**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**Form
      10-KSB**


(Mark
      One)





x
            Annual
                report under section 13 or 15(d) of the Securities Exchange Act of
                1934**for
                the fiscal year ended December 31, 2005**o
            Transition
                report under section 13 or 15(d) of the Securities Exchange Act of
                1934**for
                the transition period from_______________********to**





**Commission
      file number 000-22731**






**MINERA
      ANDES INC.**


(Name
      of
      small business issuer in its charter)





**Alberta,
      Canada**


(State
      or
      other jurisdiction of incorporation or organization)





**None**


(I.R.S.
      Employer Identification No.)




**111
      E. Magnesium Road, Suite A, Spokane, Washington**  **99208**


(Address
      of principal executive offices)





**(509)
      921-7322**


(Issuer’s
      telephone number)








Securities
                registered under Section 12(b) of the Act:Title
                of each class
            Name
                of each exchange on which registered:**None**




Securities
      registered under Section 12(g) of the Act:


**Common
      shares without par value**





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.  o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act during the past 12 months (or for such
      shorter period that the registrant was required to file such reports), and
      (2)
      has been subject to such filing requirements for the past 90 days. **** Yes  x  No  o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes  o   No  x




The
      issuer is in the exploration stage and has no revenues for its most recent
      fiscal year.





The
      aggregate market value of the voting stock held by non-affiliates as of March
      24, 2006 was  $202,853,851.





State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of the latest practicable date: **As
        of**
 **March
        24, 2006 the Registrant had 129,381,042 common shares
        outstanding**


Transitional
      Small Business Disclosure Format (Check one:)  Yes  o  No  x





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          1
          -





**TABLE
                OF CONTENTS****PART
                I**
            
            **Page**Item
                1
            Description
                of Business
            3Item
                2
            Description
                of Properties
            10Item
                3
            Legal
                Proceedings
            28Item
                4
            Submission
                of Matters to a Voteof
                Security Holders
            28**PART
                II**Item
                5
            Market
                for Common Equity and Related
            29Shareholder
                MattersItem
                6
            Management’s
                Discussion and Analysis orPlan
                of Operations
            32Item
                7
            Financial
                Statements
            47Item
                8
            Changes
                in and Disagreements With Accountantson
                Accounting and Financial Disclosure
            84Item
                8A
            Controls
                and Procedures
            84Item
                8B
            Other
                Information
            84**PART
                III**Item
                9
            Directors,
                Executive Officers, Promoters andControl
                Persons; Compliance with Section 16(a)of
                the Exchange Act
            85Item
                10
            Executive
                Compensation
            87Item
                11
            Security
                Ownership of Certain Beneficial Ownersand
                Management and Related Shareholder Matters
            90Item
                12
            Certain
                Relationships and Related Transactions
            92Item
                13
            Exhibits
            92Item
                14
            Principal
                Accountant Fees and Services
            92


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          2
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**PART
      I**





**Preliminary
      Note Regarding Forward-Looking Statements; Currency
      Disclosure**





*This
      report contains both historical and prospective statements concerning Minera
      Andes Inc. and its operations. Historical statements are based on events that
      have already happened; examples include the reported financial and operating
      results, descriptions of pending and completed transactions, and management
      and
      compensation matters. Prospective statements, on the other hand, are based
      on
      events that are reasonably expected to happen in the future; examples include
      the timing of projected operations, the likely effect or resolution of known
      contingencies or other foreseeable events, and projected operating results.
      In
      this report, Minera Andes Inc. is referred to as “Minera Andes”, “we”, “our”,
      and the “Company”.*




*Prospective
      statements (which are known as “forward-looking statements” under the Private
      Securities Litigation Reform Act of 1995) may or may not prove true with the
      passage of time because of future risks and uncertainties.*





*All
      currency amounts in this report are stated in U.S. dollars unless otherwise
      indicated. On March 24, 2006, the late New York trading rate of exchange, as
      reported by* The
      Wall
      Street Journal *for
      conversion of United States dollars into Canadian dollars was U.S.$1.00 =
      Cdn$1.1685 or Cdn$1.00 = U.S. $0.8558.*





**ITEM
      1. DESCRIPTION OF BUSINESS**





Minera
      Andes Inc. is engaged in the exploration and development of mineral properties
      located in the Republic of Argentina. Our objective is to identify and acquire
      properties with promising mineral potential, explore them to an advanced stage
      or to the feasibility study stage, and then, if warranted, to pursue development
      of the properties, typically through joint ventures or other collaborative
      arrangements with partners that have expertise in mining
      operations.





Our
      business grew out of a program begun by N.A. Degerstrom, Inc. (“Degerstrom”), a
      contract mining company based in Spokane, Washington, to identify properties
      in
      Argentina that possessed promising mineral potential. Based on the study of
      available remote sensing satellite data and experience gained from drilling
      work
      performed by Degerstrom, beginning in 1991 Degerstrom identified a number of
      areas which it believed had exploration potential and began the process of
      filing applications for exploration concessions with the provincial governments
      in Argentina and negotiating option agreements with private landowners.
      Degerstrom conveyed these property interests to Minera Andes in 1995. See
“Description of Properties - The Degerstrom Agreement” and “Management’s
      Discussion and Analysis or Plan of Operations.”





Our
      current properties and projects consist of mineral rights and applications
      for
      mineral rights covering approximately 439,804 acres (177,986 hectares) in three
      Argentine provinces. The lands comprise option-to-purchase contracts,
      exploration and mining agreements and direct interests through our filings
      for
      exploration concessions. Our properties are all early stage exploration
      prospects except for the San José project, which is an advanced stage
      exploration project. See “Description of Properties.” We have four full time
      employees and several project-specific contract consultants.





**Operating
      Structure**





Minera
      Andes is the product of an amalgamation in November 1995 of Minera Andes and
      Scotia Prime Minerals, Incorporated, a then inactive Alberta corporation which
      previously had its Common Shares listed for trading on the Alberta Stock
      Exchange. Since April 8, 2002 our Common Shares have been listed on the TSX
      Venture Exchange (“TSX-V”), which replaced the Alberta Stock Exchange. Our
      interests in Argentinean properties are held through two Argentinean
      subsidiaries: Minera Andes S.A. (“MASA”) and Minera Santa Cruz S.A. (“MSC”).


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          3
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The
      corporate structure of Minera Andes and its principal subsidiaries is as
      follows:








We
      hold
      20,539,300 of the 20,540,300 issued and outstanding shares of MASA as well
      as an
      irrevocable transferable option to purchase the remaining MASA shares. The
      remaining shares are held by a second shareholder as required by local law.
      MASA
      holds 5,047,000 shares of the 10,300,000 shares issued and outstanding of Minera
      Santa Cruz S.A.





In
      July
      2003, we announced that Mauricio Hochschild & Cia. Ltda. S.A. (“MHC”) had
      acquired 51% of the shares of the project company, MSC, upon satisfaction of
      the
      vesting requirements of the Option and Joint Venture Agreement for the
      development of the Huevos Verdes gold/silver project in southern Argentina.
      The
      agreement required MHC to expend US$3 million on the further exploration and
      development of the Huevos Verdes project, owned by MSC, in order to vest. Minera
      Andes holds a 49% interest in MSC through our subsidiary, MASA.




Through
      2003, Degerstrom provided management services to us and acted as operator of
      our
      properties and projects pursuant to an operating agreement entered into in
      March
      1995 (“Operating Agreement”). Under the Operating Agreement, Degerstrom operated
      and managed the exploration program on all properties and provided related
      offsite administrative assistance as required.





Degerstrom
      is principally involved in contract mining and road and bridge construction.
      Degerstrom provides a full range of contract services including geological
      studies, site drilling, metallurgical analysis, and engineering of pit, process
      and recovery systems.


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          4
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On
      December 2, 2003, we cancelled our Operating Agreement with Degerstrom,
      effective December 31, 2003. We are an established exploration company and
      felt
      the need to update the arrangements with Degerstrom. At the time that these
      agreements were signed, Degerstrom was a significant shareholder of ours,
      however, their shareholdings had been reduced to approximately 10.5% of our
      issued and outstanding shares at the end of 2003. In addition, the reasons
      for
      entering into the Operating Agreement, which included using the established
      Argentina infrastructure of Degerstrom at the time we were listed, are no longer
      applicable. We are no longer a newly formed junior public company and have
      been
      in existence for ten years. The management and the board of directors thought
      it
      was also prudent for corporate governance reasons to separate itself from
      Degerstrom. As of March 24, 2006, Degerstrom owned 3.62% of our issued and
      outstanding shares.





Our
      management office is 111 E. Magnesium Road, Suite A, Spokane, Washington, 99208,
      and our principal business address is Coronel Moldes 837/820, (5500) Mendoza,
      Argentina. Our registered address is 7415B 35 th Ave.
      N.W., Calgary, Alberta, T3B 1T4 Canada.




**Risks
      Related to our Business**





Ownership
      of our Common Shares involves a high degree of risk. Shareholders should
      consider, among other things, the following factors relating to our business
      and
      properties and our present stage of development:





*Risks
      Inherent in Minerals Exploration* .
      There
      are a number of uncertainties inherent in any exploration or development
      program, including location of economic ore bodies, the development of
      appropriate metallurgical processes, and the receipt of necessary governmental
      permits. Substantial expenditures may be required to pursue such exploration
      and, if warranted, development activities. Assuming discovery of an economic
      ore
      body and depending on the type of mining operation involved, several years
      may
      elapse from the initial stages of development until commercial production is
      commenced. New projects frequently experience unexpected problems during
      exploration and development stages and frequently result in abandonment of
      the
      properties as potential development projects. Most exploration projects do
      not
      result in the discovery of mineable deposits of ore. We cannot assure you that
      additional exploration efforts will yield additional reserves or result in
      any
      commercial mining operations.





Many
      of
      the properties that we intend to explore in Argentina are the subject of
      applications for concessions and licenses, many of which have not yet been
      granted. The filing of an application for a concession grants the holder the
      exclusive right to obtain the concession conditioned on the outcome of the
      approval process. In Argentina, the approval process is an administrative
      procedure under the authority of the province in which the property is located.
      The process includes a public notice and approval procedure allowing third
      parties to give notice of opposition or prior claim, if any, before the title
      to
      the concession is granted. Although we believe that we have taken all necessary
      steps with respect to the application, approval and registration process for
      the
      property concessions and licenses we have currently applied for and property
      transactions to which we are a party, there is no assurance that any or all
      applications will result in issued concessions or that the public registrations
      will be timely approved.





*Risks
      Inherent in the Mining Industry* .
      Exploration, development and mining operations are subject to a variety of
      laws
      and regulations relating to exploration, development, employee safety and
      environmental protection; mining activities are subject to substantial operating
      hazards including rock bursts, cave-ins, fires and flooding, some of which
      are
      not insurable or may not be insured for economic reasons. We currently have
      no
      insurance against such risks. We may also incur liability as a result of
      pollution and other casualties involved in the drilling and mining of ore.
      There
      may be limited availability of water and power, which are essential to mining
      operations; and interruptions may be caused by adverse weather
      conditions.





We
      or our
      joint venture or investment partners must obtain necessary governmental
      approvals and make necessary capital expenditures before production may commence
      on most of our projects.


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          5
          -





*Need
      for Additional Capital* .
      The
      exploration and, if warranted, development of Minera Andes’ properties would
      require substantial financing. Our ability to obtain additional financing will
      depend, among other things, on the price of gold, silver, copper and other
      metals and the industry’s perception of their future price. Therefore,
      availability of funding depends largely on factors outside of our control and
      cannot be accurately predicted; financing may not be available when needed
      or on
      terms satisfactory to us and may be dilutive to our shareholders. We have
      historically obtained funds for a portion of our capital expenditure from joint
      venture or investment partners. However, we cannot assure you that such joint
      venture or investment partners will provide such funds and such project
      financing for mining projects may be limited. Failure to obtain sufficient
      financing could result in delay or indefinite postponement of exploration,
      development or production on any or all of Minera Andes’ projects or loss of
      properties. For example, certain agreements pursuant to which we have the right
      to conduct exploration activities carry work commitments which, if not met,
      could result in losing our right to acquire an interest in the subject property.
      We cannot assure you that additional capital or other types of financing will
      be
      available when needed or that, if available, the terms of such financing will
      be
      favorable to Minera Andes.





*Competitive
      Business Conditions* .
      The
      exploration and development of mineral properties in the Republic of Argentina
      is a highly competitive business. Other companies compete with us in the
      acquisition, exploration and development of mining properties. Many of these
      competing companies are significantly larger than we are and have substantially
      greater economic and technical resources than us. While we seek to compete
      by
      identifying properties for exploration, acquiring exclusive rights to conduct
      such exploration and carrying out exploration and development of the properties
      with joint venture or investment partners, there can be no assurance that we
      will be successful in any of these efforts.





*Foreign
      Operations* .
      Minera
      Andes’ properties are located in Argentina. In the early 1990s Argentina emerged
      from periods of political and economic instability but showed signs of returning
      instability in 2001 through 2002. Foreign properties, operations and investments
      may be adversely affected by local political and economic developments,
      including nationalization, exchange controls, currency fluctuations, taxation
      and laws or policies as well as by laws and policies of the United States and
      Canada affecting foreign trade, investment and taxation. It is important that
      we
      maintain good relationships with the governments in Argentina. We may not be
      able to maintain such relationships if the governments change.





*Difficulties
      in Developing Remote Areas* .
      Many of
      the areas in which we conduct exploration and, if warranted, development
      activities are in particularly remote and mountainous regions, with limited
      infrastructure and limited access to essential resources. Exploration or
      development projects in these areas may require us or our joint venture partners
      to develop power sources, transportation systems and communications systems,
      and
      to secure adequate supplies of fuel, machinery, equipment and spare parts.
      Consequently, exploration and development in these areas is particularly
      difficult, requiring significant capital expenditures, and may be subject to
      cost over-runs or unanticipated delays.





*Fluctuation
      in the Price of Minerals* .
      The
      market price of minerals is volatile and beyond our control. If the price of
      a
      mineral should drop dramatically, the value of the properties we are exploring
      or developing for that mineral could also drop dramatically and we might not
      be
      able to recover our investment in those properties. The decision to put a mine
      into production, and the commitment of the funds necessary for that purpose,
      must be made long before the first revenues from production will be received.
      Price fluctuations between the time that such a decision is made and the
      commencement of production can change completely the economics of the mine.
      Although it is possible to protect against price fluctuations by hedging in
      certain circumstances, the volatility of mineral prices represents a substantial
      risk in the mining industry generally which no amount of planning or technical
      expertise can eliminate.





*Environmental
      and Other Laws and Regulations* .
      Mining
      operations and exploration activities in Argentina are subject to various
      federal, provincial and local laws and regulations governing mineral rights,
      exploration, development and mining, exports, taxes, labor, protection of the
      environment and other matters. Compliance with such laws and regulations may
      necessitate significant capital outlays, materially affect the economics of
      a


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          6
          -


given
      project, or cause material changes or delays in our intended activities. Minera
      Andes has obtained or is in the process of obtaining authorizations currently
      required to conduct its operations. New or different standards imposed by
      governmental authorities in the future or amendments to current laws and
      regulations governing operations and activities of mining companies or more
      stringent implementation thereof could have an adverse impact on Minera Andes’
activities.





*Liquidity;
      Limited Trading Market* .
      There
      currently is a limited trading market for our securities. There is no assurance
      that an active trading market will ever develop. Investment in our shares is
      not
      suitable for any investor who may have to liquidate such investment on a timely
      basis and should only be considered by investors who are able to make a
      long-term investment in the shares.





**Glossary
      of Geologic and Mining Terms; Statement of Abbreviations and Conversion Factors**





“andesite”
      is a type of dark colored, fine grained volcanic rock;





“anomalous”
      means either a geophysical response that is higher or lower than the average
      background or rock samples that return assay values greater than the average
      background;





“argillic”
      means pertaining to clay or clay minerals;





“Bankable
      Feasibility Study” means the study, prepared to industry standards, based upon
      which a bank or other lending institution may loan Minera Andes, MASA or MSC
      funds for production development on the Claims;





“breccia”
      means a course grained rock, composed of angular broken rock fragments held
      together by a finer grained matrix;





“Cateo”
      means an exploration concession for mineral rights granted to an individual
      or
      company in the Republic of Argentina, as defined by the Republic of Argentina
      Mining Code, as amended;





“Claims”
      means the Cateos, Manifestación de Descubrimiento, Mina, Estaca Mina (as defined
      by the Republic of Argentina Mining Code, as amended) described herein issued
      to
      MASA, MSC or Minera Andes by the government of Argentina or any provincial
      government;





“dacite”
      is a type of fine-grained extrusive rock;





“Estaca
      Mina” means areas granted to extend the area covered by existing
      Minas;





“felsic”
      describes an igneous rock having abundant light colored minerals;





“graben”
      means an elongate crustal block that is bounded by faults on its long
      sides;





“grab
      sample” means one or more pieces of rock collected from a mineralized zone that
      when analyzed do not


represent
      a particular width of mineralization nor necessarily the true mineral
      concentration of any larger portion of a mineralized area;





“igneous
      rock” means a rock formed by the cooling of molten rock either underground or at
      the surface of the earth;





“illitic”
      is a general name for a group of clay minerals;





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          7
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“intrusive
      rock” means an igneous rock that, when in the molten or partially molten state,
      penetrated into or between other rocks, but cooled beneath the surface;





“low
      sulfidation” applies to a type of mineralization low in sulfur
      content;





“Manifestación
      de Descubrimiento” (literally, manifestation of discovery) means the
      intermediate stage between the exploration phase and exploitation phase of
      development;





“metamorphic
      rock” means an igneous or sedimentary rock that has been altered by exposure to
      heat and pressure (resulting from deep burial, contact with igneous rocks,
      compression in mountain building zones or a combination of these factors) but
      without complete melting. Metamorphosis typically results in partial
      recrystallization and the growth of new minerals. “Metasediment” refers to
      metamorphosed sedimentary rock. “Metavolcanics” refers to metamorphosed volcanic
      rock;





“Mina”
      means an exploitation grant based on Manifestación de
      Descubrimiento;





“net
      smelter return royalty” is a form of royalty payable as a percentage of the
      value of the final product of a mine, after deducting the costs of transporting
      ore or concentrate to a smelter, insurance charges for such transportation,
      and
      all charges or costs related to smelting the ore. Normally, exploration,
      development and mining costs are not deducted in calculating a net smelter
      return royalty. However, such royalties are established by contract or statute
      (in the case of property owned by governments), and the specific terms of such
      contracts or statutes govern the calculation of the royalty;





“net
      profits royalty” is a form of royalty payable as a percentage of the net profits
      of a mining operation. In contrast to net smelter return royalties, costs
      relating to exploration, development and mining may be deducted from the net
      proceeds of the operation in calculating the royalty. However, such royalties
      are established by contract or statute (in the case of property owned by
      governments), and the specific terms of such contracts or statutes govern the
      calculation of the royalty;





“orebody”
      means a continuous well-defined mass of material containing enough ore to make
      extraction economically feasible;





“porphyry”
      means an igneous rock of any composition that contains conspicuous large mineral
      crystals in a fine-grained ground mass;





“pyroclastic”
      means pertaining to rock material formed by volcanic explosion or expulsion
      from
      a volcanic vent;





“rhyolite”
      is a type of felsic lava flow;





“stratabound”
      means a mineral deposit confined to a single stratigraphic unit;





“stratigraphy”
      means the science of rock strata;





“synvolcanic”means
      formed at the time of volcanic activity;





“tuffaceous”
      is a general term for all consolidated pyroclastic rocks;





“Underlying
      Royalty” means any royalties on the Claims that are part of the lease, purchase
      or option of said Claim from the owner or any royalties that may be imposed
      by
      the provincial government;


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          8
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“vein”
      means a mineral filling of a fault or fracture in the host rock, typically
      in
      tabular or sheet-like form;





“VLF-EM”
      means a very low frequency electromagnetic geophysical instrument used in
      exploration to measure variances of conductivity in surficial sediments and
      bedrock;





“volcanic
      rock” (basalt, pillowed-flows, rhyolite) means an igneous rock that has been
      poured out or ejected at or near the earth’s surface;





“volcanoclastic
      rock” (wacke, tuff, turbidite) means a sedimentary rock derived from the
      transportation and deposition of volcanic rock fragments by air (tuff) or water
      (wacke or turbidite).





The
      following is a list of abbreviations used throughout this annual report for
      technical terms:





Ag
              silverAu
              goldAs
              arsenicCu
              copperg/t
                  Au
              grams
                  per tonne goldg/t
                  Ag
              grams
                  per tonne silverg/t
              grams
                  per tonneha
              hectare(s)Hg
              mercuryIP/RES
              induced
                  polarization and resistivity (survey)kg
              kilogram(s)km
              kilometer(s)m
              meter(s)Mo
              molybdenumNSR
              Net
                  Smelter Returnoz
              ouncePb
              leadppb
              parts
                  per billionppm
              parts
                  per millionSb
              antimonysq.
              squaretpd
              tonnes
                  per dayVLF-EM
              very
                  low frequency electromagnetic (survey)Zn
              zinc


The
      following table sets forth certain standard conversions from Standard Imperial
      units to the International System of Units (or metric units).





**To
                  Convert From Imperial**
              **To
                  Metric**
              **Multiply
                  by**acres
              hectares
              0.404686feet
              meters
              0.30480miles
              kilometers
              1.609344tons
              tonnes
              0.907185ounces
                  (troy)/ton
              grams/tonne
              34.2857


1
      mile =
      1.609 kilometers


1
      yard =
      0.9144 meters


1
      acre =
      0.405 hectares


2,204.62
      pounds = 1 metric ton = 1 tonne





2,000
      pounds (1 short ton) = 0.907 tonnes


1
      ounce
      (troy) = 31.103 grams


1
      ounce
      (troy)/ton = 34.2857 grams/tonne


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          9
          -


**Available
      Information**





We
      make
      available, free of charge, on or through our Internet Web site, our annual
      report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on
      Form
      8-K and amendments to those reports filed or furnished pursuant to Section
      13(a)
      or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange
      Act”) as soon as reasonably practicable after we electronically file such
      material with, or furnish it to the SEC.





Item 2.    Description of
        Properties





Our
      exclusive business is the exploration and development of mineral properties
      ("Claims") located in the Republic of Argentina. Our interests in the
      Argentinean Claims are held through MASA and MSC, in which MASA holds a 49%
      share interest. MASA holds properties and is the company in which the daily
      business operations in Argentina are conducted. MASA was formed and registered
      as a mining company in order for us to receive the benefits of the new mining
      laws in Argentina. Our principal properties are described under the heading
      "Principal Properties" below.





**The
      Degerstrom Agreement**





A
      number
      of the Claims were originally held by Degerstrom. Pursuant to the March 1995
      Asset and Share Acquisition Agreement among Minera Andes, MASA, NAD S.A.
      (“NADSA”) and Degerstrom (the "Degerstrom Agreement"), Degerstrom transferred
      its interest in those Claims to NADSA and MASA in consideration for a royalty.
      Degerstrom also conveyed the MASA and NADSA capital stock it held to us. In
      consideration for those shares, Minera Andes (i) issued to Degerstrom 4,000,000
      Common Shares and the right to acquire an additional 1,213,409 Common Shares
      if
      any of the properties comprising the Claims became the subject of a Bankable
      Feasibility Study, (ii) agreed to pay a royalty on any existing or future
      properties held by us or our affiliates as described below, and (iii) agreed
      to
      pay the aggregate amount of the cost and expenses incurred by Degerstrom on
      our
      behalf, from July 1, 1994 through March 15, 1995. Minera Andes also acquired
      from Brian Gavin, a Minera Andes officer, the shares he held in MASA. In 2001
      we
      sold our interest in NADSA to Degerstrom.





