Exhibit 99.1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATING RESULTS AND FINANCIAL POSITION
MINERA ANDES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS AND FINANCIAL POSITION
This management’s discussion and analysis (“MD&A”) of the operating results and financial position of Minera Andes Inc. and its subsidiaries (the “Company”) is for the three and nine month periods ended September 30, 2011 compared with the three and nine month periods ended September 30, 2010. Together with the unaudited condensed interim consolidated financial statements and notes thereto for the three and nine month periods ended September 30, 2011, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”), the MD&A provides a detailed account and analysis of the Company’s financial and operating performance for the period. This MD&A is current to November 9, 2011 and should be read in conjunction with the Company’s Annual Information Form and other corporate filings available on SEDAR at www.sedar.com and on the United States Securities and Exchange Commission (“SEC”) EDGAR system at www.sec.gov. The Company’s functional and reporting currency is the United States dollar and all dollar amounts in this MD&A are in U.S. dollars unless otherwise indicated. Canadian dollars are shown as C$.
Unless the context otherwise requires or it is otherwise stated, references in this MD&A to “Minera Andes” the “Company” or “we” or “us” are references to Minera Andes Inc. (“MAI”) and its subsidiaries.
Cautionary Note to U.S. Investors — Information Concerning Preparation of Resource and Reserve Estimates
The terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms defined in accordance with National Instrument 43-101 - “Standards of Disclosure for Mineral Projects” (“NI 43-101”) and by the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) in the CIM Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as the same may be amended from time to time by the CIM.
The definitions of proven and probable reserves used in NI 43-101 differ from the definitions in the SEC Industry Guide 7. Under SEC Industry Guide 7 standards, a “Final” or “Bankable” feasibility study is required to report reserves, the three-year historical average commodity prices are used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101; however, these terms are not defined terms under SEC Industry Guide 7 and normally are not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that any part or all of the mineralized material in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures.
Accordingly, information contained in this MD&A containing descriptions of our mineralized material may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure
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requirements under U.S. federal securities laws and the rules and regulations thereunder.
Overview
Minera Andes Inc. is a public company listed on the Toronto Stock Exchange (“TSX”) (symbol: MAI) and our common shares are also quoted on the National Association of Securities Dealers, Over-the-Counter Bulletin Board, “NASD OTC Bulletin Board” (symbol: MNEAF).
Our head office is located at Suite 4750, Bay-Wellington Tower, 181 Bay St, Toronto, Ontario, M5J 2T3, and our principal business address is Abraham Pizzi 5045, Barrio San Roberto — Dep. Rivadavia (5400) San Juan, Argentina. Our registered address for service is Suite 3700, 205 — 5th Avenue SW., Calgary, Alberta, T2P 2V7 Canada.
The principal business of Minera Andes is the exploration and development of mineral properties located in Argentina with a focus on gold, silver and copper mineralized targets. We carry on our business by acquiring, exploring and evaluating mineral properties through our ongoing exploration program. Following exploration, we may either seek to develop properties on our own, enter joint ventures to further development or dispose of them if they do not meet our requirements. Our investment income or losses, as the case may be, arise from our 49% share of the net profit or loss of the operations of the San José Mine, owned by Minera Santa Cruz S.A. (“MSC”) and accounted for on an equity basis.
We currently hold mineral rights covering approximately 254,712 hectares in Argentina. Our principal assets consist of:
(i) a 49% interest in MSC, which holds title to the San José Mine, an operating silver and gold mine in Santa Cruz Province, which covers 50,491 hectares and is not included in the hectares noted above;
(ii) a 100% interest in mineral properties comprising our Los Azules Project, a large porphyry copper project, in the province of San Juan; and,
(iii) a portfolio of exploration properties in the prospective Deseado Massif region of southern Argentina in the province of Santa Cruz.
Highlights — Third Quarter 2011
· Arrangement Agreement to Form McEwen Mining: In June 2011, Robert R. McEwen (“Mr. McEwen”), the Chairman, Chief executive officer and largest shareholder of the Company and of US Gold Corporation (“US Gold”) proposed the combination of the two companies to create a high growth, low-cost, mid-tier silver producer focused on the Americas. In September 2011, the Company and US Gold jointly announced that they had entered into an arrangement agreement dated September 22, 2011, pursuant to which the Company and US Gold will combine to form McEwen Mining. Completion of the business combination is conditional on approval of each company’s shareholders, and satisfaction of customary approvals, including regulatory, stock exchange, and court approvals. The business combination, if approved, is anticipated to become effective in early 2012.
· Full Repayment of Loans from San José Mine: During the third quarter of 2011, MSC repaid the entire outstanding principal and accrued interest on the shareholder and project finance loans. The Company received net proceeds of approximately $29.0 million from this repayment. In addition, the project finance loan payable to our joint venture partner, Hochschild Mining plc (“Hochschild”) totaling approximately $32.4 million was repaid in full by MSC on behalf of the Company.
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· San José Mine Performance (on a 100% basis): Net income for the three month period ended September 30, 2011 at the San José Mine increased by $13.2 million or 151% compared to the same period in 2010 driven primarily by a 62% increase in sales. Production during the third quarter of 2011 totaled 1,562,000 ounces of silver and 20,910 ounces of gold. Silver production increased by 11% while gold production decreased by 5%, compared to the same period in 2010.
Selected annual information for MAI is presented in the table below (in thousands except per share amounts):
| | 3 months ended | | 9 months ended | | | | | | | |
| | and as at | | and as at | | Year ended and as at Dec. 31, | |
| | 30-Sep-11 | | 30-Sep-11 | | 2010 | | 2009* | | 2008* | |
Income on investment in Minera Santa Cruz | | $ | 11,218 | | $ | 36,026 | | $ | 24,461 | | $ | 9,349 | | $ | 4,696 | |
Net income (loss) | | 6,781 | | 34,508 | | (1,217 | ) | 4,115 | | (2,975 | ) |
Earnings (loss) per share - basic and diluted | | 0.02 | | 0.12 | | — | | 0.02 | | (0.02 | ) |
Total assets | | 199,807 | | 199,807 | | 192,657 | | 166,571 | | 137,325 | |
Total non-current financial liabilities | | 2,079 | | 2,079 | | 33,993 | | 31,850 | | 31,850 | |
Cash dividends delcared per share | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | |
*2009 and 2008 information prepared according to Canadian GAAP.
