Andover Ventures (TSX: V.AOX, Stock Forum, 50 cents)

www.andoverventures.com

Andover is a small mining company with lofty goals thanks to an acquisition announced last week. After almost two years of work, the company managed to pick up a large mining asset in Utah that was the victim of a $60 million settlement by the EPA in 2005. Andover has a very decent mining project in Alaska but it was attracting them little attention. This new acquisition should move them onto the radar of mining speculators and an upcoming road show should put them in front of the brokers. Last week’s news was sent with little fanfare so this is a good point to do some research –prior to commencement of a new IR program or news flow. This is the type of story we would follow into the fall when a drill program should commence on a high profile region of their property (the Lithocap).

Management experience

Andover’s president has 35 years of exploration, development, and mining experience in the U.S. and Australia, and their chief development officer has 45 years experience in the mining industry with Anaconda (TSX: T.ANX, Stock Forum) and Amax. Their directors include: a geologist with 35 years of experience who was also the Deputy Director of Minerals for the Alaska Department of Natural Resources in the early 1980s; a former Minister of Energy and Mines (Canada) as well as the former Chairman of BC Hydro and former Chairman of Canadian National Railways; and a former banker with Deutsche Bank (NYSE: DB, Stock Forum) based in Hong Kong.

Acquisition of the Chief mine in Utah

After two years of work, Andover announced this past week that they were able to secure a controlling 64.7% interest in the common shares of Chief Consolidated Mining (OTO: CFCM, Stock Forum). Chief’s core asset, located one hour south of Salt Lake City, has been around for decades. The company ran into problems with the U.S. Environmental Protection Agency (EPA) to the tune of $60 million, which essentially forced them into liquidation. Its assets were under the control of a fund (as principal shareholder) and the EPA eventually resolved their issues through a settlement agreement (which includes a Consent Decree that Andover has in their possession). Through a lengthy process, those assets eventually found their way to Andover.

Chief’s assets/attributes

The area is referred to as the Tintic District, and Chief lies within the East Tintic District. Chief owns some 19,000 acres. This entire district in the past has produced over two million ounces of gold, 250 million ounces of silver, 250 million pounds of copper, and over two billion pounds of lead.

The existing Chief property includes:

- Two mines ready to go to operational status: the Trixie and the Burgin.

- An 800 ton per day concentrator plant ready to go to production status for a cost estimated to be US$200,000 for repair and replacement of parts, last operated at full status in 2003 and still functional. It is permitted for operation and the appropriate governmental bonds are in place.

- An ore body in the Burgin Mine (called the Burgin Extension) delineated by 105 drill holes (such drilling finished in 1997) but not yet NI 43-101 compliant, indicating a reserve holding 1,075,000 million tons of ore containing 17,726,750 ounces of silver, 452,360,000 pounds of lead, and 143,405,000 pounds of zinc. Note that this was classified by Chief management as proven and probable in its Form 10-K for 1997.

- Further to this, Chief management categorized the “Possible Class” reserve in the same deposit holding a further 407,000 tons of ore containing 6,146,576 ounces of silver; 130,177,149 pounds of lead, and 42,521,269 pounds of zinc.

- At today’s prices, the total metal value approaches $1 billion. Against that is the cost of a dewatering/filtration facility estimated to cost some $29 million but which cost they expect to alleviate by negotiating with a specific company for the water rights, such company to build the plant and share profits on a royalty basis. Production costs are roughly estimated in the range of $70/ton.

- The Ball Park Zone and Zone A are about 1,500 meters north of the Burgin Mine and Kennecott ran adrift from the Burgin to this area during the 1970s. A Utah State Geologist with knowledge of Kennecott’s findings during the 1970s believes there were approximately 30 million tons of ore on the Ball Park alone and guesstimated the resource could contain 12% combined lead and zinc.

- The property contains tailings/dumps which previous operators thought would hold some 1.2 million tons of metal-bearing rock which we they could process quickly and profitably once the mill is operational. They estimate operational status for the mill in September of this year. However, until they have test-milled the tailings/dumps, a person should assign no value to them.

Elephant hunting on the Lithocap

The Lithocap Project located on the western end of the Chief property holds the potential for some drill excitement after the summer. Past operators and existing management believe a similar geology may exist as they’ve seen at the Bingham Canyon Mine owned by RTZ some 60 miles due north of the Lithocap. Bingham Canyon is one of the largest mines in the world and has produced, since 1906, more copper than any other mine on earth, yielding some $1.8 billion in revenue in 2006.

It was rumored that several majors were interested in punching holes on the Lithocap but the property has been tied up for years thanks to EPA issues of the past. With the bulk of this now resolved and under the new control of Andover, it will be interesting to see who (if any) come back. High metal prices make these old projects all the more attractive.

Disclosure – Danny Deadlock owns 15,000 shares of AOX.