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

Andean American Gold Corp.

March 01, 2011 08:30 ET

Andean American's Invicta Gold Project in Peru Progressing Well Towards Construction

Funding Secured, Mine Planning and Engineering Design Well Advanced

TORONTO, ONTARIO--(Marketwire - March 1, 2011) - Andean American Gold Corp. ("Andean American" or the "Company") (TSX VENTURE:AAG)(FRANKFURT:AQN) is pleased to report that its Invicta gold project, located in the mineral rich Western Pre-Cordillera of the Peruvian Andes, is progressing as planned with phase one of construction anticipated to begin in the third quarter of 2011.

"We have a strong management and operations team, supported by world-class engineering consultants, and they are confidently working through the key components required to successfully build a mine. Financing is in place, our relationships with the local communities are positive, engineering design and mine planning are advanced and we are on track to begin construction this year of one of the lowest cost gold mines in Peru. We are also planning a 20,000 metre exploration drilling program to run concurrently with mine development and this is aimed at extending the life of mine from five to 12 years," said David Rae, President and CEO of Andean American Gold.

COMMUNITY AGREEMENTS

The Company has made significant progress towards the completion of Surface Land Use agreements with the three primary communities surrounding the Invicta Project. The first of these agreements has been signed with the community of Santo Domingo de Apache. The Company anticipates that the second agreement will be signed during March 2011 and the final one by mid-year. Once the third and final agreement is completed, phase one construction of the site infrastructure will begin.

In addition, Andean American has completed a number of minor agreements for the use of the land required to build the infrastructure for the site and anticipates that the last of these agreements will be signed in March 2011.

The Company is contributing actively to environmental programs and socio-economic development in the surrounding communities. In the Santo Domingo de Apache community, Andean American and a big group of community members recently planted 30,000 pine trees on 38 hectares of land. The trees bring multiple benefits to the community including providing wood, acting as windbreaks and providing a good substrate for the cultivation of mushrooms as an additional source of revenue. Furthermore, in this community, two pilot programs will be launched in March for irrigation to support the cultivation of peaches and blueberries. Andean American has upgraded, and is maintaining, 12 km of canals providing water to the local communities and the Company is currently conducting a technical study for the irrigation of 220 hectares of agricultural land in the community of Sayán. The Company has hosted numerous educational visits to the project site for the local communities and is engaged in ongoing consultation.

FEASIBILITY STUDY

As announced on October 12, 2010, the Company has commissioned SRK Consulting (U.S.) Inc. ("SRK") to upgrade the Optimised Feasibility Study, which was filed in July 2010. SRK has confirmed that this upgraded study will be completed in June 2011.

MINERAL RESERVES AND RESOURCES

SRK is in the process of updating the resource and reserve estimate for Invicta and indications are that there are no material changes to the NI 43-101 compliant resource and reserve disclosure filed on December 10, 2009.

MINE PLANNING

Certain improvements have been made in the mine plan. Additional geotechnical studies have been completed and SRK is upgrading the design on the Atanea, Pucamina, Dany and Zone 4 measured and indicated resources to feasibility level.

The improved understanding of maximum stable stope sizes has resulted in a simplification of mining practices withlongholestoping as the predominant extraction method. Cut and fill extraction is limited to those ground areas where faulting or low slopes make it necessary. Open pit and shrinkage mining are no longer included in the planning.

Current indications are that the mining methods and orebody geometry will support a total production rate of between 4,000 and 4,500 tonnes per day of ore from the combined mining areas. The ore production rate will be finalized when the design is complete and detailed scheduling commences.The plant design remains at a 5,000 tonnes per day capacity to allow for the anticipated increase in tonnage which the Company expects will result from the planned drilling program to expand the Invicta resource.

METALLURGY

SGS Laboratories in Vancouver, Canada, and Resource Development Inc. of Denver, Colorado, have conducted studies on the two principal ore types to be mined at Invicta. Studies of abrasion, work indexes, settling rates and filtration have resulted in a simplified, conventional mineral processing flowsheet. The gravimetric separation and zinc recovery equipment havebeen removed from the scope for construction, which will simplify operation considerably. Space will be left in the design for the subsequent installation of zinc recovery equipment should it become economically favourable in the future.

ENGINEERING DESIGN AND INFRASTRUCTURE FOR CONSTRUCTION

To facilitate rapid progress towards production, the Company has retained DRA Americas Inc. to complete the engineering design to a level commensurate with the upgraded Feasibility Study. Their initial priority has been to complete the early works, or phase one, engineering in readiness for construction. This first phase includes roadways, power and water provision to the site and is a necessary precursor to the subsequent mine and metallurgical plant construction.The Company has already purchased certain long lead items such as the rod mill, overhead crane and filtration equipment. Construction will begin as soon as the remaining community agreements are signed. The project is being structured on an Engineering, Procurement, and Construction Management (EPCM) basis and DRA have been awarded the early works contract.DRA Americas Inc. is a subsidiary of a South African based project engineering company with international operations, a staff of over 800 people, and a growing presence in the mining industry in South America.

PERMITTING PROCESS

The Company is preparing the application for the beneficiation permit which will be submitted once all the community agreements are signed. Environmental baseline studies are in progress and the mine closure permit was filed on December 28, 2010, in accordance with the Environmental Impact Assessment. Assuming the community agreements are completed in mid-year, the Company expects to receive the beneficiationand mining permits late in the last quarter of this year, granting the Company the approval to build and operate the mine and metallurgical sites.

FINANCING

Andean American is well funded for pre-construction activities. Importantly, the Company has commitments for a Project Debt Finance Facility of US$68 million in place with Barclays Capital and West LB.

NEXT STEPS AND GROWTH POTENTIAL

Once the remaining community agreements are signed, the Company will submit the application for the beneficiation permit, early works will commence and major equipment will be staged. The time lines for the development of the mine at Invicta are dependent on successful completion of each previous phase and will be clearer once the upgraded Feasibility Study and Independent Technical Engineering Report is received in mid-2011.

Concurrent with mine development, Andean American plans to conduct a 20,000 metre drilling program to expand the resource and life of mine at Invicta. It is anticipated that this drilling program will commence in the third quarter of 2011.

About Andean American

Andean American is an international mining and exploration company focused on value growth through the development of gold and copper projects in Peru and currently has two key assets: the 28,200 hectare Invicta gold-silver-copper advanced exploration stage project and 60% of Sinchao Metals Corp., owner of the Sinchao gold-silver-copper exploration project. In addition, the Company is actively targeting early stage gold and silver prospects in Peru.

On behalf of Andean American Gold Corp.,

David Rae, President and Chief Executive Officer

Forward Looking Information

This news release may contain forward-looking information within the meaning of the Securities Act (Ontario) ("forward-looking statements"). Such forward-looking statements may include the Company's plans for its mineral projects, the overall economic potential of its properties, the availability of adequate financing and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements expressed or implied by such forward-looking statements to be materially different. Such factors include, among others, risks and uncertainties relating to potential political risks involving the Company's operations in a foreign jurisdiction, uncertainty of production and costs estimates and the potential for unexpected costs and expenses, physical risks inherent in mining operations, currency fluctuations, fluctuations in the price of gold and other metals, completion of economic evaluations, changes in project parameters as plans continue to be refined, the inability or failure to obtain adequate financing on a timely basis, and other risks and uncertainties, including those described in the Company's Financial Statements, Management Discussion and Analysis and Material Change Reports filed with the Canadian Securities Administrators and available at www.sedar.com.

Neither 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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