Andean Resources Ltd.
TSX : AND
ASX : AND

Andean Resources Ltd.

October 29, 2009 08:00 ET

Andean Resources Ltd.: Quarterly Report for the Quarter Ended September 30th 2009

PERTH, AUSTRALIA--(Marketwire - Oct. 29, 2009) - Andean Resources (TSX:AND)(ASX:AND) is pleased to report the results for the quarter ended September 30, 2009 covering the Company's activities at its 100% owned Cerro Negro epithermal gold project in southern Argentina. Good progress continues to be made in the exploration programs designed to increase the Company's overall gold and silver resources; in the bankable feasibility study; in site infrastructure; and in building a team to enable the path to production with the following highlights:

Highlights

- Further drilling at the Bajo Negro discovery extended known strike length to over 1 kilometer with the vein remaining open along strike and to depth

-- BDD-925: 9.4m of 22.1 g/t Au and 42 g/t Ag from 242m

-- BDD-937: 9.6m of 22.1 g/t Au and 30 g/t Ag from 267m

-- BDD-942: 13.5m of 13.7 g/t Au and 46 g/t Ag from 308m

-- BDD-954: 4.9m of 21.3 g/t Au and 41 g/t Ag from 279m

-- BDD-955: 5.75m of 104.9 g/t Au and greater than 45 g/t Ag from 263m

- Completion of the first ever winter drill program at Cerro Negro

- New Bajo Negro discovery to be included in the Bankable Feasibility Study

- Underground contractor to mobilize to site in the fourth quarter of 2009

- Appointment of Louis Gignac as Chairman of the Board

- Appointment of Richard Leclerc as Vice President, Operations

- Cash balances at quarter-end were A$95.2M

Exploration Activities

Bajo Negro Drilling - continued resource expansion

Throughout the first ever winter drill season at Cerro Negro, the Company's main drilling focus was on the Bajo Negro area, located 13 kilometers from the Eureka West veins and 2 kilometers south of Vein Zone. For the entire winter drill program, 2 Major winterized diamond core rigs were used to extend and infill the deposit.

Most of the holes drilled during the quarter extended the mineralization to the northwest and delineated a second ore-shoot northwest of the shoot defined by drilling in the prior quarter. Most of this shoot is concealed below a post-mineral breccia deposit, which reaches over 200 meters thick. This northwest shoot has a wider and/or higher grade core as defined by the following intersections:

- BDD-937: 9.6m of 22.1 g/t Au from 266.75m and 5.7m of 17.7 g/t Au from 285.05m

- BDD-942: 13.5m of 13.7 g/t Au from 308m

- BDD-946: 17.7m of 12.2 g/t Au from 231.9m

- BDD-954 : 4.9m of 21.3 g/t Au from 278.9m

- BDD-955: 5.75m of 104.9 g/t Au from 262.5m including 0.5m of 1071 g/t Au from 265.7m

- BDD-956: 12.35m of 12.1 g/t Au from 270.8m.

The shoot remains open to the northwest and at depth, where slightly narrower or lower grade mineralization has been intercepted in the following holes:

- BDD-958: 3.4m of 13.8 g/t Au from 309m

- BDD-960: 6.55m of 10.4 g/t Au from 337.9m

- BDD-962: 7.85m of 8.2 g/t Au from 362m

Four other holes explored the southeast end of the vein:

- BDD-936: 2.6m of 5.6 g/t Au from 180.1m

- BDD-938: 3m of 17 g/t Au from 197m

- BDD-939 and BDD-941: No significant intersections.

Four holes drilled in the previous quarter, with assays pending, intersected the vein between the two ore shoots:

- BDD-920: 3.3m of 7.6 g/t Au from 224.1m

- BDD-922: 2.5m of 4.8 g/t Au from 281.4m

- BDD-926: 1m of 3.1 g/t Au from 162m

- BDD-932: 15.4m of 12 g/t Au from 214.25m (transition to the NW shoot)

Step-out exploration has commenced 500m north of existing drilling on the inferred strike extension of the Bajo Negro vein As a summary of the above, drilling at Bajo Negro during the quarter has extended the length of mineralization to over 1 kilometer. The mineralization is still open to the northwest and at depth.