The
      royalty payable to Degerstrom by MASA would be a percentage of the net smelter
      return earned on those Claims or any future Claims acquired. The Claims were
      subject to a royalty equal to the difference between 3% and the Underlying
      Royalty, subject to a maximum royalty of 2%. If MASA acquired all or part of
      the
      Underlying Royalty, the royalty payable, if any, to Degerstrom would not
      increase. If Degerstrom collected a royalty on any of the Claims held, MASA
      would at any time have the option, upon giving notice to Degerstrom, to
      repurchase up to one-half of the royalty payable to Degerstrom upon payment
      of
      $1,500,000, for each 1% of the royalty repurchased.





Minera
      Andes, MASA, NADSA and Degerstrom also entered into an Operating Agreement,
      appointing Degerstrom as operator of the Claims and any future Claims acquired
      in Argentina. Under the terms of the Operating Agreement, Degerstrom operated
      and managed the exploration program on all properties and provided related
      offsite administrative assistance as required. In consideration for these
      operating services, Degerstrom was entitled to reimbursement for its costs
      of
      labor, materials and supplies incurred in connection with its services plus
      an
      additional 15% of such costs as a management fee. Included in the Operating
      Agreement were fixed usage rates for the equipment owned by Degerstrom.
      Degerstrom had the right to terminate the Operating Agreement if we did not
      maintain a program and budget in excess of Cdn$300,000 per year. If we elected
      to develop a property and contract with a third party for development or
      production, we had to give notice to Degerstrom of the terms and conditions
      of
      the proposed arrangement. Degerstrom had the right for a period of 30 days
      to
      meet the contract bid by a third party.








-
          10
          -


On
      December 2, 2003, the Company, Degerstrom, MASA and MACI entered into a
      Settlement Agreement to terminate certain agreements in place between the
      parties, to assign royalties payable to Degerstrom to our wholly owned
      subsidiary, MACI, and cancel certain obligations payable to Degerstrom for
      the
      consideration of US$500,000. We received TSX-V approval on January 13, 2004,
      for
      an effective date for the agreement of December 31, 2003.





**Terms
      of the Settlement Agreement**





1.
            The
                parties terminated the Operating Agreement effective December 31,
                2003. As
                a result of the termination, we vacated the office space previously
                provided by Degerstrom under the Operating Agreement. In addition,
                we set
                up our own accounting systems.





2.
            There
                is a termination of the lock up agreement that had been previously
                entered
                into in the summer of 2003, when we were reviewing potential merger
                candidates.





3.
            The
                parties to the Settlement Agreement acknowledged that the Degerstrom
                Royalty covered the current properties held by us and our subsidiaries.
                Degerstrom agreed to assign the Degerstrom Royalty payable under
                the asset
                agreement on the current properties to MACI and agreed to cancel
                the
                Performance Right.





4.
            The
                consideration for the assignment of the Royalty and cancellation
                of
                Performance Right was the payment of $500,000. In addition, a payment
                of
                $250,000 is payable if any of the current properties other than the
                properties comprising the San José project, meet certain conditions such
                as bankable feasibility or commercial
                production.




**PRINCIPAL
      PROPERTIES**




**I.
      ARGENTINA**




**Recent
      Mining and Economic History in Argentina**





Argentina
      is the second largest country in South America, over 2.7 million sq. km in
      area.
      In 1983, Argentina returned to a multiparty democracy, which brought to an
      end
      nearly a half century of military intervention and political instability. The
      country then began to stabilize; however, it was not until 1989, with the
      election of the government under President Carlos Menem, that Argentina's
      economy began to improve. Menem initiated economic reforms that included the
      privatization of many state companies and the implementation of the
      Convertibility Plan, which fixed the Argentine peso to the U.S. dollar at par,
      fully backed by reserves of foreign exchange, gold and dollar-denominated bonds
      of the Central Bank of Argentina. Results of the reforms were positive;
      Argentina's gross domestic product grew at up to 8% per annum in the early
      1990s
      and inflation dropped to between 1% and 3% per annum. However, following a
      recession in 1999 and 2000, a severe political and economic crisis occurred
      in
      late 2001. In early 2002, with five presidents in less than five weeks, the
      current president, Eduardo Duhalde, chose to devalue the peso, first to $1.00
      to
      Peso$1.40, before allowing the Peso to float in February 2002. The economic
      reforms associated with the devaluation of the Peso included the conversion
      of
      all U.S. dollar denominated contracts into Pesos on a one-to-one basis and
      all
      US dollar bank accounts into Pesos. At the beginning of January 2005 the Peso
      stood at Peso$2.98 to $1.00; at the end of December 2005, the peso stood at
      Peso$3.03 to $1.00.





In
      1993,
      the Mining Investments Act instituted a new system for mining investment to
      encourage mineral exploration and foreign investment in Argentina. Key
      incentives provided by the Act include guaranteed tax stability for a 30-year
      period, 100% income tax deductions on exploration costs, accelerated
      amortization of investments in infrastructure, machinery and equipment, and
      the
      exemption from import duties on capital goods, equipment and raw materials
      used
      in mining and exploration. Repatriation of capital or transfer of profits is


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          11
          -


unrestricted.
      Argentina's mineral resources, administered by its 23 provinces, are subject
      to
      a provincial royalty capped at 3% of the "mouth of mine" value of production,
      although provinces may opt to waive this royalty.





Argentina's
      mineral potential is largely unexplored, particularly in comparison to that
      of
      its immediate neighbors and, as a consequence, information pertaining to the
      country's resource base is lacking. Copper and gold mineralization discovered
      to
      date occurs predominantly in the southern Andean copper belt which extends
      over
      1,000 km through northwestern Argentina. The Bajo de la Alumbrera porphyry
      copper deposit has been brought onstream. Other copper deposits currently under
      development include the Agua Rica and El Pachon deposits. In addition, gold
      deposits are concentrated in the Argentine portion of the Central Andes'
      Maricunga-El Indio gold belts and in the newly discovered Santa Cruz gold belt
      in southern Patagonia.





In
      1989,
      fewer than a dozen foreign exploration companies had offices in Argentina;
      by
      1996 there were approximately 60 such companies. Exploration expenditures grew
      from $5 million in 1991 to over $90 million in 1995, but have since shrunk
      with
      the prolonged low gold price market. In recent years no more than a handful
      of
      exploration companies have been active in Argentina. There has been a very
      modest resurgence in exploration activity in Argentina.





We
      initiated gold exploration in Argentina in 1991, in conjunction with Degerstrom.
      As of December 2005, we had Argentine land holdings totaling 439,804 acres
      (177,986 hectares) in three Argentine provinces (Figure 1 below). Our
      exploration efforts initially focused on evaluating prospects generated by
      1960's United Nations development exploration programs and on targets generated
      by satellite image analysis. We developed techniques of processing and
      interpreting satellite imagery to assist in identifying promising exploration
      targets. Currently, we are completing exploration work that includes geophysical
      surveys, mechanical trenching and reverse-circulation drilling on the most
      advanced targets in our property portfolio, and conducting grassroots
      exploration to evaluate our other properties and to generate new
      targets.





**Property
      and Title in Argentina**





The
      laws,
      procedures and terminology regarding mineral title in Argentina differ
      considerably from those in the United States and in Canada. Mineral rights
      in
      Argentina are separate from surface ownership and are owned by the federal
      government. Mineral rights are administered by the provinces. The following
      summarizes some of the Argentinean mining law terminology in order to aid in
      understanding our land holdings in Argentina.





1.
            Cateo:
                A cateo is an exploration concession which does not permit mining
                but
                gives the owner a preferential right to a mining concession for the
                same
                area. Cateos are measured in 500 ha unit areas. A cateo cannot exceed
                20
                units (10,000 ha). No person may hold more than 400 units in a single
                province. The term of a cateo is based on its area: 150 days for
                the first
                unit (500 ha) and an additional 50 days for each unit thereafter.
                After a
                period of 300 days, 50% of the area over four units (2,000 ha) must
                be
                dropped. At 700 days, 50% of the area remaining must be dropped.
                Time
                extensions may be granted to allow for bad weather, difficult access,
                etc.
                Cateos are identified by a file number or "expediente" number. Cateos
                are
                awarded by the following process:








a.
              Application
                  for a cateo covering a designated area. The application describes
                  a
                  minimum work program for exploration;b.
              Approval
                  by the province and formal placement on the official map or graphic
                  register;c.
              Publication
                  in the provincial official bulletin;d.
              A
                  period following publication for third parties to oppose the
                  claim;e.
              Awarding
                  of the cateo.


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          12
          -


The
      length of this process varies depending on the province, and commonly takes
      up
      to two years. Accordingly, cateo status is divided into those that are in the
      application process and those that have been awarded. If two companies apply
      for
      cateos on the same land, the first to apply has the superior right. During
      the
      application period, the first applicant has rights to any mineral discoveries
      made by third parties in the cateo without its prior consent. While it is
      theoretically possible for a junior applicant to be awarded a cateo, because
      applications can be denied, we know of no instances where this has
      happened.




Applicants
      for cateos may be allowed to explore on the land pending formal award of the
      cateo, with the approval of the surface owner of the land. The time period
      after
      which the owner of a cateo must reduce the quantity of land held does not begin
      to run until 30 days after a cateo is formally awarded. Our goal is to determine
      whether our cateos contain commercial grade ore deposits before portions of
      the
      cateos must be relinquished. Our ability to do so is dependent upon adequate
      financing for exploration activities. It is likely that several of our cateos
      will be relinquished after preliminary exploration because no promising mineral
      deposits have been discovered.




Until
      August 1995, a "canon fee", or tax, of Peso $400 per unit was payable upon
      the
      awarding of a cateo. A recent amendment to the mining act requires that this
      canon fee be paid upon application for the cateo.





2.
            Mina:
                To convert an exploration concession to a mining concession, some
                or all
                of the area of a cateo must be converted to a "mina". Minas are mining
                concessions which permit mining on a commercial basis. The area of
                a mina
                is measured in "pertenencias". Each mina may consist of two or more
                pertenencias. "Common pertenencias" are six hectares and "disseminated
                pertenencias" are 100 ha (relating to disseminated deposits of metals
                rather than discrete veins). The mining authority may determine the
                number
                of pertenencias required to cover the geologic extent of the mineral
                deposit in question. Once granted, minas have an indefinite term
                assuming
                exploration development or mining is in progress. An annual canon
                fee of
                Peso$80 per pertenencia is payable to the
                province.





Minas
                are obtained by the following
                process:





a.
            Declaration
                of manifestation of discovery in which a point within a cateo is
                nominated
                as a discovery point. The manifestation of discovery is used as a
                basis
                for location of pertenencias of the sizes described above. Manifestations
                of discovery do not have a definite area until pertenencias are proposed.
                Within a period following designation of a manifestation of discovery,
                the
                claimant may do further exploration, if necessary, to determine the
                size
                and shape of the orebody.b.
            Survey
                ("mensura") of the mina. Following a publication and opposition period
                and
                approval by the province, a formal survey of the pertenencias (together
                forming the mina) is completed before the granting of a mina. The
                status
                of a surveyed mina provides the highest degree of mineral land tenure
                and
                rights in Argentina.





3.
            Estaca
                Minas: These are six-hectare extensions to existing surveyed minas
                that
                were granted under previous versions of the mining code. Estaca minas
                are
                equivalent to minas. New Estaca minas were eliminated from the mining
                code
                in August 1996.





4.
            Provincial
                Reserve Areas: Provinces are allowed to withdraw areas from the normal
                cateo/mina process. These lands may be held directly by the province
                or
                assigned to provincial companies for study or exploration and
                development.


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          13
          -





All
      mineral rights described above are considered forms of real property and can
      be
      sold, leased or assigned to third parties on a commercial basis. Cateos and
      minas can be forfeited if minimum work requirements are not performed or if
      annual payments are not made. Generally, notice and an opportunity to cure
      defaults is provided to the owner of such rights.




Grants
      of
      mining rights, including water rights, are subject to the rights of prior users.
      Further, the mining code contains environmental and safety provisions
      administered by the provinces. Prior to conducting operations, miners must
      submit an environmental impact report to the provincial government describing
      the proposed operation and the methods to be used to prevent undue environmental
      damage. The environmental impact report must be updated biennially, with a
      report on the results of the protection measures taken. If protection measures
      are deemed inadequate, additional environmental protection may be required.
      Mine
      operators are liable for environmental damage. Violators of environmental
      standards may be caused to shut down mining operations.





**Minera
      Andes Properties**





The
      sections that follow discuss certain properties that are or have been the
      subject of joint venture agreements with third parties or that we have more
      intensively explored.


-
          14
          -


**Figure
      1**


-
              15
              -





**A.**  **San
      Juan Project Summary Which Includes Los Azules**




**1.**  **San
      Juan Project Location**




The
      San
      Juan Province Project comprises five properties totaling 24,318 ha in
      southwestern San Juan province. Elevation ranges from 2,500 m to 5,500 m and
      moderate to high relief.




**2.**  **San
      Juan Area Project Geology**





The
      project area extends from the western margin of the Cordillera Frontal to the
      Cordillera Principal. The area is principally underlain by Permo-Triassic Choiyo
      Group volcanic rocks, a multi-phase igneous sequence comprising volcanic
      breccias, ignimbrites, tuffs and rhyolites, intruded by granites and overlain
      by
      extrusive acidic volcanic rocks. Jurassic continental, marine and volcanic
      derived sedimentary rocks unconformably overlay Permo-Triassic rocks. The
      youngest rocks in the project area comprise Tertiary volcanic and intrusive
      rocks, which are common hosts of epithermal gold mineralization as evidenced
      by
      deposits in the Chilean Andes.




**3.**  **San
      Juan Project Exploration**





No
      formal
      records of previous exploration in the project area exist. Evidence of
      prospecting (small trenches or pits) exists on some of the cateos. The area
      is
      currently active with pre-development work at the El Pachón copper
      deposit.





The
      San
      Juan Province project is a regional reconnaissance program, focused on
      epithermal gold and gold-copper porphyry targets in the eastern cordillera.
      All
      of the lands were acquired based on the results of satellite image analysis.
      Preliminary field examination, including rock chip sampling and property-wide
      stream sediment sampling, has been completed on all properties.





Detailed
      work at Los Chonchones included reconnaissance-scale geologic mapping and
      geochemical surveys. Results returned a number of anomalous gold and/or copper
      values in all sample types, scattered throughout the color anomalies and
      concentrating in the center of the southwest anomaly. Lands are held pending
      possible joint ventures.





**4.**  **San
      Juan Area Project Ownership**





Our
      lands
      in San Juan consist of three applications for cateos and 4 manifestations of
      discovery and total 24,318 ha. At present, these lands are not subject to a
      royalty, however, the government of San Juan has not waived its rights to retain
      up to a 3% "mouth of mine" royalty from production. Property canon fees for
      the
      properties in 2005 are estimated at $1,616.





**5.**
            **Los
                Azules Project Geology**





In
      April
      1999, the Company signed an agreement with Battle Mountain Gold Corporation
      regarding a joint venture on Minera Andes’ Los Azules cateo application in
      Calingasta Department, San Juan. Battle Mountain controlled land contiguous
      to
      the Los Azules property. Battle Mountain failed to meet their exploration
      obligations and subsequently withdrew from the agreement in April of
      2000.





The
      hydrothermal system at Los Azules is an altered area approximately 5 km by
      8 km
      surrounding a core mineralized porphyry target that is about 1 km by 3 km in
      size. The target straddles the Minera Andes property boundary where drilling
      on
      the adjacent property has revealed copper grades and thicknesses that increase
      toward the Minera Andes ground (see Table A).





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            16
            -











The
      100
      percent-owned Los Azules project is 3,418 hectares (8,633 acres) and was
      discovered by Minera Andes’ geologists through regional exploration in the
      Andes. The project is situated in Argentina near the Argentina/Chile border
      between two prolific mineral belts that straddle the border and is held as
      an
      application for a exploration permit (cateo). To the north of the property,
      the
      El Indio gold belt is host to multi-million ounces of gold, and includes
      significant gold discoveries such as Veladero, Sancarron, Pascua and El Indio-El
      Tambo. The property lies in a belt of porphyry copper prospects such as El
      Pachon (Noranda), El Altar (Rio Tinto) and Los Piuquenes (Rio
      Tinto).





**6.**  **Los
      Azules Exploration**





Minera
      Andes’ geologists discovered the Los Azules property through regional
      exploration and prospecting using Landsat imaging, mapping and sampling. The
      acquired land position covers approximately half of a large area of hydrothermal
      alteration typically associated with mineralized systems. Exploration drilling
      in 1998 within 1.2km of the northern property boundary by Battle Mountain Gold
      (“BMG”) discovered significant copper intervals including a 117-meter weighted average interval of 0.61% copper).





BMG
      also
      completed an airborne magnetics survey over the entire Los Azules target area.
      This work also validates the porphyry target on the Minera Andes ground. The
      base of information for Los Azules is taken primarily from an unsigned “Battle
      Mountain Gold” report, titled “Los Azules Project”, Final Report, dated
      September 1999, by Battle Mountain Canada Ltd., San Juan, Argentina and includes
      drilling data presented on Los Azules along with some of the technical
      information provided to Minera Andes Inc. by BMG under the terms of a joint
      venture agreement.





In
      December 2003 Minera Andes initiated an exploration program at Los Azules,
      including geologic mapping and sampling, ground magnetic and induced
      polarization geophysical surveys and core drilling. In May of 2004 we reported
      the discovery of a large, enriched (chalcocite) copper in an area defined by
      geology, MIMDAS deep penetration IP and magnetic geophysical surveys. The
      mineralized area is approximately 1500 meters by 2000 meters.







Nine
      reconnaissance core holes totaling 2,050 meters were drilled in the campaign
      to
      depths of between 154 to 330 meters. The primary focus of the drilling was
      to
      test the extension of known leachable (chalcocite) copper mineralization
      identified on the adjacent property. Minera Andes' drilling tested a deep
      penetrating IP chargeability high anomaly as well as a well-defined magnetic
      low
      on its eastern flank. Drilling at Los Azules encountered features typical of
      many porphyry copper systems. In the discovery zone, strongly leached cap rock
      extends from 65 to 161 meters depth followed by an enriched zone of secondary
      copper mineralization (chalcocite) overlying a zone of mixed secondary and
      primary (chalcopyrite) copper mineralization. The mineralization in our drilling
      is consistent with the mineralization observed in a prior drill hole by Battle
      Mountain Gold some 220 meters north of Minera Andes' property, which contained
      a
      117-meter weighted average interval of 0.61% copper in the enriched
      zone.





-
            17
            -








**Table
                A. Significant Weighted Average Drilling Results at Los
                Azules**Drill
                Hole
            TD
              (m)
            Intersection
              From
                To
              (m)
                (m)
            True
              Thickness
              (m)
            Total
              Copper
              PercentageAZ-04-01
            195
            130
              150
            195
              192
            56
              including
                36
            0.62
              0.82AZ-04-02
            330.5
            164
              164
              230
            304
              190
              304
            140
              including
                26
              and
                72
            0.38
              0.47
              0.42AZ-04-04
            300.8
            162
              162
              236
            282
              202
              282
            120
              including
                40
              and
                46
            0.54
              0.59
              0.64AZ-04-07
            168.8
            96
              126
            152
              152
            56
              including
                26
            0.44
              0.58








Hole
      AZ-04-03, drilled within the enriched copper target, penetrated 154 meters
      of
      leached cap but failed to reach the enriched copper target. Other reconnaissance
      holes examined the outer boundaries of the target and tested these areas for
      the
      presence of primary sulfide mineralization. Drill hole AZ-05 tested an outcrop
      to the west of the geophysical anomalies and encountered fresh rhyolite. Core
      holes AZ-04-08 and AZ- 04-09 were drilled in the center of the induced
      polarization chargeability high and encountered mostly primary sulfides.








**B.**  **San
      José Project Summary**





**1.**  **San
      José Project Location**





Formerly
      known as El Pluma/Cerro Saavedra, the San José property package is located in
      the Santa Cruz province of Argentina, 230 km southwest of the city of Comodoro
      Rivadavia, near latitude 46 E 41'S
      and
      longitude 70°17'W. The property consists of one cateo and 46 manifestations of
      discovery covering a total of 40,499 ha (approximately 404 km 2 ).





Road
      access to the property is good and consists of paved highways to within 80
      km
      and then via a well-maintained gravel road. Topography varies from gently
      rolling to locally rugged; elevations range from 300 to 700 m above sea level.
      Most day-to-day supply requirements can be met by the settlements of Las Heras
      (130 km from the property), Caleta Olivia (250 km from the property) or Comodoro
      Rivadavia; specialized supplies and equipment must be procured from Buenos
      Aires, Mendoza, or abroad. Major hydroelectric transmission lines pass within
      50
      km of the property.





**2.**  **San
      José Project Geology**





The
      project area occurs in the Deseado Massif, a package of Middle to Upper Jurassic
      volcanic rocks locally overlain by Cretaceous sediments and Tertiary to
      Quaternary basalts. The Jurassic rocks are divided into the Bajo Pobre
      Formation, of intermediate composition, and the felsic Bahia Laura Group. The
      Bahia Laura Group is in turn subdivided into the Chon Aike Formation (dominantly
      ignimbrites) and the La Matilde Formation (dominantly volcaniclastic rocks).
      Several potentially important, low sulfidation epithermal deposits have recently
      been discovered in the massif, including the Cerro Vanguardia deposit which
      has
      a reserve of greater than 3.2 Moz Au equivalent. Exploration by a number of
      companies is ongoing in the massif.





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            18
            -





On
      the
      San José property the prospective Jurassic stratigraphy is exposed in erosional
      windows through the overlying sediments and basalts. The Bajo Pobre Formation,
      the oldest unit, consists of massive andesitic flows, volcaniclastic material
      and minor dacite. Ignimbrites and lesser sediments tentatively correlated with
      the La Matilde Formation occur in a synvolcanic subsidence graben known as
      the
      Saavedra West basin. Pebble dikes, varying in thickness from one centimeter
      to
      ten meters, are common in the southwest part of the Saavedra West basin.
      Ignimbrites and minor rhyolites of the Chon Aike Formation, younger than the
      La
      Matilde basin-fill material, occur as a complicated series of dikes along the
      bounding faults of the west part of the Saavedra West basin, as a sequence
      of
      extrusive ignimbrites at Cerro Celular and in isolated pockets elsewhere in
      the
      northern third of the property.





Cretaceous
      sediments locally overlie the Jurassic volcanics. Poorly exposed over most
      of
      the property, these sediments are up to 50 m thick in the northern part of
      the
      project area. The youngest rocks are Tertiary to Quaternary basalts which form
      cliffs up to ten meters high and extensive plateaus. Approximately 60% of the
      property is covered by five to 50 meters of post-mineralization, Cretaceous
      to
      Quaternary rocks.





The
      San
      José project contains a variety of target areas, the three most important of
      which are Huevos Verdes, Frea and Saavedra West.







Huevos
      Verdes is a system of en echelon, variably mineralized, north-northwest trending
      quartz veins with associated strong argillic alteration, cutting the Bajo Pobre
      Formation. In this area, the Bajo Pobre Formation consists of massive and
      fragmental andesite. The vein system occurs over a strike length of at least
      2.2
      km and possibly as much as 3.5 km. The central and northwest parts of the system
      are covered by Cretaceous tuffs and sediments and locally by Tertiary basalt;
      geophysical work has confirmed the continuity of the system below cover.
      Mineralized quartz veins with true thicknesses up to 11 meters (36.1') have
      been
      intersected in drill holes and trenches over the entire length of the Huevos
      Verdes vein system. The Frea vein is a parallel, geologically and
      mineralogically similar to Huevos Verdes vein.





