Minera Andes responds to Hochschild Mining plc



    
    TSX: MAI
    NASD-OTCBB: MNEAF
    

    SPOKANE, WA, Feb. 11 /CNW/ - Minera Andes Inc. (the "Corporation" or
"Minera Andes", TSX:MAI and US OTC:MNEAF) responds today to a news release
issued by Hochschild Mining plc ("Hochschild") announcing that Hochschild had
made "firm proposals" to Minera Andes for the acquisition of its 49% interest
in the San José Project or for the acquisition of all of Minera Andes' shares
by way of a plan of arrangement.
    The announcement made by Hochschild was a direct response to the
Corporation's news release of February 8 announcing that the Corporation had
entered into a letter agreement with Robert R. McEwen, a director and existing
shareholder of the Corporation, pursuant to which Mr. McEwen or an affiliate
of Mr. McEwen will purchase, on a private placement basis, 121,212,121 common
shares of the Corporation at a price of C$0.33 per share, for proceeds of
C$40.0 million.
    The express primary purpose of the proceeds from the private placement
with Mr. McEwen is to provide the Corporation with the funds necessary to (i)
pay the outstanding cash call of US$11.3 million made by Minera Santa Cruz
S.A., which is controlled by Hochschild, so that the Corporation may maintain
its 49% interest in the San José Project; and (ii) repay the aggregate
principal amount of US$17.5 million owing by the Corporation to Macquarie Bank
Limited ("Macquarie"), US$7.5 million of which is due on or about March 7,
2009 and US$10 million of which is due in September 2009. The Corporation is
currently in default under its credit agreement with Macquarie, entitling
Macquarie to demand, upon seven days notice, payment of the entire principal
amount of US$17.5 million. The Corporation's obligations to Macquarie are
secured by all of the Corporation's present and after-acquired property.
    The proposals made by Hochschild were received by the Corporation on
February 6, 2009, after a letter agreement had been entered into with Mr.
McEwen. The proposals were thereafter considered by a special committee (the
"Special Committee") comprised of independent directors of the Corporation,
together with financial advisors to the Special Committee (Capital West
Partners) and separate financial advisors to the Corporation (Scotia Capital
Inc.). Financial advisors had been engaged by the Special Committee and the
Corporation in 2007 to consider, among others, similar proposals by
Hochschild.

    
    In reviewing the proposals made by Hochschild, the Special Committee and
its financial advisors took into consideration, a number of factors, including
without limitation and in no particular order, the following:

    -   the Corporation had engaged in previous discussions with Hochschild
        as to a possible business combination similar to the transaction set
        out in the Hochschild proposals, but the parties were continually
        unable to come to terms;

    -   the Corporation's previous requests for an extension of the
        February 17, 2009 deadline to complete the cash call for the San José
        Project had been refused by Hochschild;

    -   any transaction with Hochschild would have taken time to discuss and
        complete, in which time the Corporation's obligations to Macquarie
        Bank Limited would come due;

    -   if an extension of the deadline for the cash call been granted for
        the purposes of discussing with Hochschild its proposals, pursuing
        those discussions would have resulted in a withdrawal of Mr. McEwen's
        offer, significantly weakening the Corporation's negotiating position
        with Hochschild and placing the Corporation in a precarious position,
        should discussions with Hochschild be unsuccessful (as they had many
        times in the past) and the moratorium on the cash call lifted;

    -   in the event discussions with Hochschild were unsuccessful and the
        Corporation was unable to pay the required cash call in the
        undetermined and uncertain amount of time in which the Corporation
        would be provided by Hochschild to do so, its 49% interest in the San
        José Project would be reduced to approximately 38% compromising the
        security held by Macquarie and possibly causing all amounts due
        thereunder to become immediately due and payable and/or forcing the
        Corporation to complete a distressed financing or disposition of its
        assets; and

    -   the transaction with Mr. McEwen, if completed, will alleviate the
        Corporation's distressed financial position, thereby increasing the
        Corporation's negotiating position with Hochschild and any other
        potential acquirors.
    