Regional Exploration targets

Mariana Norte

Float sampling and geological mapping in the Mariana Norte area, commenced in the previous quarter and continued throughout the quarter ended September 30th. A total of 77 samples have been collected over a northwest-trending area of 2 x 0.5 kilometers. These include 40 vein quartz float samples with encouraging epithermal textures which average 6.6 g/t Au, 41 g/t Ag. An induced polarization survey is in progress to further define the drill target.

San Marcos

At San Marcos, located north of the Mariana targets, a northwest-trending breccia vein is developed at the faulted contact between andesite and ignimbrite, over an outcrop length of 200 meters. An east-west vein splays off the breccia vein and is exposed over 250 meters. Previous explorer, Pegasus Gold International had drilled an RC hole into each of these structures during the 1990's. Both holes intersected the structures, with 3 meters, 3.65 g/t Au in the east-west vein and 2 meters, 2.64 g/t Au in the breccia vein.

Sixteen rock chips were collected from the east-west vein during the quarter with an average 12.2 g/t Au, 52 g/t Ag. Six rock chips from the breccia vein assayed 0.2 to 1.9 ppm Au, and one additional sample assayed 121 g/t Au, 59 g/t Ag.

Las Margaritas

Existing information on the Las Margaritas prospect, in the southern part of the Cerro Negro tenements, was compiled, and a field visit to the prospect was made. The prospect contains small quartz veins in ignimbrite. Two rock chip samples of veins assayed 0.2 g/t Au, 37 and 80 g/t Ag. No immediate further exploration is planned.

Geophysics

Argali Geofisica was contracted during the quarter to carry out ground magnetics and IP surveys covering areas at Vein Zone-Bajo Negro and Eureka-Mariana-San Marcos.

Ground Magnetics

Magnetometer coverage will extend existing coverage at Eureka-Mariana to the east and north to provide continuous cover for the San Marcos and Bajo Nero prospects. The sector extending northwest from Bajo Negro has been completed and shows northwest trends, which will be used to assist in planning step-out drilling.

Induced Polarization (IP)

IP surveys commenced during the quarter will extend existing coverage at Eureka and Vein Zone to cover the Mariana Norte, San Marcos, and Bajo Negro extensions. East-west trending anomalies in the San Marcos area potentially extend the outcropping vein eastward below superficial cover. At the end of the quarter, IP coverage was progressing westward to cover the area of anomalous float at Mariana Norte.

Bankable Feasibility Study

During the quarter, work on the Bankable Feasibility Study (BFS) was expanded to include the new Bajo Negro discovery. With the success of the recent extension drilling, Andean believes Bajo Negro is likely to have a material impact on the BFS in terms of plant location, metallurgy, improved mine-life and financial returns. Accordingly, post the end of the quarter, the Company announced that the BFS will be modified in the following ways:

- Infill drilling at Bajo Negro will be completed during this current quarter for inclusion in a resource estimate for the first quarter of 2010.

- Metallurgical testwork will be completed on Bajo Negro composites during the first quarter of 2010. Initial leach testing of the pulp rejects has been positive.

- Testing a more centrally located processing site, that has been identified in a different watershed and more central to Bajo Negro, Mariana, Vein Zone and San Marcos. Condemnation and a geotechnical assessment of the new process and tailings site will begin in November.

- A modified mine plan including Eureka West, Bajo Negro and Vein Zone will be finalized in the second quarter of 2010, and is expected to confirm, as part of the BFS, a more robust mine-life and enhanced project returns.

Allowing for these changes to the current scope of work, the BFS is expected to be completed by the end of the second quarter 2010.

During the quarter the following work was undertaken in relation to the BFS:

- Metallurgical testwork on the Eureka composites were completed by AMMTEC in Perth, Australia with positive results. Details will be published once the work has been summarized.