Saavedra
      West is interpreted as a synvolcanic graben developed within the Bajo Pobre
      Formation, and infilled by pyroclastic and lesser sedimentary rocks correlated
      with the La Matilde Formation. Pebble dikes are abundant within the graben
      and
      ignimbrites that may be correlative with the Chon Aike Formation occur as dikes.
      At Saavedra West mineralization occurs in a 200 m section of epithermal quartz
      vein, and an ovoid-shaped, 20 meter by 60 meter high-grade breccia zone
      immediately adjacent to the vein.





Additional
      targets on the property are associated with four structural trends. These trends
      are defined by geophysical anomalies, intermittently exposed vein, breccias,
      and
      vein float, with high-grade gold/silver values over a total of more than 30
      km
      of potential strike length. These features are consistent with a large,
      partially eroded epithermal low sulfidation precious metals mineralized
      system.





**3.**  **San
      José Project Exploration**





Santa
      Cruz is one of Argentina's least well-explored provinces. The area was explored
      under the Argentine government-United Nations regional exploration Plan
      Patagonia-Comahue in the 1970s. In the 1980s, FOMICRUZ, S.E., a state owned
      company, completed reconnaissance surveys in the province to delineate areas
      of
      interest for mineral reserves.





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            19
            -





The
      gold
      and silver potential of the San José property was first recognized by Minera
      Andes geologists in 1997. The San José property has not previously been staked.
      There is no record of any previous sustained exploration, although portions
      of
      the area may have been sampled during at least one regional reconnaissance
      program.





Work
      on
      the property from 1997 to 2001 by Minera Andes and from 2001 to the present
      by
      MHC has consisted of the following:








Underground
                development
            5259
                metersReverse
                circulation drilling:
            90
                holes for 9,093 metersCore
                drilling:
            339
                holes for 59,367 metersTrenching:
            201
                trenches for 8,852 metersRock
                sampling:
            3450
                samplesSoil
                sampling:
            2302
                samplesStream
                sediment sampling:
            368
                samplesCSAMT
                geophysics:
            42
                line kilometersGradient
                array I.P.:
            398.7
                line kilometersRealSection
                I.P.:
            23.5
                line kilometersGround
                magnetic surveys:
            186
                line kilometers








In
      addition significant camp infrastructure (sufficient for a work force of 330)
      has been built.





As
      a
      result of this exploration and development program, representing a total
      investment of approximately $38.6 million by Minera Andes and MHC, numerous
      veins and potential vein-hosting structures have been identified on the
      property. All of these structures represent areas with the potential to host
      economic mineralization, however our level of knowledge and understanding of
      their potential varies greatly, depending on the amount and type of work
      conducted to date on each target. The Huevos Verdes and Frea veins have received
      the greatest attention to date due to the early recognition of their potential.
      The veins form the basis of the feasibility study described below.





Numerous
      other high priority targets have been identified on the Property. The Saavedra
      West Zone, approximately 6 km south of Huevos Verdes, has seen a significant
      amount of drilling and has additional exploration potential. Vein style
      discoveries at Odin, Ayelen (formerly called the Frea Satellite), Frea NW and
      SE
      extensions, HV South Extension, Frigga, Roadside, Portugues West, El Pluma
      South, Kospi and Austri all merit additional exploration. The most important
      new
      zones are Kospi, Odin and Ayelen, which occur approximately 500 to 600 m east
      of
      the Frea Vein. Table B shows weighted average drill intercepts from these
      areas.





-
            20
            -










**Table** **B.
      Significant Weighted Average Drill Intercepts at Odin and Frea
      Satellite**




**Zone**
            **Drill
                Hole**
            **From**
              **(m)**
            **To**
              **(m)**
            **Width**
              **(m)**
            **Au**
              **(g/t)**
            **Ag**
              **(g/t)****ODIN**
            SJD-199
            87.00
            87.30
            0.30
            1.04
            34.50159.86
            163.50
            3.64
            2.04
            31.31including
            161.05
            161.57
            0.52
            8.51
            32.50SJD-201
            106.00
            106.55
            0.55
            8.70
            50.00SJD-204
            80.80
            81.60
            0.80
            1.99
            53.0084.37
            85.65
            1.28
            12.03
            1,295.26including
            84.37
            84.68
            0.31
            36.22
            4,152.0087.37
            87.85
            0.48
            2.36
            25.0090.10
            91.10
            1.00
            1.08
            49.0092.75
            93.10
            0.35
            5.08
            618.0095.00
            96.50
            1.50
            2.20
            353.67SJD-205
            91.20
            92.10
            0.90
            15.29
            856.00110.25
            110.55
            0.30
            2.90
            233.00173.05
            173.73
            0.68
            1.08
            5.00SJD-209
            86.37
            88.90
            2.53
            6.58
            445.42including
            87.90
            88.90
            1.00
            13.46
            928.00139.00
            139.20
            0.20
            1.08
            101.00SJD-210
            117.90
            119.75
            1.85
            6.68
            143.00including
            118.40
            119.75
            1.35
            8.63
            188.56136.56
            137.44
            0.88
            11.55
            515.00SJD-211
            105.75
            106.10
            0.35
            2.39
            12.00SJD-213
            160.80
            161.60
            0.80
            7.10
            72.00165.15
            165.77
            0.62
            2.06
            175.00**AYELEN**
            SJD-200
            71.90
            75.49
            3.59
            2.76
            291.74including
            73.40
            75.49
            2.09
            4.27
            431.2581.35
            81.75
            0.40
            3.97
            165.00184.60
            185.29
            0.69
            2.22
            231.41SJD-208
            103.88
            105.50
            1.62
            2.23
            170.23110.28
            112.00
            1.72
            157.68
            10,819.28114.00
            116.14
            2.14
            17.85
            672.99including
            114.00
            114.55
            0.55
            60.30
            571.00**KOSPI**
            HVD-39
            54.18
            55.08
            0.90
            2.56
            118.00HVD-40
            94.5
            96.6
            2.10
            6.46
            709.00HVD-41
            90.85
            96.51
            5.66
            24.00
            747.00HVD-42
            109.01
            109.85
            0.84
            1.93
            77.00HVD-44
            73.84
            79.67
            5.83
            3.77
            339.54





Exploration
      work is ongoing with some 9,000 meters of drilling and extensive geophysical
      surveys planned for the project in 2006.





-
            21
            -





**FEASIBILITY
      STUDY**





In
      October 2005 a feasibility study was completed on the Huevos Verdes and Frea
      veins at the San José project. The
      feasibility study and capital and operating cost estimates were prepared by
      independent engineering firms, MTB Project Management Professionals (“MTB”) and
      AMEC Engineering (“AMEC”) with input provided by project operator Mauricio
      Hochschild & Cia. Ltda. (“MHC”) and
      Minera Santa Cruz (“MSC”). The resource model was prepared by MHC and MSC and
      audited by AMEC. The reserve model was then prepared by AMEC. Other specific
      technical expertise included the following:





·  mine
      plan
      and processing plant - AMEC and MTB


·  metallurgical
      testwork and flowsheet - AMEC and SGS Lakefield Research


·
            environmental,
                socio-economics, permitting, geotechnical engineering, and hydrogeology
                -
                Vector Peru and Vector Argentina.





In
      compliance with Canadian National Policy Instrument 43-101 a Technical Report
      summarizing the feasibility study was prepared by
      AMEC
      (Peru) S.A. (AMEC), a division of AMEC Americas Limited. This report is
      available at www.sedar.com.





**Assumptions
      made in the study**





Proven
                  and probable mineral reserves
              **1.2
                  tonnes**Gold
                  head grade
              **7.7
                  g/t**Silver
                  head grade
              **406
                  g/t**Gold
                  Recovery
              **90.2%**Silver
                  Recovery
              **88.1%**Total
                  gold contained
              **287,383
                  oz**Total
                  silver contained
              **15,152,930
                  oz**Milling
                  rate
              **750
                  t/day**Mine
                  life
              **4.3
                  years**Gold
                  price
              **$425/oz**Silver
                  price
              **$6.50/oz**





**Mineral
      Reserves and Mining**





Proven
      and probable mineral reserves, based on an overall cutoff off grade of $75/t
      (using a price of $394.48/oz for gold and $6.48/oz for silver), are currently
      1.16 million tonnes at 7.7 g/t gold and 406 g/t silver, containing 288,094
      ounces of gold and 15,229,380 ounces of silver. The reserves also take into
      account marginal blocks of ore located on the periphery of higher grade zones.
      The cutoff grade for these blocks was $45/t. The marginal cutoff grade was
      defined by the value of ore, which meets the variable costs, but not the fixed
      costs. AMEC has assumed a minimum mining width of 1.0 meter for conventional
      cut
      and fill stopes, and 1.5 meters for mechanized cut and fill stopes is assumed.
      A
      15 percent unplanned dilution and a 5 percent mining loss are used in the
      reserve calculation. The reserves, with an overall 15.7 percent dilution, are
      shown in the following table.





-
            22
            -








**Mineral
      Reserves - Proven and Probable**





**Area**
            **Grades**
            **Classified
                Reserve**
            **Contained
                Ounces****Au
                (g/t)**
            **Ag
                (g/t)**
            **Total
                Reserve**
              **(t)**
            **Proven**
              **(t)**
            **Probable
                (t)**
            **Gold**
              **(oz)**
            **Silver**
              **(oz)**HUEVOS
                VERDES
            6.4
            466
            533,514
            174,241
            359,280
            110,601
            8,053,168FREA
            8.8
            355
            627,345
            -
            627,345
            177,493
            7,176,212**TOTAL
                PROJECT**
            **7.7**
            **406**
            **1,160,859**
            **174,241**
            **986,626**
            **288,094**
            **15,229,380**








The
      reserve estimates are based on 117 core holes, 32 reverse circulation holes
      and
      3,285 meters of underground workings at Huevos Verdes and 88 core holes at
      the
      Frea zone. The nominal spacing in both zones is 35 meters along strike
      (horizontally) and 50 meters vertically.





The
      following summarizes the key assumptions, parameters and methods used in the
      Reserve estimates:








·
            Gold
                assays were cut to 120 g/t, 20 g/t, 80 g/t and 100 g/t at Huevos
                Verdes
                South, Central, North and Frea, respectively. Silver assays were
                cut to
                10,000 g/t, 1,000 g/t, 8,000 g/t and 4,000 g/t at Huevos Verdes South,
                Central, North and Frea,
                respectively.


·
            Density
                was assigned as an average to the two principal mineralized zones,
                Huevos
                Verdes and Frea. The values used for the estimate are 2.595 t/m3
                for
                Huevos Verdes and 2.611 t/m3 for
                Frea.


·
            The
                geological model for both Huevos Verdes and Frea zones was developed
                using
                a series of northeast oriented sections spaced approximately 10 meters
                to
                50 meters apart.


·  Assays
      were composited to full vein-width interval.


·  The
      estimation is done using Ordinary Kriging coupled with oriented search
      ellipses.


·  Block
      grades were estimated based on interpretation of geological parameters logged
      in
      drill holes.


·
              Included
                  in the resource estimate are 1,791 samples taken from the underground
                  workings at 2 meter
                  intervals.
  **Mining
      Method**





The
      feasibility study proposes a mine designed to produce 750 t/d of gold and silver
      ore from two separate structures, the Frea and Huevos Verdes veins, using
      underground mining methods. Estimated mine life is 4.3 years with the current
      reserve. Mechanized cut and fill mining will be used as the primary mining
      method supplemented with conventional cut and fill mining. Processing
      will consist of a crushing and grinding circuit followed by flotation,
      concentrate, leach cyanide recovery and Merrill-Crowe circuits. Power will
      be
      supplied by four diesel generators.





-
            23
            -





**Capital
      Cost Estimates**





The
      capital costs are estimated at $61.2 million, detailed as follows:





**Description
                of Capital Cost Items**
            
            **Cost ($ x 1,000)**Underground
                Mine Facilities
            
            
            2,149Process
                Facility
            
            
            15,260Site
                and Services, etc
            
            
            8,869Tailings
                & Waste Rock Management
            
            
            1,050Indirect
                Costs
            
            
            8,324Owner
                Costs
            
            
            17,796**Subtotal**
            
            
            **53,448**Working
                Capital
            
            
            1,400Contingency
                (12%)
            
            
            6,413**Total
                Capital Cost**
            
            
            **61,261**




The
      construction schedule would cover a period of 14 months including the completion
      of financing arrangements and the obtaining of operating permits scheduled
      for
      the first quarter of 2006.




**Operating
      Costs**




The
      operating costs are based on a 750 tonnes per day operation and include both
      the
      extension of the existing mine workings and new construction of mine ramps
      and
      raises to complete development of the mine.




The
      average life of mine total operating costs, including mining, processing, and
      general and administration, are projected to be $79.92 per tonne of ore milled
      for a cash cost of $200.02 per ounce of gold equivalent ( **using
      a price of $400/oz for gold and $6.50/oz for silver)** *.*





**Summary
                of Operating Costs**
            
            **Total
                $****Unit
                Cost ($/t milled)**General
                & Administration
            
            
            21.43Mining
            
            
            34.98Process
            
            
            23.51**Total**
            
            
            **79.92****Unit
                Cost ($/oz Au equivalent)**General
                & Administration
            
            
            53.64Mining
            
            
            87.54Process
            
            
            58.84**Total**
            
            
            **200.02**








-
            24
            -


**Production**





The
      processing facility is designed to operate at 750 tonnes per day. The mill
      is
      scheduled to process approximately 1.17 million tonnes over 4.3 years. The
      annual ore throughput to the plant is 273,752 tonnes with an average ore grade
      of 7.7 g/t gold and 406 g/t silver. During production, the mine will employ
      approximately 570 individuals.





The
      study
      includes environmental, closure and rehabilitation costs of $1,233,391 to
      fulfill all Argentinean legal requirements and comply with international,
      best-practice, procedures.





**Geology**





The
      San
      José orebodies are defined by two northwest trending quartz veins located in the
      center of the 40,499 hectare property. The Hueves Verdes vein represents about
      45 percent of the total reserves and the Frea vein the other 55 percent. Both
      vein deposits identified are open at depth. The Frea vein is open to the
      northwest and the Huevos Verdes vein is open to the southeast. In addition,
      a
      resource exists at Saavedra West that is not included in the reserve
      estimate.





The
      San
      José project also hosts several other veins including the recently discovered
      Frea Satellite and Odin veins where mineralization has been identified along
      approximately 2 kilometers of strike length. To date over 32 kilometers of
      vein
      trend have been identified on the property and will be the subject of future
      drilling programs.





**Existing
      Infrastructure**




A
      28-kilometer permanent all-weather road accesses the site. To date over 5.8
      kilometers of underground workings have been developed on two levels through
      two
      inclined shafts at the Huevos Verdes vein. Construction of two underground ramps, one for the Huevos Verdes vein and the
      other at the nearby Frea vein, is underway and base camp facilities have been
      expanded to house the 330 employees and contractors.





In
      October 2005, MSC presented an Environmental Impact Assessment (EIA) and, in
      March 2006, received the EIA permit necessary to complete construction of a
      mine
      complex. Full-scale commercial production is planned at San José for the first
      quarter of 2007.





**4.**
            **San
                José Project Ownership**





The
      San
      José project area is made up of one cateo and 46 manifestations of discovery
      totaling 40,499 ha. The cateos are located in the western half of the province
      of Santa Cruz. All of the cateos are controlled 100% by Minera Santa Cruz S.A.,
      a holding and operating company set up under the terms of the agreement with
      MHC. Any production from these lands may be subject to a provincial royalty.
      Holding costs for 2006 are estimated to be $9,361.





On
      March
      15, 2001, we signed an option and joint venture agreement with MHC for the
      exploration and possible development of Minera Andes’ epithermal gold-silver
      exploration land package at El Pluma/Cerro Saavedra (now referred to as the
      San
      José project), including Huevos Verdes.





Under
      the
      agreement, MHC could earn a 51% ownership in the joint venture by spending
      a
      total of $3 million in three years, and a minimum of $100,000 per year on
      exploration targets within the joint venture other than Huevos Verdes, the
      most
      advanced prospect. In addition, MHC will make semiannual payments





-
            25
            -





totaling
      $400,000 per year until pilot plant production is achieved. In
      September 2004, an amendment to the agreement stated such payments should be
      made until a positive feasibility study for the development of a mine on the
      property is obtained by MSC and the board of MSC takes a decision to construct
      the mine. Lands
      have been transferred to a holding and operating company, MSC, which is owned
      49% by MASA.





Once
      MHC
      vested at 51% ownership, we had the option of participating in the development
      of a pilot production plant that would process a minimum of 50 tpd. We could
      participate on either a pro-rata basis, or by choosing to retain a 35% “carried”
ownership interest. Upon the successful completion and operation of the 50
      tpd
      plant, we would have the option of participating on a pro-rata basis, or
      choosing a 15% interest in return to being “carried” to first production of 500
      tpd. Failure by either party to contribute to work programs would result in
      simple dilution of that party’s interest in the project.





On
      May 6,
      2003, we received notice from MHC pursuant to the option agreement with MHC
      that
      it had completed $3,000,000 in expenditures and would vest 51% in the San José
project.





On
      July
      1, 2003, MHC acquired 51% of the issued and outstanding shares of MSC pursuant
      to the option agreement with MHC.





On
      September 11, 2003, we notified MHC that we opted to retain our 49% ownership
      in
      MSC.





In
      September 2004, an amendment to the joint venture agreement eliminated a
      requirement for initial preliminary production from a 50 tpd pilot plant to
      process mined ore if the Huevos Verdes vein proceeds to production. The
      amendment allows the parties to eliminate a costly pilot plant and proceed
      directly to full production based on a positive bankable feasibility
      study.








**C.**  **Santa
      Cruz Project Property Summary**


**1.**  **Santa
      Cruz Project Location**





Minera
      Andes currently holds 15 cateos and 50 manifestations of discovery in the
      Deseado Massif region of Santa Cruz. These properties are located at moderate
      elevations (300 to 1,000 m above sea level). Topography varies from gently
      rolling to locally rugged. The Deseado Massif is a cold desert. Access to the
      properties is by dirt road and trail.





**2.**  **Santa
      Cruz Project Geology**





The
      project area covers the Deseado Massif, a package of Middle to Upper Jurassic
      volcanic rocks locally overlain by Cretaceous sediments and Tertiary to
      Quaternary basalts. The Jurassic rocks are divided into the Bajo Pobre
      Formation, of intermediate composition, and the felsic Bahia Laura Group. The
      Bahia Laura Group is in turn subdivided into the Chon Aike Formation (dominantly
      ignimbrites) and the La Matilde Formation (dominantly volcaniclastic rocks).
      Several potentially important, low sulfidation epithermal deposits have recently
      been discovered in the massif, including the Cerro Vanguardia deposit which
      has
      a reserve of greater than 3.2 million oz Au equivalent. Exploration by a number
      of companies is ongoing in the massif.





**3.**
            **Santa
                Cruz Project Exploration**





Santa
      Cruz is one of Argentina's least well-explored provinces. The area was explored
      under the Argentine government-United Nations regional exploration Plan
      Patagonia-Comahue in the 1970s. In the 1980s, FOMICRUZ, S.E., a state owned
      company, completed reconnaissance surveys in the province to delineate areas
      of
      interest for mineral reserves.





-
            26
            -





Minera
      Andes has been actively exploring in the region since 1997. The properties
      have
      been acquired on the basis of geologic and geochemical reconnaissance. Geologic
      evaluation of these grassroots targets is ongoing. In 2005 Minera
      Andes continued reconnaissance of new gold/silver prospects and drilled two
      properties, Cerro Mojón and San Agustín, in Santa Cruz province. Additional
      drilling at these and other properties may be undertaken in 2006.





**4.**  **Santa
      Cruz Project Ownership**





We
      currently control 15 cateos and 50 manifestations of discovery (totaling 102,789
      ha) in Santa Cruz province. Land holding costs for 2006 are estimated at
      $3,350.








**D** . **Chubut
      Project Property Summary**





**1.**  **Chubut
      Project Location**





We
      currently hold 13 manifestations of discovery in the Precordilleran and
      Patagonian Massif regions of Chubut totaling 10,380 ha. These properties are
      located at moderate elevations (300 to 1000 m above sea level) in central and
      western Chubut. Access to the properties is by dirt road and trail.




**2.**  **Chubut
      Project Geology**





Jurassic-Cretaceous
      volcanic terranes have been the focus of exploration in the southern Chilean
      Cordillera over the past decade. These rocks are potential hosts of epithermal
      gold and gold rich replacement deposits attested to by the discoveries, in
      Chile, at Fachinal (epithermal Au-Ag), El Toque (base metal, stratabound
      replacement deposit with a minor precious metal credit) and, in Argentina,
      the
      Esquel Project. This high-grade vein system contains an announced resource
      of
      4.2 million ounces of gold, and 7.8 million ounces of silver. In Argentina,
      rocks of the same age and type occur in both Andean and extra-Andean Patagonia.
      These areas are relatively unexplored.





**3.
      Chubut Project Exploration**





Chubut
      was included in the United Nations and Argentina government's Plan
      Patagonia-Comahue exploration program in the 1960s and 1970s. This campaign
      delineated several prospects with weak to moderate base metal anomalies. The
      samples were not analyzed for their precious metal content.





In
      1997,
      Minera completed reconnaissance surface sampling and mapping on five properties
      in the western Chubut province. This work indicates the potential for
      mineralized epithermal and porphyry or intrusive-related systems.





At
      the El
      Valle property, the initial exploration located a north-northeast trending
      zone
      of illitic alteration and mineralization about 1.5 km wide and three km long.
      Numerous northwest and northeast trending veins, some up to five meters wide
      and
      more than 500 m long, have also been located in tuffaceous rocks within the
      zone
      of alteration. The zone is open to the west and south under Quaternary alluvium
      in valleys, and open-ended to the north and east under Quaternary alluvium
      and
      post-mineral Tertiary basalt.





Results
      from the 40-sample reconnaissance program on this property show gold values
      ranging from below detection limit to 14.6 g/t. Several high values, above
      3 g/t
      gold, are from outcrops and float from multistage epithermal quartz veins.
      Some
      of the samples with low gold values show strongly anomalous pathfinder elements
      such as mercury (in the low 2,000 to 13,000 ppb range) that may indicate higher
      levels in the gold system. No exploration was done at El Valle in 2002 or
      2003.





-
            27
            -





On
      the
      basis of fixed-wing overflights and general geological reconnaissance, an
      additional ten cateos were acquired in late 2002 in the northern Patagonian
      Massif and Precordilleran regions of Chubut. Expenditures in 2004 relate to
      an
      ongoing reconnaissance exploration program on these lands. Expenditures for
      2005
      were primarily for maintenance and a similar level of expenditure is planned
      for
      2006.





**4.**  **Chubut
      Project Ownership**





We
      currently control 13 manifestations of discovery, totaling 10,380 ha, in Chubut
      province. Holding costs for 2006 are estimated at $1,313.





In
      August
      2000, Brancote Holdings PLC subsidiaries signed an agreement with Minera Andes
      to purchase two of Minera Andes’ gold exploration properties in Chubut province,
      southern Argentina. The agreements cover the Willimanco, Leleque and Leon
      properties. Brancote’s Argentine subsidiaries, Minera El Desquite S.A. and
      Cordon Leleque S.A., had a four-year option to purchase Willimanco and Leleque
      (and adjoining Leon properties) for a combined total of $1.25 million and a
      2%
      net smelter return royalty. Following the acquisition of Brancote Holdings
      PLC
      by Meridian Gold Inc., Minera Andes completed the sale to Meridian Gold of
      the
      Willimanco, Leleque and Leon properties for US$720,000 and Peso$200,000 for
      an
      approximate total of US$777,000.





**Summary**





The
      above
      disclosure on our properties has been prepared by, and/or reviewed by Brian
      Gavin, Vice President-Exploration of Minera Andes Inc. and a “qualified person”
within the meaning of Canada’s National Instrument 43-101.








