Minera Andes Inc.
TSX VENTURE : MAI
OTC Bulletin Board : MNEAF

Minera Andes Inc.

October 24, 2005 09:30 ET

Minera Andes Receives Positive Feasibility Study On San Jose Project

SPOKANE, WASHINGTON--(CCNMatthews - Oct. 24, 2005) - Minera Andes Inc. (TSX VENTURE:MAI)(OTCBB:MNEAF) is pleased to announce the results of the recently completed feasibility study on the Frea and Huevos Verdes veins at the San Jose project in Santa Cruz province, southern Argentina. The feasibility study does not include recently announced drill discoveries on the property (see news release dated September 22, 2005). The highlights of the study are as follows (all amounts are expressed in U.S. dollars, unless otherwise indicated):

- Proven and probable mineral reserves: 1,160,859 tonnes (t) with an average grade of 7.7 g/t gold and 406 g/t silver.

- Gold contained: 288,094 ounces proven and probable reserves

- Silver contained: 15,229,380 ounces proven and probable reserves

- Average gold production: 60,633 ounces per year

- Average silver production: 3,119,533 ounces per year

- Average operating cost: $200 per ounce of gold equivalent

- Start up capital costs: $61.2 million

- Construction period: 14 months (already completed are 3.3 km of underground workings, infrastructure and base camp for 330 workers, and start up development of 3 ramps to access the orebodies).

Project Economics

Based on the results of the feasibility study (effective date October 2005), using the key assumptions, project parameters and a long-term gold price of $425 per ounce (oz) and $6.50 per oz for silver, the internal rate of return (IRR) after taxes of the San Jose project is estimated at 12.5 percent as highlighted in the price sensitivity analysis below. At recent metals prices the IRR is about 26.1 percent. Based on the parameters listed above, the undiscounted Net Present Value (NPV) is $22.0 million.



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IRR (after tax)
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Ag Price ($/oz)
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5.50 6.00 6.50 7.00 7.50 8.00
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500.00 15.7% 19.2% 22.6% 26.0% 29.3% 32.3%
475.00 12.2% 15.8% 19.3% 22.7% 26.1% 29.4%
Gold Price 450.00 8.7% 12.4% 15.9% 19.4% 22.9% 26.2%
($/oz) 425.00 5.1% 8.8% 12.5% 16.0% 19.5% 23.0%
400.00 1.4% 5.2% 9.0% 12.6% 16.2% 19.7%
375.00 -2.5% 1.5% 5.3% 9.1% 12.7% 16.3%
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Allen Ambrose, president of Minera Andes, said "We are pleased to present the feasibility study which is an important milestone for us. The main reason we commissioned the feasibility study was to identify the reserve base required to obtain the bank financing for the San Jose project. The initial ore reserve we have drilled was the most cost efficient way to move the project forward in a timely manner. We see this as the first step in the process of fully developing the 99,000 acre San Jose property. To date we have only drilled about 15 percent of the 32 kilometers of the presently known vein trend and recently we announced three new gold/silver discoveries on the property."



Assumptions made in the study

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Proven and probable mineral reserves 1.2 tonnes
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Gold head grade 7.7 g/t
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Silver head grade 406 g/t
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Gold Recovery 90.2%
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Silver Recovery 88.1%
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Total gold contained 287,383 oz
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Total silver contained 15,152,930 oz
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Milling rate 750 t/day
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Mine life 4.3 years
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Gold price $425/oz
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Silver price $6.50/oz
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Mineral Resources, Reserves and Mining

Total audited measured and indicated resources at San Jose Project are 327,153 ounces of gold and 17.3 million ounces of silver, contained in 1.1 million tonnes grading 9.32 g/t gold and 494 g/t silver, at a cutoff grade of $45/t (using a price of $394.48 for gold and $6.48 for silver). An additional 28,973 ounces of gold and 1.6 million ounces of silver, in 93,000 tonnes, grading 9.69 g/t gold and 543 g/t silver are classified as inferred resources.



Mineral Resources - Measured and Indicated
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Grades Classified Resource Contained Ounces
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Total
Au Ag Resource Measured Indicated Gold Silver
Area (g/t)(g/t) (t) (t) (t) (oz) (oz)
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HUEVOS
VERDES 7.81 563 524,000 167,000 357,000 130,958 9,440,384
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FREA 10.70 431 573,000 - 573,000 196,195 7,902,816
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TOTAL
PROJECT 9.32 494 1,097,000 167,000 930,000 327,153 17,343,200
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Proven and probable mineral reserves, based on an overall cutoff off grade of $75/t (using a price of $394.48/oz for gold and $6.48/oz for silver), are currently 1.16 million tonnes at 7.7 g/t gold and 406 g/t silver, containing 288,094 ounces of gold and 15,229,380 ounces of silver. The reserves also take into account marginal blocks of ore located on the periphery of higher grade zones. The cutoff grade for these blocks was $45/t. The marginal cutoff grade was defined by the value of ore, which meets the variable costs, but not the fixed costs. AMEC has assumed a minimum mining width of 1.0 meter for conventional cut and fill stopes, and 1.5 meters for mechanized cut and fill stopes is assumed. A 15 percent unplanned dilution and a 5 percent mining loss are used in the reserve calculation. The reserves, with an overall 15.7 percent dilution, are shown in the following table.



