Andean is a Canadian mining company producing gold and silver from its Santa Rosa mine in the Andes mountain region in Peru, South America.
Andean continues to provide stunning revenue growth. It again produced record levels of gold in the most recent quarter ended June 30, 2005. Ounces of gold sold were 6,374, up 96% from the same quarter a year ago.
Total revenues for the quarter were $ 3.03 million, compared to $ 1.6 million for the first quarter of 2004. Net income was $ 745,417, up 114% from the quarter a year ago.
For the entire fiscal year ended March 31, 2005, sales had risen to 16,561 ounces, up 111% from the year earlier.
The Company is a low-cost, profitable, cash-flow positive gold producer, with prospects for increasing production and with exploration potential. In addition, the production is unhedged, so any future increases in the price of gold will flow directly to the bottom line.
Projected sales for the year ending March 31, 2006 are expected to be in the range of 30,000 ounces of gold and gold equivalents, or 81% higher than the previous year's record performance.
In the Director’s Report to the Shareholders issued on Aug 3, 2005, the Company’s President, John Huguet, states that the Company seeks to increase production by 200% over the next three years. The long term objective is to grow production to 200,000 ounces by 2010.
The Acamar Journal first wrote about Andean when its share price was $ 0.77. The Company has grown in every respect since then. Apart from record production numbers, it has:
Andean is listed as a mining company on the TSE Venture Exchange. The Company’s head office is in Vancouver.
Andean owns 100% of a 24,000 hectare property, which is located 550km southwest of the capital city, Lima. The Santa Rosa mine began commercial production in March 2002. The Company also has a property, Sinchao, in northern Peru, which covers 1,300 hectares that overlie 16 mining concessions.
In addition, the company has recently acquired three new titles from Barrick Gold Corp’s Peruvian sunsidiary, in Sinchao, covering 51 acres.
The Vancouver Sun, British Columbia’s largest newspaper, awarded a Top 100 BC Companies award to Andean in October 2004 for the second highest revenue growth and the tenth highest employment growth by a BC company.
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Gold is important to Peru. It is the largest gold producing country in Latin America and the second largest silver producer in the world.
In 2003, Peru's gold exports ($ 2 billion worth) accounted for 23% of its total exports. In 2005, Peru expects to become the fifth largest producer of gold in the world, according to the National Society of Mining, Oil, and Energy of Peru.
There are 122 exploration projects underway in Peru, with Canada as the leading player in that country.
Peru also has the distinction of hosting the world's largest gold mine (Yanacocha), operated by Newmont, the largest gold company in the world. Another world class mine, Pierina, is operated by Barrick Gold, Canada's largest gold miner. These two mines are among the lowest cost producers of gold in the world, due to the nature of the geology in Peru which makes production easy relative to other regions.
Santa Rosa Property:
The Santa Rosa property consists of 3 open pits, the open pit zone (structures 1 thru 6), and two under development zones - the Southern Structure and Carelo Zone.
Gold sales for the quarter were 6,374 ounces (5,852 ounces of gold and 522 from gold equivalents in silver), up 96% over the same quarter last year and a 27% improvement over the previous record for quarterly sales (March 31, 2005).
Gold stacked on leach pads was 10,862 ounces in the quarter, up 99% over the same period last year.
Over 221,580 ounces of silver was stacked on leach pads, up more than 62% from the same quarter last year.
For the quarter ended March 31, 2005, the average gold grade was 1.99 g/t while the silver grade averaged 48.3 g/t.
The total tonnage of mineralized ore stacked on the pads in the quarter ended March 21, 2005 was another record at 173,773 tonnes, taking the total tonnes on the leach pads to over 1 million tonnes This is sufficient to cover the next two years production goals.
A substantial capital expansion program has been undertaken to improve metallurgical processing and production methodology, allowing for an increase in capacity in 2005-2006 and beyond. The ADR plant functions at an 81-83% efficiency, and this is expected to increase to 94-96% by the fourth quarter with the commissioning of the silver precipitate circuit in the current quarter.
In addition to the mine, Andean has plans to continue exploration work in the open pit mine zone and other areas, to enhance its resources. Costs will be met through internal cash flow generated from operations.
Sinchao Property:
Sinchao lies approximately 30 km northwest of the Yanacocha mine, which is currently producing 1.5 million ounces of gold per year and is the largest and one of the lowest cost producing gold mines in South America. In addition, Sinchao is immediately beside the Tantahuatay deposit, which has reported resources consisting of 25 million tonnes of oxide mineralization grading 0.8 g/t Au and 350 million tonnes of gold-copper mineralization grading 0.85 % Cu and 0.3 g/t Au. Thus, it lies in a prolific mining belt.
Sinchao had exploration work done in the period 1996-1998, and four distinct types of mineralisation have been identified. Based on past technical reports, management believes that the combined mineralization systems at Sinchao have the potential to host 500 million tonnes of mineralisation, based on their strike lengths, depths and widths.