Overall Performance
For the three month period ended September 30, 2011, net income was $6.8 million ($0.02 per share basic and diluted) compared to net loss of $5.6 million (($0.02) per share basic and diluted) for the same period in 2010.
This $12.4 million or 221% increase in net income was primarily attributable to the net effects of:
· an increase of $6.3 million in income recorded on our investment in MSC;
· an increase in professional fees of $2.0 million due to merger related fees, and an increase in other consulting, accounting and legal fees in 2011;
· an increase in income tax expense of $0.1 million due to an increase in deferred tax liability;
· a decrease of $9.2 million in the unrealized loss on the revaluation of the fair value of the derivative liability relating to warrants issued by the Company in 2009 which were exercised in January 2011;
· a decrease in other operating expenses of $0.1 million due to a decrease in marketing and investor relations activity and travel expenses;
· a decrease in wages of $0.1 million due to a reduction in severance compensation present in the same period in 2010; and,
· a decrease in foreign currency exchange gains of $1.2 million resulting from the weakening of the Canadian dollar.
Results of Operations - MSC
The following discussion is related only to MSC and is disclosed on a 100% basis, of which the Company owns 49% and is accounted for using the equity method. MSC, the entity which owns and operates the San José Mine, is responsible for and has supplied to the Company all reported results and operational updates from the San José mine.
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Net income at MSC was $22.0 million for the three month period ended September 30, 2011. This $13.2 million increase compared to the same period ended September 30, 2010 was mainly attributable to an increase in sales of $30.5 million, a decrease in financial and foreign exchange costs of $2.4 million and the reversal of an asset impairment charge from the previous year of $1.2 million. This increase in income was partially offset by an increase of $10.6 million in operating costs, and an increase of $10.3 million in deferred tax expense.
Sales increased 62% for the three month period ended September 30, 2011 compared to the same period in 2010 due to both higher realized sales prices achieved and an increase in the number of ounces silver sold.
Production during the three month period ended September 30, 2011 was 1,562,000 ounces of silver and 20,910 ounces of gold. This represented an increase of 11% for silver production and a decrease of 5% for gold production compared to production of 1,409,000 ounces of silver and 22,030 ounces of gold in the same period in 2010. Overall, there was an increase in mill throughput along with higher average silver head grade mined and increased metallurgical recoveries for both silver and gold. Mill throughput increased 10% on a year over year basis as a result of continuing improvements in the mining operation. Metallurgical recoveries improved to 85% for silver and 89% for gold in the third quarter of 2011 compared to 84% for silver and 88% for gold in the same period of 2010.
The following table sets out production totals, operating cash costs and production cash costs (on a co-product basis) of the San José Mine for 2011 on a quarterly basis and for 2010 on a quarterly and annual basis and for 2009 on an annual basis, and they are considered to be non-IFRS measures (see non-IFRS measures, page 15):
| | Q3 2011 | | Q2 2011 | | Q1 2011 | | Year
2010 | | Q4 2010 | | Q3 2010 | | Q2 2010 | | Q1 2010 | | Year
2009 | |
Tonnes processed (‘000) | | 124 | | 98 | | 114 | | 461 | | 136 | | 113 | | 116 | | 96 | | 461 | |
Ounces silver produced (‘000) | | 1,562 | | 1,332 | | 1,522 | | 5,324 | | 1,871 | | 1,409 | | 1,221 | | 823 | | 4,998 | |
Ounces gold produced (‘000) | | 21 | | 18 | | 21 | | 84 | | 26 | | 22 | | 20 | | 16 | | 77 | |
Total Operating cash cost ($’000) | | 23,024 | | 18,382 | | 20,619 | | 71,913 | | 23,930 | | 18,100 | | 16,831 | | 13,052 | | 51,499 | |
Operating cash cost/tonne ($/t) | | 185 | | 187 | | 181 | | 156 | | 172 | | 161 | | 145 | | 135 | | 112 | |
Production cash cost/oz Ag ($/oz) | | 14.00 | | 13.56 | | 11.70 | | 9.67 | | 10.25 | | 8.81 | | 9.22 | | 9.15 | | 7.08 | |
Production cash cost/oz Au ($/oz) | | 622 | | 527 | | 514 | | 568 | | 531 | | 570 | | 602 | | 599 | | 477 | |
Sales
Net sales realized by MSC from the sale of silver and gold for the three month period ended September 30, 2011 totaled $80.1 million as compared to $49.6 million for the same period ended September 30, 2010, an increase of $30.5 million or 62% which was due to higher realized metal prices for both silver and gold and an increase in the number of ounces of silver sold in the quarter.
| | Sales in US$ (millions) | | Sales in Ounces (thousands) | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
| | | | | | Ag | | Au | | Ag | | Au | |
Q1 | | $ | 67.8 | | $ | 27.8 | | 1,342 | | 18 | | 739 | | 14 | |
Q2 | | 88.2 | | 49.4 | | 1,584 | | 22 | | 1,295 | | 22 | |
Q3 | | 80.1 | | 49.6 | | 1,410 | | 18 | | 1,220 | | 20 | |
Q4 | | — | | 94.0 | | — | | — | | 1,916 | | 27 | |
Total | | $ | 236.1 | | $ | 220.8 | | 4,336 | | 58 | | 5,170 | | 83 | |
The average weighted gross sale price for silver sold in the third quarter of 2011 was $35.82 per ounce, an increase of 68% compared to the average price of $21.31 per ounce received in the same period in 2010. In
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comparison, the average London P.M. fix price for silver was $38.80 per ounce for the third quarter of 2011 compared to $18.96 for the same period in 2010, a 105% increase.
