Minera Andes Inc., a small Spokane mining exploration company, says its joint-venture partner in an Argentinian gold and silver prospect will exercise its option to proceed with extensive exploration of the property.


Such work is done as a mining company decides whether to construct a mine and tap into a mineral deposit for full-scale production.


The Spokane companys joint-venture partner, Mauricio Hochschild & Co. Ltd., of Lima, Peru, will begin the exploration work this quarter on Minera Andes 217,000-acre El Pluma-Cerro Saavedra land package in the southern part of Argentina, Minera Andes says.


The Peruvian companys agreement to explore the property closely is an important step in the life of 5-year-old Minera Andes, which has yet to earn a profit, says Art Johnson, director of investor and public relations for Minera Andes. Johnson says Hochschild is a profitable, established precious metals company with four gold and silver mines and substantial cement production in Peru.


A definitive agreement for the coming exploration work is being drafted, Minera Andes says.


Under the terms of a memorandum of understanding reached last month, the Peruvian company can earn a 51 percent ownership interest in the exploration property if it spends $3 million (U.S.) on exploration there over three years. That sum would have to include at least $200,000 spent on exploration of areas other than an area known as Huevos Verdes, where most of Minera Andes own exploratory work has been done thus far.


In addition to spending the $3 million on exploration, Hochschild will pay Minera Andes $200,000 upon signing the definitive agreement and will make semiannual payments totaling $400,000 each year until adequate production is achieved to support a pilot mining operation. Minera Andes would have the option of participating in development of a full-fledged mine on a pro rata basis, or by retaining an ownership interest in the mine.


Minera Andes controls a dozen exploration projects on roughly 434,000 acres of land in Argentina. Most of the projects are located in the Andes and the plains of Patagonia and primarily contain gold, silver, and copper mineralization, the company says.