Andean Resources Ltd.
TSX : AND
ASX : AND

Andean Resources Ltd.

January 30, 2008 21:41 ET

Andean Resources Limited: Quarterly Report for the Quarter Ended 31st December 2007

FREMANTLE, WESTERN AUSTRALIA--(Marketwire - Jan. 30, 2008) - Andean Resources Ltd. (TSX:AND)(ASX:AND) -

Quarterly Report

For the Quarter Ended 31st December 2007

(Dollars expressed in Australian dollars)

HIGHLIGHTS

- Based on drill results through June 2007, completed a JORC and NI 43-101 compliant resource estimate for 1.5 million ounces of gold and 8 million ounces of silver

- Phase 4 drill program ahead of schedule with more than half of the planned 30,000m drilling for the current season at Cerro Negro completed

- Strike length of the Eureka West Vein extended by 50% to greater than or equal too 600m in total with high-grade gold and silver assays

- Completed a successful infill drilling program at Eureka West existing resource including ERC-764 with 18m of 67.7 g/t gold and 1,207 g/t silver

- Completed an infill drilling campaign at Vein Zone

- Pre-Feasibility Study on schedule for 3(rd) Quarter 2008

- Andean called the options/warrants related to the $9.8 million financing completed earlier in the year raising an additional $7.4 million to further fund drilling program

- At the end of the quarter, Andean's cash balances totalled $11.6 million

Wayne Hubert, Managing Director, summarized the quarter as follows: "We are on track in building a quality intermediate size gold company. This was a tremendous quarter for us at Cerro Negro and the Andean team has accomplished the following: prepared a baseline resource estimate, significantly expanded this resource with exploration and infill drilling, initiated a Pre-Feasibility Study, raised additional funding to continue our drill programs, and finally, successfully diversified our shareholder base into North America with improving trading volumes."

CERRO NEGRO EXPLORATION REPORT

Cerro Negro Resource Estimate

On October 9th, Andean released an updated JORC and NI 43-101 compliant resource estimate at Cerro Negro of 1.5 million ounces of gold and 8 million ounces of silver, based on its 14,000m Phase 3 drill program completed through to June 2007 and determined by independent mineral consultants, Micon International of Canada.

- Vein Zone indicated resource of 4.61 million tonnes grading 3.73 g/t Au

- Vein Zone inferred resource of 4.31 million tonnes grading 2.65 g/t at 1.0 g/t Au cut-off grade

- Eureka West inferred resource of 3.05 million tonnes grading 6.37 g/t Au and 82 g/t Ag at 2.5 g/t Au cut-off grade

The resource reflected a significant increase from the prior year with a measured, indicated and inferred resource at Vein Zone of 921,000 ounces of gold and an inferred resource of 624,000 ounces of gold and 8 million ounces of silver at Eureka West.

In order to improve Andean's confidence in the resources at both Vein Zone and Eureka West, the Company designed an infill and extension drilling program at both these deposits. The initial holes of this program were largely completed by the end of the quarter and have returned very positive results (see below).

Phase 4 Drilling Ahead of Schedule

Andean has now completed more than 15,000m of exploration drilling this season with 33 holes drilled at Eureka and 14 infill holes completed at Vein Zone. The current drill program is ahead of schedule with more than half of the expected 30,000 meters completed. To date, in half a season, Andean has drilled more meters than was drilled in the entire previous season. Of the 33 drill holes at Eureka, 11 were focused on expanding mineralization to the west, 7 targeted expanding the existing resource to depth, 13 holes were infill holes to improve the confidence of the existing resource, and 2 holes tested mineralization to the east. To date, results for most of the 33 holes have been released.