The average weighted gross sale price for gold sold in the third quarter of 2011 was $1,726 per ounce, an increase of 36% compared to the average price of $1,270 per ounce received in the same period in 2010. In comparison, the average London P.M. fix price for gold was $1,702 per ounce for the third quarter of 2011 compared to $1,227 per ounce for the same period in 2010, a 39% increase.
Operating and Production Costs
The terms operating cash cost or production cash cost used in this section are for the reporting of the MSC operations only and are considered to be non-IFRS measures (see non-IFRS measures, page 15). Operating cash cost per tonne consists of geology, mining, processing, general and administration, royalty costs and refining and treatment costs (for doré product only). Production cash cost per ounce consists of geology, mining, processing, general and administration, royalty costs, refining and treatment charges (for both doré and concentrate products), sales costs and export taxes. Depreciation is excluded from both operating cash costs and production cash costs.
Total operating cash costs were $23.0 million for the three month period ended September 30, 2011. Average operating cash costs were $185 per tonne of processed ore for the third quarter of 2011 compared to $161 per tonne for the same period in 2010, an increase of 15% which is primarily due to an increase in costs in 2011 as a result of inflationary pressures on labour costs, materials and supplies within Argentina.
On a per-ounce co-product basis the average production cash cost was $14.00 per ounce of silver and $622 per ounce of gold for the three month period ended September 30, 2011. Co-product average production cash costs are calculated by dividing the respective proportionate share of the total costs for each metal for the period by the ounces of each respective metal produced. The proportionate share of the total costs is calculated by multiplying the total operating cash costs by the percentage of total production value that the respective metal represents. Production cash costs on a per ounce basis for the third quarter of 2011 increased 59% for silver and 9% for gold when compared with the same period of 2010. Accordingly, approximately 62% of the value of the 2011 production was derived from silver and 38% was derived from gold.
Investment in MSC
The following table shows the reconciliation of MSC’s net income, as reported under IFRS, compared to the equity pickup that is reported on our financial statements:
| | Three months ended, | | Nine months ended, | |
| | September 30, | | September 30, | | September 30, | | September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Summary of MSC’s financial information from operations: | | | | | | | | | |
Sales - MSC 100% | | $ | 80,147 | | $ | 49,616 | | $ | 236,136 | | $ | 126,841 | |
Net income - MSC 100% | | 21,993 | | 8,751 | | 70,891 | | 13,884 | |
Minera Andes Inc. portion - 49% | | 10,777 | | 4,288 | | 34,737 | | 6,803 | |
Equity adjustments: | | | | | | | | | |
Amortization of pre 2008 capitalized interest income on loans to MSC | | 527 | | 443 | | 1,361 | | 1,288 | |
Interest expensed by MSC and included in equity method pickup, net of income taxes | | 389 | | 628 | | 1,154 | | 1,940 | |
| | | | | | | | | |
Income on investment in MSC | | 11,693 | | 5,359 | | 37,252 | | 10,031 | |
Less: amortization of deferred costs | | (475 | ) | (399 | ) | (1,226 | ) | (1,160 | ) |
| | | | | | | | | |
Net income on investment in MSC | | $ | 11,218 | | $ | 4,960 | | $ | 36,026 | | $ | 8,871 | |
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Exploration
The goal of the 2011 exploration program at the San José Mine is to replace depleted reserves and to discover new mineralized veins (resources) on the San José Mine property, which comprises approximately 50,491 hectares.
Exploration drilling in 2011 at San José is continuing at a pace similar to 2010. During the second quarter of 2011, 14,300 metres were drilled in 58 exploration diamond drill holes. Assay results from the drilling were published by the Company on August 30, 2011 (please see the press release for the full details of these drill results). During the third quarter of 2011, 21,200 metres were drilled and assay results from this drilling will be published by the Company by the end of November, 2011. Drilling in the two quarters was mainly dedicated to infill drilling on vein extensions and the eleven new veins discovered in 2010.
Exploration success in 2010 was based in part on the results of a ground magnetic survey that was conducted over the mine area. In order to delineate new exploration targets, an 800 line-kilometre surface magnetic survey was completed for the area to the south of the mine during the second quarter of 2011. This was followed up with an additional 3,100 line-kilometre surface magnetic survey spaced 75 metres apart covering 22,000 hectares on the southeast portion of the joint venture property during the first nine months of the year. The geophysical data will be used to define new drilling targets outside of the main mine area for drilling during the second half of the year. The magnetic data will be complemented by 342 line-kilometres of gradient array Induced Polarization (“IP”) survey to be run over the same area during the fourth quarter of 2011 as well as 25 line-kilometres of pole-dipole array IP.
Loan Repayments
During the third quarter of 2011, the Company received an accelerated repayment of $28.3 million which settled the entire amount of interest and principal outstanding on the shareholder loan agreements. Further to this accelerated repayment the Company received a scheduled repayment of $0.7 million relating to accrued interest as per the definitive shareholder loan agreements signed in the third quarter of 2010.
During the quarter, MSC also made payments to Hochschild of $32.4 million on the Company’s behalf relating to accrued interest and principal outstanding on the project finance loan agreements. This payment satisfied the entire amount of interest and principal outstanding on the project finance loan agreements.
Since MSC began making loan repayments in 2010 following the revision of the shareholder loan agreements, the Company has received cumulative repayments relating to the shareholder loans totaling $39.6 million at the end of the third quarter of 2011. In that time MSC had also made cumulative repayments to Hochschild of $43.6 million on the Company’s behalf relating to the project finance loan agreements.
Los Azules
As of September 30, 2011, the Company has expended a total of $37.8 million on exploration activities at Los Azules. Of this total, $10.4 million was spent during 2011, principally on drilling and engineering work to support a preliminary feasibility study and secondarily on site maintenance and related expenses. These costs were capitalized in exploration and evaluative assets.