Mineral Reserves - Proven and Probable
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Grades Classified Reserve Contained Ounces
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Total
Au Ag Reserve Proven Probable Gold Silver
Area (g/t) (g/t) (t) (t) (t) (oz) (oz)
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HUEVOS
VERDES 6.4 466 533,514 174,241 359,280 110,601 8,053,168
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FREA 8.8 355 627,345 - 627,345 177,493 7,176,212
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TOTAL
PROJECT 7.7 406 1,160,859 174,241 986,626 288,094 15,229,380
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The resource and reserve estimates are based on 117 core holes, 32 reverse circulation holes and 3,285 meters of underground workings at Huevos Verdes and 88 core holes at the Frea zone. The nominal spacing in both zones is 35 meters along strike (horizontally) and 50 meters vertically.

The following summarizes the key assumptions, parameters and methods used in the Resource and Reserve estimates:

- Gold assays were cut to 120 g/t, 20 g/t, 80 g/t and 100 g/t at Huevos Verdes South, Central, North and Frea, respectively. Silver assays were cut to 10,000 g/t, 1,000 g/t, 8,000 g/t and 4,000 g/t at Huevos Verdes South, Central, North and Frea, respectively.

- Density was assigned as an average to the two principal mineralized zones, Huevos Verdes and Frea. The values used for the estimate are 2.595 t/m3 for Huevos Verdes and 2.611 t/m3 for Frea.

- The geological model for both Huevos Verdes and Frea zones was developed using a series of northeast oriented sections spaced approximately 10 meters to 50 meters apart.

- Assays were composited to full vein-width interval.

- The estimation is done using Ordinary Kriging coupled with oriented search ellipses.

- Block grades were estimated based on interpretation of geological parameters logged in drill holes.

- Included in the resource estimate are 1,791 samples taken from the underground workings at 2 meter intervals.

Mining Method

The mine is designed to produce 750 t/d of gold and silver ore from two separate structures, the Frea and Huevos Verdes veins, using underground mining methods. Estimated mine life is 4.3 years with the current reserve. Mechanized cut and fill mining will be used as the primary mining method supplemented with conventional cut and fill mining. Processing will consist of a crushing and grinding circuit followed by flotation, concentrate, leach cyanide recovery and Merrill-Crowe circuits. Power will be supplied by four diesel generators.

Capital Cost Estimates

The capital costs are estimated at $61.2 million, detailed as follows:



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Description of Capital Cost Items Cost ($ x 1,000)
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Underground Mine Facilities 2,149
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Process Facility 15,260
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Site and Services, etc 8,869
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Tailings & Waste Rock Management 1,050
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Indirect Costs 8,324
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Owner Costs 17,796
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Subtotal 53,447
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Working Capital 1,400
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Contingency (12%) 6,413
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Total Capital Cost 61,260
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The construction schedule would cover a period of 14 months including the completion of financing arrangements and the obtaining of operating permits scheduled for the first quarter of 2006.

Operating Costs

The operating costs are based on a 750 tonnes per day operation and include both the extension of the existing mine workings and new construction of mine ramps and raises to complete development of the mine.

The average life of mine total operating costs, including mining, processing, and general and administration, are projected to be $79.92 per tonne of ore milled for a cash cost of $200.02 per ounce of gold equivalent (using a price of $400/oz for gold and $6.50/oz for silver).



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Summary of Operating Total
Costs $
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Unit Cost ($/t milled)
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General & Administration 21.43
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Mining 34.98
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Process 23.51
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Total 79.92
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Unit Cost ($/oz Au equivalent)
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General & Administration 53.64
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Mining 87.54
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Process 58.84
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Total 200.02
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Production

The processing facility is designed to operate at 750 tonnes per day. The mill is scheduled to process approximately 1.17 million tonnes over 4.3 years. The annual ore throughput to the plant is 273,752 tonnes with an average ore grade of 7.7 g/t gold and 406 g/t silver. During production, the mine will employ approximately 570 individuals.

The study includes environmental, closure and rehabilitation costs of $1,233,391 to fulfill all Argentinean legal requirements and comply with international, best-practice, procedures.

Geology

The San Jose orebodies are defined by two northwest trending quartz veins located in the center of the 50,000 hectare property. The Hueves Verdes vein represents about 45 percent of the total reserves and the Frea vein the other 55 percent. Both vein deposits identified are open at depth. The Frea vein is open to the northwest and the Huevos Verdes vein is open to the southeast. In addition, a resource exists at Saavedra West that is not included in the reserve estimate.