Phase 4 Exploration Drilling Expands Strike Length of Eureka West by 50%

The Andean Exploration team was able to extend the known mineralization at Eureka West, by another 200m of strike length to the west with 11 drill-holes. These holes were similar in grade and tenor to the previously released Phase 3 drill holes, EDD723 and EDD729 on the western boundary of the resource estimate. Results of these 11 (extension) holes are shown in the table below:



-----------------------------------------------------
From To Width(1) Au Ag AuE(2)
Hole (m) (m) (m) (g/t) (g/t) (g/t)
-----------------------------------------------------
ERC-743 308 329 21 15.3 298 20.3
-----------------------------------------------------
ERC-745 211 223 12 13.9 234 17.8
-----------------------------------------------------
ERC-747 277 302 25 27.5 849 41.7
327 332 5 16.7 308 21.8
-----------------------------------------------------
EDD-748 361 376 15 10.5 95 12.1
382 390 8 32.4 570 41.9
-----------------------------------------------------
EDD-749 197 218 21 32.3 904 47.4
-----------------------------------------------------
EDD-752 NSR with post mineral fault
-----------------------------------------------------
EDD-753 382 390 8 13.7 505 20.1
-----------------------------------------------------
EDD-761 NSR with post mineral fault
-----------------------------------------------------
EDD-762 265 274.8 9.8 11.0 270 15.5
---------------------------------------------
318.5 322.6 4.1 17 242 21.0
-----------------------------------------------------
174 191 17 37.3 1041 54.7
-----------------------------------------------------
EDD-765 209 212 3 6.5 215 10.1
235 240 5 10.2 55 11.1
-----------------------------------------------------
ERC-767 208 225 17 10.4 162 13.3
---------------------------------------------
230 232 2 6.4 155 9.0
---------------------------------------------
262 271 9 8.0 176 10.9
---------------------------------------------
275 279 4 15.2 303 20.3
---------------------------------------------
286 300 14 6.7 121 8.7
---------------------------------------------
306 309 3 9.1 47 9.9
---------------------------------------------
314 320 6 8.8 25 9.2
-----------------------------------------------------
(i) Note: not all intercepts shown

(1) Intersections are drilled widths, not true widths
(2) Gold equivalent ounces calculated using a 60:1 silver:gold ratio based
on prices without factoring silver and gold recoveries


Each of these drill holes can be located on the Longitudinal Section provided. Mineralization is contained within massive banded quartz veins with electrum often found on the dark sulphide banding. Silver grades appear especially high in this area to the west, which should support a very low operating cost, as silver will be taken as a by-product credit to gold production.

With holes EDD753 and ERC767 being the most westerly holes, the Eureka West vein remains open to the west.

Infill Drilling on Existing Resource at Eureka West

During the quarter, 13 drill holes were drilled into the existing resource (see Longitudinal Section) in order to improve the classification of the mineralization from inferred to indicated, so that the resource could be incorporated into the Pre-Feasibility Study. The more significant results are shown in the table below:



------------------------------------------------------
From To Width(1) Au Ag AuE(2)
Hole (m) (m) (m) (g/t) (g/t) (g/t)
------------------------------------------------------
ERC-734 305 332 27 24.0 245 28.1
------------------------------------------------------
EDD-739 200 220 20 11.8 51 12.7
------------------------------------------------------
EDD-742 142 149 7 6.0 99 7.7
------------------------------------------------------
EDD-746 168 200 32 15.4 311 20.6
--------------------------------------------
225 232 7 7.8 249 12.0
------------------------------------------------------
ERC-757 117 130 13 15.6 377 21.9
------------------------------------------------------
EDD-758 223 241 18 5.6 68 6.7
--------------------------------------------
including 228 235 7 9.7 327 15.2
------------------------------------------------------
ERC-763 224 231 7 21.7 320 27.0
--------------------------------------------
238 240 2 4.6 55 5.5
------------------------------------------------------
ERC-764 157 175 18 667.7 1207 87.8
--------------------------------------------
Including 163 165 2 483 5965 582.4
--------------------------------------------
225 230 5 5.6 21 6.0
------------------------------------------------------
EDD-766 170 189.2 19.2 19.1 361 25.1
--------------------------------------------
212.5 221.6 9.1 5.9 28.2 6.4
------------------------------------------------------
EPQ-7E 160 178 18 15.7 106 17.5
------------------------------------------------------

(1) Intersections are drilled widths, not true widths
(2) Gold equivalent ounces calculated using a 60:1 silver:gold ratio based
on prices without factoring silver and gold recoveries


Based on the infill drilling completed to date shown above, Andean expects the updated resource grades will be higher than the mineral resource grade defined by Micon International in its current resource estimate of 6.4 g/t gold and 82 g/t silver, which should improve both the economics of Eureka West and the quantity of ounces contained within the zone. Some of the infill drilling is shown on the sections below.