TNR Dispute
On April 1, 2010, the Company (and certain subsidiaries) filed a Statement of Claim in the Supreme Court of British Columbia against TNR Gold Corp and its subsidiary, Solitario Argentina S.A. (together “TNR”). This claim was subsequently consolidated with a related matter between TNR and MIM Argentina Exploraciones S.A. (“Xstrata Copper” or “Xstrata”) commenced by TNR against Xstrata in the Supreme Court of British Columbia in
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2008. These claims, in part, pertain to a purported 25% back-in right (or in the alternative, damages) by TNR to certain properties comprising the Company’s Los Azules copper project.
Certain of the properties formerly held by Xstrata (and certain affiliates) and later transferred to the Company pursuant to the (Los Azules) Option Agreement remain subject to an underlying option agreement between Xstrata and Solitario Argentina S.A. (“Solitario”), whereby Solitario had the right to back-in up to 25% of the properties covered by the underlying option agreement (the “Solitario Agreement”), exercisable by Solitario upon the satisfaction of certain conditions within 36 months of Xstrata exercising the option, including the production of a feasibility study. Xstrata exercised the option pursuant to the Solitario Agreement effective April 23, 2007. The 36-month period expired on April 23, 2010, without a feasibility study having been completed. TNR has also subsequently amended its claim to include that Xstrata (and Minera Andes) did not complete the required exploration expenditures pursuant to exercise the option to acquire the properties underlying the Solitario Agreement. TNR, by consequence, among other things, claims properties underlying the Solitario Agreement should be returned to TNR. The properties subject to these claims comprise a significant portion of the Los Azules copper project.
The Company rejects the alleged right of TNR to back-in to any portion of the Los Azules Copper Project and its assertion that the Solitario Agreement option was not validly exercised. At this time, the Company is not able to estimate the potential financial impact of this claim. However, if resolved adversely to the Company, this litigation could materially adversely affect the value of the Company’s interest in the Los Azules Project and its ability to develop the Los Azules Project. A trial date in the foregoing matter has been set for November 2012.
Santa Cruz Exploration
The Company controls approximately 145,820 hectares of mining rights in the province of Santa Cruz, Argentina, including approximately 45,105 hectares that border Goldcorp Inc.’s Cerro Negro project. At the end of September, we commenced a diamond drilling program on our 100% owned Martes property located in the province of Santa Cruz. The Martes property is located immediately south of the Sierra Blanca property that Mariana Resources Ltd is currently drilling and west of the Pingüino property being explored by Argentex Mining Corp. Targets consist of epithermal style quartz veins that outcrop at surface. Approximately 5,000 metres are planned for the first phase of drilling. Upon completion of the first phase, we will either drill additional holes at Martes if the initial results justify additional drilling, or move the drill to one of the Company’s other exploration concessions in Santa Cruz.
Summary of Quarterly Results — MAI
| | September | | June | | March | | December | | September | | June | | March | | December | |
Quarter Ended | | 30, 2011 | | 30, 2011 | | 31, 2011 | | 31, 2010 | | 30, 2010 | | 30, 2010 | | 31, 2010 | | 31, 2009 | |
| | IFRS (1) | | CDN GAAP | |
Net income (loss) ($000) | | 6,781 | | 10,677 | | 17,050 | | 3,022 | | (5,625 | ) | 4,269 | | (2,883 | ) | 2,441 | |
Net income (loss): | | | | | | | | | | | | | | | | | |
Basic & Diluted ($ per share) | | 0.02 | | 0.04 | | 0.06 | | 0.01 | | (0.02 | ) | 0.02 | | (0.01 | ) | 0.01 | |
(1) The amounts reported for Q1 to Q4 2010 were adjusted from CDN GAAP to conform with IFRS.
The changes in the quarterly net income or loss are primarily a result of the change in the reported quarterly income or loss from MSC. MSC’s quarterly results are driven by ore production levels, head grades mined, silver and gold recoveries, and silver and gold prices realized upon sale. In general, rising silver and gold prices over this period have benefitted MSC and, in turn, our quarterly net income or loss. Revaluations of our warrant liability in accordance with IAS 39 — Financial Instruments: Recognition and Measurement (“IAS 39”), has also caused significant movement in our reported net income or loss. Specifically, significant increases in the price of
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our common shares during the third and fourth quarters of 2010 resulted in decreases of $9.2 million and $10.9 million, respectively, in our net income.
Liquidity and Capital Resources
As at September 30, 2011, the Company had an accumulated deficit of $14.2 million and working capital of $43.0 million, compared to a $48.7 million deficit and $10.7 million working capital, as of December 31, 2010. As at September 30, 2011, Minera Andes had $45.0 million in cash and cash equivalents and short-term investments, compared to cash and cash equivalents of $13.8 million as of December 31, 2010. The Company has sufficient liquidity to fund its ongoing exploration programs at Los Azules and its 100% owned properties in Santa Cruz province for 2011 and 2012 based on the working capital balance as at September 30, 2011.
Our cash and cash equivalents and short-term investments of $45.0 million (2010 - $13.8 million) is held at financial institutions in the following jurisdictions:
| | As at | |
| | September 30, 2011 | | December 31, 2010 | |
Canada | | $ | 41.0 | | $ | 10.2 | |
United States | | $ | 0.2 | | $ | 0.2 | |
Argentina | | $ | 3.8 | | $ | 3.4 | |
Total | | $ | 45.0 | | $ | 13.8 | |
The increase in the Company’s cash and cash equivalents balance was primarily the result of receiving net payments from MSC of $29.0 million in September 2011 representing the entire amount of interest and principal outstanding. As a result, the Company no longer has any shareholder loan amounts due from MSC whereas at December 31, 2010 we had a receivable of $29.2 million, consisting of principal of $24.2 million and accrued interest of $5.0 million.
