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Focused on the exploration and development of gold projects in Patagonia, Argentina.
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Message: Quarterly Report for the Quarter Ended 31st December 2008
| January 30, 2009 | |||||
| Andean Resources Limited: Quarterly Report for the Quarter Ended 31st December 2008 | |||||
|
FREMANTLE, WESTERN AUSTRALIA--(Marketwire - Jan. 30, 2009) - Andean Resources Ltd. (TSX:AND)(ASX:AND) - QUARTERLY REPORT For the Quarter Ended 31th December 2008 (Dollars expressed in Australian dollars) HIGHLIGHTS - Completion of Pre-feasibility study; demonstrating robust project economics with significant upside potential - Initiated a Bankable Feasibility Study based on revised project parameters targeting lower capital expenditures, extended mine life and increased IRR - Infill drilling at Eureka West continues to confirm structural and grade continuity, supportive of further upgrading of project Resources in Q2 2009 - Expanded the depth potential of Eureka West with drill hole EDD-887, which intersected 31m of 52.1g/t Au and 568g/t Ag from 334m, including 23.7m of 65.1g/t Au and 712g/t Ag from 334m. - At quarter-end, cash balances were $28.7 million Completed Prefeasibility Study On October 28, 2008, Andean announced the highlights of its Prefeasibility Study (PFS), which was completed based on the previously reported gold and silver mineral resource estimates at the Vein Zone and Eureka West deposits. Ausenco Services Pty Ltd ("Ausenco") compiled the overall report and supervised the metallurgical testwork and process plant design; Micon International Limited ("Micon") was responsible for the mineral resource estimates; and Mine Development Associates ("MDA") was responsible for the mining study. Highlights of the PFS included (all currency in US dollars): - Proven and probable reserves of 1.5 million ounces (oz) of gold and 17.3 million oz of silver and excludes the inferred resource of 0.7 million oz of gold and 4.9 million oz of silver (based on NI 43-101 and JORC compliant resources announced in October 2007 and April 2008) - Projected annual production of up to 350,000 ounces of gold per year - Expected low average cash cost of production of $196 per ounce (after by-product silver credits), making Cerro Negro one of the lowest cost undeveloped gold deposits globally - Robust internal rate of return (IRR) of 41% (post tax) on initial capital investment estimated at $278 million with a projected payback of capital in the first two years of production - For the first three years of production, net free cash flow of $170 million per year (post-tax) Andean believes significant future upside exists to improve the "base case" economics derived from the PFS work, including - the ability to convert 336,000 ounces of inferred gold resources to indicated resources at Eureka to improve overall project economics; - engaging contract miners rather than an owner-operated mining fleet; - improvements to gold and silver recoveries from the Eureka ores through additional metallurgical testwork; and - the use of more cost effective mining methods such as sub-level stoping supported with an improved geotechnical model; Bankable Feasibility Study On the basis of the PFS results, Andean's Board of Directors approved the commencement of a Bankable Feasibility Study (BFS), which will be managed jointly between the Company and Ausenco. One of the tasks the Company undertook during the Quarter was to examine various alternatives to the PFS parameters; aimed at significantly reducing the estimated US$ 280 million initial capital costs, extending the mine life of the project and increasing the overall project IRR. Based on these analyses, Andean is now moving forward with a BFS for its Cerro Negro project based on the following: - The processing plant design has been changed from a 4,000 tonne per day operation to a smaller and less capital intensive 2,000 tonne per day plant. - Construction of the processing plant is planned for an area in close proximity to the Eureka camp, in comparison with the original plan to construct the plant near the Vein Zone deposit, approximately 15 kilometres away. - The mining sequence of the deposits will be scheduled with the high-grade Eureka deposit being mined first followed by the Vein Zone deposit once Eureka has been completed. The original PFS had planned for the simultaneous mining of both deposits, resulting in a larger mill and significantly higher initial capital expenditures. - The use of contract miners and equipment versus an owner-operated workforce and mining equipment (as assumed in the PFS). The BFS is scheduled for completion by Q4 2009, 3 months later than originally scheduled, resulting largely from the need to re-estimate key capital and operating assumptions summarized above. Indicative Operating Parameters for the Revised 2000 TPD Project The Company is obtaining revised quotes for capital and operating items consistent with a move to an initial 2,000 tonne per day throughput schedule. These quotes should be received over the next 6 weeks and will allow for a more accurate re-estimation of the project costs, which the Company will make available to the public once the review has been completed. As part of the BFS work, Andean and external consultants will also be examining possible additional cost savings by utilising second hand processing equipment. The availability of second hand equipment has increased markedly over the last 6 months, as projects have been deferred or postponed altogether due to the deterioration in the underlying operating environments. 