Minera Andes gold reserves increase 16% P+P

2009-07-29 06:36 ET - News Release

Mr. Art Johnson reports

SAN JOSE MINE RESERVES INCREASED BY 8% IN CONTAINED SILVER AND 16% IN CONTAINED GOLD BETWEEN JUNE 30, 2008 AND DECEMBER 31, 2008

Minera Andes Inc. has received the results of an independent National Instrument 43-101 technical report that includes a review of the mineral resource and reserve estimates as of Dec. 31, 2008, at the San Jose mine in Santa Cruz province, southern Argentina. Compared with the June 30, 2008, estimate as reported by the corporation on June 5, 2009, the contained silver in the proven and probable mineral reserves increased by 8 per cent and the contained gold increased 16 per cent. Gold and silver ounces at the mine increased compared with those reported in the previous technical report because the grades of the mineral reserves increased, primarily due to the usage of higher metal prices and a higher cut-off value reflecting actual cost experience, as well as the addition of mineral reserves through exploration.

The technical report entitled, "Technical Report on the San Jose Silver-Gold Mine, Santa Cruz, Argentina," was prepared by P&E Mining Consultants Inc. and authored by Eugene Puritch, PEng, Al Hayden, PEng, James L. Pearson, PEng, Antoine Yassa, PGeo, Fred H. Brown, MSc(Eng) CPG PrSCiNat, and Kirstine Malloch, MAusIMM, all of whom are qualified persons for the purposes of National Instrument 43-101.

Mineral resources

The Dec. 31, 2008, San Jose mineral resource and mineral reserve estimates disclosed herein are based on work from the company's joint venture partner that was audited and adjusted by independent qualified persons James L. Pearson, PEng, Eugene Puritch, PEng, and Fred H. Brown, MSc(Eng) CPG PrSCiNat of P&E. The mineral resources and reserves remain open along strike and at depth in some areas.

P&E used a gold price of $800 (U.S.) per ounce (oz) and a silver price of $12.00 (U.S.) per ounce for estimating mineral resources and reserves, which reflect the price levels at the end of 2008. The average life-of-mine cash operating costs are estimated at $106.51 (U.S.) per tonne of ore processed, or $4.16 (U.S.) per equivalent ounce of silver. The corporation's 49-per-cent attributable share of the base case net present value (NPV), using long-term metal price estimations of $900 (U.S.) per ounce of gold and $13.00 (U.S.) per ounce of silver and a discount rate of 7 per cent, is $103.4-million (U.S.). On an undiscounted basis, the corporation's share is $116.3-million (U.S.).

At Dec. 31, 2008, total measured and indicated mineral resources at the San Jose mine were 575,000 ounces of gold and 38.0 million ounces of silver, contained in 2,240,300 tonnes grading 7.98 grams per tonne gold and 527 grams per tonne silver, or 72.5 million ounces of silver on a silver-equivalent basis (see table below). An additional 191,000 ounces of gold and 11.3 million ounces of silver, contained in 1,049,900 tonnes, grading 5.66 grams per tonne gold and 334 grams per tonne silver are classified as inferred resources. A marginal cut-off grade of 240 grams per tonne of silver equivalent, representing the variable operating cost, was used to estimate the mineral resources (using a price of $800 (U.S.) per ounce for gold and $12.00 (U.S.) per ounce for silver).

          MINERAL RESOURCES(*) -- MEASURED AND INDICATED

                                     Measured               Indicated
Vein                     
                          Tonnes      Ag      Au  Tonnes      Ag      Au
                          (1,000)    g/t     g/t  (1,000)    g/t     g/t

Ayelen                       1.2     761    5.05   114.2     486    5.07
Frea                       243.6     551    9.90   263.3     295   13.46
Huevos Verdes Sur          144.2     706   10.41    28.0     414    7.47
Huevos Verdes Central       35.6     373    3.92    83.7     433    4.72
Huevos Verdes Norte         86.8     507    5.58    65.2     384    4.30
Kospi                          -       -       -   646.4     747    8.29
Odin                           -       -       -   306.0     364    5.67
Ramal HVS                    5.0     532    6.19    35.7     421    5.82
Ramal Frea                     -       -       -   122.7     396    6.41
Ramal 483                      -       -       -    58.9     337    3.58
Total Dec. 31, 2008        516.3     575    8.85 1,724.0     513    7.72
Total June 30, 2008        750.0     507    8.63 1,749.0     483    6.46
Percentage change           -31 per cent                     -1 per cent