The mineralization encountered to date is a true polymetallic with copper, gold, silver, zinc and molybdenum. No one value is particularly high but the CONTINUITY OF MINERALIZATION is the outstanding feature of the deposit.
The focus will be on a 1,300 meter by 900 meter magnetic and induced polarity anomaly which has been diamond drill tested to over 700 meters depth. The mineralization in this anomaly has averaged 80% to date from previous drill programs.
However, the potential quality and grade are conceptual in nature and there has been insufficient exploration to define the actual tonnage at this time. Obvious associated risks for exploration are still present.
With three new property titles optioned from the Peruvian subsidiary of Barrick Gold, Andean announced on Aug 22 that it planned an extensive 28-hole drill program. Andean President, John Huguet states "This is the day I have waited on since being elected as an executive to this company. The continuity of mineralisation is just too strong to be ignored. This property is worthy of all of the questions and deserves a program to be put into place to find the answers."
In the year ended March 31, 2005, the Company generated revenues of $ 8.8 million, with an operating profit of $ 3.7 million and a net profit of $ $ 1.8 million. This compares to a loss of $ 1.5 million from the same quarter a year earlier as sales have risen substantially during this period.
For the quarter ended June 30, 2005, the Company has announced that its revenues are up 87% and net income is up 114% compared to the quarter a year earlier. Earnings are 2 cents per share and cash-flow is 2.7 cents per share.
At June 30, 2005 Andean had total assets of $ 44.9 million, represented by $ 8.3 million in liabilities and $ 36.7 million in shareholder equity.
On August 22, the Company announced that it was arranging a financing in the amount of C$ 4.05 million. Each unit subscribed for by investors would include one common share at C$ 0.90 and a one half share purchase warrant. Two one half share purchase warrants entitle the holder to acquire one common share at a price of $ 1.20 for the first six months and a price of $ 1.50 for the second six months. The offering closed on September 13th.
The use of funds will include paying off the $ 2 million outstanding in convertible debentures (at an interest rate of 12% per annum) and other loan liabilities, and $ 1 million for drilling on the Sinchao property.
The Company has added to its management and Board level depth with some recent appointments (highlighted in red).
John Huguet (Chairman, President and Director): Mr. Huguet has over 35 years in natural resource development, including North, Central and South America and South East Asia. Many joint ventures and unique financing structures highlighted his career with the Atkinson Companies. He started his career in 1963 with Atkinson and left Atkinson in April 1997 where he had served 8 years as President and Managing Director of Atkinson Holdings and Commonwealth Construction.
Mr. Huguet joined Andean American in April 1997 and took operational control in September 1998. Mr. Huguet is a Certified Management Accountant (CMA).
Bryan Morris, F.CIMA (Chief Financial Officer and Director): Mr. Morris brings many years of valuable experience to Andean American. Until his retirement in August 2003, Mr. Morris worked for Teck Cominco Limited as Vice President, Business Development and was responsible for identifying, evaluating and negotiating acquisitions, primarily in the zinc business. Prior to that appointment he had been Vice President, Finance and Director of Cominco Resources International Ltd., the listed international exploration arm of Cominco Ltd., and had held senior positions in Cominco's finance organization.
During his career with Teck Cominco he also served as a director of several subsidiaries and associated companies. Between 1965 and 1974 Mr. Morris worked in Peru for Cerro de Pasco Corporation and Centromin. He is a fellow of the Chartered Institute of Management Accountants (UK) and is also a director of several junior mining companies.
Michael C. Scholz (Director): Mr. Scholz is currently chairman of publicly-traded Avcorp Industries Inc., which designs and builds major airframe structures for some of the world’s most respected aircraft companies, including Bombardier, Boeing and Cessna. He was formerly President, Vice Chairman and Director of Great Canadian Gaming Corporation. Mr. Scholz holds a Law Degree and a Bachelor of Commerce Degree from the University of British Columbia, and is a former Senior Partner in the law firm Alexander Holburn Beaudin & Lang, where he practiced corporate, commercial and securities law for 23 years. Mr. Scholz currently serves on a number of boards, including Acero-Martin Exploration, Uniserve Communications and CMC Metals Ltd.
Oscar Rolando Davila (General Manager, Peru): Mr. Davila holds degrees in Engineering and graduate studies in Business Administration. He has over 35 years experience in operations and project management in the natural resource industries in Peru, the Americas and Asia.
Hector Campos (Mine Manager, Mine Engineer): Mr. Campos brings 17 years mine management to Andean, having recently returned to Peru from his successful assignment at kilometer 88 in Venezuela. Mine planning and Development are Campos strong suits, skills in strong demand as the mine site now employs close to 300 engineers, miners and contractors.
