AndeanGold Ltd.
TSX VENTURE : AAU

AndeanGold Ltd.

February 01, 2010 09:00 ET

AndeanGold Signs Memorandum of Understanding to Acquire a 60% JV Interest in the Urumalqui Au-Ag Project, Peru

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 1, 2010) - AndeanGold Ltd. ("the Company" or "AndeanGold") (TSX VENTURE:AAU) is pleased to announce that it has signed a Memorandum of Understanding (the "MOU") with Gitennes Exploration Inc. ("Gitennes") (TSX VENTURE:GIT) to acquire a 60% Joint Venture ("JV") interest in Gitennes' Urumalqui Au-Ag Project (the "Project"). The Project is located in the Department of Libertad, Peru, approximately 70 km east of the city of Trujillo. The Project consists of four (4) contiguous concessions totaling 2,700 hectares, and is located at elevations ranging from 3,400 – 3,700 metres.

Mineralization at the Urumalqui Project is hosted in volcanics and is comprised of several gold-silver quartz veins. Vein mineralogy and textures and associated alteration are characteristic of low- sulphidation, vein-style, epithermal, mineralization.

Gitennes acquired an interest in the Project in 2002 by way of a joint venture with Meridian Gold Inc. The joint venture was terminated in mid-2005, upon which Gitennes assumed 100% ownership of the Project. Work on the property since January 1, 2003 includes grid-controlled soil sampling, two episodes of IP and magnetic geophysics surveying, three phases of core drilling (approximately 7,336 metres in 47 holes) and preliminary metallurgical testing.

A NI 43-101 Report (the "Report") was prepared on the Project, dated March 30, 2009 (See Gitennes technical report filing at www.sedar.com). Based on the Report:

  • The principal target on the property, among several mineralized vein structures, is referred to as the Urumalqui Vein (the "Vein"), which is a near-vertical feature, up to 20 metres wide, containing a core of one or two banded quartz veins ranging from 0.5 to 11 metres aggregate thickness, and intervening oxidized vein breccias and altered volcanic rocks. The Vein is exposed at surface over a strike length of 1,500 metres and consists of eight vein segments, ranging in length from 40 metres to 400 metres. For the most part, vein outcrop is continuous along each segment.

  • Much of the silver and gold mineralization is hosted within the vein quartz and is surrounded by a broad, lower grade envelope of disseminated Au-Ag material. Most of the silver occurs as argentite with the remainder being alloyed with gold as electrum.

  • The majority of the drilling to date has been focused on the 1,000 metre long central and southeastern segment of the Urumalqui Vein and from the surface down to about 200 metres vertical depth. Some of the noteworthy reported drill intersections were:

          TRUE        
DRILL FROM   TO   WIDTH   AU AG AUE *
HOLE # (Metres ) (Metres ) (Metres ) G/T G/T G/T
 
URU03-01 32.75   40.30   7.09   1.55 112.00 3.42
URU03-03 94.35   98.30   3.11   2.91 179.20 5.90
URU03-05 65.85   69.05   2.45   2.29 189.80 5.45
URU03-07 156.05   162.65   4.06   2.29 196.10 5.56
URU03-09 133.80   147.00   8.48   2.01 211.60 5.54
URU04-32 128.50   132.40   2.30   2.84 194.70 6.09
URU04-33 197.95   204.80   3.42   1.31 293.30 6.20
URU08-36 60.15   62.15   1.53   3.05 493.00 11.27
URU08-42 156.05   162.50   4.40   2.48 157.18 5.10
URU08-45 211.90   222.80   8.59   1.91 191.72 5.11
 
* AUE = Gold equivalent based on a 60:1 Ag - Au ratio and assuming 100% recoveries .

For the 35 holes (5,835m) drilled in the Urumalqui Vein to date, the average vein intersection width and weighted average Au and Ag grades were 3.31 metres of 1.33 g/t Au and 154 g/t Ag

  • The drilling was done on relatively widely-spaced centres, from 45 to over 100 metres. In the few holes that were deeper than 200 metres, the Vein structure remained strong and mineralized. All holes appear to have been in the "boiling zone", based upon vein textures, and the potential for good mineralization at deeper levels than those tested thus far is considered to be good.

