Andean Resources Cuts High-Grade Gold In Argentina

VANCOUVER — Deep stepout drilling on the Eureka West vein has expanded the size of zones showing bonanza-grade gold for Andean Resources (AND-T, AND-A) at its Cerro Negro property in the province of Santa Cruz, Argentina.

The mineralized extensions add confidence to company expectations that it will increase the size of its resource estimate for the Eureka West vein, where it has so far outlined 2.5 million indicated tonnes grading 12.88 grams gold per tonne and 235.26 grams silver for 1 million contained ounces gold and 18.8 million oz. silver.

Hole 901, Andean Resources’ best, returned as much as 32 metres grading 34.6 grams gold and 214 grams silver starting 340 metres down-hole. The true width of the intercept is about 19 metres.

It also drilled two other stepout holes west of hole 901, and although it is waiting for assays on those holes, the company reports intersecting quartz veins.

The three holes tested extensions of quartz veining and brecciation of the low-sulphidation epithermal system in the zero to 200-metre-east sections at a depth ranging between 300 and 400 metres.

Also significant was hole 8126 at Eureka West, the deepest drilled so far on the vein’s western extent. It hit 8 metres grading 8.1 grams gold and 61 grams silver starting about 381 metres down-hole.

In addition to the drill-hole results from Eureka West, Andean Resources continued to define gold mineralization at two other vein sections to the east, the 721 zone and the Eureka Main zone — areas not included in its resource estimate.

At the 721 vein, about 400 metres southeast of the Eureka West vein, Andean hit as much as 11 metres grading 17.4 grams gold and 33 grams silver beginning about 170 metres below surface in hole 8131.

In the Eureka Main vein, less than 100 metres northeast of the 721 zone, hole 8125 cut as much as 4 metres grading 32 grams gold and 844 grams silver, starting 157 metres down-hole.

For Andean Resources, the Eureka results are perhaps more important now than ever as the company announced mid-January that it is altering its mine plan to focus solely on the Eureka zone.

In its October 2008 prefeasibility study, Andean had announced plans to concurrently underground mine the Eureka West veins and open-pit mine near-surface veins about 9 km east. The near-surface veins form a well-defined area known as the Vein zone, where the company has calculated a resource estimate of 4.6 million tonnes grading 3.5 grams gold for just over 500,000 contained ounces gold.

That plan was to cost Andean Resources US$281 million with a 4,000-tonne-per-day operation — divided equally in terms of tonnage between the Eureka and Vein zones — producing about 350,000 oz. gold per year at a cash cost of US$198 per oz.

Based on a four-year mine life at Eureka, a six-year mine life at the Vein zone, US$800-per-oz. gold and US$13-per-oz. silver, the project returned a net present value of US$246 million and an internal rate of return of 40%.

But on Jan. 14, Andean said in order to shave off more than US$100 million in capital costs, it would drop the open-pit component and concentrate on a Eureka-only mine plan in a feasibility study it expects to release during the fourth quarter of 2009.

Investors reacted positively to the drill results boosting Andean Resources’ share price 24¢ to close at 95¢. It has 402 million shares outstanding.