Newmont inks deal with Andean (May 06, 2003)

Vancouver — Newmont Mining (NEM-N) has signed a letter of intent with Andean American Mining (AAG-V) to earn up to a 60% interest in the junior’s Santa Rosa gold-silver property in Peru.

The agreement encompasses 182 sq. km of the 189 sq. km Santa Rosa property but excludes the Santa Rosa mine site and Andean’s current exploration areas around the mine site which total about 7 sq. km.

The Santa Rosa mine has been in production since July of last year. The heap leach operation is running at approximately 1,000 tonnes per day using a carbon column recovery process. The Santa Rosa Mine is located on the southern end of the Santa Rosa Dome, which is one of 17 mineralized targets within the Santa Rosa property. The property is situated within the southern intercordilleran belt of the Peruvian Andes and is approximately 550 km southeast of Lima at an average elevation of 3,900 metres.

Due to Newmont’s technology and Peruvian experience, Andean states that it is convinced that Newmont is the right partner.

When the definitive agreement is signed, Newmont stands to earn a 51% undivided participating interest in the property. Newmont is required to spend US$7 million on exploration over a four year period and purchase US$600,000 units of common shares and a share purchase warrants from Andean.

Also in the agreement, Newmont is required to identify at least a one-million-ounce inferred gold resource, a portion of which shall meet the definition of a measured and/or indicated resource. If the major defines less than one million ounces but more than 500,000 ounces, Newmont can earn a 49% participating interest. If less than 500,000 ounces but more than 250,000 ounces are identified, Newmont may earn a 3% Net Smelter Royalty.

If Newmont earns a 51% controlling interest in the joint venture, Newmont would become the operator of the project and at Andean’s discretion, will have a one time option to earn an additional 9% undivided interest in the property, by expending an additional US$3.0 million over a 2-year period.

Also included in the agreement is the option to acquire the Santa Rosa mine site. Newmont can purchase the mine if Andean has discontinued production for 2 years or more, or, if a feasibility study indicates that average quarterly cash flows to Andean during the first 3 years of production, as a joint venture participant, are higher than the Santa Rosa Mine average cash flows, during the 4 quarters which immediately precede any production from the joint venture.

The operator of the project will provide programs and budgets for the calendar year. The non operating party will have 60 calendar days to determine if they will participate withdraw or be diluted. Penalty for stating participation and failing to contribute will double the dilution. If a non contributing party dilutes itself below a 10% interest, such party shall be converted to a 3.0% NSR and the other party would then hold a 100% participating interest in the property.