- Alternative processing routes are being investigated for suitability and cost comparisons with a focus on carbon absorption and EMEW cells. To date, the leading processing technology for Cerro Negro remains Merrill Crowe, which is a proven technology.

- Preliminary mine planning at Eureka West has been developed by NCL Engineering, out of Santiago, Chile. Underground mining methods being investigated include transverse mining in the wider zones with cut and fill mining in the narrower zones. A raise bore ore-hoist is also being studied as a potential operating cost savings due to the geometry of the orebody. A geotechnical assessment of the Eureka orebody generally concludes the rock is of moderate strength with varying levels of ground support required. Stope sizes are still being optimized based on mining method and location along the veins. It is expected based on hydro-geological studies completed by Hidroar that manageable levels of water will be encountered in ramp development and in mining.

- Paste backfill is no longer being considered for use in the mine due to the change in plant location and to the cost of paste backfill. Development waste from underground will be used as backfill. Thickened tailings will be the preferred method of tailings storage and will reduce the footprint of the tailings storage facility and minimize overall water requirements.

- Two access roads are being investigated with Vector Engineering - the north access through the San Jose mine and a new north-east access.

- The cost of sharing and extending the existing powerline from the San Jose mine is being investigated.

- All Environmental Baseline Studies have been completed and a request for a comprehensive Socioeconomic Study has been given to Vector Engineering of Mendoza. Vector will also be the lead contractor writing the Environmental Impact Study which will be completed in parallel with the BFS as much as possible.

- The final BFS document will be compiled by Ausenco in a manner similar to the PFS with contributing authors responsible for their individual sections. A complimentary 43-101 Technical Report on the BFS will be written by MDA within 45 days after the release of the BFS results.

Underground Ramp

The access for the underground mine remains one of the main items on the critical path to production and Andean plans on finalizing the construction contract for the decline into the Eureka West ore body during the current quarter, followed by mobilization of the contractor to begin construction of the portal before the end of 2009.

Initial bids by contractors were higher than expected mainly as a result of the contractors amortizing the underground equipment over the two-year ramp construction. In order to reduce the ramp construction cost, Andean will be purchasing the underground mine equipment and diesel generators. Orders are currently being placed. This equipment will continue to be used by the Company throughout the life of mine once the underground ramp has been constructed. All permits for this exploration decline (underground ramp) have been received.

Cerro Negro Timeline

- Drilling Campaign - ongoing with 2 UDR rigs onsite focusing on extending and infill drilling the Bajo Negro vein; and a UDR 1000 being mobilized to commence exploration drilling at Bajo Negro, Mariana and San Marcos areas.

- Bankable Feasibility Study - revision to include the Bajo Negro vein; and is now scheduled for completion during June 2010.

- Underground Decline - contractor selected; contract being finalized with mobilization expected in the November-December timeframe.

Corporate

Appointments

During the quarter, the Company was pleased to announce two significant appointments to its Board and management teams, as new skills are required to assist in bringing Cerro Negro into production.

Louis Gignac was appointed as the new Chairman of the Board of Directors, effective July 15, 2009. Mr. Gignac is the President of G Mining Services, Inc., a private consultancy, and previously served as the President and CEO of Cambior Inc. from its creation in 1986 until its acquisition by Iamgold Corporation in November 2006. Mr. Gignac has held previous management positions with Falconbridge, Exxon Minerals and also served as a professor of mining engineering at Laval University, and currently sits on four other boards. Mr. Gignac holds a Doctor of Engineering from the University of Missouri-Rolla, a masters in mineral engineering from the University of Minnesota and a degree in mining engineering from Laval University.

Mr. Patrick Esnouf stepped down as the Chairman, but will continue with the Company as independent director of the Board.

The appointment of Mr. Richard Leclerc as Vice President, Operations, was announced on September 14, 2009. Mr. Leclerc is a registered professional mining engineer that graduated from Laval University in Quebec in 1981, who is fluent in English, Spanish and French. Over his 27 years of mining experience, Mr. Leclerc has held senior operating and development positions with Falconbridge in Chile and Peru, with Cambior in Chile, Peru and Argentina, and for Teck Cominco in Chile.

