MINE DEVELOPMENT WITH CONFIDENCE FEBRUARY 2011
3/2/2011
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SAFE HARBOR STATEMENT •
Certain statements in this presentation constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Canadian securities legislation. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or other future events, including forecast production, earnings and cash flows, to be materially different from any future results, performances or achievements or other events expressly or implicitly predicted by such forward-looking statements.
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Such risks, uncertainties and other factors include, but are not limited to, factors associated with fluctuations in the market price of precious metals, mining industry risks, recent operating losses, uncertainty of title to properties, risk associated with foreign operations, environmental risks and hazards, proposed legislation affecting the mining industry, litigation, governmental regulation of the mining industry, properties without known mineable reserves, uncertainty as to calculations of reserves, mineral deposits and grades, requirement of additional financing, uninsured risks, risk of hedging strategies, competition, dependence on key management personnel, potential volatility of market price of the Company’s common shares, dilution and certain anti-takeover effects. Such information contained herein represents management’s best judgment as of the date hereof based on information currently available. The Company does not intend to update this information and disclaims any legal liability to the contrary.
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Mineral resources that are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by the inability to obtain required environmental and other regulatory approval, environmental or operating permits. The estimate may also be materially affected by global economic conditions such as the price of gold and silver, the price of oil and other commodities utilized in the production of gold and silver. Unknown geologic or hydrologic conditions or other unknown factors may materially affect the resource estimates. Net smelter returns and metallurgical recoveries at Sinchao have not been considered.
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This document uses the terms "measured resources", 'indicated resources' and 'inferred resources'. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, 'inferred resources' have a great amount of uncertainty as to their existence, and 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. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.
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Mr. Les Tarnai, P.Eng., General Manager of Engineering, Invicta Mining Corp., is a Qualified Person as defined by National Instrument 43-101 with the ability and authority to verify the authenticity and validity of the data herein. Victor Jaramillo, P. Geo., of Discover Geological Consultants Inc. is an Independent Qualified Person as defined by National Instrument 43-101 and is responsible for the resource estimates. Guy Lokhorst, P. Eng., of The Lokhorst Group, is an Independent Qualified Person as defined by NI 43-101 and is responsible for the review of the mining methodology, including the probable reserves and life of mine, for the Invicta Feasibility Study. Deepak Malhotra, PhD., MS in Metallurgical Engineering and PhD. in Mineral Economics, Independent Qualified Person as defined by NI 43-101, of Resource Development Inc., reviewed the metallurgy for the Invicta project and developed the finalized process flow diagram for the Invicta Feasibility Study. Leslie F. Tarnai, P. Eng., General Manager of Engineering for Invicta Mining Corp., is a Qualified Person as defined by NI 43-101 and is responsible for the Invicta Feasibility Study.
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All amounts are in Canadian dollars unless otherwise stated.
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CAPITAL STRUCTURE CAPITALIZATION Market Cap at Feb 11, 2011 Basic Shares Outstanding
TSX:V AAG MAJOR SHAREHOLDERS
C$126.7 million 141,365,892
Trafigura Beheer B.V.
