Minera Andes currently holds more than 300,000 acres of proven and highly prospective land in Argentina. Its San José silver/gold project, encompassing nearly 100,000 acres, began production in June 2007 and now the company is realizing income from the sale of gold and silver. Today, the mine is operating at the rate of 750 tonnes per day. Silver production in the second quarter was 1,093,000 ounces compared to 968,000 ounces in the first quarter. Total sales from the mine in the first three quarters of 2008 topped $81 million.
       San José’s gold and silver production is unhedged. As a relatively low-cost mine with an average grade of about one-half ounce of gold equivalent per tonne of ore, the mine is in a better position to withstand market downsides than many other mines. For example, in the third quarter Minera Andes posted a net profit of $3.6 million or $0.02 per share, despite a temporary failure of the smelter furnace and 4.5 percent lower average weighted sales prices.
       The San José project is owned 49% by Minera and operated by Minera Santa Cruz S.A., a subsidiary of Hochschild Mining, the world’s fourth largest primary silver producer and a mid-sized producer of gold. Hochschild ranks San José as the seventh largest producing silver mine.
       By the end of 2007 the mine doubled its proven and probable reserves to 2.4 million tonnes grading 6.79 g/t gold and 430 g/t silver. Gold reserves total 521,000 ounces and 38 million ounces of silver. Now, Minera is preparing an updated NI 43-101 technical report based on 2008 drilling and development that will continue to expand San José’s reserve and resource.
       More than 40 km of vein-trend targets are currently known to exist on the San José property, which to date is less than 15% explored. Drilling last year extended the known mineralization along the Odin and Ayelén vein trends for 1,000 meters along strike – a 64% increase from discovery drilling in 2005. Recent drilling along the Odin, Ayelén and Frea veins indicates significant potential to further increase the company’s current reserves and resources on the property. One of the highest grade drill holes intercepted mineralization grading at 63.63 g/t gold and 1,158 g/t silver over a width of 1.94 meters. Bonanza silver grades were also intersected grading at 4,945 g/t silver over 0.30 meters. The company has completed nearly 8,000 meters of drilling in 35 core holes so far this year and plans to complete more than 21,000 meters by year-end.
       • Odin Vein – exploration indicates the presence of massive and banded quartz veining and remains open to the west along strike and to depth.
       • Frea Vein – located 2 km northwest of the main Huevos Verdes vein. Both are currently being mined on several levels. The Frea Vein appears to be an open-ended mineralized silver/gold system. Exploration has extended known mineralization to about 1.2 km, a 200% increase. Drilling this year hit three high-grade splits off the main vein, grading up to 25.23 g/t gold and 4,945 g/t silver.
       • Ayelén Vein – Drilling has identified gold/silver mineralization along 1.2 km of strike and 200 meters of depth. The vein structure is sub-parallel to the Odin vein and dips in the same direction to the southwest. Most mineralization is moderate to low grade with one hole grading 9.5 g/t gold and 594 g/t silver over 5.10 meters.
       “Our continued discovery of new veins with high-grade mineralization is proving San José is turning into a major mining district with the potential for multiple mines,” says Ambrose.

       The scope and potential of Minera Andes Los Azules Copper Project was first suspected in 2004 during a reconnaissance drilling program. Then, in 2006, the company discovered a near surface high-grade area of copper mineralization. Today, the inferred mineral resource at Los Azules, at a 0.35% copper cutoff, is a whopping 922 million tonnes grading 0.55% copper – in other words 11.2 billion pounds of copper. Even at recent copper prices, that represents an incredible potential value that is measured in the multi-billions of dollars.
       “This resource estimate clearly demonstrates that Los Azules ranks as one of the largest new undeveloped copper deposits in Argentina, if not of all of South America,” says Ambrose. “The presence of a high-grade copper core could significantly enhance the project economics as a starter pit in the early years of any potential mining operations.”
       The copper resource lies within an area of about 3.7 km by 1 km and forms the basis of an economic scoping study which was completed at the end of 2008. Recent metallurgical testing completed as part of a scoping study for Los Azules produced significant results. Copper recoveries over 92% and copper concentrate grades over 30% copper indicate that flotation concentration would be the preferred process for all ore types at Los Azules, which are of medium hardness for grinding. Gold and silver grades are also sufficient to contribute payable precious metals to the concentrate.
       The tests were conducted on three composite samples – one a strong enriched sulfide ore, the second a weak enriched sulfide ore and the third a high-grade primary sulfide ore – collected from recent drilling at Los Azules. To date, the company has drilled nearly 20,000 feet and collected more than 10,000 samples. Mineralization is open along strike and at depth. Ambrose says the deposit has good potential along trend for 3 km of strike length to the north where historic gold exploration found copper in drilling.
       As a near-surface porphyry deposit, Los Azules is open pittable. Minera Andes is advancing its Los Azules Copper Project under an option agreement with Xstrata Copper, one of the commodity business units within Xstrata plc. The property straddles a large copper porphyry system in Argentina’s San Juan province, about 30 kilometers from the Chilean border in the Andes. Under the agreement, Minera is earning a 100% ownership in the now consolidated Los Azules project by spending at least $1 million in exploration by November 2010 and completing an economic assessment for the project. If the project shows the potential to produce 100,000 tonnes (220 million pounds) of copper per year for 10 years or more, Xstrata would then have the right to back in for a 51% interest by paying Minera three times its expenditures and completing a bankable feasibility study for taking the project to production.
“The positive metallurgical testing program shows that standard reagents and flotation methods can be used at Los Azules to produce a high quality, saleable concentrate,” says Ambrose.

       Minera Andes, led by a knowledgeable and expert management team, is a company that is strong structurally and financially. It is well on its way to paying off the debt accumulated during its ramp-up to production. At the same time, the company is self-financing its continuing exploration efforts throughout Argentina. Within its impressive portfolio, Minera Andes has an operating silver/gold mine sitting in the midst of what could become a legitimate mining district with multiple high-grade mines. The company is also actively exploring a potentially massive copper deposit that has potential to increase in size and become a world class project.
       Minera Andes is on track to boost production at its San José silver/gold mine to 1,500 tonnes per day by the end of 2008 when the mine is expected to begin producing about 100,000 ounces of gold and 8 million ounces of silver annually – and boost cash flow after payback of debt to about $100 million annually. The company is expanding its underground infrastructure and expanding capacity at its processing plant.
       “With expansion underway we expect to double San José’s current rate of production,” says Minera Andes President Allen Ambrose. “When that occurs, our San José Mine will join the ranks of the top ten primary silver producing mines in the world.”