Most recently, Mr. Leclerc was Chief Operating Officer for Centenario Copper and in charge of the construction and development of the Franke project in Chile, prior to Quadra Mining's takeover of Centenario. As VP Operations, Mr. Leclerc has assumed overall responsibility for the timely development and operation of the Cerro Negro project.

Share Capital

At quarter-end the Company's issued securities were as follows:

- 462.4 million ordinary shares

- 18.8 million unlisted options (at various strike prices 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 by ACME Analytical Laboratories SA (Mendoza) in Mendoza, Argentina, and assayed by the same laboratory in Santiago, Chile. Gold is determined initially by fire assay with AA finish. Samples assaying more than 10 ppm gold are re-assayed using a gravimetric finish. Silver is determined initially by AAS, 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.

The information in this quarterly 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 mineralization 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 JORC Code). Mr. Shatwell consents to the inclusion in this Report on his work in the form and context in which it appears.

Andean Resources Ltd. is a dual listed company (TSX:AND)(ASX:AND), actively and aggressively exploring for gold resources in Argentina. The company is well positioned to become a mid-tier gold producer over the next two years as it commences production from its 100% owned Cerro Negro project. This high-grade, world-class deposit is located in the mining-friendly province of Santa Cruz, in southern Argentina, and contains a growing resource base of over 2.5 million ounces of gold. In order to expand its resource base and add to the future production profile, Andean is committed to ongoing exploration and building its resource inventory at the Cerro Negro project and, in the process, generating enhanced returns for its shareholders as a platform for future growth.



MANAGEMENT'S DISCUSSION & ANALYSIS

FOR THE QUARTER ENDED

SEPTEMBER 30, 2009

Expressed in Australian dollars unless otherwise indicated


MANAGEMENT'S DISCUSSION & ANALYSIS

Introduction

The following Management's Discussion and Analysis ("MD&A") of the operating results and financial position of Andean Resources Limited (the "Company" or "Andean") should be read in conjunction with the unaudited financial statements of the Company for the quarter ended September 30, 2009 and the audited consolidated financial statements and related notes for the year ended June 30, 2009 which have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretation and the Corporation Act 2001. Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards ("AIFRS"). Compliance with AIFRS ensures that the consolidated financial statements and notes of Andean Resources Limited comply with International Financial Reporting Standards ("IFRS"). All amounts in this report are in Australian dollars ("AUD") unless otherwise noted.

Additional information about the company is filed in Australia and Canada in conjunction with the ASX and TSX listings. This includes the Company's Annual Information Form for the year ended June 30, 2009 (the "Annual Information Form" or "AIF") which is available on SEDAR at www.sedar.com. Under Canadian securities laws the Company is a "designated foreign issuer" as defined in "National Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to Foreign Issuers."

Company Overview

The Company is an Australian based mineral resource corporation engaged, through its subsidiaries, in the acquisition, exploration and development of precious metals properties. To date, the Company has focused entirely on its 100% owned Cerro Negro Project in Southern Argentina. Through its ongoing exploration efforts, the Company has dramatically increased reserves and continues to identify new areas for growth.

Selected Annual Financial Information

The following table presents selected financial information of the Company at the date and for the periods indicated. The information set forth below is derived from the historical consolidated financial statements and the related notes, and should be read in conjunction with the historical consolidated financial statements of Andean and related notes along with other disclosure included within the MD&A.



Selected Financial Information
(thousands of AUD, except per share amounts,
rounded to the nearest thousand)

Quarter Ended Quarter Ended
------------------- --------------
September 30, 2009 June 30, 2009
------------------- --------------

Interest and other income (4,776) (1,805)

Net Loss (6,789) (7,356)

Loss per share (0.0150) (0.0183)

Total assets 158,315 73,552

Long-term liabilities 212 219


Results of Operations

As a result of increased exploration, Andean continues to grow and advance. To date, the company has relied on equity financing to fund exploration programs on its properties in Argentina. The following comparative analysis of selected expenditures and information explains the effect of such growth on the results of the Company.

