Minera Andes announces progress and plans at San José mine

    TSX: MAI

    SPOKANE, WA, Aug. 15 /CNW/ - Minera Andes (TSX: MAI and US OTC: MNEAF)
reports that the board of Minera Santa Cruz ("MSC"), a joint venture company
owned 49% by Minera Andes and 51% by a wholly-owned subsidiary of Hochschild
Mining plc ('Hochschild") (London Stock Exchange, LSE: HOC), the project
operator, has made the formal decision to double production capacity from
750 tonnes per day (tpd) to 1,500 tpd at the San José mine in southern
Argentina. The cost of the expansion will be financed primarily from cash flow
from the existing mine and unsecured local bank financing.
    The San José mine celebrated its inaugural ceremony in June 2007 and the
first production of gold and silver came from the mine in July 2007. During
construction approximately 1,100 people were working at the site and now that
construction is complete the mine is staffed by approximately 450 personnel.
We anticipate full commercial production to be achievable within six to twelve
    Planning ahead for expansion while constructing the current mine, mill
capacity was designed to be scaleable from 750 tpd to 1,500 tpd. In
anticipation of possible production growth, some equipment with expanded
capacity has already been installed. Surface facilities have also been
expanded and upgraded. With the decision to expand the operations it will be
necessary to add more equipment and infrastructure to handle increased
production. An independent economic analysis on the expansion plans will be
provided to the partners by MSC.
    An exploration drilling program is underway and is designed to test new
targets and to develop new reserves and resources on the property to increase
mine life and facilitate the expansion of production at the San José project.
Over eight thousand meters of drilling have been completed on this program to
date and assays are pending. In addition, a new NI 43-101 technical report
that adds the Kospi vein to the San José resources is to be completed shortly.
    Construction completion of the 750 tpd operation is currently estimated
to cost $94.1 million, plus value added tax (IVA). Pre-completion mine
expansion costs and costs related to the change in scope to the original mine
plan incurred to date are approximately $11 million, plus IVA. At the end of
the second quarter of 2006, when the decision to place the mine into
production, Minera Andes reported the mine cost was estimated at
$78.3 million, plus IVA. The amounts paid for IVA tax are refundable to MSC
ratably based on production.
    The 20% cost increase for completing construction of the mine arises from
increases due to inflation of equipment and materials costs, construction
delays, and increased contractor costs. Mine expansion costs and costs related
to the change in scope to the original mine plan of approximately $11 million
include the expansion of facilities, purchase of over-dimensioned equipment,
mining engineering studies for the Kospi vein, the commencement of
construction of the ramp for the Kospi vein, and additional underground
workings. Also the processing operation at the mine is using an intensive
leaching reactor (ILR), in lieu of the Merryl-Crowe plant described in the
2005 feasibility study.
    The current project loan facility for $61 million with Hochschild was
expanded to $65 million at the end of the second quarter of 2007 to cover
additional mine completion costs and we are currently finalizing the terms and
conditions of the formal loan documentation. The loan will be repaid from MSC
cash flow and there is no hedging of the project's gold and silver production
(which had been required under the previously arranged bank financing
facility). To accelerate the mine expansion and provide necessary funds from
mine cash flow, Hochschild has agreed to extend the payback of the project
loan facility until after completion of the expansion (except for expected
repayment of $4 million from the proceeds of local bank loans to MSC in
October, 2007). MSC estimates completion of the mine expansion is expected to
occur in late 2008.
    Minera Andes is currently in discussions with Hochschild as to the timing
and amounts of the additional financing to be put into MSC for the cost
overruns and sustaining capital while the mine ramps up production.
Separately, Minera Andes will be paying a cash call of $4.9 million during
September from its own resources.

    Minera Andes is a gold, silver and copper exploration company working in
Argentina. The Corporation holds about 410,000 acres of mineral exploration
land in Argentina including the co-owned San José silver/gold mine that has
started initial production. Minera Andes is also exploring the Los Azules
copper project in San Juan province, where an exploration program is underway
to define a resource. Other exploration properties, primarily silver and gold,
are being evaluated in southern Argentina. The Corporation presently has
166,700,767 shares issued and outstanding.

    Allen V. Ambrose, Minera Andes' President, who is an appropriately
qualified person as defined by National Instrument 43-101, has reviewed the
information used in this news release.
    This news release is submitted by Allen V. Ambrose, President and
Director of Minera Andes Inc.

    Caution Concerning Forward-Looking Statements:

    This press release contains certain "forward-looking statements",
including, but not limited to, the statements regarding the Company's
strategic plans, evolution of mineral resources and reserves, work programs,
development plans and exploration budgets at the Company's San José Project.
Investors should be aware that the introduction of new technology such as ILR
can create added risk in achieving metallurgical performance. The
forward-looking statements express, as at the date of this press release, the
Company'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 commercial production at the San José mine will
be achieved on a timely basis, or at all, that production capacity at the San
José mine will be successfully increased, that resources and reserves at the
San José mine will be increased or that Minera Andes will successfully raise
the funds necessary to maintain its interest in the San José mine. 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. Reference is made to the risk factors and
uncertainties described in the Company's continuous disclosure record, a copy
of which is available under the Company's profile at www.sedar.com. In
addition, Minera Andes' joint venture partner, a subsidiary of Hochschild
Mining plc, and its affiliates do not accept responsibility for the use of
project data or the adequacy or accuracy of this release.

    Cautionary Note to U.S. Investors:

    The United States Securities and Exchange Commission (the "SEC") permits
mining companies, in their filings with the SEC, to disclose only those
mineral deposits with "mineral reserves" that a company can economically and
legally extract or produce. We use certain terms in this press release, such
as "mineral resources", that the SEC guidelines strictly prohibit us from
including in our filings with the SEC.

For further information:

For further information: Art Johnson at the Spokane office, or Krister
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, 1-877-689-7018, E-mail: ircanada@minandes.com

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