19.5%
Richmond Capital LLP
7.4%
Options
7,870,588
Management and Insiders
Warrants Price between $0.35 - $1.25 expiry starting 20 Sept 2011
5,614,368
Praetorian Capital Management LLC
5.5%
Sprott Asset Management LLP
3.9%
Cash
$28 million
Debt
At present: nil
3/2/2011
6%
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EXPERIENCED MANAGEMENT •
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DAVID RAE – PRESIDENT AND CEO Ten years in senior positions with Falconbridge/Xstrata, including Senior Vice President Europe & Africa, and worldwide head of sales for all Nickel Group products. Previously he managed the Sudbury Smelter and the Timmins Copper Operations. Prior to joining Andean American, Mr. Rae has been advising in a consulting capacity to companies such as Kinross, Vale Inco and Iamgold on operational, productivity and strategic challenges. BRUCE RAMSDEN - VICE PRESIDENT AND CFO Vice President and CFO with noted resource companies since 1996 and has received the 2006 Mining Journal Development Funding Award for his work with Tiomin Resources Inc. He has a Bachelor of Commerce as well as a degree from The Institute of Chartered Secretaries and Administrators. Mr. Ramsden is a member of the Institute of Commercial and Financial Accountants of Southern Africa, the Institute of Chartered Secretaries and Administrators in both South Africa and Canada and Financial Executives International Canada. MARK ZABEL – VP CORPORATE DEVELOPMENT From 2005 - 2010 Mr. Zabel worked in equity investments at Praetorian Capital Management LLC, a highly successful small cap long/short equity hedge fund based in Miami, Florida. Mr. Zabel has development experience as an active shareholder across an array of industries, having worked closely with senior management teams to help implement business expansion plans, restructure management, and define new corporate and operational strategy. MIGUEL HUAMAN – VP OPERATIONS From 2004 to 2009, Mr. Huaman was the President of Minera Huallanca, where he managed the 1000tpd Pucarrajo Zn-Pb-Ag mine and the 850tpd Contonga Zn-Pb-Ag-Cu mine, both underground operations. From 2002 to 2004, he was General Manager of Cedimin SAC, a subsidiary of the BRGM–France and Buenaventura Mining Company Peru. Mr. Huaman is an Engineering Graduate of the Universidad Nacional Mayor de San Marcos and a Geologist Engineer with a Postgraduate degree in Exploration and Valuation of Mineral Resources from the University of Nancy, France. Mr. Huaman is a former President of the Geological Society of Peru.
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ANDEAN AMERICAN HIGHLIGHTS Near term low cost gold production from Invicta Project in Peru 160,000 AuEq Oz per year at US$275/Oz projected LOM World class assets in pipeline: Sinchao gold/copper project in Peru 3/2/2011
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INVICTA PROJECT – KEY FACTS PRODUCTION
• 5,000 tpd at full production from underground mine • Five year initial life of mine
METALLURGY
• Conventional metallurgical flowsheet • High recoveries, low grinding costs • Flexible process
INFRASTRUCTURE GROWTH POTENTIAL 3/2/2011
• Excellent access to infrastructure in well established mining region
• Drilling planned to expand resource and extend life of mine to 12 years
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MINE DEVELOPMENT MILESTONES FEASIBILITY STUDY COMMUNITY AGREEMENTS CONSTRUCTION PERMIT FINANCING 3/2/2011
• Completed in July 2010 • Bankable Feasibility Study expected Q2 2011
• Negotiations progressing well with communities • Agreements expected Q2
• Application being prepared • Subject to signed community agreements • Company is well funded, cash balance $28 M as at Feb 11, 2011 • Debt financing for CAPEX in place 7
INVICTA PROJECT - LOCATION •
• Cajamarca Invicta Project Lima
Sinchao Metals TSX.V:SMZ AAG owns 60%
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Located in the Western Pre-Cordillera of Peruvian Andes in the Huaura Province, Department of Lima. Approx. 250 km north of Lima & 29 km east of the town of Sayan. Sayan provides services, supplies & skilled personnel to the mining industry. Accessible by road from Lima via the Panamerican Highway, north to Huaura & east to Sayan via Highway 16 & Huamboy, on packed dirt road - Approx 4½ hours by car.