Andean reported a net loss for the quarter ended September 30, 2009 of $6.8 million or $0.0150 per share, which was $0.6 million lower than the net loss for the previous quarter. The Loss was lower primarily due to reduced share based payments resulting from the number of options granted and the revaluation of unexercised options and share entitlements; offset by a higher foreign currency exchange loss.

For the quarter ended September 30, 2009, the Company incurred exploration expenditures of $2.9 million on its resource property compared to $4.5 million for the quarter ended June 30, 2009. The costs were less for the most recent quarter because the exploration program slows during the winter months of July and August due to the challenges of cold weather. Of the exploration expenditures in the quarter, the vast majority was spent to explore and develop the Cerro Negro property. During the quarters ended September 30, 2009 and June 30, 2009, exploration primarily included expenditures for drilling, labor and consulting, geology, metallurgical studies, road and drill site construction, environmental permitting, and resource modeling. During the quarter ended September 30, 2009, drilling accounted for approximately 34% of the costs, labor and consulting made up approximately 45%, and maintenance and equipment rentals were approximately 6%.

Interest and other income, which was primarily made up of foreign currency exchange losses during the quarters ended September and June 2009, decreased $3.0 million for the quarter ended September 30, 2009 compared to the quarter ended June 30, 2009. These losses were the result of the recovery from the devaluation of the Australian dollar in the latter part of 2008. The Company's presentation currency is the Australian dollar, and as a result will incur foreign exchange gains and losses from the settlement of transactions denominated in foreign currencies. Furthermore, the Company's financial instruments are mainly held in foreign currencies. Due to fluctuating exchange rates with the Australian dollar, a foreign exchange loss of $4.8 million was recorded in the current quarter, which was a change from the foreign exchange loss of $1.8 million recorded in the quarter ended June 30, 2009.

Employee benefits expense were $0.6 million for the quarter ended September 30, 2009. This spending is consistent over quarters and relates to the salaries and benefits of employees hired to facilitate company growth.

The depreciation expense recorded on the income statement reflects the amount charged for furniture and office equipment used in administrative offices.

Consultancy fees for the quarter ended September 30, 2009 were $0.4 million compared to the quarter ended June 30, 2009 of $0.9 million. Consulting decreased as a result of seasonality of work on the project during the winter months of July and August.

Corporate and administrative expense increased by $0.2 million over the current quarter. The main drivers included rentals & leases and audit fees.

Share based payments decreased $2.6 million for the quarter ended September 30, 2009 compared to the quarter ended June 30, 2009. This was a result of the number of options granted and the revaluation of unexercised options as of June 30, 2009. This expense represents a reserve to recognize the fair value of options issued but not exercised and share entitlements pursuant to the Company's share plan.

Summary of Interim Results

Over the past six half-year periods, the Company's expenses have been generally increasing attributable to matters described in "Results of Operation" explained above.

The following table sets out the financial results for each of the Company's six most recently completed half-year periods. The half-year financial results are in accordance with the AIFRS applied on the same basis as the annual financial statements incorporated by reference herein.



Selected Interim Financial Information
(thousands of AUD, rounded to the nearest thousand)

Six Month Period Ending
(unaudited)
Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31,
2009 2008 2008 2007 2007 2006
------- ------- ------- ------- ------- -------

Interest and
other income (1,987) 5,226 376 278 249 120

Net Gain (Loss) (9,500) 2,263 (7,560) (3,422) (2,883) (1,945)


Interest and other income fluctuations are based on the amount of cash and cash equivalents as well as foreign currency exchange gains. The timing of financings affects the amount of interest earned. The fluctuation of exchange rates on the cash held in foreign denominated currencies was the cause of the significant movement in the two most recent periods.

Net loss has increased over time due primarily to the acceleration of exploration. The increase in net loss is consistent with the growth in the company to support the exploration activities. The number of meters drilled in a given period has been a significant indicator of the support expenditures and therefore overall loss during the various periods. During the six months ending December 31, 2008, the devaluation of the Australian dollar caused a significant reporting gain. Whereas the subsequent strengthening of the Australian dollar during the six months ending June 30, 2009 negated a portion of the previous gain, thus reporting a foreign currency exchange loss.

