Minera Andes

A major part of mineral exploration is being able to see beyond the surface. It takes thorough research, expert leadership, a pioneering attitude and the intuition to know whether or not you’re on to something – all of which are attributes that junior explorer company Minera Andes possesses. Minera Andes was established in the early 1990s to take advantage of new Argentinean laws that encouraged foreign investors to invest in the country’s rich mineral deposits. Minera Andes leveraged the opportunity successfully.

The company discovered two major deposits in Argentina – a large porphyry copper deposit in the northern province of San Juan, as well as a major gold-silver vein deposit in the Deseado Massif region of Santa Cruz province in the south.

“One of the interesting things to watch has been the emergence of both precious metals in Santa Cruz and the emergence of copper around San Juan,” COO James Duff explains.

“San Juan has always been known as a mining province, but in the last 10 to 20 years, some major deposits – such as Barrick’s Veladero and Pascua-Llama > mines and Yamana’s Gualcamayo mine – have been advanced to development and production.”

Seeing the upside
Minera Andes’ contribution to Argentina’s mining landscape is considerable. Its work includes the discovery of one of the world’s largest undeveloped copper deposits, Los Azules. The deposit – as it is drilled today – is about four kilometers long by one kilometer wide, and its mineralization extends to a depth of at least 650 meters, the company notes. Minera Andes’ drilling through the end of 2010 had identified a measured and indicated resource of 12.5 billion pounds of copper.

About the same time that Minera Andes acquired the mining rights for Los Azules, Battle Mountain Gold started exploring for gold in the area. Battle Mountain, however, found only low levels of gold and some copper mineralization in the area.

Minera Andes started its first drilling campaign in 2004, and in 2006, Hole 19 hit “spectacular high-grade mineralization – 221 meters at a grade of 1.62 percent,” the company says.

Eventually the Battle Mountain ground passed to the hands of Xstrata Copper Company, and in 2007 Minera Andes and Xstrata formed a joint venture to explore the combined property with Minera Andes as the operator during the exploration phase.

The company completed a preliminary assessment of the project in the first quarter of 2009, and Minera Andes is currently working on a preliminary feasibility study. Xstrata Copper dropped out of the joint venture in 2009, and Minera Andes now owns 100 percent of the project.

“We are systematically advancing the Los Azules project through exploration and feasibility,” Duff says. “And through that process, we are expanding and de-risking the project.”

Minera Andes released an updated preliminary assessment in December 2010 that showed a significant rise in the project’s value directly linked to the base case price of copper increasing to $3 per pound. The 2010 report also announced the project had a higher metal content of 12.5 billion pounds.

The increased metal content coupled with a higher copper price brings the mine’s net present value to $2.9 billion (which is discounted at 8 percent).

“There is tremendous upside associated with our assets,” Duff claims. “The geophysical survey we conducted last year on the Los Azules project has led to the development of new targets that could potentially expand the size significantly of the Los Azules project.

“The preliminary feasibility study is scheduled to be completed by the end of 2012,” he adds.

In the meantime, Minera Andes and its shareholders continue to benefit from its mining project in southern Argentina, he notes.

Increasing capacity
Minera Andes is a unique junior explorer. While the company does not operate any mines, it does benefit from its 49 percent stake in the San José mine in Santa Cruz province. The 51 percent owner of the property, Hochschild Mining of Peru, operates the 1,500 tonne per day underground mine year-round.

Duff says that Hochschild Mining has several years experience in developing narrow-vein mines that are similar to the San Jose mine.

“Minera Andes discovered the San José mine in the early 1990s but did not have the financial resources to put it into production,” Duff explains. “So, we formed a partnership with Hochschild Mining to develop the mine.”

Commercial production at San Jose commenced in 2008.

“In October 2008, the joint venture completed an expansion of the mill doubling its capacity,” Duff says.

“[It has] been a challenge to fully bring the expanded San Jose operation up to full capacity, but we have seen results from the fourth quarter of 2010 at full capacity without disruptions, and the mine and the mill are both running smoothly.”

During 2010’s fourth quarter, the San Jose Mine produced more than 1.8 million ounces of silver and 26,141 ounces of gold, the company says. That’s 33 percent more silver and 19 percent more gold than the previous quarter.

Full-year production for 2010 was 5.3 million ounces of silver and 84,300 ounces of gold. Full production from the mine and resolution of previous disputes with Hochschild Mining is happy news for Minera Andes’ shareholders, Duff says.