Earlier in the first quarter of the year, the Company also received $19.1 million from the proceeds of warrants exercise. The warrants had been issued pursuant to a “bought deal” underwritten financing completed in August 2009 and each whole warrant was exercisable to purchase one common share of the Company at a price of C$1.25 per common share until August 19, 2014. Pursuant to the terms of the warrant indenture governing the warrants, the expiry of the warrants was accelerated to January 31, 2011 as the volume weighted average trading price of the underlying common shares listed on the TSX was greater than C$2.50 for 20 consecutive trading days.
At September 30, 2011, the Company had no warrants outstanding.
During construction of the San José Mine, project financing totaling $65 million in principal had been provided pursuant to the Project Loan Letter Agreement (“Project Loan”) between Minera Andes, MSC and by assignment, Hochschild Mining Holdings Limited (the “Hochschild Lender”). Concurrent with repayment of the shareholder loans and interest noted above, the Project loan and related interest was also repaid in full by MSC in September 2011. As a result of this repayment, the Company no longer has balances outstanding related to the Project Loan whereas in 2010 we had a receivable balance of $42.6 million, consisting of principal of $31.9 million and outstanding interest of $9.7 million. These amounts receivable from MSC were offset by corresponding payable balances to the Hochschild Lender.
As both the Project Loan and shareholder loan balances have been repaid in full, the Company is now entitled to receive 49% of the distributable profits of MSC. The Company expects to receive quarterly dividend payments beginning in 2012 subject to the risks discussed below.
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The operation of the San José Mine is subject to a number of risks, including the risk that the price of silver and gold may decline. If, and to the extent that cash from operations is insufficient for any reason including cost-overruns and/or lower than expected sales or production, dividend payments may need to be reduced or suspended and additional investment by the shareholders of MSC (including the Company) may be required. Furthermore, on October 26, 2011, the government of Argentina announced a change in policy which requires that mining companies now repatriate all export revenues derived from mining, including silver and gold sales, back to Argentina prior to distribution locally or elsewhere. Previously, the mining industry had been exempt from this requirement since 2004. This policy, which also requires such export revenue to be converted to Argentine pesos when repatriated, may result in increases in foreign exchange transaction costs and additional delays in moving funds to Canadian banks.
The Company is in the process of exploring its other properties and has not yet determined whether these properties, other than the San José Mine, contain reserves that are economically recoverable not withstanding an independent positive Preliminary Economic Assessment which was completed in March 2009, and subsequently updated in December 2010, on the Los Azules property. The amounts shown on the Company’s balance sheet as exploration and evaluative assets represent net costs incurred to date, less amounts recovered from third parties and/or written off, and do not necessarily represent present or future values. The recoverability of amounts shown on the balance sheet for exploration and evaluative assets depend upon the existence of economically recoverable reserves, securing and maintaining title and beneficial interest in the properties, obtaining the financing required to explore and develop the properties, entering into agreements with others to explore and develop the mineral properties, and upon future profitable production or disposition of the mineral properties at a profit. The Company’s ability to continue its exploration and development activities depend in part on the ability of the San José Mine to continue to remain cashflow positive, and the Company’s ability to complete an equity financing, joint venture arrangements or raise funds by other means.
Although we have been successful in securing financing in the past, current global financial conditions, including volatility in the prices for all commodities, as well as legislation and political changes in Argentina, may make it difficult for us to secure the required financing on reasonable terms, if at all. If the Company were unable to meet its ongoing obligations on a timely basis, it could result in the loss or substantial dilution of the Company’s interests in its properties.
The Company’s contractual obligations as at September 30, 2011 are set out below:
| | | | Payments Due by Period Ending | |
Contractual Obligations | | Total | | Dec. 31,
2011 | | Dec. 31,
2012 | | Dec. 31,
2013 | | Dec. 31,
2014 | | 31-Dec-15
and after | |
Operating Lease Obligations (1) | | 827 | | 41 | | 350 | | 332 | | 104 | | — | |
Purchase Obligations | | 40 | | 40 | | — | | — | | — | | — | |
Accounts Payable and Accrued Liabilities | | 2,733 | | 2,733 | | — | | — | | — | | — | |
Total | | $ | 3,600 | | $ | 2,814 | | $ | 350 | | $ | 332 | | $ | 104 | | — | |
| | | | | | | | | | | | | | | | | | |
Note: (1) Consists of various lease agreements for office and storage space in Spokane, United States, Toronto, Canada and Mendoza and San Juan, Argentina.
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Outstanding Share Data
Our outstanding share data, as of November 9, 2011, is set out below:
Class and Series of
Security | | Number
Outstanding | | Value | | Expiry Date of
Convertible Securities | | Relevant Terms |
Common shares | | 282,948,854 | | | | | | |
Stock options | | 4,237,000 | | $ | 5,081,235 | | Various (December 27, 2011 to May 13, 2015) | | Exercisable for one common share each at C$0.66 to C$1.51 |
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Financial Instruments
As at September 30, 2011, the Company has no long term debt outstanding. The Company believes its capital structure is appropriate to ensure sufficient liquidity to meet the needs of the business. The Company has not executed any derivative financial instruments to manage the risks associated with its operations and, therefore, in the normal course of business the Company is inherently exposed to a number of risks related to changes in foreign currency exchange rates, interest rates, credit risk, liquidity risk and commodity price fluctuations.
The Company currently holds certain financial instruments such as cash and cash equivalents, short-term investments, receivables, accounts payable and accrued liabilities. The Company previously held certain financial instruments such as the project loan receivable, the project loan payable and related interest receivable and payable. All of these financial instruments are classified into one of five categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments are recorded in the statement of financial position either at fair value or at amortized cost. Subsequent measurement and changes in fair value will depend on their initial classification, as follows:
· Fair value through profit or loss financial assets are measured at fair value and changes in fair value are recognized in net earnings. The Company has classified its cash and cash equivalents and short-term investments as financial assets at fair value through profit or loss.
· Available-for-sale financial instruments are measured at fair value with change in fair value recorded in other comprehensive income until the instrument is derecognized.
· Receivables and project loan and interest receivable were classified as loans and receivables and are measured at amortized cost.
· Accounts payable and accrued liabilities, project loan and interest payable were classified as other financial liabilities and are measured at amortized cost.