Capital Resources and Liquidity

As at September 30, 2009, the Company had working capital of $91.2 million. This amount represents a working capital increase of $82.2 million from June 30, 2009. This change was primarily due to the July 15, 2009 offering of 56,250,000 common shares at $1.60 Canadian dollars (CAD) per share, for gross proceeds of CAD 90.0 million. The Company is adequately funded to carry out its planned exploration and development programs into the construction phase.

Critical Accounting Estimates and Assumptions

Andean makes estimates and assumptions concerning the future. The more significant estimates and assumptions included in the consolidated financial statements are:

(a) Restoration obligations

The Company estimates the present value of the costs of legal and constructive obligations to restore operating locations in the period in which the obligations arises.

(b) Shared-based payment transactions

The Company measures the cost of equity settled share based payments at fair value at the grant date using the Black-Scholes model.

Outlook

The Company continues to drill the existing veins to expand the resource. The work on the Bankable Feasibility Study (BFS) is ongoing with both Eureka and Vein Zone. Additionally, Andean recently evaluated the Bajo Negro discovery and has determined to include it in the BFS as it has potential to materially enhance the already attractive economics of the Cerro Negro project. The Company is committed to steady growth and rising value through successful exploration and development of mineral deposits. The Company will continue to increase its gold and silver resources through the prudent exploration of priority targets in the upcoming fiscal year. Management will continue to evaluate all options in an effort to advance its properties while limiting financial exposure to the Company.

Risk and Uncertainties

This discussion and analysis may contain disclosures that are forward-looking. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially for those in such forward-looking statements.

The Company is a mineral exploration and development company and as such is exposed to a number of risks and uncertainties that are not uncommon to other companies in the same business.

The Company's financial success is subject to, among other things, fluctuations in metal prices and foreign exchange rates, and its ability to obtain financing to continue and complete the development of those properties it has classified as assets.



FINANCIAL STATEMENTS

FOR THE QUARTER ENDED

SEPTEMBER 30, 2009

Expressed in Australian dollars unless otherwise indicated



ANDEAN RESOURCES LIMITED
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2009 - Unaudited
AT JUNE 30, 2009 - Audited
(Thousands of Australian Dollars)

September 30 June 30
2009 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current assets
Cash and cash equivalents 95,231 13,598
Trade and other receivables 1,073 586
----------------------
Total current assets 96,303 14,184

Non-current assets
Receivables 5,135 4,930
Property, plant and equipment 3,390 1,930
Exploration and evaluation costs carried forward 53,486 52,509
----------------------
Total non-current assets 62,011 59,368

Total assets 158,315 73,552
----------------------

Current liabilities
Trade and other payables 5,066 5,141
----------------------
Total current liabilities 5,066 5,141

Non-current liabilities
Payables (0) 0
Provisions 212 219
----------------------
Total non-current liabilities 212 219

Total liabilities 5,278 5,360
----------------------

Net assets 153,037 68,192
----------------------
----------------------

Equity
Contributed equity 190,366 99,201
Reserves 10,214 9,748
Accumulated losses (47,544) (40,756)
----------------------

Total equity 153,037 68,192
----------------------
----------------------



ANDEAN RESOURCES LIMITED
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 - Unaudited
FOR THE YEAR ENDED JUNE 30, 2009 - Audited
(Thousands of Australian Dollars)

Three months ended Year ended
September 30 June 30
2009 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue from continuing operations
Interest income 43 521
Exchange loss (4,819) 2,718
Bank Commissions (75) (289)
Employee benefits expense (594) (1,654)
Depreciation expense (3) (13)
Consultancy fees (397) (2,066)
Corporate and administrative expenses (413) (927)
Impairment of receivable - (808)
Legal fees (91) (540)
Promotional expense (45) (228)
Share based payments (88) (3,060)
Stock Exchange fees (120) (78)
Travel & accomodation costs (185) (811)
----------------------
Net Income/ (Loss) before tax (6,788) (7,237)