2008/09 Exploration Program The Company's largest drill program to-date, with a budget of $12.5 million, began in earnest in September 2008. This drilling program was designed to - Expand the indicated resources at the Eureka West veins for inclusion in the Bankable Feasibility Study (BFS); - Drill test a new geologic interpretation at Vein Zone to follow what has been interpreted as a possible NW-SE trending inflection in the eastern part of the current resource and test the possibility of a higher-grade underground resource with the veins open to depth; - Investigate the possibility of new ore shoots in the Eureka corridor, with less than 1km of the 4km Eureka structure drill tested; - Perform geotechnical, metallurgical, hydrological, and condemnation drilling for commencement of the BFS; - Drill test four targets near Vein Zone; Silica Cap, Bajo Negro, Don Adolfo, and Pescado Rabioso. Eureka West Vein - Extension Holes (Step out) The Company continued to drill test the high-grade Eureka West Vein in order to better define the top and bottom limits of the structure which hosts the Eureka West mineral resource. The highlights of the drill results obtained during the quarter include: - EDD-887: 31m of 52.1g/t Au and 568g/t Ag from 334m, including 23.7m of 65.1g/t Au and 712g/t Ag from 334m - ERC-889: 2m of 11.4g/t Au and 185g/t Ag from 212m and 12m of 6.1g/t Au and 185g/t Ag from 218m - ERC-890: 1m of 44.0g/t Au and 53g/t Ag from 194m - ERC-891: 6m of 20.8g/t Au and 105g/t Ag from 131m - ERC-893: 5m of 7.5g/t Au and 159g/t from 131m and 16m of 5.6g/t Au and 69g/t Ag from 165m - ERC-895: 7m of 12.8g/t Au and 258g/t Ag from 289m EDD-887 was drilled as a geotechnical hole to test rock quality in the hanging wall andesite ahead of designing the underground decline. The Eureka West vein was intersected at the 300m elevation, the deepest drill intersection on the vein to date, and returned the 31m high-grade intersection in the 1.0 split. This same hole then encountered a 6m intersection of 6.0 g/t Au and 99 g/t Ag corresponding to the 1.1 split. Since this was a geotechnical hole, the intersection was oblique to the vein (see the attached cross-section), and the estimated true thickness of the intersection is about 6m. Eureka West Vein - Infill Holes During the quarter, several new and encouraging infill holes were drilled at the Eureka West veins in order to upgrade the inferred resource of 336,000 oz of gold into the indicated status. Some of the results included: - ERC-877: 4.0m of 8.6 g/t Au and 95 g/t Ag from 207m - ERC-878: 16.0m of 5.8 g/t Au and 61 g/t Ag from 162m - ERC-879: 5.0m of 29.3 g/t Au and 324 g/t Ag from 288m - ERC-885: 12.0m of 14.4 g/t Au and 135 g/t Ag from 230m - ERC-886: 8m of 17.0 g/t Au and 308 g/t Ag from 272m - ERC-888: 17m of 14.1 g/t Au and 372g/t Ag from 136m - ERC-892: 5m of 8.5g/t Au and 33 g/t Ag from 229m and 3m of 9.9g/t Au and 110g/t Ag from 243m - EDD-896: 12.3m of 8.9g/t Au and 116g/t Ag from 172.7m, including 6m of 14.0g/t Au and 153g/t Ag from 177m - ERC-897: 15m of 6.1g/t Au and 40g/t Ag from 186m, including 4m of 9.4g/t Au and 63g/t Ag from 192m The seven 2009/09 holes that were released on December 4, 2008, were drilled on a NE-SW grid to better test the SE part of the resource, where veins have a predominant north-westerly trend. Previous holes, drilled on a NS grid, were in some cases oblique to the trend of the veins. The best results from this program were obtained in holes drilled in the western half of the new grid: - VDD-801: 10m of 9.4 g/t Au from 145m - VRC-805: 9m of 6.4 g/t Au from 9m and 9m of 8.7 g/t Au from 42m - VRC-806: 24m of 5.4 g/t Au from 173m Three holes (VDD-802, VDD-803, and VRC-807) were drilled to test the SE limit of the resource with limited success as the veins tend to narrow in this area (see Figure 4). Results include: - VDD-802: 3m of 9.1 g/t Au from 119m - VRC-807: 6m of 3.3 g/t Au from 223m A total of 550m of new trenching was completed on the Bajo Negro vein, south west of Vein Zone, in addition to a 190m existing trench. The Bajo Negro vein outcrops are approximately 100m above the level of exposure at Vein Zone, and are close to silicified outcrops thought to have been deposited above a paleo-water table. Andean intends to drill the vein to explore for a deeper gold-enriched zone such as was found in the Eureka area. 2009 CERRO NEGRO TIMELINE - Drilling Campaign - ongoing from January through May, break for winter months, and recommence in September - Resource Estimates - to be completed in the second quarter for inclusion in the BFS - Bankable Feasibility Study - to be released in the fourth quarter - Permitting - to be completed during the fourth quarter Currently, two exploration drill-rigs are focused on expanding the deep high-grade mineralization at Eureka West, intersected in drill-hole EDD-887 (31m of 52.1 g/t Au 568 g/t Ag), which was released on December 19, 2008. This drill-hole was the deepest hole drilled on the property to date intersecting the mineralization at 300 meters above sea-level. Drilling is now focused on stepping out at 50 meter increments along strike to the west and to the east at this 300m elevation in order to further explore the potential at depth. Drilling results will be released once assays have been received. CORPORATE Share Capital At quarter-end the Company's issued securities were as follows: - 402.9 million ordinary shares - 21.4 million unlisted options (at various strike pieces between A$0.25 and A$1.70) 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. Appendix 5B
