Minera Andes Inc., a small Spokane-based mining company, has reported a third-quarter net loss of $3.5 million, or 2 cents a share, compared with a loss of $979,000, or 1 cent a share, in the year-earlier quarter.

For the nine months ended Sept. 30, however, Minera Andes posted a net profit of $3.6 million, or 2 cents a share.

The company gets its revenue from its 49 percent interest in Minera Santa Cruz S.A., a joint venture with Lima, Peru-based Hochschild Mining plc that operates the San Jose silver and gold mine in southern Argentina. Production at that mine began last year, and the joint venture produced its first earnings in the second quarter of this year, Minera Andes says. Soon after the mine opened, the two companies announced they would double its production capacity, boosting overall mine production costs to more than $100 million.

"Sales and net revenues for the third quarter were less than expected, primarily due to temporary mechanical problems with a smelting furnace, causing an inventory buildup of precipitate at (the) site," says Allen Ambrose, president of Minera Andes. "With the first phase of expansion completed to double the production rate, it is estimated that the San Jose mine will join the ranks of the top 10 primary silver-producing mines in the world next year, when the mine and mill ramp up to the expanded capacity level."

Silver and gold sales from the mine totaled $18.5 million in the third quarter, compared with $63.2 million in the second quarter, but sales in the second quarter were unusually high due to the sale of built-up inventory from earlier quarters, the company says. Inventories began building up again during the third quarter, while the smelting furnace was having problems, and are expected to be sold during the fourth quarter, it says.

Since the mine's startup 15 months ago, San Jose's total sales have been $92.9 million, Minera Andes says.