The following came from Canaccord on Nov 12, 2012:


Andina Minerals (ADM : TSX-V| HOLD, Target C$0.80)

All-cash C$0.80/sh friendly offer from Hochschild; low odds of competing offer; rating lowered to HOLD


We are revising our rating on Andina’s shares to HOLD from SPEC BUY following the

announcement of a friendly all-cash offer for the company from Hochschild Mining.


Investment highlights

Hochschild Mining’s friendly all-cash C$0.80/sh offer is at a 106% premium to the 20-day volume weighted average price and values Andina at C$103 million. The offer includes a lock-up agreement with all of Andina’s directors/officers and Mackenzie Financial, representing 13.7%. The deal requires 2/3 tender, with the circular expected to be mailed by Nov 22nd and the bid open for at least 36 days.


The break fee is $4.1 million.


Andina has indicated this offer is the best option for shareholders after reviewing all available alternatives. The market conditions have been terrible and Andina is challenged by equity dilution and investor concerns over the project's metallurgical complexity. We suspect that options with other potential suitors would have been explored, with regional players like Kinross and Barrick. For Kinross, the time isn't right and they remain focused on their capital rationing efforts and Tasiast. For Barrick, capital discipline and the Volcan project's relative size would likely have resulted in only modest interest. We conclude the odds of a competing offer are very low.



Our revised target price of C$0.80 (previously C$1.00, which represented 0.4x our 12.5%/diluted $2,000 peak gold NAVPS estimate of $2.60) reflects our expectation of the Hochschild offer being successful.


Investment risks

The typical risks associated with any mining investment include commodity and exchange rate risk, and permitting and technical (development/operating) risk. In particular, investors considering an investment in Andina Minerals should consider the early stage of the Volcan project and risks associated with parameters estimated by the recently completed pre-feasibility.


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