The carrying value and fair value of the Company’s financial assets and liabilities as at September 30, 2011, December 31, 2010, and January 1, 2010, is summarized as follows:
| | September 30, 2011 | | December 31, 2010 | | January 1, 2010 | |
| | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | |
Fair value through profit and loss | | $ | 45,029 | | $ | 45,029 | | $ | 13,834 | | $ | 13,834 | | $ | 18,872 | | $ | 18,872 | |
Loans and receivables | | $ | 379 | | $ | 379 | | $ | 41,644 | | $ | 41,644 | | $ | 31,900 | | $ | 31,900 | |
Other liabilities | | $ | 4,752 | | $ | 4,752 | | $ | 71,843 | | $ | 71,843 | | $ | 47,719 | | $ | 47,719 | |
The fair value of receivables, accounts payable and accrued liabilities approximate their carrying values due to their short term nature. The fair values of the project loans and the corresponding interest receivable and payable
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approximate their carrying values as there is no net exposure to the Company due to their equal and offsetting terms of arrangement.
The Company does not hedge its exposure to gold and silver sales arising from its equity investment in MSC, and MSC does not hedge its sales. In the event that one of the Company’s exploration projects enters into production and revenue contracts are entered into in respect of other commodities and metals, the Company would be exposed to fluctuations in the prices of those commodities and metals at that time.
Related Party Transactions
Minera Santa Cruz
As disclosed above, under the terms of the Project Loan Letter Agreement among the Company, the Hochschild Lender and MSC, the San José Mine has been financed by Project Loans made thereunder by the Hochschild Lender. As at September 30, 2011, the total principal amount of the Project Loan Receivable (owing to the Company by MSC) is $nil (2010 — $31.9 million and the total principal amount of the Project Loan Payable (owing by the Company to the Hochschild Lender) is $nil (2010 - $9.7 million).
2083089 Ontario Inc.
The Company pays a management service fee to a related party, 2083089 Ontario Inc. (“208”) under the terms of a management services agreement. 208 is a company controlled by Mr. Robert R. McEwen (“Mr. McEwen”), the chairman and chief executive officer of the Company and beneficial owner of more than 5% of our voting securities. Mr. McEwen is also the chief executive officer and director of 208, which provides management services to a number of entities in which Mr. McEwen has significant equity interests. The management services fees cover inter-alia, rent, personnel, office expenses, and other administrative services on a cost recovery basis. During the respective three and nine month periods ended September 30, 2011 the Company paid $51,322 and $141,210 (2010 - $37,301 and $117,702) to 208. Mr. McEwen receives no compensation from 208.
Lexam L.P.
Beginning in the second quarter of 2010, an aircraft owned and operated by Lexam L.P. (of which Mr. McEwen is a limited partner and beneficiary) has been made available to the Company in order to expedite business travel. In his role as Chairman and CEO of Minera Andes as well as being involved in senior management with two other mineral exploration companies, Mr. McEwen must travel extensively and frequently on short notice.
The Company is able to charter the aircraft from Lexam L.P. at a preferential rate. The Company’s independent board members have approved a policy whereby only the variable expenses of operating this aircraft for business related travel are eligible for reimbursement. The hourly amount that the Company has agreed to reimburse Mr. McEwen is well under half the full cost per hour of operating the aircraft or equivalent hourly charter cost and in any event less than even Mr. McEwen’s preferential charter rate. Where possible, trips also include other company personnel, both executives and non-executives, to maximize efficiency.
During the respective three and nine month periods ended September 30, 2011 the Company incurred costs of $nil and $131,782 (2010 - $7,008 and $11,411) related to the business use of Lexam L.P.’s aircraft.
Outlook
Proposed Merger of Minera Andes and US Gold Corporation
In June 2011, Mr. McEwen, the Chairman, Chief executive officer and largest shareholder of the Company and of US Gold Corporation (“US Gold”) proposed the combination of the two companies to create a high growth, low-cost, mid-tier silver producer focused on the Americas. As a result of this proposal both companies formed special committees of independent directors to review Mr. McEwen’s proposal and retained independent financial
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advisors and independent legal counsel to consider the transaction and on September 22, 2011, the Company and US Gold announced that the two companies had entered into an arrangement agreement, pursuant to which the companies will combine to form McEwen Mining.
Completion of the business combination is conditional on the approval of each company’s shareholders, and satisfaction of other customary approvals, including regulatory, stock exchange, and court approvals. The business combination, if approved, is anticipated to become effective in early 2012. The Company expects to incur costs of approximately $3.0 million relating to the merger and the Company had incurred $1.7 million in merger related costs as at the end of the third quarter.
Minera Santa Cruz - San José Mine
Net income at MSC on a 100% basis increased by $13.2 million in the third quarter of 2011 compared to the same period of 2010, which is primarily the result of higher average silver head grade mined, higher realized metals prices and higher metallurgical recoveries.
For the balance of 2011, MSC will maintain its focus on maintaining silver and gold production. MSC intends to continue to optimize production by controlling dilution through improved mining methods including using smaller mining equipment to increase selectivity of ore mined. The original 2011 operating budget for MSC projects production levels are approximately 5,000,000 ounces of silver and 80,000 ounces of gold, levels similar to 2010 production. Despite losing 18 days of production due to the strike at the mine in the second quarter MSC believes that its original full year production estimates can still be met, barring any further significant disruptions to operations and subject to the final conditions of the strike settlement reached with the union.
There will be a continued emphasis on exploration drilling by MSC, as the 2011 budget for exploration drilling consists of approximately 56,000 metres. The drilling program is divided between in-fill drilling to upgrade inferred resources to measured and indicated resources, and step-out drilling to identify new resources. Resources defined by the drilling will be reported as part of the year end resource update that will be released near the end of the first quarter of 2012.
Los Azules
Planning is underway for work that will be carried out in the upcoming filed season, which will start in December 2011. Drilling during the 2011-2012 season will focus on exploring a new extension to the mineralization discovered during the 2010-2011 field season, in addition to continuing infill drilling on the known deposit and engineering activities to support the preliminary feasibility study.