**ITEM
      3. LEGAL PROCEEDINGS**





We
      are
      not currently aware of any material legal proceeding, actual, contemplated
      or
      threatened, to which we are a party or of which any of our property interests
      is
      subject.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




There
      were no matters submitted to a vote of security holders during the fourth
      quarter of the year ended December 31, 2005.





-
            28
            -





**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
      MATTERS**





Our
      Common Shares are listed on the TSX Venture Exchange ("TSX-V") under the trading
      symbol MAI, and the Common Shares are also quoted on the NASD’s OTC Bulletin
      Board over -the-counter market under the trading symbol MNEAF.





The
      high
      and low prices for the Common Shares reported by the TSX-V for each of the
      quarters during the years ended December 31, 2005 and 2004 are set forth in
      the
      table below:





**High
                (Cdn$)**
            **Low
                (Cdn$)**2004
            January
                - March
            0.84
            0.47April
                - June
            0.58
            0.38July
                - September
            0.65
            0.36October
                - December
            0.79
            0.602005
            January
                - March
            0.69
            0.46April
                - June
            0.57
            0.44July
                - September
            0.51
            0.37October
                - December
            0.65
            0.38





The
      high
      and low prices for the Common Shares reported for the OTC Bulleting Board for
      each of the quarters during the years ended December 31, 2005 and December
      31,
      2004 are set forth in the table below:





**High
                (US$)**
            **Low
                (US$)**2004
            January
                - March
            0.63
            0.33April
                - June
            0.45
            0.28July
                - September
            0.51
            0.28October
                - December
            0.63
            0.492005
            January
                - March
            0.59
            0.38April
                - June
            0.46
            0.34July
                - September
            0.43
            0.31October
                - December
            0.60
            0.31





These
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission, and may not represent actual transactions.





As
      of
      December 31, 2005, there were approximately 224 holders of record of our Common
      Shares. No dividends have ever been paid on our Common Shares, and we intend
      to
      retain any earnings for use in the business and do not expect to pay dividends
      in the foreseeable future.





At
      December 31, 2005, 1,009,000 options were available for grant under our stock
      option plan (“the Plan”). The aggregate number of shares to be delivered upon
      exercise of all options granted under our stock options plan shall not exceed
      20% of our issued and outstanding Common Shares up to a maximum of 9,000,000
      shares. No participant may be granted an option under the Plan which exceeds
      the
      number of shares permitted to be granted pursuant to rules or policies of any
      stock exchange on which the Common Shares is then listed. Additional information
      about the Plan is set forth under “Stock Option Plan” in Item 10, “Executive
      Compensation."





-
            29
            -





**EQUITY
      COMPENSATION PLAN INFORMATION**





**Plan
                Category**
            **No.
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
              
              
              
              
              
              **(a)**
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
              
              
              
              
              **(b)**
            **No.
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**
              
              
              
              
              **(c)**Equity
                compensation plans approved by security holders
            6,745,000
            Cdn$0.54
            1,009,000Equity
                compensation plans not approved by security holders
            --
            --
            --Total
            6,745,000
            Cdn$0.54
            1,009,000





**Recent
      Sales of Unregistered Securities**





On
      November 28, 2005, we sold 2,004,685 units to accredited investors at a price
      of
      Cdn$0.35 per unit for net of commission proceeds of Cdn$701,640 (US$600,000).
      Each unit consists of one common share and one-half of one common share purchase
      warrant. One whole common share purchase warrant entitles the holder to purchase
      one additional common share at an exercise price of Cdn$0.55 per share for
      a
      period of 2 years from the closing date. Finder’s fees of 6 percent were paid
      and the Company issued 120,281 shares in connection with this financing. A
      total
      of 2,004,685 common shares were issued pursuant to the private placement, and
      1,002,343 common shares are reserved for issuance on exercise of the
      warrants.





On
      December 20, 2005, we sold 15,414,740 units to Robert McEwen at a price of
      Cdn$0.35 per unit for net of commission proceeds of Cdn$5,125,401
      (US$4,382,558). Each unit consists of one common share and one-half of one
      common share purchase warrant. One whole common share purchase warrant entitles
      the holder to purchase one additional common share at an exercise price of
      Cdn$0.55 per share at any time prior to the earlier of: a) the date which is
      the
      15th trading day after receiving notice from Minera Andes that the weighted
      average price of the common shares on the TSX Venture Exchange has been equal
      to
      or greater than C$1.00 for a period of 20 consecutive trading days commencing
      120 days after the date of issuance of the warrants, and b) December 20, 2007.





The
      agents received a cash commission of 5% of the gross proceeds of the financing
      and 377,661 broker warrants, equal to 2.45% of the aggregate number of units
      sold. Each broker warrant upon exercise will entitle the holder to acquire
      one
      common share at an exercise price of Cdn$0.55 per common share at any time
      prior
      to the earlier of: a) the date which is the 15th trading day after receiving
      notice from Minera Andes that the weighted average price of the common shares
      on
      the TSX Venture Exchange has been equal to or greater than C$1.00 for a period
      of 20 consecutive trading days commencing 120 days after the date of issuance
      of
      the warrants, and b) December 20, 2007. A total of 15,414,740 common shares
      were
      issued pursuant to the private placement, and 7,707,370 common shares are
      reserved for issuance on exercise of the warrants and 377,661 common shares
      are
      reserved for issuance on the exercise of the broker warrants.





-
            30
            -





On
      March
      8, 2006, we sold 13,156,689 units to Rob McEwen at a price of Cdn$0.35 per
      unit
      for an aggregate of approximately Cdn$4.6 million (US$3,970,718). Each unit
      consists of one common share and one-half of one common share purchase warrant.
      One whole common share purchase warrant entitles the holder to purchase one
      additional common share at an exercise price of Cdn$0.55 per share for a period
      of 24 months from the closing date. The agent for the offering was Canaccord
      Adams Capital Corporation. The agents received cash commissions of 5% of the
      gross proceeds and agents’ warrants for the purchase of 322,339 common shares
      (2.45% of the aggregate number of units sold in the offering) at an exercise
      price of Cdn$0.55 per common share for a period of 24 months from the date
      of
      issue.





In
      reliance on Rule 903 of Regulation S under the Securities Act of 1933, as
      amended (the “Securities Act”), units were offered and sold to purchasers
      outside of the United States without any directed selling efforts pursuant
      to
      Category 1 of Rule 903(b), in that Minera Andes is a foreign private issuer
      and
      there is no substantial U.S. market interest for the class of securities sold. In
      reliance on Rule 506 of Regulation D under the Securities Act, units were also
      offered and sold, without general solicitation or advertising and subject to
      resale restrictions, to accredited investors in the United States who
      represented they were purchasing with investment intent and without a view
      to
      distribute the units.





Also
      during 2005, we received gross proceeds of $9,230 for the exercise of 22,500
      warrants; gross proceeds of $258,480 for the exercise of 901,175 broker
      warrants; and $34,055 for the exercise of 253,500 stock options.








-
            31
            -





**ITEM
      6.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
      OPERATIONS**




The
      following discussion should be read in conjunction with our audited consolidated
      financial statements and notes thereto for the years ended December 31, 2005
      and
      2004 which have been prepared in accordance with generally accepted accounting
      principles (“GAAP”) in Canada. Differences from U.S. GAAP are described in Note
      12 to the audited consolidated financial statements. Our financial condition
      and
      results of operations are not necessarily indicative of what may be expected
      in
      future years.





**Overview**





Minera
      Andes was incorporated in Alberta in July 1994 and went public in November
      1995
      through an amalgamation with Scotia Prime Minerals, Incorporated, also an
      Alberta corporation. We are a reporting issuer in Alberta, British Columbia,
      Saskatchewan, Ontario and Nova Scotia and trade our common shares on the TSX
      Venture Exchange under the symbol MAI. We are also a Form 10-KSB filer in the
      U.S. and trade on the NASD OTC Bulletin Board under the symbol
      MNEAF.





Our
      principal business is locating, acquiring, exploring, and, if warranted,
      developing mineral properties located in the Republic of Argentina. We carry
      out
      our business by acquiring, exploring, and evaluating mineral properties through
      our ongoing exploration program, and either joint-venturing or developing these
      properties further, or disposing of them if the properties do not meet our
      requirements.





Our
      current properties and projects consist of mineral rights and applications
      for
      mineral rights covering approximately 439,804 acres (177,986 hectares) in three
      Argentine provinces. The lands comprise option-to-purchase contracts,
      exploration, and mining agreements and direct interests through our filings
      for
      exploration concessions. Our properties are all early stage exploration
      prospects, except for the San José property, which is an advanced-stage
      exploration/development project. A positive feasibility study completed in
      October of 2005 provides an independent estimate of the proven and probable
      reserves at the San José. See "Description of Properties."





Through
      our subsidiaries and joint ventures we own a 49% equity interest in MSC, which
      owns the San José gold/silver property in Southern Argentina, and a 100%
      interest in over 10 mineral properties in Argentina. San José is currently in
      advanced exploration and underground development. With a positive feasibility
      study for the development of a mine on the property, the board of MSC decided
      in
      December 2005 and a decision to construct a mine on the property, subject to
      receiving all necessary permits and government approvals. In March of 2006,
      provincial approval was obtained for the permits to construct a mine on the
      property with production expected in the first quarter of 2007.





**Critical
      Accounting Policies**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make a wide variety of estimates
      and assumptions that affect (i) the reported amounts of assets and liabilities
      and disclosure of contingent assets and liabilities as of the date of the
      financial statements, and (ii) the reported amounts of revenues and expenses
      during the reporting periods covered by the financial statements. Our management
      routinely makes judgments and estimates about the effect of matters that are
      inherently uncertain. As the number of variables and assumptions affecting
      the
      future resolution of the uncertainties increases, these judgments become even
      more subjective and complex. The most significant accounting policies that
      are
      most important to the portrayal of our current financial condition and results
      of operations relates to mineralization and deferred development costs. Other
      accounting policies are disclosed in Note 2 of Notes to Consolidated Financial
      Statements. These financial statements do not include any adjustments to the
      amount and classification of assets and liabilities that may be necessary should
      we be unable to continue as a going concern.





-
            32
            -





Mineral
      properties consist of exploration and mining concessions, options and contracts.
      Acquisition and leasehold costs and exploration costs are capitalized and
      deferred until such time as the property is put into production or the
      properties are disposed of either through sale or abandonment. If put into
      production, the costs of acquisition and exploration will be depreciated over
      the life of the property, based on estimated economic reserves. Proceeds
      received from the sale of any interest in a property will first be credited
      against the carrying value of the property, with any excess included in
      operations for the period. If a property is abandoned, the property and deferred
      exploration costs will be written off to operations.





**Business
      Strategy and Development**





Our
      business and development strategy since our inception in 1994 has been to focus
      primarily on the acquisition and development of exploration stage gold/silver
      and copper properties in Argentina and on the exploration and development of
      these properties. Our current portfolio of properties consists of mineral rights
      and applications for mineral rights, covering approximately 439,804 acres
      (177,986 hectares) in three provinces in Argentina.





We
      carry
      out our business by acquiring, exploring and evaluating mineral properties
      through our ongoing exploration program. Following exploration, we either seek
      to enter joint ventures to further develop these properties or dispose of them
      if the properties do not meet our requirements. We have several early stage
      exploration properties with no proven or probable reserves currently identified
      and one advanced stage exploration property, the San José property, with proven
      and probable reserves.





In
      October of 2005 a positive feasibility study defined a mineral reserve. Given
      our developed mineral reserve at San José, our operator partner, who owns a 51%
      interest in the project, is currently completing exploration and development
      work moving the project towards production of the defined reserve. At the San
      José project, our partner commenced underground exploration in 2003, and our
      joint venture made a production decision in December of 2005 and expects to
      complete construction and reach full production in the first quarter of 2007.
      However, there can be no assurance that production and start-up can be completed
      as anticipated or that our production will be achieved.





Our
      objective is to grow our business to become a gold/silver producer over the
      next
      few years and to add new properties that have the potential to become
      profitable, producing mines. Due to higher gold prices and our improved
      financial condition, we believe we are well placed to pursue the acquisition
      and
      development of exploration properties in Argentina. We are actively
      investigating the potential acquisition of new mineral exploration properties.
      However, we presently have no agreement or understanding with respect to any
      potential transaction. We have increased exploration activities and expenditures
      on our current exploration properties in Argentina.





**Overview
      of 2005**





Our
      cash
      position improved during 2005 through the raising of funds through equity
      financing and completion of a credit facility. Cash and cash equivalents at
      the
      end of 2005 was $3.3 million, an increase of $1.6 million from the end of 2004.
      Equity offerings and warrant and option exercises provided a net of $12.9
      million during the year and $3 million was drawn on the credit facility. In
      addition, several other significant milestones were achieved during 2005:





·
            Minera
                Andes and its joint venture partner completed a bankable feasibility
                study
                at the San José project in October of 2005 to determine the economic
                viability of theSan
                JosŽ veins. The study was managed by MTB Project Management Professionals,
                Inc., of Denver. The purpose of the feasibility study was to provide
                an
                independent third party determination of the technical and economic
                viability of the veins currently developed at the project. The results
                of
                the feasibility study indicate the project is positive for the development
                of a mine on the property;





-
            33
            -








·
            We
                funded and maintained our 49% interest in the San José
                project;





·
            We
                acquired several new exploration land packages in southern
                Argentina;





·
            Our
                partner in the San José project completed 2.8 km of underground
                exploration workings on the Huevos Verdes vein and continued exploration
                and engineering studies on the property where four new veins were
                discovered in 2005;





·
            We
                signed a letter of intent with Xstrata Copper concerning the Los
                Azules
                porphyry copper project;





·
            We
                advanced exploration on several wholly owned mineral properties and
                made
                gold and silver discoveries on two properties that are near the drill
                stage, and;





·
            We
                continued to pursue new growth
                opportunities.





**Trends
      Affecting our Operations During 2005**





Gold
      prices have now trended generally upward for nearly four years from a low of
      $256 in early April 2001 to $517 per ounce in December 2005, an average annual
      increase of 17%. The higher gold price increased our ability to equity finance
      during 2005.





The
      market for gold company equities generally strengthened during 2005. Our common
      share price began the year at $0.59 and ended the year at $0.58. The increased
      interest in investing in gold and gold mining companies during the past three
      years has made exploration and development capital more readily available.
      As a
      result, we successfully raised $12.9 million of new equity funds during 2005,
      including option and warrant exercises. We used portions of the cash to make
      joint venture payments, acquire new exploration properties in Argentina, and
      to
      fund exploration and development activities at the San José project and other
      projects in our property portfolio. In 2006 we anticipate using our cash to
      maintain our interest in the San José project, and to fund other exploration
      activities and for other general corporate purposes. We also expect we may
      have
      to raise additional funds to maintain our programs and interest in the San
      José
project.





**Plan
      of Operations**





We
      have
      budgeted and plan to spend approximately $3.6 million for our mineral property
      and exploration activities, other than the San José project, and for other
      general and administrative expenses through 2006, with work being conducted
      on
      several properties including an ongoing reconnaissance program designed to
      make
      new acquisitions. See “Description of Properties.” In addition, the 2006 budget
      for the exploration, development and construction to place the San José project
      into production by the first quarter of 2007 is approximately $59 million,
      of
      which we will fund $6.5 million and the balance will be funded by our partners,
      MHC, and a project financing facility. The San José project is owned by MSC, an
      Argentine corporation owned by Minera Andes Inc. (49%) and MHC (51%) the
      operator of the project. In October of 2005, a positive feasibility was
      delivered and MSC secured a letter of intent for a non-recourse debt financing
      to complete construction of the project. If this financing is completed we
      may
      not be required to spend additional equity funds on the project, however, the
      financing of the project is uncertain at this time. To maintain our 49% interest
      in MSC we may need to raise additional funds in 2006. If we cannot match MHC
      pro
      rata, we expect to have our interest in the San José project diluted in
      accordance with the joint venture agreement. Failure by either party to
      contribute to work programs will result in simple dilution of that party’s
      interest in the project. If additional funds are raised during 2006 through
      the
      exercise of warrants or options, through a further equity financing, through
      debt financing, by the sale of property interests, or by joint venture
      financing, additional exploration would be planned and carried out on our
      properties. If we were to develop a property or a group of





-
            34
            -





properties
      beyond the exploration stage, substantial additional financing would be
      necessary. Such financing would likely be in the form of equity, debt, or a
      combination of equity and debt. There is no assurance that such financing,
      if
      necessary, would be available to us on favorable terms.





As
      of
      December 31, 2005, the Company had negative working capital of approximately
      $0.6 million, and in the first quarter of 2006 raised an additional $3.7 million
      by private placement. These funds, as estimated by management, are sufficient
      to
      cover budgeted expenditures for mineral property and exploration activities
      on
      properties outside the San José project in Argentina, and general and
      administrative expenses through at least the end of 2006.





**Exploration**





Minera
      Andes has made significant strides in its business plan during 2005,
      particularly with development at the advanced-stage Huevos Verdes silver/gold
      vein and the Frea vein located within the San Jos é project
      area in southern Argentina. During 2005 four new mineralized silver/gold veins
      were discovered by drilling geophysical targets at the San José project. In
      addition, new gold and silver discoveries were made by Minera Andes on its
      100
      percent-owned exploration projects in Argentina. Management has been active
      in
      Argentina for twelve years and has developed expertise in all aspects of
      conducting exploration/development business there.





We
      currently have a portfolio of properties totaling about 10 projects on about
      439,804 acres (177,986 hectares) of mineral exploration land in Argentina.
      The
      properties primarily contain gold, silver and copper mineralization targets.





Several
      new exploration properties have been acquired through the filing of mineral
      applications. These properties reveal numerous similarities to Minera Andes’ San
      José property in northern Santa Cruz province. In addition, two properties,
      Cerro Mojón and San Agustin, contain several mineralized structures with
      favorable geologic indicators and silver values up to 10 ounces per ton in
      surface sampling. These characteristics mirror much that has been discovered
      about San José. Drilling conducted at San Agustin encountered geology indicating
      a deeper target that remains to be tested. At Cerro Mojón the drilling
      encountered some high-grade silver that will require follow up. Other prospects
      contain structures with sinter-like quartz veining and anomalous arsenic and
      mercury. In November of 2005, we signed a letter of intent with Xstrata Copper
      relating to our Los Azules copper project and have begun a detailed exploration
      program including drilling.





All
      of
      our programs are supervised by Brian Gavin, vice president of exploration,
      who
      has reviewed the programs and is the qualified person under Canada’s National
      Instrument 43-101.





**Los
      Azules Project**





The
      Los
      Azules project was discovered by Minera Andes' geologists through regional
      exploration near the Argentina/Chile border. The combined Minera Andes-Xstrata
      Copper property package (approx. 7,500 Ha) encompasses a large, enriched
      (chalcocite) copper zone at Los Azules. The overall target area is approximately
      2,700 meters by 700 meters as currently defined. Past drilling consists of
      15
      reverse-circulation and 9 core holes (totaling 5,481 meters) drilled by Minera
      Andes, Xstrata Copper and Battle Mountain Gold between 1998 and 2004. Eight
      holes intersected significant copper mineralization greater than 0.4 percent
      in
      an area defined by geology, MIMDAS deep penetration IP and magnetic geophysical
      surveys. The
      best
      hole, LA-08-98 encountered 0.55 percent copper over 143 meters and ended in
      mineralization.





In
      May of
      2004 we reported the discovery of a large, enriched (chalcocite) copper zone
      at
      our 100% owned Los Azules property. The overall target area is approximately
      1500 meters by 2000 meters. Drilling returned





-
            35
            -





up
      to
      0.8% copper over 36 meters and 120 meters of 0.54% copper within an area defined
      by geology, MIMDAS deep penetration IP and magnetic geophysical surveys. This
      new zone has been confirmed by four drill holes showing enriched copper over
      an
      area approximately 1000 meters by 500 meters. A fifth drill hole penetrated
      a
      thick section of related surface alteration before stopping short of its target
      depth.





In
      November of 2005, a letter of intent was signed with Xstrata
      Copper regarding t he
      Los
      Azules porphyry copper project in San Juan province, Argentina. Xstrata Copper
      and Minera Andes had been working on separate, adjoining properties that
      straddle a large copper porphyry system now
      consolidated into one package. Xstrata Copper is one of the commodity business
      units within Xstrata
      plc.





In
      the
      letter of intent Minera Andes has the right to earn a 100 percent interest
      in
      Xstrata Copper’s property by spending at least US$1.0 million on the property
      over the next four years, making payments to keep the property in good standing
      and producing preliminary economic assessment (to NI 43-101 standards). If
      the
      preliminary assessment shows the project to be potentially economically viable
      and can be expected to produce 100,000 tonnes of copper per year for 10 years
      then Xstrata Copper will have a one time back-in right to earn a 51 percent
      interest in the combined properties by making a cash payment to Minera Andes
      of
      three times its expenditures on the property, completing a bankable feasibility
      study within five years and assuming underlying property commitments. In the
      event that the preliminary assessment does not meet the size criterion
      contemplated above, Xstrata Copper would retain a first right of refusal on
      any
      subsequent sale of the property.





The
      Company is conducting a drill program on the Los Azules property in the first
      half of 2006 to evaluate the leachable copper target area.





**San
      José Project**





A
      significant exploration and development program is underway at the San José
gold/silver project in southern Argentina. The 2006 work program at the project
      is designed to complete the EIA approval process, and continue exploration
      and
      development of the underground workings, and construct the mine, processing
      facility and infrastructure to attain production. The program will also explore
      other vein targets already identified on the property. The development site
      at
      Huevos Verdes currently has a work force of approximately 260
      personnel.





The
      2006
      San José budget has been expanded to total approximately US$59.0 million,
      consisting of US$58.0 million in development and construction of a mine at
      the
      San Jos é project,
      and US$1.0 million for the exploration of additional targets on the property.
      It
      is anticipated that, following the March 2006 receipt of the Environmental
      Impact Assessment permit approval the debt financing can now be finalized for
      the remainder of the required mine development budget.





An
      important part of the work at the San José project in 2005 was the completion of
      a three-part drilling program designed to accelerate the conversion of resources
      into reserves, at the Frea vein (formally called Huevos Verdes East) and the
      Huevos Verdes vein. This program also was designed to test the new targets
      identified from the property-wide exploration program. The
      resource/reserve drill program at San José, of which the major part was in 2004
      and was completed in 2005, totaled approximately 41,210 meters. In addition,
      a
      total of 5090 meters of drilling has been completed underground from inception
      to the year end of 2005. A total of 5.3 kilometers of underground workings
      have
      been completed on the Huevos Verdes vein including 620 meters in two ramps
      under
      construction.





Several
      major events occurred in 2005 to advance the San José/Huevos Verdes construction
      project. The accelerated development at this vein-hosted, low-sulfidation,
      epithermal silver/gold mineralization system has allowed the joint venture
      to
      formalize a production decision at year end.





-
            36
            -





·
            A
                comprehensive, third-party feasibility study was completed in October
                2005
                to assess possible mine production.The study indicates the San José project is positive for the development
                of a mine at the site. A detailed technical report written to Canada’s
                NI43-101 standards on the project is available online at www.sedar.com.
                The study defined proven and probable mineral reserves, based on
                an
                overall cutoff off grade of $75/t (using a price of $394.48/oz for
                gold
                and $6.48/oz for silver), are currently 1.16 million tonnes at 7.7
                g/t
                gold and 406 g/t silver, containing 288,094 ounces of gold and 15,229,380
                ounces of silver.





·
            Underground
                construction at the Huevos Verdes vein focused on an area of drill-proven,
                high-grade mineralization and approximately 2.8 km of workings were
                completed on the vein.





·
            Underground
                testing discovered new high-grade silver/gold zones and previously
                unknown
                veins. These discoveries hold potential for increased grade and tonnage
                at
                Huevos Verdes. These discoveries were not included in the reserve
                estimates calculated in the feasibility study.