The San Jose project also hosts several other veins including the recently discovered Frea Satellite and Odin veins where mineralization has been identified along approximately 2 kilometers of strike length. To date over 32 kilometers of vein trend have been identified on the property and will be the subject of future drilling programs.

Existing Infrastructure

A 28-kilometer permanent all-weather road accesses the site. To date over 4 kilometers of underground workings have been developed on two levels through two inclined shafts at the Huevos Verdes vein. Construction of two underground ramps, one for the Huevos Verdes vein and the other at the nearby Frea vein, is underway and base camp facilities have been expanded to house the 330 employees and contractors.

A technical report including the updated resource and reserve estimates and a summary of the feasibility study will be filed with SEDAR within the next 30 days in accordance with National Instrument 43-101. Brian Gavin, Minera Andes' vice president of exploration and an appropriately qualified person as defined by National Instrument 43-101, has reviewed this news release.

The feasibility study and capital and operating cost estimates were prepared by independent engineering firms, MTB Project Management Professionals ("MTB") and AMEC Engineering ("AMEC") with input provided by project operator Mauricio Hochschild & Cia. Ltda. ("MHC") and Minera Santa Cruz ("MSC"). The resource model was prepared by MHC and MSC and audited by AMEC. The reserve model was then prepared by AMEC. Other specific technical expertise included the following:

- mine plan and processing plant - AMEC and MTB

- metallurgical testwork and flowsheet - AMEC and SGS Lakefield Research

- environmental, socio-economics, permitting, geotechnical engineering, and hydrogeology - Vector Peru and Vector Argentina.

The San Jose project is held by MSC, the joint venture corporation co-owned by Minera Andes (49%) and project operator MHC (51%). MHC is a large private South American metal mining and cement production company, specializing in the mining of vein-hosted metal deposits. MHC produces about 250,000 ounces of gold, 10 million ounces of silver and approximately one million tonnes of cement annually, and has annual revenues of approximately $200 million.

The Road Ahead

Ambrose commented, "As we advance the project the next step will be to optimize and further refine parts of the study to develop the project efficiently and for the lowest cost possible. Over the next few weeks an engineering firm will be awarded a contract for the detailed engineering and optimization work. Due to the advanced exploration, development, and infrastructure at the site including a trained labor force of over 350 workers and contractors, we are in an advantageous position to rapidly move the project ahead."

Minera Andes is a gold, silver and copper exploration company working in Argentina. Minera Andes holds about 500,000 acres of mineral exploration land in Argentina, including the co-owned San Jose silver/gold project now under construction and feasibility consideration for possible mine production. Minera Andes has also discovered an enriched copper zone at its Los Azules property and is acquiring other exploration targets in southern Argentina. The Corporation presently has 90,818,505 issued and outstanding shares.

This news is submitted by Allen V. Ambrose, President and Director of Minera Andes Inc.

Caution Concerning Forward-Looking Statements:

This press release contains certain "forward-looking statements", including, but not limited to, the statements regarding the Company's strategic plans, evolution of mineral resources and reserves, work programs, development plans and exploration budgets at the Company's San Jose Project. The forward-looking statements express, as at the date of this press release, the Company's plans, estimates, forecasts, projections, expectations or beliefs as to future events and results. Forward-looking statements involve a number of risks and uncertainties, and there can be no assurance that such statements will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements. Risks and uncertainties that could cause results or future events to differ materially from current expectations expressed or implied by the forward-looking statements include, but are not limited to, factors associated with fluctuations in the market price of precious metals, mining industry risks, risks associated with foreign operations, environmental risks and hazards, uncertainty as to calculation of mineral reserves and other risks. In addition, Minera Andes' joint venture partner, Mauricio Hochschild & Cia. Ltda., does not accept responsibility for the use of project data or the adequacy or accuracy of this release.

Cautionary Note to U.S. Investors:

The United States Securities and Exchange Commission (the "SEC") permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We use certain terms in this press release, such as "mineral resources", that the SEC guidelines strictly prohibit us from including in our filings with the SEC.

THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Minera Andes Inc. - Spokane Office
    Art Johnson
    (509) 921-7322
    mineraandes@minandes.com
    or
    Minera Andes Inc. - Vancouver Office
    Krister A. Kottmeier
    Investor Relations - Canada
    (604) 689-7017 or 1-877-689-7018
    ircanada@minandes.com
    www.minandes.com
    or
    Minera Andes Inc. - Spokane Office
    111 East Magnesium Rd., Suite A
    Spokane, WA 99208 USA
    or
    Minera Andes Inc. - Vancouver Office
    410-744 West Hastings Street
    Vancouver, B.C. V6C 1A5