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MINE DEVELOPMENT WITH CONFIDENCE           FEBRUARY 20113/2/2011                                      1
SAFE HARBOR STATEMENT•   Certain statements in this presentation constitute “forward-looking statements” within the meanin...
CAPITAL STRUCTURE                                      TSX:V AAGCAPITALIZATION                                     MAJOR S...
EXPERIENCED MANAGEMENT•   DAVID RAE – PRESIDENT AND CEO    Ten years in senior positions with Falconbridge/Xstrata, includ...
ANDEAN AMERICAN HIGHLIGHTS           Near term low cost gold production           from Invicta Project in Peru           1...
INVICTA PROJECT – KEY FACTS                       • 5,000 tpd at full production from underground mine       PRODUCTION   ...
MINE DEVELOPMENT MILESTONES                       • Completed in July 2010  FEASIBILITY STUDY    • Bankable Feasibility St...
INVICTA PROJECT - LOCATION                                           •    Located in the Western Pre-Cordillera of        ...
READILY ACCESSIBLE INFRASTRUCTURE           POWER   • Government backed 29km extension of the 220kv national grid         ...
FEASIBILITY STUDY SUMMARY1•   Average annual production of 97,931 oz gold    & 160,8572 oz gold equivalent over 5 year    ...
FEASIBILITY STUDY FINANCIALS         AFTER TAX FREE CASH FLOW & NPV SENSITIVITY ANALYSIS ON A PROJECT BASIS 1       GOLD P...
FINANCINGCAPITAL COSTS                                      US $ MMProject Costs                                          ...
STRATEGIC RELATIONSHIP WITH TRAFIGURA BEHEER • Major shareholder: 19.5%   interest • Offtake agreement for all   base meta...
RESERVES AND RESOURCES CATEGORY          TONNES         DENSITY         GOLD           SILVER    COPPER       LEAD       Z...
INVICTA PROPERTY MAP                  •   Invicta project covers 28,200 hectares                  •   Located in a prolifi...
INVICTA LONGITUDINDAL SECTION   2.7 KM MINERALIZED STRUCTURE                                                            Me...
MINERAL PROCESSING FLOWSHEET                      (internal)3/2/2011                           17
NEXT STEPS TOWARD PRODUCTIONESTIMATED                ACTIVITYTARGET DATEQ2 2011                  Complete community agreem...
ANDEAN AMERICAN ADVANTAGES• Near term low cost  production• Potential for resource  expansion• Projected production  160,0...
ACTIVE COMMUNITY ENGAGEMENTAndean American is committed tocooperative and mutually beneficial minedevelopment• We have str...
COMPARISON TABLE   COMPANY              MARKET CAP            EST. ANNUAL       EST. BY-PRODUCT         EST. ANNUAL       ...
THANK YOU            For more information:            Andean American Gold            Suite 1340-1090 West Georgia        ...
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Andean American Gold (TSX.V - AAG) Corporate Presentation - Feb 17th 2011

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Andean American Gold is an international mining and exploration company focused on advanced stage gold and copper opportunities in Peru. Currently, the company has two key assets: the Invicta gold-silver-copper development project and 60% ownership in the world class Sinchao copper-gold exploration project (Sinchao Metals, SMZ-TSX.V). Andean American continues to maintain excellent community relations and a commitment to responsible environmental practices. The company has a strong management team with over 60 years experience and an effective board dedicated to excellence in corporate governance.

Andean American Gold is currently completing its transition from explorer to emerging producer, and has been adding key staff accordingly over the past several months. The company has a strong current cash position, providing flexibility for exploration and resource definition drilling, which is ongoing.