·
            Metallurgical
                testing of Huevos Verdes' silver/gold mineralization demonstrated
                high
                recoveries (over 90 percent for both silver and gold) are possible
                using
                standard industry technology.





·
            Reflecting
                confidence in Huevos Verdes, pre-production employment at San
                Joséproject exceeded 260 by December 2005 compared to 53 in January
                2005.





·
            Exploration
                at the San José project continued to identify more silver/gold
                mineralization. The Huevos Verdes vein itself remains open at depth
                and
                laterally. The entire San José project area is host to four parallel vein
                structures totaling some 32 kilometres in combined length, as outlined
                by
                reconnaissance field work and geophysical surveys conducted by Minera
                Andes. Only some 15% of the outlined vein package has yet been
                drilled.





·
            Drilling
                at Frea Vein intersected significantly thicker and higher-grade
                silver/gold mineralization than is currently known at Huevos Verdes.
                The
                Frea vein is a parallel vein approximately two kilometers to the
                east of
                the Huevos Verdes vein and has excellent potential to expand the
                projects
                reserves.Drilling
                on the Frea vein encountered bonanza grades on an interval with a
                weighted
                average of 0.4 meters of 374 ounces per ton -opt (11,619 g/t) silver
                and
                5.0 opt (155 g/t) gold.****The
                Frea vein currently makes up about half the reserves identified on
                the
                property and is open ended.





·
            By
                year end 2005 four new veins had been discovered by drilling geophysical
                targets on the San José project. The Ayelen vein intersected weighted
                average interval of 1.72 meters 348 (opt 10,819 g/t) 5.07 opt silver
                (158
                g/t) gold.The
                Odin vein drilling intersected a weighted average interval of 1.0
                meter of
                13.46 g/t (0.43 opt) gold and 928 g/t (30 opt) silver (SJ-209) which
                is
                part of a larger interval running 2.53 meters of 6.58 g/t (0.21 opt)
                gold
                and 445 (14 opt) g/t silver. Other highlights include a weighted
                average
                interval of 1.0 meter of 16.49 g/t (0.53 opt) gold and 281 g/t (9
                opt)
                silver (SJD-188) drilled 200 meter of strike of the Frea vein.The
                Kospi vein was discovered during a late 2005 drilling program in
                the area
                between the Huevos Verdes and Frea Veins. The best weighted average
                intercept encountered in this drilling campaign is 24 g/t (0.77 ounces
                per
                ton - opt) gold and 747 g/t (24 opt) silver over 5.66 meters in hole
                HVD-41.These
                discoveries were not included in the reserve estimates calculated
                in the
                feasibility study.





**Results
      of Operations**





**2005
      compared to 2004**





-
            37
            -





In
      2005,
      our net loss was $3.6 million (4 cents per share) compared with a net loss
      of
      $2.1 million (3 cents per share) in 2004. Our general and administrative costs
      were $2.3 million in 2005 compared to $1.7 million in 2004. The following table
      summarizes the significant changes in operations in 2005 compared to
      2004.








**Description**
            
            **2005**
            
            **2004**Legal,
                audit and accounting fees(1)
            
            $
            267,225
            
            $
            235,973Consulting
                Fees(2)
            
            $
            595,752
            
            $
            527,838Foreign
                Exchange(3)
            
            $
            82,245
            
            $
            (260,549
            )Office
                Overhead and administration fees(4)
            
            $
            308,037
            
            $
            526,279Wages
                and benefits(5)
            
            $
            858,969
            
            $
            508,943





Notes:





(1)
            Audit
                and accounting fees increased this year due to an overall increase
                in
                audit fees.





(2)  Consulting
      fees increased in 2005 due to our increased public and investor relations
      program. Stock option compensation relating to consultants, valued at $239,953
      and $127,516, was expensed to consulting fees in 2005 and 2004,
      respectively.





(3)  We
      realized a loss in foreign exchange in 2005. This is mostly related to the
      effect of a strengthening U.S. dollar offset by the associated impact on the
      value of cash equivalents invested in Canadian dollar instruments.





(4)
            Office
                overhead included public and investor relations program expenses,
                advertising and numerous conferences attended during the year. Office
                overhead was higher in 2004 due to a substantial mailing.





(5)  Stock
      option compensation relating to employees and directors, valued at $569,140
      and
      $478,020, was expensed to wages and benefits expense in 2005 and 2004,
      respectively.





In
      2006
      we will be continuing the prospecting, acquisition, exploration and evaluation
      of property interests that have been our hallmark since our inception, and
      we
      will focus on the Santa Cruz, Chubut and San Juan properties. As in the past,
      if
      a property or program does not meet our requirements in the future, costs
      associated with abandonment of the property or program will result in a charge
      to operations. For this reason, we may incur additional write-offs in future
      periods, although the amounts of such write-offs are difficult to predict,
      as
      they will be determined by the results of future exploration
      activities.





Mineral
      property and deferred exploration costs in 2005 amounted to $1.6 million
      compared to $1.9 million in 2004.





The
      following table summarizes the significant changes in exploration expense for
      2005 compared to 2004.








**Description**
            
            **2005**
            
            **2004**Consulting(1)
            
            $
            149,156
            
            $
            109,779Drilling(2)
            
            $
            396,110
            
            $
            264,450Geology(3)
            
            $
            317,653
            
            $
            729,425Legal(4)
            
            $
            88,985
            
            $
            47,659




-
            38
            -




Notes:





(1)
            Consulting
                increased due to the drilling and geophysical program
                support.


.


(2)
            Drilling
                increased as an outgrowth of our expanded 2004 target
                generation.





(3)
            Geology
                decreased on our 100 percent projects due to an expanded program
                and
                expenditures at our co-owned San Josè project. In addition, more emphasis
                was placed on drilling and supporting
                consults.





(4)
            Legal
                fees increased due to increased land acquisitions and due diligence
                work.





**2004
      compared to 2003**





In
      2004,
      our net loss was $2.1 million (3 cents per share), compared with a net loss
      of
      $1.5 million (4 cents per share) in 2003. Our general and administrative costs
      were $1.7 million in 2004 compared to $1.5 million in 2003.





Mineral
      property and deferred exploration costs in 2004 amounted to $1.9 million
      compared to $0.5 million in 2003. We focused nearly all our available
      exploration resources on the San José project in Santa Cruz province during
      2004, and the success of the exploration carried out on these properties over
      the last few years resulted in the joint venture arrangement which was signed
      March 15, 2001. We received mineral property option proceeds of $400,000 from
      the joint venture in 2004 and in 2003.





-
            39
            -





**Contractual
      Obligations, Contingent Liabilities and Commitments**





We
      enter
      into operating leases in the normal course of business. Substantially all lease
      agreements have fixed payment terms based on the passage of time. Some lease
      agreements provide us with the option to renew the lease. Our future operating
      lease obligations would change if we exercised these renewal options and if
      we
      entered into additional lease agreements. In addition we also enter into loan
      facilities as sources of financing for our advanced projects.





Our
      lease
      and loan obligations are as follows:





**Contractual
                Obligations**
            
            **Payments
                Due by Period**Total
            
            Less
                than
              1
                year
            
            1-3
              years
            
            3-5
              years
            
            More
                than
              5
                yearsLong
                Term Debt
            
            $
            4,000,000
            
            $
            4,000,000
            
            $
            --
            
            $
            --
            
            $
            --Operating
                Lease Obligations
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Purchase
                Obligations
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Capital
                Lease Obligations
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Other
                long-term liabilities
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Total
            
            $
            4,000,000
            
            $
            4,000,000
            
            $
            --
            
            $
            --
            
            $
            --





On
      December 2, 2003, we signed an agreement that obligated us to pay Degerstrom
      a
      royalty of $250,000 if any of the current properties, other than the properties
      comprising the San José project, meet certain conditions such as bankable
      feasibility or commercial production. Our obligation expires December 31, 2013.
      As of December 31, 2005 no payments are required under this agreement. This
      royalty is not included in the above table.  Additionally, we are obligated
      to fund our 49% of future costs at San José or our ownership will be
      diluted.  These costs are excluded from the above table.





On
      December 16, 2004, Minera Andes Inc. closed on the US$2 million first tranche
      of
      the US$4 million loan facility from Macquarie Bank Limited ("Macquarie"). This
      facility is being provided in two tranches for funding of Minera Andes' 49%
      portion of the costs of completing a bankable feasibility study and related
      development work for the San Jos é /Huevos
      Verdes silver/gold project in Argentina. Macquarie is an international banking
      group active in providing project financing to the mining sector.





In
      December 2004, Macquarie advanced US$1 million of the first US$2 million
      tranche, and the balance of US$1 million was advanced in February 2005. This
      first tranche of US$2 million is available for up to two-years from draw-down.
      The second tranche of the facility, being an additional US$2 million, was
      provided on July 2005, through the achievement of positive exploration and
      development at Huevos Verdes to the satisfaction of Macquarie, regulatory
      approvals, and completion of documentation.





The
      commercial terms of the loan include a facility fee of 1.5% of the principal
      amount of the initial tranche and an interest rate of Libor plus 2% p.a.,
      currently totaling approx 4.15% p.a. In addition, a success fee of US$40,000,
      being one percent of the principal amount of the first tranche and second
      tranche was paid to Xystus Limited for assisting with the structuring and
      negotiation of the loan facility.





-
            40
            -





In
      connection with the first tranche of the facility, Minera Andes has issued
      share
      purchase warrants to Macquarie to acquire 2,738,700 Common Shares of Minera
      Andes at an exercise price of Cdn$0.91 per share. The warrants exercise price
      was calculated at a 20 percent premium to the volume weighted average of Minera
      Andes' common stock determined from the ten business days prior to acceptance
      of
      this offer. Each warrant is to be exercisable for two years and will expire
      on
      December 15, 2006. In the first quarter of 2005 additional share purchase
      warrants to acquire 3,987,742 Common Shares of Minera Andes at an exercise
      price
      of Cdn$0.62 were issued to Macquarie in regard to the second tranche of US$2.0
      million, on terms calculated in a similar manner at that time, upon fulfillment
      of conditions precedent for that tranche and appropriate regulatory
      approvals.





During
      2005, MSC signed agreements with third party providers relating to the
      development of the San José/Huevos Verdes project. Our 49 percent portion of
      these commitments is approximately $975,000.





In
      addition, mineral rights in Argentina are owned by the federal government and
      administered by the provinces. The provinces can levy a maximum 3% “mouth of
      mine” (gross proceeds) royalty. The provinces of Mendoza and Neuquén have waived
      their right to a royalty. The provinces of Río Negro, San Juan, Santa Cruz and
      Chubut have not yet established a policy regarding the royalty.





**Liquidity
      and Capital Resources**





Due
      to
      the nature of the mining business, the acquisition, exploration, and development
      of mineral properties requires significant expenditures prior to the
      commencement of production. To date, we have financed our activities through
      the
      sale of equity securities and joint venture arrangements. We expect to use
      similar financing techniques in the future, however, we cannot assure you that
      we will be successful in our financing activities in the future. Our ability
      to
      continue in operation is dependent on our ability to secure additional
      financing, and while we have been successful in doing so in the past (including
      the property and financing transactions in “Plan of Operations” and “Results of
      Operations” above), we cannot assure you that we will be able to do so in the
      future. Management is actively pursuing such additional sources of financing;
      however, in the event this does not occur, there is doubt about the ability
      to
      continue as a going concern. Our financial statements do not include the
      adjustments that would be necessary should we be unable to continue as a going
      concern.





In
      recognition of our liquidity and capital resources, our independent public
      accountants have included a comment in their report on our accompanying
      consolidated financial statements for the year ended December 2005, that would
      express substantial doubt as to our ability to continue as a going concern
      .





Our
      exploration and development activities and funding opportunities, as well as
      those of our joint venture partner, may be materially affected by precious
      and
      base metal price levels and changes in those levels. The market prices of
      precious and base metals are determined in world markets and are affected by
      numerous factors which are beyond our control.





At
      December 31, 2005, we had cash and cash equivalents of $3.3 million, compared
      to
      cash and cash equivalents of $1.7 million as of December 31, 2004. Working
      capital at December 31, 2005 was a negative $0.6 million compared with a
      positive $1.6 million at the end of 2004. Net cash used in operating activities
      during 2005 was $1.4 million compared with $0.9 million in 2004. Investing
      activities in 2005 used $12.8 million, compared with $5.6 million used in 2004.
      The increase in investing activity is due to the investment in the San José
project.





In
      2005,
      we received the remaining $3 million of credit on a two-year
      loan facility of $4 million from Macquarie Bank Limited (“Macquarie”). All
      amounts advanced are due in December 2006. This facility was provided in two
      tranches to fund our 49% portion of the costs of completing a bankable
      feasibility study and related development work for the San José/Huevos Verdes
      gold/silver project in Argentina. We received





-
            41
            -





$1,000,000
      of the first tranche in December 2004. As at December 31, 2005, interest expense
      incurred was $164,495, of which all was capitalized to the investment in
      MSC.





Also
      during 2005, we had private placements which raised proceeds of $12.7 million,
      net of agents’ commissions, through the issuance of 18,180,450 units at a price
      of Cdn$0.55 per unit, 2,004,685 units at a price of Cdn$0.35 per unit, and
      15,414,740 units at a price of Cdn$0.35; gross proceeds of $9,230 for the
      exercise of 22,500 warrants; gross proceeds of $258,480 for the exercise of
      901,175 broker warrants; and $34,055 for the exercise of 253,500 stock options.





The
      principal financing activities during 2004 were a private placement which raised
      proceeds of $ 4,545,455 ,
      net of
      agents’ commissions, through the issuance of 10,000,000 units at a price of
      Cdn$0.65 per unit; gross proceeds of $250,401 for the exercise of 648,375
      warrants; gross proceeds of $239,610 for the exercise of 867,566 broker
      warrants; and $78,400 for the exercise of 330,000 stock options.





**Investor
      Relations**





During
      2005 we attended various trade shows and gold conferences to increase awareness
      in our activities in the mining industry. We also advertised our corporate
      profile on several Web-based sites and in the news media. In addition, we have
      retained the services of a media consultant to design company presentations
      and
      literature.





**Audit
      Committee**





Our
      board
      of directors has determined that we do not currently have a financial expert,
      as
      defined by Item 401(e) of Reg. S-B, on the audit committee.  We are seeking
      to add a new director to the audit committee who would qualify as a financial
      expert.





**Outlook**





In
      December 2005, after receiving a positive feasibility study to develop a mine
      on
      the property in October of 2005, the co-owned company MSC formalized the
      decision to proceed to take the project to production and submitted a
      Environmental Statement and Impact Assessment study to the provincial government
      to seek permitting approvals to build a mine. In March of 2006 we received
      the
      approval and are proceeding to place the San Josè project into production by the
      first quarter of 2007. We anticipate financing completion of the San Josè
project with a banking credit facility. A letter of intent for the credit
      facility is currently in place and is expected to be completed in the second
      quarter of 2007. If the credit facility is not in place we may require
      additional cash for the development of the project described above. It is
      anticipated that exploration on other projects and acquisition of new projects
      will require additional cash.





Our
      main
      objectives in 2006 are to:





·
            maintain
                our 49% interest in the San José joint
                venture;




·
            continue
                to evaluate and advance our current property
                portfolio;





·
            substantially
                increase exploration efforts with a focus on gold and silver targets
                in
                southern Argentina and elsewhere;





·
            continue
                efforts to seek out and evaluate acquisition and growth opportunities
                in
                Argentina;





-
            42
            -











·
            advance
                the San José project to production by completing construction of
                infrastructure, mine, and processing facility following the March
                15, 2006
                provincial approval of the permit to build an operating mine on the
                site,
                and;





·
            complete
                bank project financing to complete the mine with a debt
                facility.





As
      more
      fully disclosed in Item 1 - “Risk Factors Related to our Business”, numerous
      factors could cause our estimates and expectations to be wrong or could lead
      our
      management to make changes in our plans. Under any of these circumstances,
      the
      estimates described above would likely change materially.





**Mining
      in Argentina**





We
      constantly review the social and political aspects of Argentina in general
      to
      apprise ourselves of the social situation and political risks that exist in
      the
      region. Argentina has benefited from an extended period of political stability
      and a democratic governmental system including orderly governmental transitions.
      It is our belief that Argentina is committed to creating a stable political
      and
      economic environment that will foster additional economic growth.





Argentina
      is endowed with abundant mineral resources and is actively pursuing policies
      designed to support expansion of its mineral industry. Because of the political
      stability and supportive policies, several international mineral companies
      have
      initiated activities in Argentina in recent years and we understand that these
      companies now have in place plans to invest significant new sums in gold/silver
      and copper exploration and development.





It
      is our
      intent to be a responsible corporate citizen of Argentina and as such we have
      worked diligently to establish excellent working relationships with both local
      and federal governmental authorities as well as with the local citizens in
      the
      areas surrounding our operations.





**Seasonality**





Most
      of
      our projects are in generally arid climates which experience four seasons.
      The
      exploration season is short in areas of higher elevation due to winter snow
      conditions. Low elevation areas can be worked year-round. Winter months can
      present muddy travel conditions on primitive roads.





**Recent
      U.S. Accounting Pronouncements**





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20
      and FASB Statement No. 3.” SFAS No. 154 changes the requirements for the
      accounting for and reporting of a change in accounting principle. This Statement
      applies to all voluntary changes in accounting principle. It also applies to
      changes required by an accounting pronouncement in the unusual instance that
      the
      pronouncement does not include specific transition provisions. The statement
      requires retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change. When it
      is
      impracticable to determine the period-specific effects of an accounting change
      on one or more individual prior periods presented, this statement requires
      that
      the new accounting principle be applied to the balances of assets and
      liabilities as of the beginning of the earliest period for which retrospective
      application is practicable and that a corresponding adjustment be made to the
      opening balance of retained earnings (or other appropriate components of equity
      or net assets in the statement of financial position) for that period rather
      than being reported in an income statement. When it is impracticable to
      determine the cumulative effect of applying a change in accounting principle
      to
      all prior periods, this statement requires that the new accounting principle
      be
      applied as if it were adopted prospectively from the





-
            43
            -





earliest
      date practicable. The adoption of revised SFAS No. 154 is not expected to have
      a
      material effect on our consolidated financial statements.





In
      March
      2005, the Financial Accounting Standards Board (“FASB”) issued Interpretation
      No. 47, “Accounting for Conditional Asset Retirement Obligations—an
      interpretation of FASB Statement No. 143.” This Interpretation clarifies that
      the term conditional asset retirement obligation as used in FASB Statement
      No.
      143, Accounting for Asset Retirement Obligations, refers to a legal obligation
      to perform an asset retirement activity in which the timing and (or) method
      of
      settlement are conditional on a future event that may or may not be within
      the
      control of the entity. The obligation to perform the asset retirement activity
      is unconditional even though uncertainty exists about the timing and (or) method
      of settlement. Thus, the timing and (or) method of settlement may be conditional
      on a future event. Accordingly, an entity is required to recognize a liability
      for the fair value of a conditional asset retirement obligation if the fair
      value of the liability can be reasonably estimated. The fair value of a
      liability for the conditional asset retirement obligation should be recognized
      when incurred—generally upon acquisition, construction, or development and (or)
      through the normal operation of the asset. Uncertainty about the timing and
      (or)
      method of settlement of a conditional asset retirement obligation should be
      factored into the measurement of the liability when sufficient information
      exists. Statement 143 acknowledges that in some cases, sufficient information
      may not be available to reasonably estimate the fair value of an asset
      retirement obligation. This Interpretation also clarifies when an entity would
      have sufficient information to reasonably estimate the fair value of an asset
      retirement obligation **.** The
      adoption of revised FIN 47 is not expected to have a material effect on our
      consolidated financial statements.





In
      December 2004, FASB issued SFAS No. 153 to amend Opinion 29 by eliminating
      the
      exception for non-monetary exchanges of similar productive assets and replaces
      it with general exception for exchanges of non-monetary assets that do not
      have
      commercial substance. A non-monetary exchange is defined to have commercial
      substance if the future cash flows of the entity are expected to change
      significantly as a result of the exchange. The
      adoption of revised SFAS No. 153 is not expected to have a material effect
      on
      our consolidated financial statements





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued (“SFAS”)
      No. 123R (revised 2004), “Share-Based Payment.” SFAS No. 123(R) requires the
      Company to measure all employee stock-based compensation awards using a fair
      value method and record such expense in its consolidated financial statements.
      In addition, SFAS No. 123(R) requires additional accounting related to the
      income tax effects and additional disclosure regarding the cash flow effects
      resulting from share-based payment arrangements. For public entities that do
      not
      file as a small business issuer, SFAS No. 123(R) is effective for the first
      annual reporting period beginning after December 15, 2005.





We
      are
      assessing the effect on the consolidated financial statements as a result of
      implementation of these new U.S. standards.





**Subsequent
      Events**





Through
      March 11, 2006, we issued 410,000 shares for the exercise of stock options
      and
      6,097,742 common shares for the exercise of purchase warrants for net proceeds
      of $3,297,223.





In
      February of 2006, the shareholders of Minera Andes voted by a margin of 97%
      to
      approve the Corporation’s previously announced private placement with Mr. Robert
      McEwen. As part of their approval and to facilitate Rob McEwen’s investment in
      Minera Andes, shareholders voted in favor of redeeming the rights under the
      Corporation’s shareholder rights plan and of repealing the shareholder rights
      plan.




At
      the
      Special Meeting of the Common Shareholders, 37,947,501 shares were voted, of
      which 36,863,661 shares voted for approval of the matters put to shareholders.
      The shares voted represent 35% of the issued and





-
            44
            -





outstanding
      shares of the Corporation.





On March
      8,
      2006, we completed a second private placement with Mr. McEwen and sold
      13,156,689 shares at a price of Cdn$0.35 per unit for gross proceeds of
      Cdn$4,604,841 (US$3,970,703). Each unit consists of one common share and
      one-half of one common share purchase warrant. One whole common share purchase
      warrant entitles the holder to purchase one additional common share at an
      exercise price of Cdn$0.55 per share at any time prior to the earlier of: a)
      the
      date which is the 15th trading day after receiving notice from Minera Andes
      that
      the weighted average price of the common shares on the TSX Venture Exchange
      has
      been equal to or greater than C$1.00 for a period of 20 consecutive trading
      days
      commencing 120 days after the date of issuance of the warrants, and b) March
      8,
      2008.





The
      agents received a cash commission of 5% of the gross proceeds of the financing
      and 322,339 broker warrants, equal to 2.45% of the aggregate number of units
      sold. Each broker warrant upon exercise will entitle the holder to acquire
      one
      common share at an exercise price of Cdn$0.55 per common share at any time
      prior
      to the earlier of: a) the date which is the 15th trading day after receiving
      notice from Minera Andes that the weighted average price of the common shares
      on
      the TSX Venture Exchange has been equal to or greater than C$1.00 for a period
      of 20 consecutive trading days commencing 120 days after the date of issuance
      of
      the warrants, and b) March 8, 2008. All securities issued in the private
      placement are subject to a four-month hold period expiring on July 9,
      2006





Proceeds
      from the private placement will be used for further development and exploration
      of the advanced-stage, high-grade San José silver/gold project in southern
      Argentina, general corporate purposes, and exploration at the Los Azules copper
      discovery in west central Argentina, in accordance with Minera Andes’ announced
      letter of intent with Xstrata Copper Americas.





The
      Environmental Impact Assessment (EIA) for the San José project was submitted to
      the province in November of 2005 by Minera Santa Cruz (MSC), the joint venture
      corporation co-owned by Minera Andes (49%) and Mauricio Hochschild & Cia.
      Ltda. (51%). The EIA has been designed to fulfill the legal requirements in
      Argentina and also to comply with the procedures of evaluation widely accepted
      internationally (for example the World Bank and the International Finance
      Corporation guidelines and the Equator Principles) regarding environment and
      social protection measures. In addition, the EIA has been structured according
      to the national mining code. In March of 2006, the EIA, the primary document
      for
      permitting the San José silver/gold project, was approved by the province of
      Santa Cruz, Argentina. This approval allows us to construct the infrastructure,
      mine, and processing facilities.