    In effect it was determined that only by first rectifying the
Corporation's financial situation and, in particular, maintaining its 49%
interest in the San José Project, could the Corporation consider the
Hochschild proposals and any other strategic alternative that would maximize
shareholder value.
    As such, based on the advice of both advisors, the Special Committee
determined, that the proposed private placement with Mr. McEwen was fair, from
a financial point of view, to the shareholders of the Corporation other than
Mr. McEwen.
    The news release issued by Hochschild was preceded by a request made by
Hochschild to the TSX and Ontario Securities Commission, to re-examine and
reconsider the availability of the hardship exemption, upon which the
Corporation was relying upon to complete the private placement with Mr. McEwen
without convening a shareholder meeting. Such a shareholder meeting would have
necessarily occurred after the deadline for payment of the cash call, even as
extended by Hochschild to March 3, 2009. Simply put, without the availability
of the hardship exemption, there can be no assurance that the Corporation will
be able to (i) meet the cash call and maintain its interest in the San José
Project; and (ii) repay its obligations to Macquarie as scheduled to come due,
or as they may be accelerated by Macquarie.
    In respect of the cash call due on March 3, 2009, as a result of foreign
investment restrictions in Argentina, a transfer of funds must be initiated by
the Corporation on or about February 23, 2009.
    Accordingly, the Special Committee is of the view that Hochschild's
motivation in issuing its news release dated February 9, 2009 and making the
related submission to the TSX and OSC is to delay or cause a termination of
the proposed private placement with Mr. McEwen, in turn causing the
Corporation to fail to satisfy the cash call, thereby reducing its interest in
the San José Project and potentially causing Macquarie to accelerate the
payment of amounts due to it or seizing the Corporation's assets all to afford
Hochschild the opportunity to acquire the remaining interest in the San José
Project at a depressed price, at the expense of the Corporation's
shareholders.

    Minera Andes is a gold, silver and copper exploration Corporation working
in Argentina. The Corporation holds approximately 304,000 acres of mineral
exploration land in Argentina. Minera Andes holds a 49% interest in the San
José Project, an operating gold and silver mine. Minera Andes is also
exploring the Los Azules copper project in San Juan province, where an
exploration program has defined a resource and a preliminary assessment has
been completed. Other exploration properties, primarily silver and gold, are
being evaluated in southern Argentina. The Corporation presently has
190,158,851 shares issued and outstanding.

    This news release is submitted by Allan J. Marter, a Director and the
Chairman of the Special Committee of the Board of Directors of Minera Andes
Inc.

    Caution Concerning Forward-Looking Statements:

    This press release contains certain forward-looking statement and
information. The forward-looking statements and information express, as at the
date of this press release, the Corporation's plans, estimates, forecasts,
projections, expectations or beliefs as to future events and results.
Forward-looking statements involve a number of risks and uncertainties, and
there can be no assurance that such statements will prove to be accurate.
Therefore, actual results and future events could differ materially from those
anticipated in such statements. In particular, there can be no assurance that
financing will be secured within the time required. Risks and uncertainties
that could cause results or future events to differ materially from current
expectations expressed or implied by the forward-looking statements include,
but are not limited to, factors associated with fluctuations in the market
price of precious metals, mining industry risks, risks associated with foreign
operations, the state of the capital markets, environmental risks and hazards,
uncertainty as to calculation of mineral reserves and other risks.





For further information:

For further information: Art Johnson at the Spokane office, or Kristen
A. Kottmeier, investor relations - Canada, at the Vancouver office; Visit our
Web site: www.minandes.com.; Spokane Office: 111 East Magnesium Road; Ste. A,
Spokane, WA, 99208, USA, Phone: (509) 921-7322, E-mail: info@minandes.com;
Vancouver Office: 911-470 Granville Street, Vancouver, B.C., V6C 1V5, Phone:
(604) 689-7017, 877-689-7018, E-mail: ircanada@minandes.com

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MINERA ANDES INC.

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