  • Mineralization is open along strike and recent drill results suggest that further drilling on the 400 to 500 metre-long Northwestern Segment of the same Vein structure is warranted.

  • Based on preliminary metallurgical test results to date on core and rock samples, which entailed a combination of gravity, flotation and cyanide test work, it may be possible to achieve favorable recoveries by a combination of crushing and milling, followed by gravimetric separation and cyanide leaching. However, additional metallurgical tests will be required to determine the ultimate method of recovering gold and silver at the Project.

Pursuant to the MOU, AndeanGold's Peruvian subsidiary, PeruGold Resources S.A.C. ("PGR"), will sign an Option and Mining Assignment Agreement with Gitennes' Peruvian Subsidiary, Minera Corimalqui S.A. ("MC"), the concessions titleholder. In addition, Gitennes and AndeanGold will sign a Parent Company Agreement, and the Peruvian subsidiaries will sign a Partners' Agreement, which will principally cover the formation of a new Peruvian company ("Newco") that will be responsible for the Project's JV activities once PGR has fulfilled its earn-in requirements under the Option and Mining Assignment Agreement. PGR will be entitled to exercise its option and earn a sixty (60) percent shareholder's interest in Newco by:

a.) Expending $3 million of qualifying expenditures on the Project over a four (4) year term (the "Term"),
b.) Completing 3,000 metres of drilling by the end of the second year of the Term and 7,000 metres of cumulative drilling by the end of the third year of the Term, and
c.) AndeanGold issuing Gitennes 200,000 publicly traded shares of the Company, each, within five (5) days of signing the agreements and on the first, second and third year anniversaries of signing the agreements. 
   
  Except for the first payment, Gitennes may elect to receive cash in lieu of shares, with the cash amount not to exceed $25,000, $50,000 and $100,000 with respect to the first, second and third year anniversary date payments, respectively. If the market value of the shares on the respective payment dates exceed the maximum cash payment amount on such date, the difference will be satisfied by the issuance of equivalent shares.

Upon PGR exercising its option, MC will transfer the mining titles to the Project's concessions to Newco.

The MOU shall remain in full force and effect provided that in the event the JV-related agreements are not executed and delivered by April 30, 2010 other than as a result of unreasonable delay by Gitennes, the MOU may be terminated by either Party upon giving five (5) days notice to the other Party.

This transaction is subject to acceptance by the TSX Venture Exchange.

Mr. Anthony F. Ciali, President and CEO, stated, "We are extremely pleased at the opportunity to add a high-quality, advanced-staged Au-Ag exploration project, such as Urumalqui, to the Company's portfolio in Peru. The Urumalqui Vein mineralization is open along strike and at depth, and the style of mineralization can reach depths of 400 to 600 metres. Future drilling programs will include both infill and deeper drilling to obtain accurate data for future resources / reserves calculations and to determine the depth potential of the Urumalqui Vein mineralization."

Dr. William F. Lindqvist, a director of AndeanGold, is the Qualified Person in compliance with National Instrument 43-101 with respect to this release.

About AndeanGold Ltd:

AndeanGold Ltd. is engaged in the acquisition, exploration and potential development of primarily precious metals properties, principally in Peru and Ecuador. The focus of the Company's exploration activities is presently in advancing its Rio Seco Project, as well as pursuing mineral property acquisitions, in Peru. In Ecuador, the Company's activities have been limited to administrative and legal matters due to the Mining Mandate issued by the Ecuador Constituent Assembly on April 18, 2008. On November 4, 2009, President Correa signed the Mining Regulations into law pursuant to the requirements of the new Mines Law, which was passed in January 2009. This was the final legal precursor to the re-initiation of exploration and mining development in Ecuador. The Company has filed the requisite documents with the Ministry of Non-Renewable Natural Resources in support of the Company's request to renew exploration programs on its key projects in Ecuador. The Company looks forward to working with government officials to this end.

Please refer to AndeanGold's website at www.andeangoldltd.com for further information on the Company's projects and activities.

On Behalf of the Board of Directors of ANDEANGOLD LTD.

Anthony F. Ciali President, CEO and Director

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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