To view the accompanying map of Eureka West Prospect, Cross Sections, please visit the following link:

http://www.ccnmatthews.com/docs/andmapa.jpg

Expansion of Existing Eureka West Resource to Depth

While the existing resource was locally extended to depth by holes EDD748 (15m of 10.5 g/t Au 95 g/t Ag and 8m of 32.4 g/t Au 570 g/t Ag), EDD 755 (13.5m of 12 g/t Au 76 g/t Ag and 7m of 17.6 g/t Au and 61 g/t Ag), and EDD760 (27m of 32.5 g/t Au 179 g/t Ag), the bottom of the Eureka West ore shoot appears to have been truncated by a post mineral fault. This can be seen on the Longitudinal Section provided. The exploration program will try to locate the faulted offset to the vein, and is targeting a structure known as the 721 Vein, intersected in Phase 3 by EDD-721 to the east of current drilling, which averaged 9 g/t gold, 69 g/t silver over 17m.

Andean is planning on completing an updated resource estimate in March 2008 incorporating the 33 new extension and infill holes detailed above.

To view the accompanying map of Eureka West Prospect, Longitudinal Projection, please visit the following link:

http://www.ccnmatthews.com/docs/andmapb.jpg

To view the accompanying map of Eureka West Prospect, Drillhole Location & Results, please visit the following link:

http://www.ccnmatthews.com/docs/andmapc.jpg

Vein Zone Infill Drilling

Since only measured and indicated resources can be included in a Pre-Feasibility Study, fourteen reverse circulation holes were drilled into Vein Zone in order to improve the resource classification, which is currently about 60% in the measured and indicated category and 40% inferred. While Andean expects that the drilling results shown below will largely confirm the (previous) Micon Resource Model for Vein Zone, it was considered that a better understanding of the structural geology of the deposit would also enhance resource confidence, especially with regard to lower-grade stockwork mineralisation. A structural consultant was contracted to carry out a detailed study of the deposit and is currently finalising his report.



-----------------------------------
Hole From To Width Au
--------------------------
m m m g/t
-----------------------------------
VRC-770 162 189 22 7.5
-----------------------------------
VRC-772 63 69 7 3.6
--------------------------
93 149 56 9.0
-----------------------------------
VRC-773 19 30 11 6.80
--------------------------
54 58 4 7.74
-----------------------------------
VRC-776 91 95 4 4.08
--------------------------
118 122 4 2.92
--------------------------
132 146 14 3.02
-----------------------------------
VRC-777 15 29 14 2.09
--------------------------
40 42 2 2.14
--------------------------
72 78 6 2.88
--------------------------
116 118 2 1.53
-----------------------------------
VRC-778 12 27 15 5.66
--------------------------
100 103 3 4.18
-----------------------------------
VRC-779 85 92 7 4.86
--------------------------
113 116 3 1.75
--------------------------
117 119 2 2.03
--------------------------
174 179 5 1.90
-----------------------------------
VRC-780 70 72 2 4.92
--------------------------
94 98 4 6.32
-----------------------------------
VRC-781 19 28 9 8.28
--------------------------
38 40 2 2.85
--------------------------
75 77 2 2.42
--------------------------
175 185 10 1.6
-----------------------------------
VRC-782 60 62 2 14.47
--------------------------
129 131 2 1.65
--------------------------
189 195 6 4.60
--------------------------
197 199 2 4.52
--------------------------
208 213 5 1.10
--------------------------
217 222 5 2.28
--------------------------
233 239 6 11.79
--------------------------
245 252 7 2.74
--------------------------
258 263 5 1.87
-----------------------------------
VRC-783 135 138 3 4.31
--------------------------
159 186 27 8.39
--------------------------
195 199 4 4.87
-----------------------------------


Exploration Outlook

During the remaining six months of the current drilling campaign, three drill rigs are being focused on the following targets at Cerro Negro in order of priority:

- Following the Eureka West Vein to the west

- Defining two potential new ore-shoots intersected by previous drilling (EDD-721 with 17m of 9.2 g/t gold and 69 g/t silver) and the five holes that intersected grades permissive for underground mining on the Main Eureka Vein).

