control is maintained by sending assay sample splits to a second laboratory from time to time. These checks are evaluated statistically at regular intervals.
All analytical data are entered into a Microsoft Access database, with limited access and numerous checks to ensure integrity of the data.
Note 1: Reno Pressacco has sufficient experience (more than 5 years) which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Reno Pressacco consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. The information in this Report that relates to Mineral Resources is based on information compiled by Reno Pressacco, who is a Member of APGO, which is a ‘Recognised Overseas Professional Organisation’ (‘ROPO’) included in a list promulgated by the ASX from time to time.
Note 2: The information in this Report that relates to exploration results is based on information provided by David Shatwell who is a Fellow of the Australian Institute of Geoscientists. Mr Shatwell has extensive experience relevant to the style and type of mineralisation and deposits under consideration, and to the activity undertaken, to qualify as a Competent Person as defined in the 2004 Edition of the “Australian Code for Reporting of Mineral Resources and Ore Reserves” (the J.O.R.C. Code). Mr Shatwell consents to the inclusion in this Report on his work in the form and context in which it appears.
To view a map of the Eureka West Ore Block Model, please visit the following link:
http://media3.marketwire.com/docs/and731a.pdf
To view a map of the Longitudinal Projection, 721 Vein, please visit the following link:
http://media3.marketwire.com/docs/and731b.pdf
________________________Appendix 5B ________MINING EXPLORATION ENTITY QUARTERLY REPORT Name of entity ——————————————————————– ——– ANDEAN RESOURCES LTD ——————————————————————– ——– ABN________________________________________Quarter ended (“current quarter”) ——————________________________ ————————- ——- 66 064 494 319________________________________________________ 30 June 2008 ——————________________________ ————————- ——– Consolidated statement of cash flows ________________________________________________ ——————- ——- ________________________________________________ Current Qtr__Year to Date ________________________________________________________________(12 months) Cash flows related to operating activities____________$A’000________$A’000 ________________________________________________ ——————- ——- 1.1 Receipts from product sales and related ____ debtors 1.2 Payments for: ____ evaluation____ (a) exploration and______________ (3,254)______(11,365) ____________________(b) development ____________________(c) production ____________________(d) administration________________(2,532)______ (6,593) 1.3 Dividends received 1.4 Interest and other items of a similar ____ nature received____________________________________ 248__________ 677 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) ________________________________________________ ——————- ——- ____Net Operating Cash Flows__________________________(5,538)______(17,281) ——————————————————————– ——- ____Cash flows related to investing activities 1.8 Payment for purchases of:__(a) prospects ______________________________ (b) equity investments ______________________________ (c) other fixed assets__ (463)______ (1,263) 1.9__Proceeds from sale of:____(a) prospects____________________________10 ______________________________ (b) equity investments ______________________________ (c) other fixed assets 1.10 Loans to/from other entities 1.11 Loans repaid by other entities 1.12 Other ________________________________________________ ——————- ——- ____ Net Investing Cash Flows______________________________(463)____(1,253) ________________________________________________ ——————- ——- 1.13 Total operating and investing cash flows____________(6,001)__ (18,534) ____ (carried forward) ——————————————————————– ——- ——————————————————————– ——- 1.13 Total operating and investing cash flows____________(6,001)__ (18,534) ____ (brought forward) ——————————————————————– ——- ____ Cash flows related to financing activities 1.14 Proceeds from the issue of shares, options, etc.____42,896____ 51,739 1.15 Proceeds from the sale of forfeited shares 1.16 Proceeds from loans 1.17 Repayment of loans 1.18 Dividends paid 1.19 Other – Capital raising expenses____________________(2,126)____(2,126) ________________________________________________ ——————- ——- ____ Net financing cash flows____________________________40,770____ 49,613 ——————————————————————– ——- ____ Net increase (decrease) in cash held________________34,769____ 31,079 1.20 Cash at beginning of quarter/year to date____________5,748____ 10,722 1.21 Exchange rate adjustments to item 1.20______________(2,849)____(4,133) ________________________________________________ ——————- ——- 1.22 Cash at end of quarter______________________________37,668____ 37,668 ——————————————————————– ——- Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities ______________________________________________________________ —– —— ______________________________________________________________ Current Qtr
______________________________________________________________$A’000 ______________________________________________________________ —– —— 1.23 Aggregate amount of payments to the parties included in ______item 1.2________________________________________________________ 339 ______________________________________________________________ —– —— 1.24 Aggregate amount of loans to the parties included in ____ item 1.10 ——————————————————————– —— 1.25 Explanation necessary for an understanding of the transactions ——————————————————————– —— ______Consultancy fees (193) ______Directors fees, salaries & superannuation (146) ——————————————————————– —— Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows ——————————————————————– —— ——————————————————————– —— 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest ——————————————————————– —— ——————————————————————– —— Financing facilities available Add notes as necessary for an understanding of the position ________________________________—————————- ________________________________Amount available Amount used __________________________________________$A’000______$A’000 ________________________________—————————- 3.1 Loan facilities ________________________________—————————- 3.2 Credit standby arrangements ———————————————————— Estimated cash outflows for next quarter ______________________________________________________$A’000 ________________________________—————————- 4.1 Exploration and evaluation________________________ 1,000 4.2 Development ———————————————————— ____Total______________________________________________1,000 ———————————————————— Reconciliation of cash Reconciliation of cash at the end of the quarter__________———- ——- (as shown in the consolidated statement of cash__________ Current__Previous flows) to related items in the accounts as follows.______ Quarter__ Quarter __________________________________________________________ $A’000____$A’000 __________________________________________________________———- ——- 5.1 Cash on hand and at bank________________________________3,245____ 1,439 5.2 Deposits at call______________________________________ 34,423____ 4,309 5.3 Bank Overdraft 5.4 Other (provide details) __________________________________________________________———- ——- Total: cash at end of quarter (Item 1.22)__________________37,668____ 5,748 __________________________________________________________———- ——- Changes in interests in mining tenements __________________ ————————————————- ——– ____________________Tenement__Nature of interest____ Interest at Interest at __________________ Reference____________(note (2))__Beginning of______End of ________________________________________________________ Quarter____ Quarter __________________ ————————————————- ——– 6.1 Interests in mining tenements____________________________ relinquished, reduced or lapsed__________________________ Nil __________________ ————————————————- ——– 6.2 Interests in mining tenements____________________________ acquired or increased__________________________________ Nil __________________ ————————————————- ——– Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates.
………………………………………………………….. __________________________—————————————— ——- ________________________________Number______ Number Issue price Amount paid ________________________________Issued______ quoted________ per______up per ______________________________________________________ security____security __________________________—————————————— ——- 7.1 Preference securities ____ (description) __________________________—————————————— ——- 7.2 Issued during Quarter __________________________—————————————— ——- 7.3 Ordinary securities____399,819,749__399,819,749 __________________________—————————————— ——- 7.4 Issued during Quarter__ 31,200,000__ 31,200,000 __________________________—————————————— ——- 7.5 Convertible debt ____ securities ____ (description) __________________________—————————————— ——- 7.6 Issued during quarter ——————————————————————– ——- ______________________________________________________ Exercise______Expiry 7.7 Options______________________________________________ Price________Date ____ (description)__________ 4,000,000____________________$0.25____31/10/09 ____________________________ 1,000,000____________________$0.30____30/04/10 ____________________________ 1,000,000____________________$0.35____31/10/10 ____________________________ 7,000,000____________________$0.30____30/09/10 ______________________________ 980,000____________________$0.35____27/02/09 ____________________________ 1,600,000____________________$0.40____14/03/11 ____________________________ 1,600,000____________________$0.40____30/06/11 ____________________________ 3,000,000____________________$0.70____14/07/11 ____________________________ 1,000,000____________________$1.70____14/04/12 ______________________________ 250,000____________________$1.60____02/06/12 __________________________—————————————— ——- 7.8 Issued during Quarter____1,000,000____________________$1.70____14/04/12 ______________________________ 250,000____________________$1.60____02/06/12 __________________________—————————————— ——- 7.9 Exercised during________ 5,000,000____________________$0.08____30/06/08 ____ Quarter__________________ 400,000____________________$0.40____30/06/11 __________________________—————————————— ——- 7.10 Expired during ______Quarter __________________________—————————————— ——- 7.11 Debentures ______(totals only) __________________________————————- 7.12 Unsecured notes ______(totals only) __________________________————————-
Compliance Statement
1. This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).
2. This statement does give a true and fair view of the matters disclosed.
Sign here:______”signed”____________________Date: 31 July 2008 ____________————— ______________Ross Arancini __________Company Secretary
Notes
1. The quarterly report is to provide a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. Any entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
2. The “Nature of Interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
3. Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
4. The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.
5. Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.
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