Andean American Gold Corp.
TSX VENTURE : AAG
FRANKFURT : AQN

Andean American Gold Corp.

December 05, 2006 19:30 ET

Andean American Mining Reports Second Quarter Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 5, 2006) - The Board of Directors of Andean American Mining Corp. (TSX VENTURE:AAG)(FWB:AQN) is pleased to provide financial results for the Quarter ended September 30, 2006. The net loss for the period was $7,495,800 or 0.15 per share compared with a loss of $44,452 or nil per share in the comparable period last year. As previously reported, on June 30, 2006 the Company sold its interest in its wholly owned subsidiary, Corporacion Minera Sinchao, holder of the Sinchao property, to Sinchao Metals Corp. and received 36,000,000 shares and 3,000,000 transferable warrants. As a result of this transaction the Company's interest in the Sinchao property was reduced to 78% on a fully diluted basis. The Company incurred a non-cash loss on the sale of Corporacion Minera Sinchao amounting to $6,086,167 due to the fluctuation in the value of the shares of Sinchao Metals Corp. between the date of the agreement and the date of the closing of the transaction. In addition, as a result of differences in the book value and tax value of the mineral property interest acquired, Sinchao Metals recorded a future income tax liability of $4,867,346 with a corresponding amount capitalized to mineral property interest.

Gross profit from operations is in line with expectations as the Company continues to develop solutions for the metallurgical problems at the Santa Rosa mine. The Quarter has been an extremely busy one with encouraging news from Invicta, which the Company continues to fast track towards an early production decision. In its news release of October 30, 2006, the Company announced results from an updated NI 43-101 report with gross metals content of over 2,000,000 gold ounces equivalent in Measured and Indicated Resources.

Highlights for the Quarter:

The loss from operations in this quarter amounting to $696,444 compared with earnings of $487,520 in the comparable period last year was due to low recoveries from recycled materials and increased operating costs offset in part by rising prices for gold and silver. Also offsetting the effect of higher metal prices in this quarter was a weaker US dollar.

Net loss for the quarter ended September 30, 2006 was $7,495,800 compared with a net loss of $44,452 in the same quarter of 2005. The reduction in earnings in this quarter compared with the previous year was primarily due to the Sinchao transactions.

Cash used in operations in the quarter before changes to non-cash working capital items was $901,796, compared with positive cash flow of $656,982 in last year's quarter. The reduction in cash flow from operations was due to the reduction of gold and silver produced and an increase in the cost of sales mainly due to poor recoveries.

Revenues were $1,468,902 in 2006 compared with $2,540,153 in 2005. Sales of gold and gold equivalents in the quarter were 2146 ounces compared to 4804 ounces in the comparable period last year. The revenue decrease in 2006 was due to the focus shifting from maximizing production to trying to solve recovery problems.

Outlook:

The current successes from the three exploration programs at Invicta, Santa Rosa and Sinchao have buoyed the spirits of all at Andean American. Continuing higher metal prices add to the enthusiasm.

Santa Rosa

Has connected the dots, at last, tying Virundo, Rio, OPZ, Southern Structures all the way to Carelo and on to Huayllumpay over 4,400 meters of continuous structure. The continuity of economic mineralization has yet to be established. On the metallurgical front it appears that a solution for the poor gold and silver recoveries is in sight.

Invicta

Has a successful drill program underway and a major new discovery, called Ydalia, south of the Atenea Zone. Resource estimates have been published.

Sinchao

Has a major program underway with 2 drills about to begin and major expansion of the targeted areas already accomplished.

The Company expects to produce 12,000 ounces of gold equivalent in fiscal 2007. Gold and silver prices are showing continued strength and at the date of this report are greater than US$610.00 and US$11.00 per ounce, respectively. The Company's revenues will be negatively affected by any further strengthening of the Canadian dollar against the US dollar. Metal prices and currencies are subject to fluctuation due to changes in global economic conditions.

The Company is experiencing rising production costs due to increasing prices for fuel, chemicals and maintenance supplies. These rising prices, driven by the global economic boom, are expected to continue throughout calendar 2006 and into 2007.

In fiscal year 2007 capital expenditures for the Santa Rosa Mine and the development of nearby properties are estimated to be $650,000. Capital expenditures for the advancement of the Invicta project to a production decision are estimated to be $800,000. The Company's share of capital expenditures for Sinchao are estimated to be $2,000,000 and will be funded by existing cash flow and the proceeds from the Sinchao Metals Corp. transaction.