INVICTA WELL LOCATED FOR ESSENTIAL INFRASTRUCTURE & SERVICES
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READILY ACCESSIBLE INFRASTRUCTURE POWER CAPEX US $6M
WATER CAPEX US $1M
ROADS CAPEX US $2M 3/2/2011
• Government backed 29km extension of the 220kv national grid • Engineering completed by CESEL • 27 towers to be erected mostly on land purchased by Invicta • Power cost 6c/kwh
• Sourced from well drilled next to Huara River near Paran at 1100m elevation • Requires 201 litres/second • Well engineered & tested by CESEL & performs at 501 litres/second • Water is pumped & stored in a pond at 2400m elevation • Excess water is supplied to the communities
• An existing 10m wide concentrate haul road runs 13km from the project • A 13.8km long, 10m wide connection from 1100 masl to the plant at 2300 masl to be constructed • A 4km long, 3m wide access road from the plant to mine site at 3400 masl to be constructed
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FEASIBILITY STUDY SUMMARY1 •
Average annual production of 97,931 oz gold & 160,8572 oz gold equivalent over 5 year initial mine life
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LOM cash cost per oz gold2 – Co-product basis: : US$451.38 – Gold-equivalent basis: US$274.80 – By-product basis: (US$126.91)
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Estimated CAPEX US$68 million
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Operating costs US$28.31 per tonne
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1 year payback
1 2
Summary of July 2010 Optimized Feasibility Study. SRK are currently upgrading this study. Price deck for AuEq: Gold $900/oz, Copper $2.50/lb, Lead $0.70/lb, Zinc $0.75/lb
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FEASIBILITY STUDY FINANCIALS AFTER TAX FREE CASH FLOW & NPV SENSITIVITY ANALYSIS ON A PROJECT BASIS 1 GOLD PRICE
TOTAL FREE CASH FLOW
5 YEAR AVERAGE FREE CASH FLOW
NPV 8%
NPV 10%
$900
$264,691,245
$52,938,249
$215,191,049
$203,542,333
$1,000
$295,525,040
$59,105,008
$249,917,929
$227,112,434
$1,100
$326,366,991
$65,273,398
$265,057,808
$250,688,663
$1,200
$357,185,186
$71,437,037
$289,974,787
$274,246,114
PROJECT REVENUE DISTRIBUTION 2 Revenue %
Au
Ag
Cu
Pb
Zn
65.5
5.9
20.3
4.5
3.8
1. Prices: $12 Ag, $2.50 Cu, $.70 Pb, $.75 Zn 2. Prices: $900 Au, $12 Ag, $2.50 Cu, $.70 Pb, $.75 Zn 3/2/2011
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FINANCING CAPITAL COSTS Project Costs
US $ MM $49
IGV (Refundable Tax)
$9
Contingency
$7
Start-up Facility
$3
Total Capital Cost SOURCE OF FUNDS
$68 US $ MM
Senior Secured Project Debt Facility
$68
Subordinated Debt
$15
Total Capital Cost & Overrun Facility
$83
$15M already invested in the project by Andean American Gold Senior Secured Project Debt Facility underwritten by international banks Barclays Capital and West LB Subordinated Debt Facility to be negotiated with Trafigura Beheer B.V.. 3/2/2011
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STRATEGIC RELATIONSHIP WITH TRAFIGURA BEHEER • Major shareholder: 19.5% interest • Offtake agreement for all base metal concentrates • World's second largest independent non-ferrous trading company & third largest independent oil trader • Existing presence, network and global logistics in Peru 3/2/2011
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RESERVES AND RESOURCES CATEGORY Measured
TONNES
DENSITY
GOLD
SILVER
COPPER
LEAD
ZINC
GOLD
g/t
g/t
%
%
%
Oz
868,000
2.77
2.71
31.26
0.69
0.73
0.61
75,724
Indicated
9,866,735
2.73
1.99
14.74
0.4
0.28
0.27
632,336
Inferred
14,224,661
2.75
0.67
11.2
0.36
0.24
0.15
306,913
MINEABLE RESERVES – FIRST FIVE YEARS Tonnes Metal
7,807,157 Au
Ag
Cu
Pb
Zn
2.14
18.76
0.52%
0.38%
0.30%
Contained Metal (oz or lb)
538,946
4,724,589
89,476,265
65,386,501
51,620,922
Metals expressed in AuEq Ounces *
538,946
65,619
248,545
50,856
43,017
Grade (g/t or %)
* Price deck for AuEq: Gold $900/oz, Copper $2.50/lb, Lead $0.70/lb, Zinc $0.75/lb 3/2/2011