In order to ensure availability of reliable drill rigs for our campaign at Los Azules, we have ordered two new Sandvik drill rigs with delivery scheduled for December 2011. The capital cost of the drills is expected to total approximately $1.0 million. A deposit of $0.3 million was paid prior to September 30, 2011 in connection with the drill rigs and is reflected on our balance sheet within the Exploration and Evaluative Assets balance. We intend to utilize contract drilling companies to operate the drill rigs
Santa Cruz Exploration
The Company controls approximately 145,820 hectares of mining rights in Santa Cruz province, Argentina, including approximately 45,105 hectares that border Goldcorp’s Cerro Negro project. At the end of September 2011, we commenced a diamond drilling program on our 100% owned Martes property located in the province of Santa Cruz. Targets consist of epithermal style quartz veins that outcrop at surface. Approximately 5,000 metres are planned for the first phase of drilling. Upon completion of the first phase, we will either drill additional holes
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at Martes if the initial results justify additional drilling or move the drill to one of the Company’s other exploration concessions in Santa Cruz.
Recent Accounting Pronouncements
Certain pronouncements were issued by the International Accounting Standards Board (“IASB”) or the International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for accounting periods after December 31, 2011. Pronouncements that are not applicable or do not have a significant impact to the Company have been excluded from the listing below.
(a) The following five new Standards were issued by the IASB in May 2011, and are effective for annual periods beginning on or after January 1, 2013. Early application is permitted if all five Standards are adopted at the same time.
(i) Consolidated Financial Statements
IFRS 10 “Consolidated Financial Statements” (“IFRS 10”) will replace existing guidance on consolidation in IAS 27 “Consolidated and Separate Financial Statements” (“IAS 27”), and SIC 12 “Consolidation — Special Purpose Entities”. The portion of IAS 27 that deals with separate financial statements will remain. IFRS 10 changes the definition of control, such that the same consolidation criteria will apply to all entities. The revised definition focuses on the need to have both “power” and “variable returns” for control to be present. Power is the current ability to direct the activities that significantly influence returns. Variable returns can be positive, negative or both. IFRS 10 requires continuous assessment of control of an investee in line with any changes in facts and circumstances.
(ii) Joint Arrangements
IFRS 11 “Joint Arrangements” (“IFRS 11”) will replace IAS 31 “Interests in Joint Ventures”, and SIC 13 “Jointly Controlled Entities — Non-monetary Contributions by Venturers”. IFRS 11 defines a joint arrangement as an arrangement where two or more parties contractually agree to share control. Joint control exists only when the decisions about activities that significantly affect the returns of an arrangement require the unanimous consent of the parties sharing control. The focus is not solely on the legal structure of joint arrangements, but rather on how the rights and obligations are shared by the parties to the joint arrangement. IFRS 11 eliminates the existing policy choice of proportionate consolidation for jointly controlled entities. In addition, the Standard categorizes joint arrangements as either joint operations or joint ventures.
(iii) Disclosure of Interests in Other Entities
IFRS 12 “Disclosure of Interests in Other Entities” (“IFRS 12”) is the new Standard for disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. Matters covered include information about the significant judgments and assumptions that any entity has made in determining whether it has control, joint control or significant influence over another entity.
(iv) Separate Financial Statements
IAS 27 has been updated to require an entity presenting separate financial statements to account for those investments at cost or in accordance with IFRS 9 “Financial Instruments” (“IFRS 9”). The amended IAS 27 excludes the guidance on the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent currently within the scope of the current IAS 27 that is replaced by IFRS 10.
(v) Investments in Associates and Joint Ventures
IAS 28 “Investments in Associates and Joint Ventures” (“IAS 28”) has been revised and it is to be applied by all entities that are investors with joint control of, or significant influence over, an investee. The scope of
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IAS 28 does not include joint ventures.
(b) IFRS 13 “Fair Value Measurement” (“IFRS 13”) was issued by the IASB in May 2011, and is effective for annual periods beginning on or after January 1, 2013. Early application is permitted. IFRS 13 was issued to remedy the inconsistencies in the requirements for measuring fair value and for disclosing information about fair value measurement in various current IFRSs. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price).
(c) The IASB is expected to publish new IFRSs on the following topics during 2012. The Company will assess the impact of these new standards on the Company’s operations as they are published:
· Leases
· Revenue recognition
· Stripping costs
(d) IFRS 9 “Financial Instruments” was issued by the IASB on November 12, 2009 and will replace IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification options in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of IFRS 9 on its consolidated financial statements.
(e) In October 2010, the IASB issued amendments to IFRS 7, “Financial Instruments: Disclosures” (“IFRS 7”), that enhance disclosure requirements in relation to transferred financial assets. The amendments are effective for annual periods beginning on or after July 1, 2011, with earlier application permitted. The Company does not anticipate this amendment to have significant impact on its consolidated financial statements.
(f) In December 2010, the IASB issued an amendment to IAS 12 “Income Taxes” (‘IAS 12”) that provides a practical solution to determining the recovery of investment properties as it relates to accounting for deferred income taxes. This amendment is effective for annual periods beginning on or after January 1, 2012, with earlier application permitted. The Company does not anticipate this amendment to have a significant impact on its consolidated financial statements.
(g) In June 2011, the IASB issued amendments to IAS 1, “Presentation of Financial Statements” (“IAS 1”) that require an entity to group items presented in the Statement of Comprehensive Income on the basis of whether they may be reclassified to earnings subsequent to initial recognition. For those items presented before taxes, the amendments to IAS 1 also require that the taxes related to the two separate groups be presented separately. The amendments are effective for annual periods beginning on or after July 1, 2012, with earlier adoption permitted. The Company does not anticipate the application of the amendments to IAS 1 to have a material impact on its consolidated financial statements.