**Other
      MD&A Requirements**





The
      Management Discussion & Analysis should be read in conjunction with the
      Corporation's audited financials for the year ended December 31, 2005 included
      in this report.





**Outstanding
      Share Data (as at March 31, 2006):**





**Class
                and Series of Security**
            **Number
                Outstanding**
            **Expiry
                Date of Convertible Securities**
            **Relevant
                Terms**Common
                shares
            109,992,637Stock
                options
            6,670,000
              (vested)
            Various
                (June 27, 2007 to March 21, 2013)
            Exercisable
                for one common share each at Cdn$0.31 to Cdn$0.61Purchase
                warrants
            34,855,505
            Various
                (December 14, 2006 to March 22, 2010)
            Exercisable
                for one common share each at Cdn$0.50 to Cdn$0.91Broker
                warrants
            1,650,293
            Various
                (March 22, 2007 to December 20, 2007)
            Exercisable
                for one common share each at Cdn$0.55 to
                Cdn$0.70








-
            45
            -








**Off-Balance
      Sheet Arrangements**





We
      have
      no off-balance sheet arrangements that have, or are reasonably likely to have,
      a
      current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that is material to investors





-
            46
            -





.




**ITEM
                7.**
            **FINANCIAL
                STATEMENTS**Index
                to Consolidated Financial Statements
            PageReport
                of Independent Registered Public Accounting Firm
            48Comments
                by the Auditors for U.S. Readers on Canada - U.S. Reporting
                Differences
            49Consolidated
                Balance Sheets at December 31, 2005 and 2004
            50Consolidated
                Statements of Operations and Accumulated Deficitfor
                the years ended December 31, 2005 and 2004 and for theperiod
                from July 1, 1994 (inception) through December 31, 2005
            51Consolidated
                Statements of Mineral Properties and Deferred ExplorationCosts
                for the years ended December 31, 2005 and 2004 and for theperiod
                from July 1, 1994 (inception) through December 31, 2005
            52Consolidated
                Statements of Cash Flows for the years endedDecember
                31, 2005 and 2004 and for the period from July 1, 1994(inception)
                through December 31, 2005
            53Notes
                to Consolidated Financial Statements
            55





-
            47
            -
















**Report
      of Independent
      Registered Public Accounting Firm**










**To
      the Shareholders of Minera Andes Inc.:**





We
      have
      audited the consolidated balance sheets of Minera Andes Inc. (an exploration
      stage corporation) as at December 31, 2005 and 2004 and the consolidated
      statements of operations and accumulated deficit, mineral properties and
      deferred exploration costs and cash flows for the years then ended. We have
      also
      audited the consolidated statements of operations and accumulated deficit,
      mineral properties and deferred exploration costs and cash flows for the period
      from July 1, 1994 (inception) through December 31, 2005. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with Canadian generally accepted auditing
      standards and the standards of the Public Company Accounting Oversight Board
      (United States). Those standards require that we plan and perform an audit
      to
      obtain reasonable assurance whether the financial statements are free of
      material misstatement. An audit includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements. An audit
      also includes assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation.





In
      our
      opinion, these consolidated financial statements present fairly, in all material
      respects, the financial position of Minera Andes Inc. (an exploration stage
      corporation) as at December 31, 2005 and 2004 and the results of its operations
      and its cash flows for the years then ended and for the period from July 1,
      1994
      (inception) through December 31, 2005 in accordance with Canadian generally
      accepted accounting principles.








/s/
      BDO
      Dunwoody LLP


Chartered
      Accountants


Vancouver,
      B.C. Canada


March
      11,
      2006





-
            48
            -













**Comments
      by the Auditors for U.S. Readers on Canada - U.S. Reporting
      Differences**











Public
      Company Accounting Oversight Board (United States) reporting standards for
      auditors require the addition of an explanatory paragraph (following the opinion
      paragraph) when the financial statements are affected by conditions and events
      that cast substantial doubt on the Company’s ability to continue as a going
      concern such as those described in Note 1 of the consolidated financial
      statements. Public Company Accounting Oversight Board (United States) reporting
      standards also require the addition of an explanatory paragraph (following
      the
      opinion paragraph) when changes in accounting policies, such as those involving
      2004 stock-based compensation and 2004 asset retirement obligations described
      in
      Note 2 of the consolidated financial statements, have a material effect on
      the
      consolidated financial statements. Furthermore,
      the standards of the Public Company Accounting Oversight Board (United States)
      require the addition of an explanatory paragraph when financial statements
      disclosures are restated, such as those described in Note 12(c), which have
      a
      material effect on the financial statements. Our
      report to the shareholders dated March 11, 2006, is expressed in accordance
      with
      Canadian reporting standards, which do not permit a reference to such conditions
      and events in the auditors’ report when these are adequately disclosed in the
      financial statements.








/s/
      BDO
      Dunwoody LLP


Chartered
      Accountants


Vancouver,
      B.C. Canada


March
      11,
      2006








-
            49
            -








**MINERA
      ANDES
      INC.**


**“An
      Exploration Stage
      Corporation”**


**CONSOLIDATED BALANCE SHEETS**


**(U.S. Dollars)**








**December
                31,**
              **2005**
            
            **December
                31,**
              **2004****ASSETS**Current:Cash
                and cash equivalents (Note 3)
            
            $
            3,314,559
            
            $
            1,726,820Receivables
                and
                prepaid expenses
            
            
            95,777
            
            
            111,570Total
                current
                assets
            
            
            3,410,336
            
            
            1,838,390Mineral
                properties and deferred exploration costs (Note 4)
            
            
            4,470,174
            
            
            2,827,655Investment
                (Note 4 (b))
            
            
            17,505,938
            
            
            7,345,840Equipment,
                net (Note 5)
            
            
            66,378
            
            
            97,655Total
                assets
            
            $
            25,452,826
            
            $
            12,109,540**LIABILITIES**Current:Accounts
                payable and accruals
            
            $
            259,806
            
            $
            257,268Bank
                loan interest payable
            
            
            84,064
            
            
            3,913Bank
                loan (Note 6)
            
            
            3,628,635
            
            
            653,800Total
                liabilities
            
            
            3,972,505
            
            
            914,981Commitments
                and contingencies (Notes 1, 4 and 8)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 7):Preferred
                shares, no par value, unlimited number authorized, none
                issuedCommon
                shares, no par value, unlimited number authorizedIssued
                December 31, 2005—108,484,137 shares
              Issued December 31, 2004—71,586,806 shares
            
            
            41,679,110
            
            
            28,711,334Contributed
                capital - stock option compensation (Notes 2 and 7)
            
            
            2,736,570
            
            
            1,663,677Accumulated
                deficit
            
            
            (22,935,359
            )
            
            (19,180,452
            )Total
                shareholders’
                equity
            
            
            21,480,321
            
            
            11,194,559Total
                liabilities and shareholders’ equity
            
            $
            25,452,826
            
            $
            12,109,540





Approved
      by the Board of Directors:




/s/
                Allen V. Ambrose
            **/s/
                Bonnie L. KuhnAllen
                V. Ambrose, Director
            Bonnie
                L. Kuhn, Director




*The
      accompanying notes are an integral part of these consolidated financial
      statements.*





-
            50
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT**


**(U.S.
      Dollars)**


**Period
                            from****Year
                            Ended**
                        
                        **July
                            1, 1994****(inception)****through****December
                            31, 2005**
                        
                        **December
                            31, 2004**
                        
                        **December
                            31, 2005**Consulting
                            fees (Note 7 (c))
                        
                        $
                        595,752
                        
                        $
                        527,838
                        
                        $
                        2,561,976Depreciation
                        
                        
                        10,393
                        
                        
                        13,347
                        
                        
                        87,890Equipment
                            rental
                        
                        
                        --
                        
                        
                        --
                        
                        
                        21,522Foreign
                            exchange (gain) loss
                        
                        
                        82,245
                        
                        
                        (260,549
                        )
                        
                        178,928Insurance
                        
                        
                        69,813
                        
                        
                        69,180
                        
                        
                        391,884Legal,
                            audit and accounting fees
                        
                        
                        267,225
                        
                        
                        235,973
                        
                        
                        1,778,430Materials,
                            supplies and maintenance
                        
                        
                        --
                        
                        
                        --
                        
                        
                        49,260Office
                            overhead and administration fees
                        
                        
                        308,037
                        
                        
                        526,279
                        
                        
                        2,696,781Telephone
                        
                        
                        36,089
                        
                        
                        22,856
                        
                        
                        452,923Transfer
                            agent
                        
                        
                        22,178
                        
                        
                        9,077
                        
                        
                        138,934Travel
                        
                        
                        87,667
                        
                        
                        65,191
                        
                        
                        546,494Wages
                            and benefits (Note 7 (c))
                        
                        
                        858,969
                        
                        
                        508,943
                        
                        
                        2,915,986Write-off
                            of deferred exploration costs (Note 4 (e))
                        
                        
                        --
                        
                        
                        --
                        
                        
                        8,540,235Total
                            expenses
                        
                        
                        2,338,368
                        
                        
                        1,718,135
                        
                        
                        20,361,243Gain
                            on sale of equipment
                        
                        
                        --
                        
                        
                        (7,742
                        )
                        
                        (112,330
                        )Gain
                            on sale of mineral property (Note 4(c))
                        
                        
                        --
                        
                        
                        --
                        
                        
                        (898,241
                        )Loss
                            on investment (Note 4 (b))
                        
                        
                        1,354,397
                        
                        
                        420,349
                        
                        
                        1,774,746Interest
                            income
                        
                        
                        (58,705
                        )
                        
                        (71,837
                        )
                        
                        (599,108
                        )Net
                            loss for the period
                        
                        
                        3,634,060
                        
                        
                        2,058,905
                        
                        
                        20,526,310Accumulated
                            deficit, beginning of the period, as previously reported
                        
                        
                        19,180,452
                        
                        
                        16,356,398
                        
                        
                        --Adjustment
                            for change in accounting for stock-based compensation
                            (Note 2
                            (l))
                        
                        
                        --
                        
                        
                        678,569
                        
                        
                        678,56922,814,512
                        
                        
                        19,093,872
                        
                        
                        21,204,879Adjustment
                            on acquisition of royalty interest
                        
                        
                        --
                        
                        
                        --
                        
                        
                        500,000Share
                            issue costs
                        
                        
                        120,847
                        
                        
                        86,580
                        
                        
                        1,213,265Deficiency
                            on acquisition of subsidiary
                        
                        
                        --
                        
                        
                        --
                        
                        
                        17,215Accumulated
                            deficit, end of the period
                        
                        $
                        22,935,359
                        
                        $
                        19,180,452
                        
                        $
                        22,935,359Basic
                            and diluted loss per common share
                        
                        $
                        0.04
                        
                        $
                        0.03Weighted
                            average shares outstanding
                        
                        
                        87,056,150
                        
                        
                        68,393,266




*The
      accompanying notes are an integral part of these consolidated financial
      statements.*





-
            51
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**CONSOLIDATED
      STATEMENTS OF MINERAL PROPERTIES**


**AND
      DEFERRED EXPLORATION COSTS**


**(U.S.
      Dollars)**


**Period
                  from****July
                  1, 1994****Year
                  Ended**
              
              **(inception)****through****December
                  31,****December
                  31,**
                **2005**
              
              **December
                  31,**
                **2004**
              
              **2005**Administration
                  fees
              
              $
              --
              
              $
              --
              
              $
              392,837Assays
                  and analytical
              
              
              99,224
              
              
              112,871
              
              
              1,157,041Construction
                  and trenching
              
              
              7,932
              
              
              2,661
              
              
              534,283Consulting
                  fees
              
              
              149,156
              
              
              109,779
              
              
              1,321,949Depreciation
              
              
              25,167
              
              
              26,442
              
              
              222,234Drilling
              
              
              396,110
              
              
              264,450
              
              
              1,589,393Equipment
                  rental
              
              
              84,303
              
              
              176,025
              
              
              505,252Geology
              
              
              317,653
              
              
              729,427
              
              
              4,066,988Geophysics
              
              
              65,058
              
              
              --
              
              
              374,960Insurance
              
              
              1,853
              
              
              --
              
              
              257,412Legal
              
              
              88,985
              
              
              47,659
              
              
              830,472Maintenance
              
              
              6,740
              
              
              18,097
              
              
              187,954Materials
                  and supplies
              
              
              41,667
              
              
              39,089
              
              
              516,940Project
                  overhead
              
              
              53,877
              
              
              64,503
              
              
              439,535Property
                  and mineral rights
              
              
              41,484
              
              
              88,762
              
              
              1,454,083Telephone
              
              
              25,903
              
              
              22,697
              
              
              134,919Travel
              
              
              106,677
              
              
              93,950
              
              
              1,320,691Wages
                  and benefits
              
              
              130,730
              
              
              115,944
              
              
              1,427,208Costs
                  incurred during the period
              
              
              1,642,519
              
              
              1,912,356
              
              
              16,734,151Deferred
                  costs, beginning of the period
              
              
              2,827,655
              
              
              915,299
              
              
              --Deferred
                  costs, acquired
              
              
              --
              
              
              --
              
              
              576,139Deferred
                  costs, contributed to MSC
              
              
              --
              
              
              --
              
              
              (2,320,980
              )Deferred
                  costs written off
              
              
              --
              
              
              --
              
              
              (8,540,235
              )Mineral
                  property option proceeds, net
              
              
              --
              
              
              --
              
              
              (1,978,901
              )Deferred
                  costs, end of the period
              
              $
              4,470,174
              
              $
              2,827,655
              
              $
              4,470,174





*The
      accompanying notes are an integral part of these consolidated financial
      statements.*





-
            52
            -











**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(U.S.
      Dollars)**





**Year
                  Ended**
              
              **Period
                  from****July
                  1, 1994****(inception)****through****December
                  31, 2005**
              
              **December
                  31, 2004**
              
              **December
                  31, 2005**Operating
                  Activities:Net
                  loss for the
                  period
              
              $
              (3,634,060
              )
              $
              (2,058,905
              )
              $
              (20,526,310
              )Adjustments
                  to
                  reconcile net loss to net cashprovided
                  by (used
                  in) operating activities:Write-off
                  of incorporation costs
              
              
              --
              
              
              --
              
              
              665Write-off
                  of deferred exploration costs
              
              
              --
              
              
              --
              
              
              8,540,235Loss
                  on investment
              
              
              1,354,397
              
              
              420,349
              
              
              1,774,746Depreciation
              
              
              10,393
              
              
              13,347
              
              
              87,890Stock
                  option compensation
              
              
              809,093
              
              
              478,020
              
              
              1,448,001Gain
                  on sale of equipment
              
              
              --
              
              
              (7,742
              )
              
              (112,330
              )Gain
                  on sale of mineral properties
              
              
              --
              
              
              --
              
              
              (898,241
              )Change
                  in:Receivables
                  and
                  prepaid expenses
              
              
              15,793
              
              
              116,553
              
              
              (95,777
              )Accounts
                  payable and accruals
              
              
              2,538
              
              
              160,628
              
              
              259,806Due
                  to
                  related parties
              
              
              --
              
              
              (30,531
              )
              
              --Cash
                  used in operating activities
              
              
              (1,441,846
              )
              
              (904,368
              )
              
              (9,521,315
              )Investing
                  Activities:Incorporation
                  costs
              
              
              --
              
              
              --
              
              
              (665
              )Purchase
                  of equipment
              
              
              (4,283
              )
              
              (55,689
              )
              
              (305,612
              )Proceeds
                  from sale of equipment
              
              
              --
              
              
              14,225
              
              
              14,225Proceeds
                  from sale of property
              
              
              --
              
              
              --
              
              
              898,241Mineral
                  properties and deferred exploration
              
              
              (1,617,352
              )
              
              (1,885,914
              )
              
              (16,511,917
              )Investment
              
              
              (11,595,709
              )
              
              (4,103,062
              )
              
              (17,437,005
              )Proceeds
                  from sale of subsidiaries
              
              
              --
              
              
              --
              
              
              9,398Acquisition
                  of royalty interest
              
              
              --
              
              
              --
              
              
              (500,000
              )Mineral
                  property option proceeds
              
              
              400,000
              
              
              400,000
              
              
              2,778,901Cash
                  used in investing activities
              
              
              (12,817,344
              )
              
              (5,630,440
              )
              
              (31,054,434
              )





-
            53
            -





**MINERA
        ANDES INC.**
 **“An
        Exploration Stage Corporation”**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS - Continued**
 **(U.S.
        Dollars)**
 **Period
                    from**
                  **July
                    1, 1994**
                  **(inception)**
                  **through**
                  **December
                    31, 2005****Year
                    Ended****December
                    31, 2005**
                
                **December
                    31, 2004**Financing
                    Activities:Shares
                    and subscriptions issued for cash, less issue costs
                
                
                12,846,929
                
                
                5,027,286
                
                
                39,890,308Bank
                    loan proceeds received
                
                
                3,000,000
                
                
                1,000,000
                
                
                4,000,000Cash
                    provided by financing activities
                
                
                15,846,929
                
                
                6,027,286
                
                
                43,890,308Increase(decrease)in
                    cash and cash equivalents
                
                
                1,587,739
                
                
                (507,522
                )
                
                3,314,559Cash
                    and cash equivalents, beginning of period
                
                
                1,726,820
                
                
                2,234,342
                
                
                --Cash
                    and cash equivalents, end of period
                
                $
                3,314,559
                
                $
                1,726,820
                
                $
                3,314,559Supplemental
                    disclosure cash flow information:Interest
                    paid
                
                $
                84,344
                
                $
                --
                
                $
                84,344Non-cash
                    investing and financing activities and other information:Stock
                    option compensation (Note 7)
                
                $
                809,093
                
                $
                478,020
                
                $
                1,448,001Capitalized
                    interest (Note 6)
                
                $
                164,495
                
                $
                3,913
                
                $
                168,408Capitalized
                    accreted interest expense (Note 6)
                
                $
                238,635
                
                $
                -
                
                $
                238,635Depreciation
                    capitalized to mineral properties
                
                $
                25,167
                
                $
                26,442
                
                $
                51,609Adjustment
                    for change in accounting for stock-based compensation (Note 2
                    (l))
                
                $
                --
                
                $
                --
                
                $
                678,569Deferred
                    costs, acquired
                
                $
                --
                
                $
                --
                
                $
                576,139Deferred
                    costs, contributed to MSC (Note 4 (b))
                
                $
                --
                
                $
                --
                
                $
                2,320,980Shares
                    issued for acquisition
                
                $
                --
                
                $
                --
                
                $
                575,537


*The
      accompanying notes are an integral part of these consolidated financial
      statements.*








-
            54
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**







**1.**
            **NATURE
                OF OPERATIONS****AND
                ABILITY TO CONTINUE AS A GOING
                CONCERN**





We
      are in
      the business of acquiring, exploring and evaluating mineral properties, and
      either entering into joint ventures, developing these properties further, or
      disposing of them when the evaluation is completed. At December 31, 2005, we
      were in the exploration stage and had interests in properties in three provinces
      in the Republic of Argentina.





The
      recoverability of amounts shown as mineral properties and deferred exploration
      costs is dependent upon the existence of economically recoverable reserves,
      the
      ability to obtain necessary financing to complete our development, and the
      future profitable production or disposition thereof. The accompanying
      consolidated financial statements have been prepared using Canadian generally
      accepted accounting principles applicable to a going concern. The use of such
      principles may not be appropriate because, as of December 31, 2005, there was
      significant doubt that we would be able to continue as a going
      concern.





At
      December 31, 2005, we had an accumulated deficit of approximately $23 million.
      In addition, due to the nature of the mining business, the acquisition,
      exploration and development of mineral properties requires significant
      expenditures prior to the commencement of production. To date, we have financed
      our activities through the issuance of equity securities, debt financing, and
      joint venture arrangements. We expect to use similar financing techniques in
      the
      future and are actively pursuing such additional sources of financing (see
      Note
      13).





Although
      there is no assurance that we will be successful in these actions, management
      believes that it will be able to secure the necessary financing to enable the
      Company to continue as a going concern. Accordingly, these financial statements
      do not reflect adjustments to the carrying value of assets and liabilities,
      the
      reported revenues and expenses and balance sheet classifications used that
      would
      be necessary if the going concern assumption were not appropriate. Such
      adjustments could be material.





Although
      we have taken steps to verify title to mineral properties in which we have
      an
      interest, in accordance with industry standards for the current stage of
      exploration of such properties, these procedures do not guarantee title.
      Property title may be subject to unregistered prior agreements and noncompliance
      with regulatory requirements.





**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES**





The
      statements are expressed in United States dollars because the majority of our
      exploration activities are incurred in U.S. dollars.





**a.**  **Consolidation/Reporting**


These
      consolidated financial statements include the accounts of Minera Andes Inc.,
      an
      Alberta Corporation, and all its wholly-owned subsidiaries including its
      principal subsidiaries, Minera Andes S.A. (“MASA”) and Minera Andes (USA) Inc.
      (“MUSA”) as well as other non-significant subsidiaries. Our investment in Minera
      Santa Cruz S.A. (“MSC”), an Argentine corporation, is accounted for by the
      equity method, whereby the Company records its investment and its 49% share
      of
      the income and expense of MSC. All significant intercompany transactions and
      balances have been eliminated from the consolidated financial statements.





**b.**
            **Foreign
                Currency Translation**


Our
      consolidated operations are integrated and balances denominated in currencies
      other than U.S. dollars are translated into U.S. dollars using the temporal
      method. This method translates monetary balances at the rate of exchange at
      the
      balance sheet date, non-monetary balances at historic exchange rates and
      revenues and expense items at average exchange rates. The resulting gains and
      losses are included in the statement of operations in the reporting
      period.





-
            55
            -








**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES - continued**





**c.   
      Cash and Cash Equivalents**


We
      consider cash and cash equivalents to include amounts held in banks and highly
      liquid investments with remaining maturities at point of purchase of three
      months or less. We place our cash and cash equivalents with institutions of
      high
      credit worthiness. At times, such investments may be in excess of federal
      insurance limits.





**d.**
            **Mineral
                Properties and Deferred Exploration
                Costs**


Mineral
      properties consist of exploration and mining concessions, options and contracts.
      Acquisition and leasehold costs and exploration costs are capitalized and
      deferred until such time as the property is put into production or the
      properties are disposed of either through sale or abandonment. If put into
      production, the costs of acquisition and exploration will be depreciated over
      the life of the property, based on estimated economic reserves. Proceeds
      received from the sale of any interest in a property will first be credited
      against the carrying value of the property, with any excess included in
      operations for the period. Where
      the Company enters into an option agreement for the acquisition of an interest
      in mining properties which provides for periodic payments, such amounts are
      payable entirely at the Company’s option. If a
      property is abandoned, the property and deferred exploration costs will be
      written off to operations. On a quarterly basis, we evaluate the future
      recoverability of our mineral properties and deferred exploration costs.





**e.     Investment**


Investments,
      over which we exert significant influence, are accounted for using the equity
      method. Under this method, our share of the earnings and losses is included
      in
      operations and our investment therein is adjusted by a like amount. Where in
      management’s opinion there has been a loss in value that is other than a
      temporary decline, the carrying value is reduced to estimated realizable
      value.





**f.**   **Equipment
      and Depreciation**


Equipment
                is recorded at cost, and depreciation is provided on a declining
                - balance
                basis over their estimated useful lives of up to five years to a
                residual
                value of 10%.





**g.**
            **Share Issue Costs**


Commissions
                paid to underwriters and agents on the issuance of our shares are
                charged
                directly to share capital. Other share issue costs, such as legal,
                accounting, auditing and printing costs, are charged to accumulated
                deficit.