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INVICTA PROPERTY MAP • •
Invicta project covers 28,200 hectares Located in a prolific mining district
Flor de Loto past producing Au/Ag mine
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INVICTA LONGITUDINDAL SECTION 2.7 KM MINERALIZED STRUCTURE
Measured Indicated Inferred
20,000 m drill program to be completed during construction to extend mine life to 12 years
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MINERAL PROCESSING FLOWSHEET (internal)
3/2/2011
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NEXT STEPS TOWARD PRODUCTION ESTIMATED TARGET DATE
ACTIVITY
Q2 2011
Complete community agreements
Q2 2011
Start of construction following signed community agreements
Q3 2011
Start exploration drilling to expand Invicta resource & LOM
Q3 2011
Completion of independent engineering technical report
Q3 2011
Debt financing approval, drawdown subject to achievement of certain conditions precedent
Q4 2011
Receipt of construction permit approx. 6 months after community agreements are signed
Q3 2012
Revised expanded resource including results from planned definition drilling
Q2/Q3 2012
Commissioning 12 months after start of construction
All dates are estimated and dependent on satisfactory completion of previous steps 3/2/2011 in the process. Please see the Safe Harbour Statement on slide 2.
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ANDEAN AMERICAN ADVANTAGES • Near term low cost production • Potential for resource expansion • Projected production 160,000 AuEq Oz p.a. • Well funded • Undervalued • Production-ready management team • Strong strategic partners • Located in well established mining region 3/2/2011
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ACTIVE COMMUNITY ENGAGEMENT Andean American is committed to cooperative and mutually beneficial mine development • We have strong community relationships • Regular & ongoing community meetings • Significant socio-economic contribution: o 30,000 trees planted on 38 hectares o Established peach plantation of 2 hectares, including agricultural engineering o Upgrading & maintenance of 12km of water canals for local communities o Creation of detailed technical engineering project for the development of 220 hectares of agricultural land to benefit the communities. o Support for cultural events
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COMPARISON TABLE COMPANY
MARKET CAP
EST. ANNUAL PRODUCTION Oz/Au
EST. BY-PRODUCT CASH COST/OZ
EST. ANNUAL FREE CASH FLOW ($1,100 Au)
MULTIPLE OF EST. ANNUAL FREE CASH FLOW
EST. EV/OZ AuEq GLOBAL RESOURCE
Timmins Gold
$290,000,000
90,000
$412
$44,100,000
6.6
$242
Brigus Gold
$320,000,000
90,000
$600
$25,000,000
12.8
$69
Luna Gold Corp
$330,000,000
90,000
$450
$39,000,000
8.5
$253
$1,230,000,000
100,000
$200
$60,000,000
20.5
n/a
Minefinders
$791,000,000
85,000
$450
$35,000,000
22.6
$110
Alamos Gold
$1,750,000,000
170,000
$338
$98,000,000
17.9
$273
Average
$785,166,667
100,833
$408
$50,183,333
15.6
$189
Andean American
$130,000,000
97,000
-$126
$65,000,000
2.0
$15*
Gold Resource Corp
Company comparisons are for illustrative purposes only and are based on publicly available information. Andean American Gold is not responsible for the validity of this information. The Company’s projects are not currently in production and all estimates are based on data from the Invicta Project Feasibility Study of July 2010. Please refer to the Safe Harbour statement on slide 2. *Global resource includes all attributable ounces including 60% ownership in Sinchao, where title review is currently underway 3/2/2011
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THANK YOU For more information: Andean American Gold Suite 1340-1090 West Georgia Street Vancouver, BC V6E 3V7 Tel: 604 681 6186 Fax: 604 681 3652 www.AAGgold.com TSX:V AAG
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