- Exploring the remaining 4 km of the Eureka Main Vein

- Drilling an area of poor outcrop immediately north of the West Vein, where several narrow veins have been exposed by backhoe trenching.

- Drilling a few of the parallel veins (Eureka South Vein and Eureka North Vein)

- Testing additional targets at Vein Zone (Bajo Negro, Silica Cap, Pescado Rabiosa)

Four new geologists have been added to the exploration team, enabling Andean to expand its exploration efforts outside the Vein Zone and Eureka prospects, and to explore its other properties in Santa Cruz including Las Mellizas and La Esperanza.

Pre-Feasibility Study

The majority of the work to complete the Pre-Feasibility Study (PFS) has been outsourced to independent contractors under the direct supervision of Andean's in-house mining engineer, Mr Pete Blakeley:

- Ausenco Services Pty. Ltd. of Queensland, Australia will supervise the Metallurgical test work, assist in determining the project infrastructure requirements, prepare the PFS document, and develop a potential plant design.

- Metallurgical test work is being completed by PRA Labs, Vancouver, British Columbia, Canada.

- Micon International, of Canada will prepare a new resource model during the next quarter.

- Golder Associates Argentina will complete a geotechnical investigation of a potential open pit at Vein Zone and a potential underground development at Eureka. They will also develop a comprehensive geotechnical model of both resources.

- The environmental baseline study and other testing will be performed by Vector Argentina.

- Hidroar S.A. will develop an overall hydro-geological model for water sources.

- A Community Relations assessment of the project has also been initiated and will be incorporated in the overall PFS.

Andean expects the results of the PFS to be released in the third quarter of 2008. Please refer to the news release dated January 9, 2008 for additional PFS information.

CORPORATE

Financings and Liquidity

During the quarter, the Company expended approximately A$ 3.0 million on advancing the Cerro Negro project. During the quarter additional funds of approximately A$7.4 million were received on the accelerated exercise of 16.4 million unlisted options (see below). A further 5.5 million options were exercised by various parties during the quarter. At quarter-end, Andean was well funded with a cash balance of A$11.6 million.

Acceleration of Options Expiry Date

On 22 October 2007, Andean exercised its right to call for the early exercise of 16.4 million outstanding unlisted options (with an exercise price of A$ 0.45) issued by the Company as part of it's A$ 9.8 million fundraising completed in February 2007. On or before the exercise date of 21 November 2007, all 16.4 million options were exercised and the Company received the anticipated A$7.38 million. Andean will continue to utilize these proceeds for general working capital purposes and to fund the current exploration programs at Cerro Negro.

Share Capital

Including the exercise of options during the quarter, the Company's issued share capital is as follows:

- 368.1 million ordinary shares

- 26.1million unlisted options (at various strike pieces between A$0.08 and A$0.70)

Annual General Meeting of Shareholders

The Annual General Meeting (AGM) of the Shareholders was held in Perth, Western Australia on 29th November 2007at 3:30pm at Royal Freshwater Bay Yacht Club, Keane's Point, Peppermint Grove, Western Australia. In addition to the approval of ordinary business at the AGM, a new employee and director share ownership plan was approved for an allocation of shares contingent upon satisfactory completion of specific performance criteria.

Note: The information in this Report that relates to exploration results is based on information provided by David Shatwell who is a Fellow of the Australian Institute of Geoscientists.

Mt Shatwell has extensive experience relevant to the style and type of mineralisation 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 J.O.R.C. Code). Mr Shatwell consents to the inclusion in this Report on his work in the form and context in which it appears.