                             Measured and indicated     Contained ounces
Vein                     
                          Tonnes      Ag      Au   Silver    Gold   EqAg
                          (1,000)    g/t     g/t   (k oz)   (k oz) (k oz)

Ayelen                     115.4     489    5.07   1,814      19   2,943
Frea                       506.9     418   11.75   6,812     191  18,302
Huevos Verdes Sur          172.2     659    9.93   3,648      55   6,947
Huevos Verdes Central      119.3     415    4.48   1,592      17   2,623
Huevos Verdes Norte        151.9     455    5.03   2,222      25   3,696
Kospi                      646.4     747    8.29  15,524     172  25,861
Odin                       306.0     364    5.67   3,581      56   6,928
Ramal HVS                   40.7     435    5.87     569       8   1,030
Ramal Frea                 122.7     396    6.41   1,562      25   3,079
Ramal 483                   58.9     337    3.58     638       7   1,045
Total Dec. 31, 2008      2,240.3     527    7.98  37,958     575  72,445
Total June 30, 2008      2,499.0     490    7.11  39,350     570  73,550
Percentage change           -10%                     -4%     +1%     -2%

(*) Note: Contains 100 per cent of the resources, Minera Andes's ownership
    of the mine is 49 per cent. Mineral Resources are inclusive of mineral
    reserves. Mineral resources that are not mineral reserves do not have
    demonstrated economic or operational viability. Minera Andes
    calculates the Silver/Gold equivalency as 1oz gold equals 60 ounces of
    silver.

The San Jose mineral resource estimate is based on 507 surface and underground drill holes and 6,640 channel samples. Channel samples were taken from underground operations at Huevos Verdes Sur, Frea and Kospi.

The resource models were developed using industry-accepted methods. P&E validated the model estimates and found them to reasonably estimate grade and tonnage. The mineral resource estimates are compliant with CIM Definition Standards for Mineral Resources and Mineral Reserves as incorporated by reference in NI 43-101.

Mineral reserves

At Dec. 31, 2008, the proven and probable mineral reserves, based on an overall economic cut-off value of $126.47 (U.S.) per tonne (using a price of $800 (U.S.) per ounce for gold and $12.00 (U.S.) per ounce for silver), are 1,626,000 tonnes at 523 grams per tonne silver and 7.89 grams per tonne gold, containing 27,323,000 ounces of silver and 412,000 ounces of gold. The mineral reserves also take into account marginal blocks of ore located within or on the periphery of higher grade zones. The marginal cut-off for these blocks was $60.84 (U.S.) per tonne. The marginal cut-off was defined by the value of ore that meets the variable costs, but not the fixed costs.

                  MINERAL RESERVES(*) -- PROVEN AND PROBABLE

                                      Proven                 Probable
Vein                     
                          Tonnes      Ag      Au   Tonnes     Ag      Au
                          (1,000)    g/t     g/t   (1,000)   g/t     g/t

Frea                         256     483    8.64     244     263   11.89
Huevos Verdes Sur            142     629    9.37      17     440    7.57
Huevos Verdes Central         35     341    3.58      77     377    4.11
Huevos Verdes Norte           80     450    4.97      52     342    3.63
Kospi                          -       -       -     607     696    7.52
Ramal HVS                      4     505    5.94      18     392    6.42
Ramal Frea                     -       -       -      66     443    5.91
Ramal 483                      -       -       -      28     366    4.73
Total Dec. 31, 2008          517     508    7.91   1,109     529    7.88
Total June 30, 2008          519     459    6.28   1,095     499    7.16
Percentage change            Nil                      +1%

                                Proven and probable      Contained ounces
Vein                   
                          Tonnes      Ag      Au   Silver    Gold   EqAg
                          (1,000)    g/t     g/t   (k oz)   (k oz) (k oz)

Frea                         500     375   10.23   6,030     164  15,892
Huevos Verdes Sur            159     609    9.18   3,105      47   5,915
Huevos Verdes Central        112     366    3.94   1,314      14   2,164
Huevos Verdes Norte          132     407    4.44   1,733      19   2,866
Kospi                        607     696    7.52  13,573     147  22,379
Ramal HVS                     22     413    6.33     297       5     569
Ramal Frea                    66     443    5.91     944      13   1,700
Ramal 483                     28     366    4.73     327       4     581
Total Dec. 31, 2008        1,626     523    7.89  27,323     412  52,065
Total June 30, 2008        1,615     486    6.88  25,231     357  46,651
Percentage change            +1%                     +8%    +16%    +12%

(*) Note: Contains 100 per cent of the reserves. Minera Andes ownership 
    of the mine is 49 per cent. Minera Andes calculates the silver/gold 
    equivalency as once ounce of gold equals 60 ounces of silver.