MINING EXPLORATION ENTITY QUARTERLY REPORT
Name of entity
---------------------------------------------------------------------------
ANDEAN RESOURCES LTD
---------------------------------------------------------------------------
ABN Quarter ended ("current quarter")
-------------- ---------------------------------
66 064 494 319 31 December 2008
-------------- ---------------------------------
Consolidated statement of cash flows
----------------------
Current Year to Date
Qtr (6 months)
Cash flows related to operating activities $A'000 $A'000
----------------------
1.1 Receipts from product sales and related debtors
1.2 Payments for: (a) exploration and evaluation (6,625) (9,996)
(b) development
(c) production
(d) administration (2,478) (4,645)
1.3 Dividends received
1.4 Interest and other items of a similar
nature received 212 525
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 (8,891) (14,116)
----------------------------------------------------------------------------
Cash flows related to investing activities
1.8 Payment for purchases of: (a) prospects
(b) equity investments
(c) other fixed assets (464) (864)
1.9 Proceeds from sale of: (a) prospects
(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 (464) (864)
----------------------
1.13 Total operating and investing cash flows (9,355) (14,980)
(carried forward)
----------------------------------------------------------------------------
1.13 Total operating and investing cash flows (9,355) (14,980)
(brought forward)
----------------------------------------------------------------------------
Cash flows related to financing activities
1.14 Proceeds from the issue of shares, options, etc. 300
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
----------------------
Net financing cash flows 300
----------------------------------------------------------------------------
Net increase (decrease) in cash held (9,355) (14,680)
1.20 Cash at beginning of quarter/year to date 38,031 37,668
1.21 Exchange rate adjustments to item 1.20 87 5,775
----------------------
1.22 Cash at end of quarter 28,763 28,763
----------------------------------------------------------------------------
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 1.2 291
------------
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 (207)
Directors fees, salaries & superannuation (84)
----------------------------------------------------------------------
Non-cash financing and investing activities
2.1 Details of financing and investing transactions which have had assets
a material effect on consolidated 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 5,000
4.2 Development
----------------------------------------------------------------------------
Total 5,000
----------------------------------------------------------------------------
Reconciliation of cash
Reconciliation of cash at the end of ----------------------------------
the quarter (as shown in the
consolidated statement of cash flows)
to related items in the accounts Current Quarter Previous Quarter
as follows. $A'000 $A'000
----------------------------------
5.1 Cash on hand and at bank 1,506 2,725
5.2 Deposits at call 27,257 35,306
5.3 Bank Overdraft
5.4 Other (provide details)
----------------------------------
Total: cash at end of quarter (Item 1.22) 28,763 38,031
----------------------------------
Changes in interests in mining tenements
-----------------------------------------------
Tenement Nature of Interest at Interest at
Reference interest Beginning of End of
(note (2)) 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 Amount paid
Issued quoted price per up per
security security
----------------------------------------------------------------------------
7.1 Preference securities
(description)
------------------------------------------------
7.2 Issued during
Quarter
------------------------------------------------
7.3 Ordinary securities 402,874,544 402,874,544
------------------------------------------------
7.4 Issued during Quarter 2,054,795 2,054,795
----------------------------------------------------------------------------
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
6,000,000 $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
1,000,000 $0.75 31/07/12
------------------------------------------------
7.8 Issued during Quarter 1,000,000 $0.75 31/07/12
------------------------------------------------
7.9 Exercised during
Quarter
------------------------------------------------
7.10 Expired during
Quarter
------------------------------------------------
7.11 Debentures
(totals only)
-----------------------
7.12 Unsecured notes
(totals only)
-----------------------
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: 30 January 2009
Ross Arancini
Company Secretary
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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