I first wrote about Andean American almost 18 months ago. The stock was $.92. They have increased their resource a lot and the stock is now $.56. Go figure.
I've been doing a lot of traveling lately. The metals stock prices are in the dumps and I'm doing my best to find the real diamonds in the rough while they are still dirt-cheap. Two weeks ago I made a quick trip to Lima to revisit the Invicta project of Andean American (AAG).
Andean has a producing project named Santa Rosa. They have yet to sort out the metallurgy and the project has sucked up both resources and time. With a world-class silver-gold-lead-zinc-copper mine in the wings, my suggestion to Andean 18 months ago was to either start firing people or dump Santa Rosa. They finally made some management changes and are looking for a new home for the project.
Invicta on the other hand looks to be a world-class multi-element project. When I looked at the core 18 months ago, management believed they had an epithermal system on their hands. Later drilling indicates the system is a mesothermal system, higher temperature. That's very good because mesothermal systems tend to be 6-8 times as deep as they are long. Recent work in the adit uncovered a number of wide and rich mineralization. Assays are pending but the rock is awesome and I expect the assays to be as awesome.
Andean now projects a 2700-meter strike length. They have increased the size of their land package at Invicta to 41,500 ha. Some of their intercepts are showing 37-43 meters true width and an incredible specific gravity of about 6. Given that ordinary rock has a SG of about 2.5, latest drill samples are direct shipping ore.
Andean has completed over 26,000 meters of diamond drilling in the epithermal breccia and 1000 meters of a 4-meter adit into the mesothermal zone to define the structure. They expect their feasibility study to be completed by the 20th of May.
Andean is designing a 5100 TPD mill. Using a figure of about $40 for cost of mining and milling and a very conservative $100 for the value of the rock, it's pretty easy to see a $100 million pre tax profit yearly. Andean expects to repay the capital cost in the first full year of production.
There has been quite a change in the last 18 months. Company Chairman and CEO John Huguet has ramped up the staff to get Invica into production within 13 months. Sinchao has been spun off with Andean American retaining a 58% interest worth some $14 million at today's prices.
There's a lot going on as Andean picks up speed. The 43-101 was due last month and like everything else in mining today, has been delayed by excessive demand for consultant's services. The feasibility study should be out any day now. I suspect the industry is going to be surprised by both the tonnage of high-grade ore and the robustness of the project.
I really liked the project and the company 18 months ago and John and his staff have accomplished wonders since then. This is going to be a very attractive and very profitable project. The stock is dirt-cheap and that's not going to last long once the numbers come out.
Andean American is an advertiser and we are biased. Please, please, please do your own due diligence.
Andean American Mining
May 18, 2008