(h) In June 2011, the IASB issued amendments to IAS 19 “Employee Benefits” (“IAS 19”) that introduced changes to the accounting for and classification of some employee benefits. The Company does not anticipate the application of the amended IAS 19 to have an impact on its consolidated financial statements.
Risks and Uncertainties
The Company’s operations and financial results are subject to a number of different risks: the Company does not control (jointly or otherwise) the San José Mine and has limited control over capital projects; any cost overruns or cash shortfall at the San José Mine could require further investment; the Company’s cash flows from the San José Mine are dependent on a large number of factors but most importantly on production levels, on silver and gold prices, operating costs, capital expenditures and working capital requirements; a substantial or prolonged decline
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in metal prices, particularly gold, silver, or copper, would have a material adverse effect on the Company’s ability to raise additional capital at terms economic to existing shareholders, if at all; global economic conditions combined with the Company’s financial position could make financing its operations and business strategy more difficult; the Company is subject to ongoing litigation, the outcome of which is undeterminable; the Company is subject to fluctuations in currency exchange rates, which could materially adversely affect the Company’s financial position; the Company is subject to risks relating to economic, political and labour instability in Argentina; estimates of mineral reserves and mineral resources could be inaccurate. An additional analysis of the Company’s risk factors can be found in the Company’s annual information form dated March 30, 2011, which is available on SEDAR (www.sedar.com) and should be reviewed in conjunction with this document.
Non-IFRS Measures
Operating cash costs are calculated by dividing the total operating cash costs for the period by the tonnes processed in that period. Total operating cash costs are the sum of geology, mining, processing plant, general and administration, royalty costs and refining and treatment charges (for doré product only). Production cash costs are calculated on a co-product basis and by dividing the respective proportionate share of the total production cash costs for the period attributable to each metal by the ounces of each respective metal produced. Total production cash costs are the sum of the geology, mining, processing plant, general and administration costs, royalties, refining and treatment charges (for both doré and concentrate products), sales costs and export taxes divided by the number of ounces of gold and silver produced at the mine. Depreciation is excluded from both operating cash costs and production cash costs.
We use operating and production cash cost as an operating performance indicator. We provide this measure to provide additional information regarding operational efficiencies at the San José Mine. Operating and production cash costs should be considered as a non-IFRS performance measure and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Cash costs are based on information from MSC and does not impact the Company’s consolidated financial statements. There are material limitations associated with the use of such non-IFRS measures. Since these measures do not incorporate revenues, changes in working capital and non-operating cash costs, they are not necessarily indicative of operating profit or cash flow from operations as determined in accordance with IFRS. Changes in numerous factors including, but not limited to, mining rates, milling rates, gold grade, gold recovery, and the costs of labour, consumables and mine site operations general and administrative activities can cause these measures to increase or decrease.
Furthermore the foregoing non-IFRS measures are not standardized and therefore may not be comparable to similar measures disclosed by other issuers.
Internal Control over Financial Reporting
Management is responsible for the design of internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with accounting principles generally accepted in Canada. Based on a review of its internal control procedures at the end of the period covered by this MD&A, management believes its internal controls and procedures are appropriately designed to provide reasonable assurance that financial information is recorded, processed, summarized and reported in a timely manner.
Changes to Internal Controls over Financial Reporting
There have been no significant changes to internal control over financial reporting in the three month period ended September 30, 2011.
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Disclosure Controls
Management is also responsible for the design of disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to the Company’s certifying officers. The Company’s Chief Executive Officer and Chief Financial Officer have each evaluated the Company’s disclosure controls and procedures as of September 30, 2011, and have concluded that these controls and procedures are adequately designed to provide reasonable assurance that material information.
Additional Information
Additional information relating to Minera Andes, including our annual information form, is available under our profile at SEDAR at www.sedar.com.
Cautionary Statement on Forward-Looking Information
Certain statements and information in this MD&A, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities laws. Such forward-looking statements or information include, but are not limited to, statements or information with respect to the cash from operations at the San José Mine and the future cash requirements of MSC, the estimated operating and capital costs of the San José Mine, the Company’s ability to complete a further financing or strategic acquisitions or divestitures in the near term, the Company’s interest in the San José Mine being maintained at 49%, the future price of gold, silver, copper and other base metals, production estimates, the outcome of pending and ongoing litigation, estimation of mineral reserves, exploration and development capital requirements, and our goals and strategies. Often, these statements include words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate” or “believes” or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, or “might” be taken, occur or be achieved.
In making the forward-looking statements and providing the forward-looking information included in this MD&A, management of Minera Andes have made numerous assumptions. These assumptions include among other things, assumptions about the price of gold, silver, copper and other base metals, decisions to be made by our joint venture partner in respect of the management and operation of the San José Mine, anticipated costs and expenditures, future production and recovery, that the supply and demand for gold, silver and copper develop as expected, that there are no unanticipated fluctuations in interest rates and foreign exchange rates, accuracy of advice from professional advisors, that there is no further material deterioration in general economic conditions and that we are able to obtain the financing, as and when, required to, among other things, develop our Los Azules copper project. Although our management believes that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that the forward-looking statements will prove to be accurate. By their nature, forward-looking statements and information are based on assumptions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from future results, performance or achievements expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include among other things the following: actions by, and our relationship with, our joint venture partner, including decisions regarding the amount and timing of future cash calls or cash shortfalls at the San José Mine may result in a requirement for additional investment by us, our lack of operating cash flow and dependence on external financing, availability of financing, as and when, required to meet any future cash calls in respect of the San José Mine (to maintain our interest therein), and to finance our day-to-day operations and planned growth and development, any decline in the prices of gold, silver, copper and other base metals, risks related to ongoing or pending litigation including specifically risks related to litigation which if resolved adversely to Minera Andes could materially impact the Company’s value and interest in and ability to develop the Los Azules copper project,
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changes in general economic and business conditions, economic and political instability in Argentina, discrepancies between actual and estimated production and mineral reserves and resources; operational and development risk; the speculative nature of mineral exploration and regulatory risks.
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