Appendix 5B

MINING EXPLORATION ENTITY QUARTERLY REPORT

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

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

ABN Quarter ended ("current quarter")
-------------- ---------------------------------

66 064 494 319 31 December 2007
-------------- ---------------------------------

Consolidated statement of cash flows

------------------
Current Year to
Qtr Date
(6 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 (2,326) (3,866)
(b) development
(c) production
(d) administration (1,758) (2,928)
1.3 Dividends received
1.4 Interest and other items of a similar nature
received 150 308
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 (3,934) (6,486)
---------------------------------------------------------------------------

Cash flows related to investing activities
1.8 Payment for purchases of: (a) prospects
(b) equity investments
(c) other fixed assets (699) (761)
1.9 Proceeds from sale of: (a) prospects 10
(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 (699) (751)
------------------

1.13 Total operating and investing cash flows (4,633) (7,237)
(carried forward)
---------------------------------------------------------------------------
1.13 Total operating and investing cash flows (4,633) (7,237)
(brought forward)
---------------------------------------------------------------------------

Cash flows related to financing activities

1.14 Proceeds from the issue of shares, options, etc. 8,743 8,743
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
------------------

Net financing cash flows 8,743 8,743
---------------------------------------------------------------------------

Net increase (decrease) in cash held 4,110 1,506

1.20 Cash at beginning of quarter/year to date 7,691 10,722
1.21 Exchange rate adjustments to item 1.20 (163) (590)

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

1.22 Cash at end of quarter 11,638 11,638
---------------------------------------------------------------------------

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 1.2 267
------------

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 (198)
Directors fees, salaries & superannuation (69)
---------------------------------------------------------------------------

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 4,500

4.2 Development
---------------------------------------------------------------------------

Total 4,500
---------------------------------------------------------------------------

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 1,638 716

5.2 Deposits at call 10,000 6,975

5.3 Bank Overdraft

5.4 Other (provide details)

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

Total: cash at end of quarter (Item 1.22) 11,638 7,691
---------------------

Changes in interests in mining tenements

-----------------------------------------------
Nature of Interest at Interest at
Tenement interest Beginning of End of
Reference (note (2)) Quarter Quarter
-----------------------------------------------

6.1 Interests in mining
tenements relinquished,
reduced or lapsed Nil
-----------------------------------------------

6.2 Interests in mining
tenements acquired or
increased
Nil
-----------------------------------------------



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 Issued Number quoted Issue price Amount paid
per security up per
(cents) security
(cents)
---------------------------------------------------------------------------

7.1 Preference
securities
(description)

------------------------------------------------------
7.2 Issued during
Quarter

---------------------------------------------------------------------------
7.3 Ordinary
securities 368,119,749 368,119,749

------------------------------------------------------
7.4 Issued during
Quarter 21,870,000 21,870,000

---------------------------------------------------------------------------
7.5 Convertible
debt securities
(description)

------------------------------------------------------
7.6 Issued during quarter

---------------------------------------------------------------------------
Exercise Expiry
7.7 Options Price Date
(description) 5,000,000 8 cents 30/06/08
4,000,000 25 cents 31/10/09
500,000 20 cents 31/12/08
1,000,000 30 cents 30/04/10
1,000,000 35 cents 31/10/10
7,000,000 30 cents 30/09/10
980,000 35 cents 27/02/09
1,600,000 40 cents 14/03/11
2,000,000 40 cents 30/06/11
3,000,000 70 cents 14/07/11

------------------------------------------------------
7.8 Issued during
Quarter 490,000 45 cents 27/02/09

------------------------------------------------------
7.9 Exercised during 16,890,000 45 cents 27/02/09
Quarter 980,000 35 cents 27/02/09
4,000,000 20 cents 31/10/07
------------------------------------------------------
7.10 Expired during
Quarter

------------------------------------------------------
7.11 Debentures
(totals only)
---------------------------

7.12 Unsecured notes
(totals only)
---------------------------


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.



Sign here: (Signed)
--------------- Date: 31 January 2008
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.

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