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Transcript of "Andean American Gold (TSX.V - AAG) Corporate Presentation - Feb 17th 2011"

  1. 1. MINE DEVELOPMENT WITH CONFIDENCE FEBRUARY 20113/2/2011 1
  2. 2. 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.• 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.• 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.• 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.• 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.• All amounts are in Canadian dollars unless otherwise stated.3/2/2011 2
  3. 3. CAPITAL STRUCTURE TSX:V AAGCAPITALIZATION MAJOR SHAREHOLDERSMarket Cap at Feb 11, 2011 C$126.7 million Trafigura Beheer B.V. 19.5%Basic Shares Outstanding 141,365,892 Richmond Capital LLP 7.4% Options 7,870,588 Management and Insiders 6% Warrants 5,614,368 Praetorian Capital 5.5% Price between $0.35 - $1.25 Management LLC expiry starting 20 Sept 2011 Sprott Asset Management 3.9%Cash $28 million LLPDebt At present: nil 3/2/2011 3
  4. 4. EXPERIENCED MANAGEMENT• 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.3/2/2011 4
  5. 5. 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 Peru3/2/2011 5
  6. 6. INVICTA PROJECT – KEY FACTS • 5,000 tpd at full production from underground mine PRODUCTION • Five year initial life of mine • Conventional metallurgical flowsheet METALLURGY • High recoveries, low grinding costs • Flexible process • Excellent access to infrastructure in well established INFRASTRUCTURE mining region GROWTH • Drilling planned to expand resource and extend life of mine to 12 years POTENTIAL3/2/2011 6
  7. 7. MINE DEVELOPMENT MILESTONES • Completed in July 2010 FEASIBILITY STUDY • Bankable Feasibility Study expected Q2 2011 COMMUNITY • Negotiations progressing well with communities AGREEMENTS • Agreements expected Q2 CONSTRUCTION • Application being prepared PERMIT • Subject to signed community agreements • Company is well funded, cash balance $28 M as FINANCING at Feb 11, 2011 • Debt financing for CAPEX in place3/2/2011 7
  8. 8. INVICTA PROJECT - LOCATION • 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. Cajamarca Sinchao Metals • Sayan provides services, supplies & skilled TSX.V:SMZ personnel to the mining industry.Invicta AAG owns 60% • Accessible by road from Lima via theProject Panamerican Highway, north to Huaura & east to Sayan via Highway 16 & Huamboy, Lima on packed dirt road - Approx 4½ hours by car. INVICTA WELL LOCATED FOR ESSENTIAL INFRASTRUCTURE & SERVICES 3/2/2011 8
  9. 9. READILY ACCESSIBLE INFRASTRUCTURE POWER • Government backed 29km extension of the 220kv national grid • Engineering completed by CESEL • 27 towers to be erected mostly on land purchased by Invicta CAPEX US $6M • Power cost 6c/kwh WATER • 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 CAPEX US $1M • Excess water is supplied to the communities ROADS • 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 CAPEX US $2M constructed3/2/2011 9
  10. 10. FEASIBILITY STUDY SUMMARY1• Average annual production of 97,931 oz gold & 160,8572 oz gold equivalent over 5 year initial mine life• LOM cash cost per oz gold2 – Co-product basis: : US$451.38 – Gold-equivalent basis: US$274.80 – By-product basis: (US$126.91)• Estimated CAPEX US$68 million• Operating costs US$28.31 per tonne• 1 year payback1 Summary of July 2010 Optimized Feasibility Study. SRK are currently upgrading this study.2 Price deck for AuEq: Gold $900/oz, Copper $2.50/lb, Lead $0.70/lb, Zinc $0.75/lb3/2/2011 10
  11. 11. FEASIBILITY STUDY FINANCIALS AFTER TAX FREE CASH FLOW & NPV SENSITIVITY ANALYSIS ON A PROJECT BASIS 1 GOLD PRICE TOTAL FREE CASH 5 YEAR NPV 8% NPV 10% FLOW AVERAGE FREE CASH FLOW$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 Au Ag Cu Pb ZnRevenue % 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 11