Jose Antonio Rado (Mine Engineer, Pit Superintendent): Mr. Rado brings 14 years experience to the Santa Rosa mine, having worked extensively in the Peruvian Andes, most recently in the same position for Comarsa.
Jorge Alejos (Mine and Chemical Engineer, Plant Superintendent): Mr. Alejos brings 20 years of metallurgical Processing experience to the Santa Rosa Mine. Importantly he also heads up a 7 man committee for scientific investigation and development, which is dedicated to continuous process improvement.
Javier Carnero Rodriguez (Quality Control and Exploration, Santa Rosa Mine):Mr. Rodriguez is a professional engineering geologist. He received his degree from the National University of Saint Agustin in Arequipa, Peru. Mr. Rodriguez had worked in a variety of roles in exploration, ore control, drilling with a number of companies including Minera Antamina, Cominco (Peru), Buenaventura and Fresnillo S.A.
Orlando Zavalos, P. Geo. (Superintendent of Geology): Mr. Zavalos brings 14 years of Gold Exploration and Operations experience from his years at SIPAN Gold mines in Northern Peru where he held positions of ever increasing responsibility, his last 4 years as Chief of Geology, Operacions.
Hai Van Le (Director of Corporate Development): Mr. Le brings corporate development, financial analysis and investor relations capability to Andean American. He was most recently with Vannessa Ventures, an emerging producer with operations in Latin America ,where he managed Vannessa's investor relations program and assisted management with finance-related matters including, but not limited to, cash flows forecast and NPV analysis of advanced projects. He has a Bachelor’s degree from Simon Fraser University.
Sheera Waisman, MBA (Director of Media Relations): Ms. Sheera Waisman is an experienced professional with over 15 years as a Media Producer and Director including 10 years as a Manager at Roger Cable and a Board Member and President of the Greater Vancouver Media Association.
Gregg Thompson (Director): Mr. Thompson is the President and Chief Operating Officer of the Tom Peters Company. He has extensive experience as a business leader, executive coach, trainer and management consultant, with clients such as Microsoft, Wal-Mart, Intel and Coca Cola. Mr. Thompson holds a Master of Organization Development degree from Pepperdine University in Malibu, California.
Nick DeMare, CA (Director and Corporate Secretary): Mr. DeMare has over 20 years experience in a broad range of administrative, management and financial services to private and public companies including his own, Chase Management. He is a member of the Institute of Chartered Accountants of British Columbia and has his Bachelor of Commerce from the University of British Columbia.
Shafiq Gulamani, (Director): Mr. Gulamani is the President and director of Comnav Marine Ltd. and SD1 Capital Corp. Mr. Gulamani is also a board member of a private investment corporation. Mr.Gulamani is a member of the Association of Professional Engineers of BC.
Advisory Board
J. Peter Davies, P.Eng.: Mr. Davies has spent over 45 years in the mining industry including 8 years with Getty Mining Company where he was responsible for minerals developments including their 50% share of Escondida in Chile. He spent 6 years as Chief Mining Engineer with Bechtel Corporation; 5 years with Kaiser Mining and Exploration, including evaluation of the Bayovar phospate project in Peru; and 15 years in operations. Peter is a mining engineer from the Royal School of Mines, University of London, where he was awarded the Brough medal for achievement.
Fred Warnaars, Ph.D.: Mr. Warnaars has 28 years of world wide economic geology experience including many major precious and base metal discoveries in North, Central and South America. His experience includes 5 years with Cyprus Minerals, 2 years with Behre Dolbear, 9 years with Exxon Minerals, and 7 years with Kennecott Copper. Dr. Warnaars has a Ph.D in Petrology from Leyden, the Netherlands, 10 publications to his name, and is credited with advancing quantitative chemical analysis with a newly designed electron microprobe.
Lindsay Bottomer, P.Geo.: Mr. Bottomer has over 29 years of worldwide exploration experience and is currently President of Southern Rio Resources Ltd. In 1999 through 2001 Mr. Bottomer acted as third party verification for Andean American and reported directly to the Company's president.
Edwilde Yoplac, Chief Metallurgical Consultant: Mr. Yoplac has over 25 years of experience with deposits in the Peruvian Andes. He is also retained as a consultant by both Yanacocha and Pierina.
Dieter Luescher: Mr. Luescher is a graduate of University Zurich (FH Business Economist SEBA/UAS) and holds degree of Certified European Financial Analyst and Portfolio Manager (CEFA/AZEK). He has over 21 years experience in private banking.
Andean American is a profitable mining company with excellent growth prospects. It has no analyst coverage and represents a potentially undervalued situation, if it is able to deliver in accordance with its production plan. It has exploration potential within both its primary properties, with one of them lying in a prolific mining district which includes the largest gold mine in the world.
Visit Andean American Mining Corp.’s website at www.andeanamerican.com
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