Los Azules Pre-Feasibility ReportIs on SEDAR!
On November 2, 2007, Minera Andes and MASA entered into the Los Azules Option
Agreement with Xstrata Copper, through Xstrata Queensland Limited and MIM, in respect of
the MASA Properties and the adjoining MIM Properties. Under the Los Azules Option
Agreement, MASA has an option, exercisable until November 24, 2010 to acquire a 100%
interest in the MIM Properties (the “MASA Option”). If MASA exercises the MASA Option,
MIM has the option to back-in to the Combined Property for a 51% interest.
In order to exercise the MASA Option, MASA must incur US$1 million in expenditures on the
MIM Properties, deliver to MIM an independent scoping study and technical report in respect
of the Combined Property (the “Los Azules Preliminary Assessment”) and deliver a notice of
exercise.
On exercise of the MASA Option, MIM is required to transfer to MIM Property to MASA.
However, if in the opinion of MIM, the Los Azules Preliminary Assessment shows the
potential to economically produce 100,000 tonnes (224 million pounds) of contained copper
per year for 10 years or more then MIM has the right to earn a 51% interest in the Combined
Property (the “Back-in Right”). To satisfy the conditions of the Back-in Right, MIM must
assume control and responsibility for the Combined Property, make a cash payment to
Minera Andes of three times MASA’s and it’s affiliates’ direct expenditures incurred and paid
on the Combined Property after the 25th of November 2005 and complete a bankable
feasibility study within five years of its election to exercise the Back-in Right. In the event
that the Los Azules Preliminary Assessment does not, in MIM’s opinion, meet the criterion
contemplated above, MIM’s interest is reduced to a right of first refusal on a sale of the
Combined Property, or any part thereof. All lands that comprise the Combined Property’s
mineral applications are subject to a provincial mouth of mine royalty of between zero and
3%. This royalty will be negotiated with the province of San Juan as the project advances.
The MIM Properties are subject to two underlying agreements. The first agreement covering
approximately 1,400 ha has one remaining payment totaling US$500,000, due when a
bankable feasibility study is complete. The purchase option to acquire a 100% interest in
these lands has been exercised. The second agreement between MIM and Solitario
Argentina S.A. (“SASA”), covering the remainder of the MIM lands has had all payments
made, and a US$1,000,000 work commitment completed, and is subject to a 25% buy back
clause if a feasibility study is completed within three years (36 months) of MIM exercising
the option to acquire the property. The option was exercised on April 23, 2007. If SASA
buys back five percent or less, or if SASA buys back greater than 5%, but its interest is
subsequently diluted to 5% or less, its interest will convert to a one percent net smelter
royalty (“NSR”).
Los Azules Preliminary Assessment Technical Report SE Project No. 8019-01 35
SE Samuel Engineering, Inc.
SASA together with its parent, TNR Gold Corp., has commenced an action in the Supreme
Court of British Columbia against MIM seeking amongst other things, rectification of its
agreement with MIM to eliminate the 36 month restriction referred to above, or alternatively,
a declaration that the 36 month restriction is not enforceable. MIM is defending the claim,
however, the outcome of this Court action is not certain. If SASA were to be successful, the
interest of MIM in those properties (and, if MASA exercises its option, MASA’s resulting
interest therein) may be diluted by SASA by as much as 25% in the event that a feasibility
study is completed on any part of those properties at any time.
In the same Court action, SASA is seeking a declaration that the property referred to as
“Escorpio IV” in Figure 6.2 was not included in the option granted to MIM and that MIM has
no interest in that property. MIM has filed a Counterclaim against SASA and TNR Gold
Corp. seeking amongst other things, a declaration from the Court that Escorpio IV forms part
of the property that was optioned to MIM and an order for SASA and/or TNR Gold Corp. to
convey a 100% interest in Escorpio IV to MIM. The outcome of this action is not certain. If
MIM is successful in its claims, Escorpio IV will be included in the MIM Properties to be
acquired by MAI. If MIM is not successful, Escorpio IV will be excluded.