Overview
In July 2008, AndeanGold established its Colombian subsidiary, ColombiaGold Resources S.A. ("CGR"), and, in August 2008, opened an office in Medellin, capital city of the Department of Antioquia ("Antioquia"), Colombia. This office is the headquarters for the Company's activities in the country, and will be managed and assisted by AndeanGold's Quito-based senior exploration group.
AndeanGold has been active in Colombia since February 2008 and is presently focused principally on mineral property opportunities in Antioquia. CGR has signed several confidentiality and exclusivity agreements with various concession owners, mainly within the north-south Segovia Batholith trend located in northeast Antioquia. In September 2008, CGR signed a Letter of Intent to enter into a Joint Venture Operating Agreement with the Colombian owners of two gold concessions --- Santa Cruz and Palmichala --- near the historic mining towns of Remedios and Segovia located in Antioquia.
Colombia
Located in the northwestern corner of South America, Colombia is strategically surrounded by the Caribbean Sea and the Pacific Ocean, which in addition to a chain of 74 internal airports connecting all of the major cities in the country, allows for quick and efficient transportation of goods, cargo and people. While the majority of the country is vastly under explored, it has extensive infrastructure already in place, which would facilitate the future development of new mineral discoveries.
Colombia is rich with significant natural resources, including gold, silver, emeralds, platinum and coal (largest reserves in Latin America), as well as substantial oil reserves (second largest in Latin America). Historically, the country has been the largest gold producer in South America, dating back to the pre-Colombian period, with historical gold production believed to be in excess of 120 million ounces. It is reported that over half of the country's historical production came from the Department of Antioquia, which abounds with historical mines, both alluvial and underground hard rock. The Frontino Gold Mines, which have been in production for over 150 years with historical production reported to be approximately 5 million ounces, are located in northeast Antioquia within the Segovia Batholith which includes the historic Frontino Gold Belt. Recent large gold discoveries by Anglo American and Greystar Resources are the first indications of the potential for the discovery of world-class gold deposits in Colombia. Today, Colombia is the world's leading producer of emeralds, and South America's second largest gold producer after Peru.
Foreign investment has increased significantly over the past decade, and between 2000 and 2007, grew at a compound average rate of 16.3 percent. In order to generate better conditions and new opportunities for investment and trade, the Colombian government committed to establishing free trade agreements with key countries including the US, Chile, the European Union and Canada. Additionally, tax reforms have reduced the income tax rate from 38.5 percent to 33 percent, abolished the 7 percent remittance tax on profits and dividends sent abroad and increased tax deductible expenses up to 40 percent of investments made on fixed and real productive assets. Further, since the election of Avaro Uribe as President in August 2002, the security situation in Colombia has improved significantly. These reforms along with improved conditions for investors have brought about the general consensus that Colombia has entered into a new era of stability and prosperity. It should also be noted that as the oldest and most stable democracy in South America, Colombia has never defaulted on a foreign loan or expropriated foreign assets, as has happened in several other countries in the region.
Ease of transportation along with a strong labour force, significant natural resources in an under-explored region, and numerous incentives for foreign investment made Colombia an ideal choice for AndeanGold's diversification strategy.
Geology
Colombia is geologically underlain by a wide diversity of rock-types and formations. Due to the mode of formation and the highly active tectonic environment of the area, the country is host to a great wealth of mineral abundance including gold, silver, copper, emeralds, platinum and coal. Based on historic tectonics, the Andean region of Colombia has undergone extensive uplifting and erosion of the geological formations --- an essential process that exposes mineral deposits formed at depth within the earth as visible mineralized outcroppings, allowing them to be discovered. Erosion of these outcroppings by weathering agents (rain, wind, temperature and rivers) resulted in large alluvial occurrences of precious metals, which have been extracted by artisanal miners.
One of the primary gold producing regions of Colombia is Antioquia, which is underlain with rocks of primarily pre-Cambrian, Paleozoic and Jurassic ages, and cut by a series of major fault zones belonging to the Palestina-Bagre-Nus-Otu system. Mineralization in the historic Frontino Gold Belt ("FGB") is controlled by the Otu Fault. The north-south trending mineralized belt (approximately 60 kilometres by 10 kilometres) contains gold mineralization associated with the Jurassic Batholith of Segovia, which intruded the older rocks. Gold deposits along FGB have been worked extensively over the last 200 years, by artisanal miners, and numerous mining companies. Notably, the Frontino Gold Mines, centrally located within the belt, has been in production for more than 150 years.