The increase in the silver and gold content of the mineral reserves from June, 2008, to December, 2008, is due to the usage of higher metal prices and a higher cut-off value as well as the addition of mineral reserves through exploration, which overall has had a positive impact on both silver and gold grades as well as the metal contained in the mineral reserves. At the current mill capacity of 1,500 tonnes per day, the reserves have a life of 3.1 years.

The following table provides a reconciliation of the December, 2008, mineral reserves to the June, 2008, mineral reserves taking production during the period into account. The percentage gain is calculated by dividing the depleted mineral reserve tonnes and ounces as of Dec. 31, 2008, by the amount gained. The amount gained is the mineral reserve reported on Dec. 31, 2008, less the depleted mineral reserve resulting from production.

The following summarizes the key assumptions, parameters and methods used in the mineral resource and mineral reserve estimates:

• Drill hole assay values and channel samples were combined for mineral resource estimation;
• Bulk density values used for the estimate are 2.60 tonnes per cubic meter (t/m(3)) for Huevos Verdes Sur, 2.60 t/m(3) for Frea, and 2.60 t/m(3) for Kospi;
• Assays values manually identified as ore grade were composited to length-weighted composite samples;
• Prior to block estimation, gold composite samples were cut to 150 grams per tonne at Huevos Verdes Sur, 70 grams per tonne at Frea and 40 grams per tonne at Kospi. Silver assays were cut to 10,000 grams per tonne at Huevos Verdes Sur, 4,200 grams per tonne at Frea and 4,400 grams per tonne at Kospi;
• Estimation was done using oriented search ellipses and Ordinary Kriging where sufficient resolution was available for variography, or by inverse distance cubed weighting of composite values where the resolution was poor;
• Mineral resource estimation was confined to areas considered to have a reasonable degree of geological confidence.
• The mineral reserve cut-off value (COV) is based on historical January to October, 2008, geologic, mining, plant and mine administration variable and fixed costs, and November and December, 2008, estimated costs. Economic cut-off values (ECOV) were estimated using both variable and fixed costs and marginal cut-off values (MCOV) were estimated using variable costs only. The mineral reserve estimate is primarily based on the ECOV. Ore with a grade above the MCOV and less than the ECOV are included in the mineral reserve estimate if it was necessary to develop through them in order to access ore grades above the ECOV. A total of 84 per cent of reserves are at or above the ECOV and 16 per cent of mineral reserves are between the ECOV and the MCOV. The ECOV and the MCOV are $126.47 (U.S.) per tonne and $60.84 (U.S.) per tonne, respectively.
• The economic and marginal cut-offs used to estimate mineral reserves are 499 grams per tonne gold and 240 grams per tonne silver equivalent, respectively.
• Mineral reserves are estimated to a minimum 0.8 metre (m) mining thickness. This adds 1.2 per cent to the initial measured and indicated mineral resources used to estimate mineral reserves.
• Within the boundaries of this 0.8 metre minimum thickness there is some material that contains combined silver and gold grade values below the MCOV cut-off value that must be mined. This material is referred to as planned internal dilution. Planned internal dilution is estimated to be 4.4 per cent, 0.6 per cent and 0.6 per cent by tonnes, contained Ag and contained Au, respectively.
• Mine recovery is estimated based on the mine plan and design. Mine recovery losses includes pillars not recovered, losses due to bad ground and blasted ore left in stopes. Of the initial measured and indicated mineral resources used to estimate mineral reserves an estimated 24.6 per cent of these mineral resources will not be recovered.
• Planned external dilution is estimated, based on the mine plan and design. This planned external dilution is estimated based on historical reconciliation data gathered, including excavation surveys, and includes slough and blasted waste rock from both the hanging and footwalls, mined backfill and blasted waste sent to the mill. Planned external dilution is estimated to be 13.2 per cent.

A technical report, prepared in accordance with NI 43-101, will be filed on SEDAR shortly.

This news release was prepared under the supervision of Brian Gavin, CPG, vice-president exploration of Minera Andes, a "qualified person" within the meaning of National Instrument 43-101. For (i) the mineral resource/reserve estimate contained herein; (ii) a description of the key assumptions, parametres and methods used to estimate the mineral resource/reserve referred to in this news release; and (iii) a general discussion of the extent to which the estimate of mineral resources/reserves may be materially affected by any unknown environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues, please refer to the technical report to be filed as noted above.

We seek Safe Harbor.