  12. 12. FINANCINGCAPITAL COSTS US $ MMProject Costs $49IGV (Refundable Tax) $9Contingency $7Start-up Facility $3Total Capital Cost $68SOURCE OF FUNDS US $ MMSenior Secured Project Debt Facility $68Subordinated Debt $15Total Capital Cost & Overrun Facility $83$15M already invested in the project by Andean American GoldSenior Secured Project Debt Facility underwritten by internationalbanks Barclays Capital and West LBSubordinated Debt Facility to be negotiated with Trafigura BeheerB.V.. 3/2/2011 12
  13. 13. STRATEGIC RELATIONSHIP WITH TRAFIGURA BEHEER • Major shareholder: 19.5% interest • Offtake agreement for all base metal concentrates • Worlds second largest independent non-ferrous trading company & third largest independent oil trader • Existing presence, network and global logistics in Peru 3/2/2011 13
  14. 14. RESERVES AND RESOURCES CATEGORY TONNES DENSITY GOLD SILVER COPPER LEAD ZINC GOLD g/t g/t % % % OzMeasured 868,000 2.77 2.71 31.26 0.69 0.73 0.61 75,724Indicated 9,866,735 2.73 1.99 14.74 0.4 0.28 0.27 632,336Inferred 14,224,661 2.75 0.67 11.2 0.36 0.24 0.15 306,913 MINEABLE RESERVES – FIRST FIVE YEARSTonnes 7,807,157Metal Au Ag Cu Pb ZnGrade (g/t or %) 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 51,620,922Metals expressed in AuEq 538,946 65,619 248,545 50,856 43,017Ounces ** Price deck for AuEq: Gold $900/oz, Copper $2.50/lb, Lead $0.70/lb, Zinc $0.75/lb 3/2/2011 14
  15. 15. INVICTA PROPERTY MAP • Invicta project covers 28,200 hectares • Located in a prolific mining district Flor de Loto past producing Au/Ag mine3/2/2011 15
  16. 16. INVICTA LONGITUDINDAL SECTION 2.7 KM MINERALIZED STRUCTURE Measured Indicated Inferred20,000 m drill program to be completed during construction to extend mine life to 12 years 3/2/2011 16
  17. 17. MINERAL PROCESSING FLOWSHEET (internal)3/2/2011 17
  18. 18. NEXT STEPS TOWARD PRODUCTIONESTIMATED ACTIVITYTARGET DATEQ2 2011 Complete community agreementsQ2 2011 Start of construction following signed community agreementsQ3 2011 Start exploration drilling to expand Invicta resource & LOMQ3 2011 Completion of independent engineering technical reportQ3 2011 Debt financing approval, drawdown subject to achievement of certain conditions precedentQ4 2011 Receipt of construction permit approx. 6 months after community agreements are signedQ3 2012 Revised expanded resource including results from planned definition drillingQ2/Q3 2012 Commissioning 12 months after start of constructionAll dates are estimated and dependent on satisfactory completion of previous steps 3/2/2011 18in the process. Please see the Safe Harbour Statement on slide 2.
  19. 19. 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 region3/2/2011 19
  20. 20. ACTIVE COMMUNITY ENGAGEMENTAndean American is committed tocooperative and mutually beneficial minedevelopment• We have strong community relationships• Regular & ongoing community meetings• Significant socio-economic contribution:o 30,000 trees planted on 38 hectareso Established peach plantation of 2 hectares,including agricultural engineeringo Upgrading & maintenance of 12km of watercanals for local communitieso Creation of detailed technical engineeringproject for the development of 220 hectares ofagricultural land to benefit the communities.o Support for cultural events 3/2/2011 20
  21. 21. COMPARISON TABLE COMPANY MARKET CAP EST. ANNUAL EST. BY-PRODUCT EST. ANNUAL MULTIPLE OF EST. EV/OZ PRODUCTION CASH COST/OZ FREE CASH FLOW EST. ANNUAL AuEq GLOBAL Oz/Au ($1,100 Au) FREE CASH RESOURCE FLOWTimmins Gold $290,000,000 90,000 $412 $44,100,000 6.6 $242Brigus Gold $320,000,000 90,000 $600 $25,000,000 12.8 $69Luna Gold Corp $330,000,000 90,000 $450 $39,000,000 8.5 $253Gold Resource $1,230,000,000 100,000 $200 $60,000,000 20.5 n/aCorpMinefinders $791,000,000 85,000 $450 $35,000,000 22.6 $110Alamos Gold $1,750,000,000 170,000 $338 $98,000,000 17.9 $273Average $785,166,667 100,833 $408 $50,183,333 15.6 $189Andean American $130,000,000 97,000 -$126 $65,000,000 2.0 $15* 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 21
  22. 22. 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 AAG3/2/2011 22
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