Andean Precious Metals: Gold & Silver Producer in the Americas | JC Sandoval and Jimmy Connor

Key Concepts

• Distressed Asset Acquisition: Purchasing underperforming or near-end-of-life assets and revitalizing them through operational improvements.
• Third-Party Ore Sourcing: A business model where a processing facility operates without owning a mine, instead purchasing ore from artisanal miners and cooperatives.
• All-In Sustaining Cost (AISC): A comprehensive metric used to measure the total cost of producing an ounce of gold, including mining, processing, and sustaining capital expenditures.
• NI 43-101: A Canadian technical reporting standard for mineral projects that ensures transparency and accuracy in reporting reserves and resources.
• Blending Strategy: The technical process of mixing ores from various sources to optimize plant performance and recovery rates.
• Organic vs. Inorganic Growth: Expanding through internal exploration/optimization (organic) versus acquiring new assets (inorganic).

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1. Company Overview: Andian Precious Metals

Andian Precious Metals, established in 2017, operates a unique dual-asset model. The company focuses on acquiring distressed assets and optimizing them for cash flow. As of early 2023, the company maintains a "clean" balance sheet with no debt, streams, or royalties, holding approximately $160 million in cash and cash equivalents.

2. Asset Profiles

A. Golden Queen (California, USA)

• Production: 40,000–50,000 ounces of gold annually, with a minor silver component.
• Financials: AISC is approximately $2,000/oz, elevated due to a $50 million investment program aimed at long-term stability.
• Operational Improvements: The company replaced the entire haul truck fleet, shovels, loaders, stackers, and agglomeration drums.
• Exploration: Currently running three drill rigs within existing permitted boundaries to extend the mine life beyond the current 2-year official estimate. An updated NI 43-101 technical report is expected by the end of the year.

B. San Bartolomé (Bolivia)

• Business Model: A processing facility that does not own a mine. It sources 100% of its ore from third-party artisanal miners, cooperatives, and the state-owned mining company, COMIBOL.
• Risk Management: The company utilizes a "natural hedge" by splitting sourcing between:
  • Spot Purchases (50%): Paid at market prices, targeting a gross margin of 35%–45%.
  • Long-Term Contracts (50%): Fixed-price agreements that provide stability during market fluctuations.
• Logistics: The company manages a dedicated team to sample ore within a 400km radius to ensure grade quality before and after transport to the plant.

3. Strategic Frameworks and Methodologies

• Operational Optimization: At both sites, the company emphasizes "people and process." In Bolivia, success is driven by the technical ability to blend diverse ore types to maintain consistent plant throughput.
• Capital Allocation: The company prioritizes maintaining a strong balance sheet while seeking a third asset. They are actively scouting for gold, silver, or copper projects within the Americas (Canada, US, and select South American jurisdictions).
• Quality Control: To mitigate the risks of dealing with independent miners, Andian employs a rigorous sampling protocol at the source and at the plant gate to verify ore grades before payment.

4. Key Arguments and Perspectives

• Profitability vs. Market Volatility: JC argues that the San Bartolomé model is inherently resilient. Because they target a fixed gross margin on spot purchases, they remain profitable even when commodity prices drop, as the cost of purchasing ore decreases proportionally.
• Proven Track Record: The management team emphasizes their ability to turn around distressed assets—specifically citing the transformation of the San Bartolomé plant (which had less than one year of life remaining when acquired) and the operational overhaul of Golden Queen.

5. Notable Quotes

• "We are no longer a traditional mine in Bolivia... Everything 100% that goes into the plant is coming from third-party purchases." — JC, on the unique business model of San Bartolomé.
• "If prices go down when nobody’s making money, I’ll still be making the same amount of money [due to the margin-based purchasing model]." — JC, regarding the natural hedge of their Bolivian operations.

6. Synthesis and Conclusion

Andian Precious Metals has successfully transitioned from a single-asset operator in Bolivia to a diversified producer with a significant presence in the US. Their strategy relies on two pillars: operational excellence (investing in equipment and technical expertise to lower long-term costs) and flexible sourcing (using a mix of spot and fixed-price contracts to hedge against commodity price volatility). The primary near-term catalyst is the expected extension of the mine life at Golden Queen, while the long-term growth strategy remains focused on acquiring a third, high-quality asset to further diversify their portfolio.