Income tax expense - -
----------------------

Net Income/ (Loss) after tax (6,788) (7,237)
----------------------
----------------------

Basic and diluted loss per share (cents) (1.4998) (1.7958)



Appendix 5B

MINING EXPLORATION ENTITY QUARTERLY REPORT



Name of entity
----------------------------------------------------------------------------

ANDEAN RESOURCES LTD
----------------------------------------------------------------------------

Quarter ended
ABN ("current quarter")
-------------- -----------------
66 064 494 319 30 September 2009
-------------- -----------------

Consolidated statement of cash flows
---------------------------
Current Qtr Year to Date
(3 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 (2,874) (2,874)
(b) development
(c) production
(d) administration (1,918) (1,918)
1.3 Dividends received
1.4 Interest and other items of a similar
nature received 50 50
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 (4,742) (4,742)
----------------------------------------------------------------------------
Cash flows related to investing
activities

1.8 Payment for purchases of: (a) prospects
(b) equity
investments
(c) other fixed
assets (1,544) (1,544)
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 (1,544) (1,544)
---------------------------

1.13 Total operating and investing cash flows
(carried forward) (6,286) (6,286)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
1.13 Total operating and investing cash flows
(brought forward) (6,286) (6,286)

Cash flows related to financing activities

1.14 Proceeds from the issue of shares,
options, etc. 95,091 95,091
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 (4,505) (4,505)
---------------------------

Net financing cash flows 90,586 90,586
----------------------------------------------------------------------------

Net increase (decrease) in cash held 84,300 84,300

1.20 Cash at beginning of quarter/year to date 13,598 13,598
1.21 Exchange rate adjustments to item 1.20 (2,667) (2,667)

---------------------------

1.22 Cash at end of quarter 95,231 95,231
----------------------------------------------------------------------------

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 1.2 449
------------
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 (296)
Directors fees & superannuation (153)
----------------------------------------------------------------------------

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 4,000
4.2 Development
----------------------------------------------------------------------------

Total 4,000
----------------------------------------------------------------------------

Reconciliation of cash

Reconciliation of cash at the end of the ----------------------
quarter (as shown in the consolidated Current Previous
statement of cash flows) to related items Quarter Quarter
in the accounts as follows. $A'000 $A'000
----------------------

5.1 Cash on hand and at bank 4,241 1,755

5.2 Deposits at call 90,990 11,843

5.3 Bank Overdraft

5.4 Other (provide details)
----------------------

Total: cash at end of quarter (Item 1.22) 95,231 13,598
----------------------

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 Nil
relinquished,
reduced or lapsed
------------------------------------------------------
6.2 Interests in
mining tenements Nil
acquired or
increased
------------------------------------------------------



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 security up per
security
----------------------------------------------------------------------------
7.1 Preference
securities
(description)
------------------------------------------------------
7.2 Issued
during
Quarter
----------------------------------------------------------------------------
7.3 Ordinary
securities 462,354,325 462,354,325
------------------------------------------------------
7.4 Issued during
Quarter 56,833,142 56,833,142
----------------------------------------------------------------------------
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
150,000 $0.40 14/03/11
1,412,500 $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
------------------------------------------------------
7.9 Exercised during 100,000 $0.40 14/03/11
Quarter 150,000 $0.40 14/03/11

------------------------------------------------------
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.

Date: 29 October 2009

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.

A.C.N. 064 494 319

Contact Information

  • Andean Resources Ltd.
    Krista Muhr
    Director of Investor Relations
    647.330.1478
    krista.muhr@andeangold.com
    or
    Andean Resources Ltd.
    Morrice Cordiner
    Director
    +61 (2) 9276.1245 or Cell: +61 (0) 412.270.761
    morrice@bigpond.net.au
    or
    Andean Resources Ltd.
    1/1 Nairn Street, Fremantle
    Western Australia 6160
    +61 (8) 9430 9966
    +61 (8) 9430 9965 (FAX)
    www.andeangold.com