**h.**
            **Accounting
                for Income Taxes**


Income
                taxes are calculated using the liability method of accounting. Temporary
                differences arising from the difference between the tax basis of
                an asset
                or liability and its carrying amount on the balance sheet are used
                to
                calculate future income tax liabilities or assets. Future income
                tax
                assets and liabilities are measured using tax rates and laws that
                are
                expected to apply when the temporary differences are expected to
                reverse.





**i.**
            **Basic
                and Diluted Loss Per Common Share**


Basic
      loss per share is calculated by dividing net loss applicable to common
      shareholders by the weighted-average number of common shares outstanding for
      the
      year.





For
      the
      years ended December 31, 2005 and 2004, potentially dilutive common shares
      (relating to options and warrants outstanding at year end) totaling 43,175,798
      (2004 - 25,031,259) were not included in the computation of loss per share
      because their effect was anti-dilutive.





-
            56
            -








**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES - continued**





**j.**
            **Estimates**


The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates based on information
      available at the time, and assumptions that affect the reported amount of
      assets, particularly the recoverability of mineral properties and deferred
      exploration expenses, and the recording of liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements,
      and
      the reported amounts of revenues and expenditures during the reporting period.
      Actual results could differ from management’s best estimates.





**k.**
            **Fair
                Value of Financial
                Instruments**


The
      carrying values of cash and cash equivalents, receivables, accounts payable
      and
      accruals, and bank loan interest payable approximate their fair values due
      to
      the short term nature of the instruments. The fair value of the Company’s
      investment in MSC, a private company, was not practical to determine. Unless
      otherwise noted, it is management’s opinion that we are not exposed to
      significant foreign currency or other risks arising from these financial
      instruments.





**l.**
            **Stock
                Based Compensation**


Effective
      January 1, 2004 we adopted on a retroactive basis without restatement, the
      new
      recommendations of CICA Handbook Section 3870, “Stock-Based Compensation and
      Other Stock-Based Payments”, which requires companies to adopt the fair value
      method for all stock-based awards granted on or after January 1, 2002.
      Previously we used the intrinsic value method of accounting for stock options
      granted to employees and directors (for services rendered as a director) whereby
      we were only required to disclose the pro forma effect of stock options granted
      to the above noted parties in the notes to the financial statements. The effect
      of this change in accounting policy was to increase the accumulated deficit
      at
      January 1, 2004 by $678,569 with a corresponding increase to contributed
      surplus.




**m.**  **Asset
      Retirement Obligations**


Effective
      January 1, 2004, we adopted CICA 3110, “Asset Retirement Obligations” which
      requires us to record the fair value of an asset retirement obligation as a
      liability in the period in which it incurred a legal obligation associated
      with
      the retirement of tangible long-lived assets that result from the acquisition,
      construction, development, and/or normal use of the assets. The obligation
      is
      measured initially at fair value using present value methodology, and the
      resulting costs are capitalized into the carrying amount of the related asset.
      In subsequent periods, the liability will be adjusted for any changes in the
      amount or timing of the underlying future cash flows. Capitalized asset
      retirement costs are depreciated on the same basis as the related asset and
      the
      discounted accretion of the liability is included in determining the results
      of
      operations.





There
      is
      no material impact on the consolidated financial statements resulting from
      the
      adoption of CICA 3110 in the current or prior periods presented.





-
            57
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**








**3.**  **CASH
      AND CASH EQUIVALENTS**





Cash
      and
      cash equivalents are comprised of the following:





20052004


Cash
        on
        hand- US dollar denominated bank accounts    $3,153,259 $1,704,662
  Cash
        on
        hand- Canadian dollar denominated bank
        account                                          
163, 116  87,784
 (Overdaft)-
          Argentina Peso denominated bank account       
          (1,816)(65,626)
 $
          3,314,559         
           $
          1,726,820










**4.**  **MINERAL
      PROPERTIES, DEFERRED EXPLORATION COSTS AND INVESTMENTS**





At
      December 31, 2005, we, through our subsidiaries and investment, hold interests
      in a total of approximately 439,804 acres (177,986 hectares) of mineral rights
      and mining lands in three Argentine provinces. Under our present acquisition
      and
      exploration programs, we are continually acquiring additional mineral property
      interests and exploring and evaluating our properties. If, after evaluation,
      a
      property does not meet our requirements, then the property and deferred
      exploration costs are written off to operations. All properties in Argentina
      are
      subject to a royalty agreement as disclosed in Note 8. Mineral property costs
      and deferred exploration costs, net of mineral property option proceeds, are
      as
      follows:





-
            58
            -







**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**








**4.**  **MINERAL
      PROPERTIES, DEFERRED EXPLORATION COSTS AND INVESTMENTS -
      continued**





**2005
      COSTS BY PROPERTY**





**Description**
            
            **San
                Juan**
              **Cateos**
            
            **Santa
                Cruz Cateos**
            
            **Chubut**
              **Cateos**
            
            **General**
              **Exploration**
            
            **Total**Balance,
                beginning of year
            
            $
            1,065,399
            
            $
            1,582,043
            
            $
            180,213
            
            $
            --
            
            $
            2,827,655Assays
                and analytical
            
            
            --
            
            
            99,224
            
            
            --
            
            
            --
            
            
            99,224Construction
                and trenching
            
            
            --
            
            
            7,932
            
            
            --
            
            
            --
            
            
            7,932Consulting
                fees
            
            
            2,874
            
            
            46,849
            
            
            12,605
            
            
            86,828
            
            
            149,156Depreciation
            
            
            --
            
            
            --
            
            
            --
            
            
            25,167
            
            
            25,167Drilling
            
            
            --
            
            
            396,110
            
            
            --
            
            
            --
            
            
            396,110Equipment
                Rental
            
            
            --
            
            
            84,303
            
            
            --
            
            
            --
            
            
            84,303Geology
            
            
            2,910
            
            
            226,358
            
            
            6,345
            
            
            82,040
            
            
            317,653Geophysics
            
            
            --
            
            
            65,058
            
            
            --
            
            
            --
            
            
            65,058Insurance
            
            
            --
            
            
            --
            
            
            --
            
            
            1,853
            
            
            1,853Legal
            
            
            --
            
            
            --
            
            
            --
            
            
            88,985
            
            
            88,985Maintenance
            
            
            --
            
            
            5,429
            
            
            --
            
            
            1,311
            
            
            6,740Materials
                and supplies
            
            
            51
            
            
            32,331
            
            
            536
            
            
            8,749
            
            
            41,667Project
                overhead
            
            
            111
            
            
            3,013
            
            
            1,688
            
            
            49,065
            
            
            53,877Property
                and mineral rights
            
            
            12,103
            
            
            27,622
            
            
            1,759
            
            
            --
            
            
            41,484Telephone
            
            
            3
            
            
            15,970
            
            
            12
            
            
            9,918
            
            
            25,903Travel
            
            
            193
            
            
            54,029
            
            
            259
            
            
            52,196
            
            
            106,677Wages
                and benefits
            
            
            9,214
            
            
            17,388
            
            
            --
            
            
            104,128
            
            
            130,730Overhead
                allocation
            
            
            56,428
            
            
            435,843
            
            
            17,969
            
            
            (510,240
            )
            
            --**Balance,
                end of year**
            
            **$**
            **1,149,286**
            
            **$**
            **3,099,502**
            
            **$**
            **221,386**
            
            **$**
            **--**
            
            **$**
            **4,470,174**








-
            59
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**4.**  **MINERAL
      PROPERTIES, DEFERRED EXPLORATION COSTS AND INVESTMENTS -
      continued**





**2004
      COSTS BY PROPERTY**





**Description**
            
            **San
                Juan**
              **Cateos**
            
            **Santa
                Cruz Cateos**
            
            **Chubut**
              **Cateos**
            
            **General**
              **Exploration**
            
            **Total**Balance,
                beginning of year
            
            $
            378,806
            
            $
            393,886
            
            $
            142,607
            
            $
            --
            
            $
            915,299Assays
                and analytical
            
            
            31,093
            
            
            81,331
            
            
            --
            
            
            447
            
            
            112,871Construction
                and trenching
            
            
            2,491
            
            
            170
            
            
            --
            
            
            --
            
            
            2,661Consulting
                fees
            
            
            7,067
            
            
            35,012
            
            
            10,182
            
            
            57,518
            
            
            109,779Depreciation
            
            
            --
            
            
            --
            
            
            --
            
            
            26,442
            
            
            26,442Drilling
            
            
            263,469
            
            
            645
            
            
            --
            
            
            336
            
            
            264,450Equipment
                Rental
            
            
            132,688
            
            
            43,337
            
            
            --
            
            
            --
            
            
            176,025Geology
            
            
            164,738
            
            
            539,224
            
            
            2,529
            
            
            22,936
            
            
            729,427Legal
            
            
            --
            
            
            220
            
            
            --
            
            
            47,439
            
            
            47,659Maintenance
            
            
            3
            
            
            15,217
            
            
            --
            
            
            2,877
            
            
            18,097Materials
                and supplies
            
            
            2,537
            
            
            28,192
            
            
            244
            
            
            8,116
            
            
            39,089Project
                overhead
            
            
            5,153
            
            
            9,399
            
            
            562
            
            
            49,389
            
            
            64,503Property
                and mineral rights
            
            
            10,660
            
            
            60,770
            
            
            17,301
            
            
            31
            
            
            88,762Telephone
            
            
            2,844
            
            
            10,158
            
            
            20
            
            
            9,675
            
            
            22,697Travel
            
            
            7,965
            
            
            54,006
            
            
            495
            
            
            31,484
            
            
            93,950Wages
                and benefits
            
            
            12,463
            
            
            26,618
            
            
            --
            
            
            76,863
            
            
            115,944Overhead
                allocation
            
            
            43,422
            
            
            283,858
            
            
            6,273
            
            
            (333,553
            )
            
            --**Balance,
                end of year**
            
            **$**
            **1,065,399**
            
            **$**
            **1,582,043**
            
            **$**
            **180,213**
            
            **$**
            **--**
            
            **$**
            **2,827,655**








**a.**  **San
      Juan Project**


The
      San
      Juan Province project comprises five properties totaling 24,318 hectares (“ha”)
      (2004 - 20,900 ha) in southwestern San Juan province. At present, these lands
      are not subject to a royalty; however, the government of San Juan has not waived
      its rights to retain up to a 3% "mouth of mine" royalty from production. Land
      holding costs for 2006 are estimated at $1,616.





-
            60
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**4.**  **MINERAL
      PROPERTIES, DEFERRED EXPLORATION COSTS AND INVESTMENTS
      -continued**





Expenditures
      in 2004 largely relate to land maintenance and an exploration program at the
      Los
      Azules project, while expenditures for 2005 were primarily for land maintenance.
      In November, 2005, we signed a letter of intent over the Los Azules porphyry
      copper project with Xstrata Copper (“Xstrata”). Xstrata and Minera Andes own
      separate, adjoining properties that straddle a large copper porphyry system.
      The
      letter of intent consolidates these properties and gives us a right to earn
      a
      100 percent interest in Xstrata’s property by spending at least US$1.0 million
      on the property over the next four years, making payments to keep the property
      in good standing and producing a preliminary economic assessment (to NI 43-101
      standards). If the preliminary assessment shows the project to be potentially
      economically viable and can be expected to produce 100,000 tonnes of copper
      per
      year for 10 years then Xstrata Copper will have a one time back-in right to
      earn
      a 51 percent interest in the combined properties by making a cash payment to
      Minera Andes of three times its expenditures on the property, completing a
      bankable feasibility study within five years and assuming underlying property
      commitments. In the event that the preliminary assessment does not meet the
      size
      criterion contemplated above, Xstrata Copper would retain a first right of
      refusal on any subsequent sale of the property.





**b.**
            **San
                José Project (Investment in
                MSC)**


The
      investment in Minera Santa Cruz S.A. is comprised of the following:


_______________




**2005**
            
            **2004**Investment
                in MSC, beginning of year
            
            $
            7,345,840
            
            $
            4,063,127Plus:Deferred
                costs incurred
            
            
            595,495
            
            
            196,993Advances
                during the year
            
            
            11,319,000
            
            
            3,906,069Option
                agreement proceeds
            
            
            (400,000
            )
            
            (400,000
            )Loss
                from equity investment
            
            
            (1,354,397
            )
            
            (420,349
            )$
            17,505,938
            
            $
            7,345,840


________________





The
      San
      José project area is made up of one cateo and 46 manifestations of discovery
      totaling 40,499 ha. The cateos are located in the western half of the province
      of Santa Cruz. All of the cateos are controlled 100% by Minera Santa Cruz S.A.
      (“MSC”), a holding and operating company set up under the terms of an agreement
      with Mauricio Hoschschild & Cia. Ltda. (“MHC”). Any production from these
      lands may be subject to a provincial royalty. Holding costs for 2006 are
      estimated to be $3,100.





In
      October of 2000, following completion of a 30-day due diligence period under
      a
      memorandum of understanding, MHC exercised an option to enter into a joint
      venture (“JV”) on the project.





-
            61
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**4.**
            **MINERAL
                PROPERTIES, DEFERRED EXPLORATION COSTS AND INVESTMENTS -
                continued**





On
      March
      15, 2001, we signed an option and joint venture agreement with MHC for the
      exploration and possible development of Minera Andes’ epithermal gold-silver
      exploration land package at El Pluma/Cerro Saavedra (now referred to as San
      José), including Huevos Verdes.





Under
      the
      agreement, in July 2003 MHC earned a 51% ownership in the JV by spending a
      total
      of $3 million, including a minimum of $100,000 per year on exploration targets
      within the JV, other than Huevos Verdes, the most advanced prospect. In
      addition, MHC was to make semiannual payments totaling $400,000 per year until
      pilot plant production is achieved. In September 2004, an amendment to the
      agreement stated such payments should be made until a positive feasibility
      study
      for the development of a mine on the property is obtained by MSC and the board
      of MSC takes a decision to construct the mine. To date, MHC has made all
      required payments. During 2005 a positive feasibility study was completed such
      that the semiannual payments totaling $400,000 per year are no longer payable
      by
      MHC.





Following
      MHC’s vesting at 51% ownership; Minera Andes opted to participate in the
      development of the project on a pro-rata basis.





In
      the
      fourth quarter of 2003, we notified MHC of our intent to subscribe for
      additional equity in MSC, so as to maintain a 49% interest. We made payments
      of
      $11.3 million and $3.9 million in 2005 and 2004, respectively, to fund our
      49%
      interest in the project. As a result of the fact that we do not control the
      JV,
      we are accounting for this investment under the equity method.





Expenditures
      in 2004 and 2005 consisted of drilling, detailed topographic surveys, detailed
      mapping and sampling. Development work included completion of the shafts and
      additional work related to pre-feasibility and feasibility studies. In October
      2005, MSC completed a positive feasibility study for the development of a mine
      on the property and in December 2005, the board of MSC made a decision to
      construct the mine subject to receiving all necessary permits and government
      approvals.





Subsequent
      to December 31, 2005, we made payments of $4.4 million to fund our 49% interest
      in the San Jos é project.





**c.**  **Chubut
      Projects**


We
      hold
      13 (2004 - 20) manifestations of discovery in the Precordilleran region of
      Chubut, totaling 10,380 hectares. In August 2000, we signed an agreement with
      Brancote Holdings PLC subsidiaries to purchase two of our Chubut gold
      exploration properties. The agreements covered the Willimanco, Leleque and
      Leon
      properties. All required payments pursuant to the agreements had been received
      by December 31, 2001 and in November 2002, we negotiated a buy-out of these
      Chubut properties with Meridian Gold Inc. (surviving entity of Brancote Holdings
      PLC merger) for $204,000 (Argentina Peso$720,000) and $56,700 (Argentina
      Peso$200,000), resulting in a gain of $898,241.





Expenditures
      in 2005 relate primarily to land maintenance costs. Expenditures in 2004 relate
      to a reconnaissance exploration program on lands acquired in 2002. Land holding
      costs for 2006 are estimated at $1,300.





-
            62
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**4.**  **MINERAL
      PROPERTIES, DEFERRED EXPLORATION COSTS AND INVESTMENTS -
      continued**





**d.**
            **Santa
                Cruz Projects**


We
      currently control 15 (2004 - 20) cateos and 40 (2004 - 57) manifestations of
      discovery totaling 102,789 (2004 - 122,263) ha in the Santa Cruz province.
      Land
      holding costs for 2006 are estimated at $3,819. We have been actively exploring
      in the region since 1997. The properties have been acquired on the basis of
      geologic and geochemical reconnaissance. Expenditures in 2005 relate to land
      acquisition and reconnaissance geologic surveys on the acquired properties.
      Geologic evaluation of these targets is ongoing.





**e.**  **Write-Off
      of Mineral Property and Deferred Exploration Costs**


Having
      completed an impairment review, we did not write-off any mineral property and
      deferred exploration costs in 2005 (2004 - nil).





**5.**
            **EQUIPMENT**





**December
                31, 2005**
            
            **December
                31, 2004****Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net**
            
            **Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net**Field
              Equipment
            
            $
            96,049
            
            $
            55,235
            
            $
            40,814
            
            $
            96,049
            
            $
            34,186
            
            $
            61,863Office
                Equipment
            
            
            81,627
            
            
            56,063
            
            
            25,564
            
            
            77,343
            
            
            41,551
            
            
            35,792**Total**
            
            $
            177,676
            
            $
            111,298
            
            $
            66,378
            
            $
            173,392
            
            $
            75,737
            
            $
            97,655





**6.**
            **BANK
                LOAN**





In
      December 2004, we secured a two-year loan facility of up to $4 million from
      Macquarie Bank Limited (“Macquarie”). All amounts advanced are due in December
      2006. This facility has been provided in two tranches to fund our 49% portion
      of
      the costs of completing a bankable feasibility study and related development
      work for the San José/Huevos Verdes gold/silver project in Argentina.





The
      commercial terms of the loan include a facility fee of 1.5% of the principal
      amount of each tranche at the time of the advance and interest of LIBOR plus
      2%
      per year, currently totaling approximately 6.5% per year. In addition, as
      further explained below, we issued share purchase warrants for each tranch.
      The
      warrants exercise price was calculated at a 20 percent premium to the volume
      weighted average of our common stock determined from the ten business days
      prior
      to acceptance of the loan facility. Each warrant is exercisable for two years.
      The loan is collateralized by our interest in Minera Andes S.A., our 49%
      interest in MSC, and personal property.





-
            63
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**6.**
            **BANK
                LOAN - continued**





We
      received $1,000,000 of the first tranche in December 2004 and the remaining
      $1,000,000 of the first tranche in February 2005. In connection with the first
      tranche, we issued share purchase warrants to acquire 2,738,700 of our common
      stock at an exercise price of Cdn $0.91 per share (Note 7 (d)). The fair value
      of the warrants was calculated using the Black-Scholes option pricing model
      with
      the following assumptions: dividend yield - Nil; risk free interest rate -
      3.53%; expected volatility of 62% and an expected life of 24 months. The
      difference between the allocated fair value and the face value of the debt
      of
      $346,200 was initially recorded as a debt discount with a corresponding entry
      to
      contributed surplus. The debt discount is being accreted to interest expense
      over the term of the debt using the effective interest rate method. No amount
      of
      the discount was accreted in 2004 since the debt agreement only became effective
      in December 2004. The accretion of the debt discount began in January
      2005.





In
      July
      2005, we received the second tranche of $2,000,000. For the second tranche,
      we
      issued share purchase warrants to acquire 3,987,742 of our Common Shares at
      an
      exercise price of Cdn$0.62 per share. The fair value of the warrants was
      calculated using the Black-Scholes option pricing model with the following
      assumptions: dividend yield - Nil; risk free interest rate - 3.99%; expected
      volatility of 55.8% and an expected life of 24 months. The difference between
      the allocated fair value and the face value of the debt of $263,800 was
      initially recorded as a debt discount with a corresponding entry to contributed
      capital.





The
      debt
      discount is being accreted and capitalized to our investment in MSC (Note 4)
      over the term of the debt using the effective interest rate method. For the
      year
      ended December 31, 2005, $238,635 of debt discount was accreted.





The
      bank
      loan and debt discount are summarized as follows:





Face
                Amount
            
            Discount
            
            Carrying
              ValueBank
                loan, initial tranche, being the balance at January 1,
                2005
            
            $
            1,000,000
            
            $
            346,200
            
            $
            653,800Remainder
                of first tranche received
            
            
            1,000,000
            
            
            --
            
            
            1,000,000Second
                tranche received
            
            
            2,000,000
            
            
            263,800
            
            
            1,736,200Accretion
                of debt discount
            
            
            --
            
            
            (238,635
            )
            
            238,635Bank
                loan, initial and second tranche, being the balance at December 31,
                2005
            
            $
            4,000,000
            
            $
            371,635
            
            $
            3,628,635




As
      at
      December 31, 2005, interest expense incurred of $164,495 (2004 -$3,913), and
      accreted interest expense related to the debt discount of $238,635 were
      capitalized to the Investment in MSC (Note 4 (b)).





In
      March
      2006, Macquarie exercised its warrants from the second tranche to acquire
      3,987,742 of our Common Shares at an exercise price of Cdn $0.62 per share
      for
      proceeds of Cdn$2,472,400 (US$ 2,060,333). We used part of the proceeds to
      repay
      principal and interest outstanding in the amount of $2,000,000 and $18,926,
      respectively, related to the second tranche.





-
            64
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL**





**a.**  Authorized


We
      have
      authorized capital of an unlimited number of Common Shares, with no par value,
      and an unlimited number of preferred shares, with no par value.




