BCSC taps Andean American with cease-trade

Vancouver — The British Columbia Securities Commission (BCSC) has issued a cease trade order on shares of Andean American Mining (AAG-V, ANMCF-O) until the company re-files a 2006 technical report on its Invicta gold-silver-copper property, located in west-central Peru.

Andean American chairman and CEO John Huguet says the company received the order to “correct some disclosure” regarding a report filed in October 2006 by the company’s qualified person. The report was reviewed and accepted for filing by the BCSC at the time.

“They (BCSC) don’t like the fact that the report contains a historical resource estimate, and that it has higher grades than the report that we put out — well it has higher grades but much, much lower tonnage,” Huguet says. “They never looked at the coppers, zincs or the leads back in 1988, or even the silvers, they only looked at high-grade gold, and we put out a resource estimate that included all metal values.”

The company used a 1.5-3 gram cutoff for the measured resource, and a 1-gram cutoff for indicated and inferred resources.

In early July, Andean was also prompted to issue a retraction on a news release that reviewed a series of objectives and production targets, as well as projections of mine life at Invicta. It also gave geological potential tonnage estimates of certain drill targets. The release did not include a disclaimer, as mandated by National Instrument 43-101 guidelines, explaining that there is no certainty projections will be achieved, or that any proposed operation would be economic.

“We are in good communication with (the BCSC) and there is nothing of a scandalous nature,” Huguet says. “They want to see the 43-101 issues addressed by the author of the report.”

Andean recently saw its share price rally about 25% to around 65 on the release of initial results from its latest drill campaign at Invicta. Hole 30 returned an intercept of 14.25 metres (from 146 metres downhole depth) averaging 18.45 grams gold per tonne, 18 grams silver and 0.46% copper in porphyritic medium-grained andesite with a brecciated structure cemented by multiple quartz veins. Additionally, an 18.5-metre interval (from 159.2 metres) graded 2.87% copper, 2.1 grams gold and 56.1 grams silver.

Up to 40% sulphides are reported in the mineralized sections of the core, as blebs of pyrite and chalcopyrite, along with strong hematite alteration.

The company feels the distinct zones of gold and copper suggest two potentially separate mineralizing events.

The infill hole was collared on the Atenea vein, where at least 3,500 metres of drilling is planned to provide data for a resource upgrade program. In addition, about 7,200 metres of drilling on the Ydalia vein and zones 4, 5, 7, as well as the Azulmina and Manuel structures, is also scheduled.

In late 2006, the measured and indicated resource at the project was pegged at 4.8 million tonnes grading 3.58 grams gold, 33.46 grams silver and 0.68% copper. Another 8.3 million inferred tonnes of 2.14 grams gold, 15.1 grams silver and 0.47% copper was also reviewed.

The company is looking at building a mine at Invicta with a minimum 7-year life, starting with two years of high-grade production. A phased, 3,000-tonne-per-day mill complex has been modelled with payback expected in less than three years. However, a feasibility study still needs to be conducted on the project.

Andean American acquired its option on the advanced, prefeasibility-stage project from a Barrick Gold (ABX-T, ABX-N) subsidiary in late 2005. It can acquire a 100% interest for cash and shares totalling US$700,000, followed by annual advanced royalty payments of US$100,000 upon exercising its option. Barrick would also receive a lump sum payment of US$800,000 when production begins. Barrick retains a 1% net smelter return royalty, capped at US$1 million, and a back-in right for up to 51% of the project should Andean American delineate more than 2 million contained ounces gold in proven and probable reserves.

In addition to Invicta, Andean American is working to solve metallurgical issues at its Santa Rosa gold-silver mine, in southern Peru. It also holds 74% of Sinchao Metals (SMZ-V), which is exploring the Sinchao gold-silver-copper project in northern Peru’s Cajamarca province.

The Aug. 3 trading halt came after Andean had closed at 71 per share. The company’s stock has a 52-week trading range of 48.5-$1.10.