For the complete Management's Discussion and Analysis and Financial Statements, please refer to the Company's filings at www.sedar.com.

On behalf of Andean American Mining Corp.,

John Huguet, President & CEO

Andean American Mining Corp. (TSX VENTURE:AAG) is focused on growth both organically and through acquisitions. The company is actively pursuing new properties with potential for early stage gold and silver targets. Andean American continues to maintain excellent community relations and a commitment to responsible environmental practices. The company has a strong management team with over 60 years experience and an effective board dedicated to excellence in corporate governance. Andean American Mining is committed to continuing to be a low-cost, profitable producer with an objective of producing 200,000 ounces of gold by 2010.



ANDEAN AMERICAN MINING CORP.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited - Prepared by Management)

September 30, March 31, 2006
2006 $
$ (audited)
ASSETS
CURRENT ASSETS
Cash 1,362,553 810,500
Restricted cash (Note 9) 59,963 265,597
Accounts receivable (Note 4) 570,204 820,423
Prepaid expenses 188,499 69,700
Minerals on pads & inventories (Note 5) 5,122,197 5,231,399
---------- -----------
7,303,416 7,197,619

-
MINERAL ON PADS (Note 5) 1,599,096 1,749,223
MINERAL PROPERTIES AND DEFERRED
COSTS (Note 6) 36,504,052 36,967,866
PROPERTY, PLANT AND EQUIPMENT (Note 7) 2,798,230 3,052,262
PREPAID TAX 107,257 -
---------- -----------
48,312,051 48,966,970
---------- -----------
---------- -----------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 3,252,216 3,685,816
Deferred income 250,776 186,415
Loans payable (Note 8) 44,055 46,100
Current portion of capital lease
obligation (Note 9) 11,636 264,998
Current portion of long term debt (Note 10) 623,613 975,138
---------- -----------
4,182,296 5,158,467

LONG TERM DEBT (Note 10) 163,288 -
FUTURE INCOME TAX LIABILITIES (Note 6) 4,867,346 -
PROVISION FOR RECLAMATION &
CLOSURE COSTS (Note 11) 117,500 119,253
---------- -----------
9,330,430 5,277,720

MINORITY INTEREST 2,596,780 -
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 12) 58,389,291 58,371,791
CONTRIBUTED SURPLUS 1,732,684 1,674,684
DEFICIT (23,737,134) (16,357,225)
---------- -----------
36,384,841 43,689,250
---------- -----------
48,312,051 48,966,970
---------- -----------
---------- -----------
CONTINGENCY (Note 20)
GOING CONCERN (Note 1)

APPROVED BY THE DIRECTORS

JOHN HUGUET BRYAN MORRIS
DIRECTOR DIRECTOR


ANDEAN AMERICAN MINING CORP.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006
(Unaudited - Prepared by Management)

Three Month Period Six Month Period
Ended September 30 Ended September 30
2006 2005 2006 2005
$ $ $ $

REVENUE
Sales of metals 1,468,902 2,540,153 2,702,522 5,570,672
------------ ------------ ----------- -----------

OPERATING EXPENSES

Direct operating costs 1,807,787 1,693,043 2,712,675 2,892,147
Royalty expense 26,296 24,774 47,234 80,923
Amortization and depletion 287,968 271,666 430,368 702,621
Selling expenses 40,911 59,177 71,857 122,659
Reclamation 2,384 3,973 7,132 11,274
------------ ------------ ----------- -----------
2,165,346 2,052,633 3,269,266 3,809,624
------------ ------------ ----------- -----------

GROSS PROFIT (696,444) 487,520 (566,744) 1,761,048

OTHER EXPENSES

General and
administrative expenses 622,810 377,452 707,376 687,390
Stock based compensation - 87,375 - 207,353
Interest and finance
expenses 22,665 5,360 48,513 11,226
Other expenses (income) (137,738) (339,457) (137,738) (258,148)
Foreign exchange
(gain) loss 253,597 411,964 156,992 411,964
Loss on sale of shares
(note 6) (6,086,167) - (6,086,167) -
------------ ------------ ----------- -----------
(7,543,945) (44,452) (7,428,054) 701,263
LESS: MINORITY INTEREST 48,145 - 48,145 -
------------ ------------ ----------- -----------
NET INCOME (LOSS) (7,495,800) (44,452) (7,379,909) 701,263

DEFICIT - BEGINNING OF
PERIOD (16,241,334) (16,342,287) (16,357,225) (17,088,002)
------------ ------------ ----------- -----------
DEFICIT - END OF
PERIOD (23,737,134) (16,386,739) (23,737,134) (16,386,739)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
BASIC 51,535.686 45,577,029 51,523,970 44,728,018
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
DILUTED 52,022,087 46,670,786 52,112,153 45,821,775
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
EARNINGS (LOSS)
PER COMMON SHARE
BASIC (0.15) (0.001) (0.14) 0.02
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
DILUTED (0.14) (0.001) (0.14) 0.02
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------


ANDEAN AMERICAN MINING CORP.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOW
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006
(Unaudited - Prepared by Management)

Three Month Period Six Month Period
Ended September 30 Ended September 30
2006 2005 2006 2005
$ $ $ $

CASH PROVIDED FROM
(USED FOR)
OPERATING ACTIVITIES

Income (loss) for
the period (7,495,800) (44,452) (7,379,909) 701,263
Amortization
and depletion 277,466 271,666 419,866 747,007
Provision for
reclamation 2,384 3,973 7,132 11,274
Foreign exchange
(gain) loss 48,937 (10,943) (47,670) (120,722)
Stock based compensation - 411,964 - 411,964
Others - 24,774 - 75,223
Loss on sale of shares 6,265,217 - 6,265,217 -
------------ ------------ ----------- -----------
(901,796) 656,982 (735,365) 1,826,009

(Increase) decrease in
accounts receivable 111,106 (217,803) 250,219 (13,138)
(Increase) decrease in
inventories (13,064) (301,878) 259,329 (493,085)
(Increase) decrease in
prepaid expenses (77,772) 217,082 (118,798) (48,128)
Increase (decrease) in
accounts payable (46,162) 260,563 (433,601) 114,969
Increase (decrease) in
deferred income (15,585) 124,219 64.361 190,862
Increase (decrease) in
accrued interest payable - (336,358) - (321,465)
------------ ------------ ----------- -----------
(943,273) 402,807 (713,855) 1,256,024
------------ ------------ ----------- -----------

INVESTING ACTIVITIES

Mineral properties and
deferred costs 108,534 (670,040) (1,332,325) (1,040,353)
Property, plant
and equipment (69,960) (224,518) (69,960) (382,282)
------------ ------------ ----------- -----------
38,574 (894,558) (1,402,285) (1,422,635)
------------ ------------ ----------- -----------
FINANCING ACTIVITIES

Payment of debentures - (1,513,989) - (1,924,757)
Common shares issued
for cash - 4,734,449 17,500 4,870,491
Common shares issued
by Sinchao Metals 144,926 - 2,644,926 -
Change in restricted cash 72,142 - 205,634 -
Payment of long term debt (67,623) (225,527) (145,723) (277,742)
Payment of loans payable (26,758) (150,730) (54,144) (297,586)
------------ ------------ ----------- -----------
122,687 2,844,203 2,668,193 2,370,406
------------ ------------ ----------- -----------
INCREASE (DECREASE)
IN CASH DURING PERIOD (782,012) 2,352,452 552,053 2,203,795
CASH - BEGINNING
OF PERIOD 2,144,565 94,000 810,500 242,657
------------ ------------ ----------- -----------
CASH - END
OF PERIOD 1,362,553 2,446,452 1,362,553 2,446,452
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
CASH IS COMPRISED OF:
Cash 1,470,933 2,446,452
Bank indebtedness (108,380) -
----------- -----------
1,362,553 2,446,452
----------- -----------
----------- -----------

SUPPLEMENTARY CASH FLOW INFORMATION (Note 18)


This news release may contain forward-looking statements regarding upcoming work programs and events. Actual results may differ materially from those anticipated in such statements.

SEDAR Profile # 00003879



The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release

Contact Information

  • Andean American Mining Corp
    John Huguet
    President & CEO
    (604) 681-6186 or Toll Free: 1-888-356-4784
    Website: www.andeanamerican.com