**b.**
            Issued,
                Allotted and/or Subscribed:





**Number**
              **of
                Shares**
            
            **Amount**Common
                shares issued:Issued
                for cash on incorporation
            
            
            1
            
            $
            1Issued
                for acquisition of subsidiaries
            
            
            4,000,000
            
            
            575,537Subscriptions
                received for private placement
            
            
            --
            
            
            57,069Balance,
                December 31, 1994
            
            
            4,000,001
            
            
            632,607Issued
                for cash (Cdn$0.10 each)
            
            
            1,000,000
            
            
            70,850Issued
                for cash (Cdn$0.40 each)
            
            
            2,345,094
            
            
            669,058Issued
                for cash (Cdn$1.00 each)
            
            
            3,031,000
            
            
            2,237,071Issued
                for finder’s fee
            
            
            150,000
            
            
            --Issued
                for services
            
            
            168,000
            
            
            --Issued
                for subsidiary
            
            
            336,815
            
            
            --Subscriptions
                applied
            
            
            --
            
            
            (57,069
            )Balance,
                December 31, 1995
            
            
            11,030,910
            
            
            3,552,517Issued
                for cash (Cdn$1.50 each)
            
            
            1,433,333
            
            
            1,535,553Issued
                for broker special warrants
            
            
            90,400
            
            
            --Issued
                for cash (Cdn$3.42 each)
            
            
            877,194
            
            
            2,174,388Issued
                to N.A. Degerstrom, Inc.:For
                cash (Cdn$1.44 each)
            
            
            500,000
            
            
            514,608For
                cash on exercise of warrants (Cdn$1.75 each)
            
            
            500,000
            
            
            625,392Issued
                for cash on exercise of warrants (Cdn$1.80 each)
            
            
            67,500
            
            
            89,220Subscriptions
                received for private placement
            
            
            --
            
            
            4,873,336








-
            65
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**





Balance,
                December 31, 1996
            
            
            14,499,337
            
            
            13,365,014Issued
                for cash on exercise of warrants (Cdn$1.80 each)
            
            
            1,271,233
            
            
            1,689,102Issued
                for cash (private placement-Cdn$2.10 each)
            
            
            3,370,481
            
            
            4,873,336Subscriptions
                applied
            
            
            --
            
            
            (4,873,336
            )Issued
                for cash on exercise of options (Cdn$1.44 each)
            
            
            75,000
            
            
            78,146Balance,
                December 31, 1997
            
            
            19,216,051
            
            
            15,132,262Issued
                for cash on exercise of warrants (Cdn$1.60 each)
            
            
            720,383
            
            
            806,136Issued
                for cash on exercise of options (Cdn$1.15 each)
            
            
            15,000
            
            
            11,936Issued
                for cash on exercise of warrants (Cdn$1.53 each)
            
            
            438,597
            
            
            464,332Balance,
                December 31, 1998
            
            
            20,390,031
            
            
            16,414,666Issued
                for cash (by prospectus Cdn$0.25 each)
            
            
            3,214,540
            
            
            545,874Issued
                for broker’s fees
            
            
            128,582
            
            
            --Balance,
                December 31, 1999
            
            
            23,733,153
            
            
            16,960,540Issued
                for cash (by prospectus Cdn$0.25 each)
            
            
            5,985,460
            
            
            1,032,973Issued
                for broker’s fees
            
            
            191,418
            
            
            --Issued
                for cash on exercise of options (Cdn$0.55 each)
            
            
            90,000
            
            
            34,109Subscriptions
                received for private placement
            
            
            --
            
            
            162,242Balance,
                December 31, 2000
            
            
            30,000,031
            
            
            18,189,864Issued
                for cash on exercise of options (Cdn$0.25 each)
            
            
            46,000
            
            
            7,558Balance,
                December 31, 2001
            
            
            30,046,031
            
            
            18,197,422Issued
                for cash on exercise of options (Cdn$0.16 each)
            
            
            91,500
            
            
            9,449Issued
                for cash (private placement Cdn$0.15 each)
            
            
            4,416,667
            
            
            402,224Issued
                for exercise of special warrants
            
            
            1,175,000
            
            
            --Issued
                for cash on exercise of warrants (Cdn$0.25 each)
            
            
            1,175,000
            
            
            186,923Balance,
                December 31, 2002
            
            
            36,904,198
            
            
            18,796,018








-
            66
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**







Issued
                for cash on exercise of options
            
            
            345,000
            
            
            66,696


Issued
                for cash on exercise of warrants
            
            
            50,000
            
            
            11,287Issued
                for cash on exercise of broker warrants
            
            
            441,667
            
            
            48,677Issued
                for cash (private placement Cdn$0.30 each)
            
            
            22,000,000
            
            
            4,674,790Balance,
                December 31, 2003
            
            
            59,740,865
            
            
            23,597,468Issued
                for cash on exercise of options
            
            
            330,000
            
            
            78,400Issued
                for cash on exercise of warrants
            
            
            648,375
            
            
            250,401Issued
                for cash on exercise of broker warrants
            
            
            867,566
            
            
            239,610Issued
                for cash (private placement Cdn$0.65 each)
            
            
            10,000,000
            
            
            4,545,455Balance,
                December 31, 2004
            
            
            71,586,806
            
            
            28,711,334Issued
                for cash on exercise of options
            
            
            253,500
            
            
            34,055Issued
                for cash on exercise of warrants
            
            
            22,500
            
            
            9,230Issued
                for cash on exercise of broker warrants
            
            
            901,175
            
            
            258,480Issued
                for cash (private placement Cdn$0.55 each)
            
            
            18,180,450
            
            
            7,683,453Issued
                for cash (private placement Cdn$0.35 each)
            
            
            2,004,685
            
            
            600,000Issued
                for finder’s fee (private placement Cdn$0.35)
            
            
            120,281
            
            
            --Issued
                for cash (Dec05 private placement Cdn$0.35 each)
            
            
            15,414,740
            
            
            4,382,558Balance,
                December 31, 2005
            
            
            108,484,137
            
            $
            41,679,110







**i.**
            On
                March 12, 2004, we sold 10,000,000 units to accredited investors
                at a
                price of Cdn$0.65 per unit for net of commission proceeds of Cdn$5,929,908
                (US$4,545,455). Each unit consisted of one common share and one-half
                of
                one common share purchase warrant. One whole common share purchase
                warrant
                entitles the holder to purchase one additional common share at an
                exercise
                price of Cdn$0.80 per share for a period of 18 months from the closing
                date. The issued securities were subject to a four-month hold period.





-
            67
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**





The
                agents received a cash commission of 7% of the gross proceeds of
                the
                financing. The agents also received agent’s warrants equal to 10% of the
                aggregate number of units sold pursuant to the offering. Each agent’s
                warrant upon exercise will entitle the holder to acquire one common
                share
                at an exercise price of Cdn$0.80 per common share for a period of
                18
                months from the date of issue. A total of 10,000,000 common shares
                were
                issued pursuant to the private placement, and 5,000,000 common shares
                are
                reserved for issuance on exercise of the warrants and 1,000,000 common
                shares are reserved for issuance on the exercise of the agent’s
                warrants.





**ii.**
            During
                2004, we issued 330,000 shares for the exercise of stock options;
                648,375
                shares for the exercise of 1,296,750 purchase warrants and 867,566
                shares
                for the exercise of broker warrants for net proceeds of
                $568,411.





**iii.**
            On
                March 22, 2005, we sold 18,180,450 units to accredited investors
                at a
                price of Cdn$0.55 per unit for net of commission proceeds of Cdn$9,299,300
                (US$7,683,453). Each unit consists of one common share and one-half
                of one
                common share purchase warrant. One whole common share purchase warrant
                entitles the holder to purchase one additional common share at an
                exercise
                price of Cdn$0.70 per share for a period of 5 years from the closing
                date.





The
      agents received a cash commission of 7% of the gross proceeds of the financing.
      The agents also received agent’s warrants equal to 7% of the aggregate number of
      units sold pursuant to the offering. Each agent’s warrant upon exercise will
      entitle the holder to acquire one common share at an exercise price of Cdn$0.70
      per common share for a period of 2 years from the date of issue. A total of
      18,180,450 common shares were issued pursuant to the private placement, and
      9,090,225 common shares are reserved for issuance on exercise of the warrants
      and 1,272,632 common shares are reserved for issuance on the exercise of the
      agent’s warrants.





**iv.**
            On
                November 28, 2005, we sold 2,004,685 units to accredited investors at
                a price of Cdn$0.35 per unit for net of commission proceeds of Cdn$701,640
                (US$600,000). Each unit consists of one common share and one-half
                of one
                common share purchase warrant. One whole common share purchase warrant
                entitles the holder to purchase one additional common share at an
                exercise
                price of Cdn$0.55 per share for a period of 2 years from the closing
                date.
                Finder’s fees of 6 percent were paid and the company issued 120,281 in
                shares in connection with this financing. A total of 2,004,685 common
                shares were issued pursuant to the private placement, and 1,002,343
                common
                shares are reserved for issuance on exercise of the
                warrants.





**v.**
            On
                December 20, 2005, we sold 15,414,740 units to Robert McEwen at a
                price of Cdn$0.35 per unit for net of commission proceeds of Cdn$5,125,401
                (US$4,382,558). Each unit consists of one common share and one-half
                of one
                common share purchase warrant. One whole common share purchase warrant
                entitles the holder to purchase one additional common share at an
                exercise
                price of Cdn$0.55 per share at any time prior to the earlier of:
                a) the
                date which is the 15th trading day after receiving notice from Minera
                Andes that the weighted average price of the common shares on the
                TSX
                Venture Exchange has been equal to or greater than C$1.00 for a period
                of
                20 consecutive trading days commencing 120 days after the date of
                issuance
                of the warrants, and b) December 20, 2007.





-
            68
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**





The
      agents received a cash commission of 5% of the gross proceeds of the financing
      and 377,661 broker warrants, equal to 2.45% of the aggregate number of units
      sold. Each broker warrant upon exercise will entitle the holder to acquire
      one
      common share at an exercise price of Cdn$0.55 per common share at any time
      prior
      to the earlier of: a) the date which is the 15th trading day after receiving
      notice from Minera Andes that the weighted average price of the common shares
      on
      the TSX Venture Exchange has been equal to or greater than C$1.00 for a period
      of 20 consecutive trading days commencing 120 days after the date of issuance
      of
      the warrants, and b) December 20, 2007. A total of 15,414,740 common shares
      were
      issued pursuant to the private placement, and 7,707,370 common shares are
      reserved for issuance on exercise of the warrants and 377,661 common shares
      are
      reserved for issuance on the exercise of the broker warrants.





On
      March
      8, 2006, we completed the second private placement with Mr. McEwen and sold
      13,156,689 units at a price of Cdn$0.35 per unit for gross proceeds of
      Cdn$4,604,841 (US$3,970,703). Each unit consists of one common share and
      one-half of one common share purchase warrant. One whole common share purchase
      warrant entitles the holder to purchase one additional common share at an
      exercise price of Cdn$0.55 per share at any time prior to the earlier of: a)
      the
      date which is the 15th trading day after receiving notice from Minera Andes
      that
      the weighted average price of the common shares on the TSX Venture Exchange
      has
      been equal to or greater than C$1.00 for a period of 20 consecutive trading
      days
      commencing 120 days after the date of issuance of the warrants, and b) March
      8,
      2008.





The
      agents received a cash commission of 5% of the gross proceeds of the financing
      and 322,339 broker warrants, equal to 2.45% of the aggregate number of units
      sold. Each broker warrant upon exercise will entitle the holder to acquire
      one
      common share at an exercise price of Cdn$0.55 per common share at any time
      prior
      to the earlier of: a) the date which is the 15th trading day after receiving
      notice from Minera Andes that the weighted average price of the common shares
      on
      the TSX Venture Exchange has been equal to or greater than C$1.00 for a period
      of 20 consecutive trading days commencing 120 days after the date of issuance
      of
      the warrants, and b) March 8, 2008.





**vi.**
            During
                2005, we issued 253,500 shares for the exercise of stock options
                at
                weighted average exercise price of $0.13 per share; 22,500 shares
                for the
                exercise of 45,000 one-half purchase warrants at weighted average
                exercise
                price of $0.21 and 901,175 shares for the exercise of broker warrants
                at
                weighted average exercise price of $0.29 for total proceeds of
                $301,765.





**vii.**
            Subsequent
                to December 31, 2005, we issued 410,000 shares for the exercise of
                stock
                options and 6,097,742 common shares for the exercise of purchase
                warrants
                for net proceeds of $3,297,223.





**c.**
            **Stock
                Options**


The
      aggregate number of shares to be delivered upon exercise of all options granted
      under our stock option plan (“the Plan”) shall not exceed 20% of our issued and
      outstanding Common Shares up to a maximum of 9,000,000 (2004 - 6,000,000)
      shares. No participant may be granted an option under the Plan which exceeds
      the
      number of shares permitted to be granted pursuant to rules or policies of any
      stock exchange on which the Common Shares is then listed.





-
            69
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**





Under
      the
      Plan, the exercise price of the shares covered by each option shall be
      determined by the directors and shall not be less than the closing price of
      our
      Common Shares on the stock exchange or stock exchanges on which the shares
      are
      listed on the last trading day immediately preceding the day on which the stock
      exchange is notified of the proposed issuance of option, less any discounts
      permitted by the policy or policies of such stock exchange or stock exchanges.
      If an option is granted within six months of a public distribution of our Common
      Shares by way of prospectus, then the minimum exercise price of such option
      shall, if the policy of such stock exchange or stock exchanges requires, be
      the
      greater of the price determined pursuant to the provisions of the Plan and
      the
      price **** per
      share
      paid by the investing public for our Common Shares acquired by the public during
      such public distribution, determined in accordance with the policy of such
      stock
      exchange or stock exchanges. Options granted under the Plan will not be
      transferable and, if they are not exercised, will expire one (1) year following
      the date the optionee ceases to be a director, officer, employee or consultant
      of Minera Andes Inc. by reason of death, or ninety (90) days after ceasing
      to be
      a director, officer, employee or consultant of Minera Andes Inc. for any reason
      other than death. Options vest immediately, except for options granted for
      investor relations related work which vest 25% each three-month period from
      the
      date of grant.





At
      December 31, 2005, 1,009,000 (2004 - 309,000) options were available for grant
      under the Plan.





A
      summary
      of the status of our stock option plan as of December 31, 2005 and 2004, and
      changes during the years ended on those dates is:




**2005**
            
            **2004****Options**
            
            **(Cdn)**
              **Weighted
                Ave.**
              **Exercise**
              **Price**
            
            **Options**
            
            **(Cdn)**
              **Weighted
                Ave. Exercise Price**Outstanding
                at beginning of year
            
            
            4,698,500
            
            $
            0.49
            
            
            4,408,500
            
            $
            0.47Granted
            
            
            2,300,000
            
            $
            0.60
            
            
            1,650,000
            
            $
            0.55Exercised
            
            
            (253,500
            )
            $
            0.16
            
            
            (330,000
            )
            $
            0.32Forfeited
            
            
            --
            
            $
            --
            
            
            (1,030,000
            )
            $
            0.55Outstanding
                at end of year
            
            
            6,745,000
            
            $
            0.54
            
            
            4,698,500
            
            $
            0.49Exercisable
                at end of year
            
            
            6,670,000
            
            $
            0.54
            
            
            4,608,500
            
            $
            0.49Weighted
                average grant-date fair value of options granted during
              the
                year
            
            
            
            
            $
              $
            0.41
              (US
                0.35
            )
            
            
            
            $
            0.39
                (US$0.28
            )








-
            70
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**





The
      weighted average remaining contractual life of outstanding options is 4.0 years
      at December 31, 2005 (2004 - 4.3 years).




At
      December 31, 2005 there were options held by directors, officers, employees
      and
      non-employees for the purchase of our Common Shares as follows:





**Number
                of Shares**
            **Exercise
                Price**
            **Expiry
                Date**715,000
            Cdn$0.40
            June
                27, 200725,000
            Cdn$0.36
            August
                27, 20081,500,000
            Cdn$0.59
            December
                5, 2008100,000
            Cdn$0.50
            March
                29, 20091,500,000
            Cdn$0.55
            September
                10, 200950,000
            Cdn$0.61
            December
                14, 20092,300,000
            Cdn$0.60
            December
                28, 2010555,000
            Cdn$0.31
            March
                21, 20136,745,000







The
      fair
      value of each option granted was estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted average
      assumptions used for grants.




**2005**
            **2004**Dividend
                yield (%)
            --
            --Expected
                volatility (%)
            83.7
            86.6Risk-free
                interest rates (%)
            4.3
            3.5Expected
                lives (years)
            5.0
            5.0





In
      connection with the vesting of certain non-employees, employees and directors
      stock options, we have recorded stock option compensation of $809,093 ($569,140
      to wages and benefits and $239,953 to consulting fees) and $478,020 ($302,614
      to
      wages and benefits and $175,406 to consulting fees) during the year ended
      December 31, 2005 and 2004, respectively.





-
            71
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**


**7.**
            **SHARE
                CAPITAL - continued**





**d.**
            **Warrants**





**2005**
            
            **2004****Warrants**
            
            **Cdn**
              **Wgt.
                Avg.**
              **Exercise
                Price**
            
            **Warrants**
            
            **Cdn**
              **Wgt.
                Avg.**
              **Exercise
                Price**Outstanding
                and exercisable at beginning of year
            
            
            20,422,759
            
            $
            0.62
            
            
            13,200,000
            
            $
            0.49Purchase
                warrants
            
            
            21,787,680
            
            $
            0.63
            
            
            7,738,700
            
            $
            0.82Brokers’
                warrants
            
            
            1,650,293
            
            $
            0.67
            
            
            1,000,000
            
            $
            0.80Expired
            
            
            (6,431,259
            )
            $
            0.77
            
            
            --
            
            
            --Exercised
            
            
            (923,675
            )
            $
            0.35
            
            
            (1,515,941
            )
            $
            0.44Outstanding
                and exercisable
              at
                end of year
            
            
            36,505,798
            
            $
            0.61
            
            
            20,422,759
            
            $
            0.62





The
      range
      of exercise prices on outstanding warrants is Cdn$0.50 to Cdn$0.91 (2004 -
      Cdn$0.35 to Cdn$0.91) with a weighted average contractual life of 2.64 years
      at
      December 31, 2005 (2004 - 2.64 years).





**8.**
            **AGREEMENTS,
                COMMITMENTS AND
                CONTINGENCIES**





**a.**
            Mineral
                rights in Argentina are owned by the federal government and administered
                by the provinces. The provinces can levy a maximum 3% "mouth of mine"
                (gross proceeds) royalty. The provinces of Mendoza and Neuquén have waived
                their right to a royalty. The provinces of Río Negro, San Juan, Santa
                Clara and Chubut have not yet established a policy regarding the
                royalty.





**b.**
            We
                rent office space in Spokane, Washington for $2,122 per month with
                a
                commitment through November 2006.





**c.**
            We
                rent office space in Vancouver, British Columbia, Canada for Cdn$900
                per
                month, without a commitment.





**d.**
            We
                rent office space in Argentina for $345 per month with a commitment
                through August 2006.





**e.**
            We
                rent a storage space in Argentina for $276 per month with a commitment
                through December 2006.





-
            72
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**8.**
            **AGREEMENTS,
                COMMITMENTS AND CONTINGENCIES -
                continued**





**f.**
            On
                December 2, 2003, we signed an agreement that obligated us to pay
                N.A.
                Degerstrom (“Degerstrom”) a royalty of $250,000 if any of the current
                properties, other than the properties comprising the San Joséproject, meet certain conditions such as bankable feasibility or
                commercial production prior to December 2,
                2013.





**g.**
            During
                2005, MSC signed agreements with third party providers relating to
                the
                development of the San José/Huevos
                Verdes project. Our 49 percent portion of these commitments is
                approximately $975,000.These commitments are expected to be completed
                by
                December 31, 2006.





**h.**
            In
                March 2005, MSC discovered an alleged employee fraud committed by
                the
                former purchasing manager during the period June 2004 through March
                2005.
                Respective to our 49% interest, the fraud amounted to approximately
                $57,000 in 2004 and $78,000 in 2005. MSC will vigorously pursue full
                recovery but the final amount recoverable is not certain at this
                time.
                Canadian accounting standards require a high level of certainty in
                recording a recovery on the balance sheet that is contingent on future
                events, as a result the full amount of the fraud for each year
                respectively, has been written off against our investment in MSC
                and is
                included in our loss from equity investment (Note 4(b)). Funds recovered
                in the future related to the fraud will be recorded if and when they
                are
                received.





**9.**  **RELATED
      PARTY TRANSACTIONS**





During
      2005 and 2004, we incurred the following transactions with related parties:
      geological consulting to a director totaling $3,266 and $3,613 and legal fees
      to
      a firm in which a director and officer was an associate totaling $50,081 and
      $81,412, respectively. The above noted transactions were in the normal course
      of
      operations and were measured at the exchange amount, which is the amount of
      consideration established and agreed to by the related parties.





**10.**  **INCOME
      TAXES**





The
      tax
      effects of the temporary differences that give rise to our future tax assets
      and
      liabilities are as follows:




**2005**
            
            2004Net
                operating losses
            
            **$**
            **2,247,900**
            
            $
            1,919,000Equipment
            
            
            **5,300**
            
            
            5,300Undeducted
                financing costs
            
            
            **80,800**
            
            
            72,100Valuation
                allowance
            
            
            **(2,334,000**
            **)**
            
            (1,996,400
            )Future
                tax assets (liabilities)
            
            **$**
            **-**
            
            $
            -







The
      tax
      benefit of net operating losses carried forward and the associated valuation
      allowance were reduced by $199,700 (2004 - $218,000), representing the tax
      effect of losses which expired in the year.





-
            73
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**10.**
            **INCOME
                TAXES - continued**







The
      provision for income taxes differs from the amount established using the
      statutory income tax rate as follows:





**2005**
            
            2004Income
                benefit at CDN statutory rate
            
            **$**
            **(1,222,000**
            **)**
            $
            (721,300
            )Foreign
                income taxes at other than CDN statutory rate
            
            
            **(21,000**
            **)**
            
            (7,400
            )Non-deductible
                equity pickup
            
            
            **474,300**
            
            
            147,100Non-deductible
                stock option compensation
            
            
            **272,000**
            
            
            160,700Increase
                in valuation allowance
            
            
            **496,700**
            
            
            420,900Future
                income tax recovery
            
            **$**
            **-**
            
            $
            -








The
      Company’s future tax assets include approximately $120,767 (2004 - $86,580)
      related to deductions for share issue costs in excess of amounts deducted for
      financial reporting purposes. If and when the valuation allowance related to
      these amounts is reversed, the Company will recognize this benefit as an
      adjustment to share capital as opposed to income tax expense in the Statement
      of
      Operations





The
      Company evaluates its valuation allowance requirements based on projected future
      operations. When circumstances change and this causes a change in management’s
      judgment about the recoverability of future tax assets, the impact of the change
      on the valuation allowance is reflected in current income. As management of
      the
      Company does not currently believe that it is more likely than not that the
      Company will receive the benefit of this asset, a valuation allowance equal
      to
      the future tax asset has been established at both December 31, 2005 and December
      31, 2004.





As
      at
      December 31, 2005, the Company had net operating loss carry-forwards available
      to reduce taxable income in future years as follows:








Country
            
            Amount
            
            Expiration
                DatesUnited
                States - Federal
            
            $
            890,000
            
            
            2006
                - 2025Argentina
            
            $
            36,000
            
            
            2006
                - 2010Canada
            
            $
            5,749,000
            
            
            2006
                - 2015





These
      financial statements do not reflect the potential effect on future income taxes
      of the application of these losses.





-
            74
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**11.**  **COMPARATIVE
      FIGURES**





Certain
      financial statement line items from prior years have been reclassified to
      conform with the current year's presentation. These reclassifications had no
      effect on the net loss and accumulated deficit as previously
      reported.





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES**





As
      discussed in Note 2, these financial statements are prepared in accordance
      with
      Canadian generally accepted accounting principles (“GAAP”). Differences between
      Canadian and United States generally accepted accounting principles (“U.S.
      GAAP”) as they apply to these financial statements are summarized as
      follows:




**a.**
            **Compensation
                Expense Associated with Release of Shares from
                Escrow**


Under
      U.S. GAAP, stock compensation expense is recorded as shares held in escrow
      become eligible for release based upon the number of shares eligible for release
      and the market value of the shares at that time. Under Canadian GAAP, no value
      is attributed to such shares released and no compensation expense is recorded.
      Shares become eligible for release from escrow based on deferred exploration
      expenditure in accordance with the Escrow Agreement and with the consent of
      the
      TSX Venture Exchange. During the years ended December 31, 2005 and 2004 and
      for
      the period from July 1, 1994 (inception) through December 31, 2005, we would
      have recorded compensation expense of $nil, $nil and $6,324,914 respectively,
      under U.S. GAAP.





**b.**
            **Mineral
                Properties and Deferred Exploration
                Costs**


The
      U.S.
      Securities and Exchange Commission staff has taken the position that a U.S.
      registrant without proven and probable economic reserves, in most cases, could
      not support the recovery of the carrying value of deferred exploration costs.
      Our investment in MSC has proven and probable reserves but MSC did not receive
      government approval of the Environmental Impact Assessment (EIA) until the
      first
      quarter of 2006. Therefore, we have presented the effect of expensing all
      deferred exploration costs through December 31, 2005 as a reconciling item
      between U.S. and Canadian GAAP.





As
      our
      investment in MSC is effectively an investment in a property without proven
      and
      probable reserves it has been expensed for U.S. GAAP purposes.





**c.**  **Stock
      Based Compensation**


The
      net
      income under US GAAP for the year ended December 31, 2004 has been restated. Under
      US
      GAAP, as the Company continued to follow Accounting Principle Board Opinion
      No.
      25 “Accounting for stock issued to employees” and related interpretations to
      account for stock options issued to employees, options issued with an exercise
      price denominated in a currency other then its functional currency are not
      considered fixed and variable accounting is required in accordance with Emerging
      Issues Task Force (“EITF”) 00-23 Issue 31. Under variable accounting, the
      intrinsic value of the options issued to employees is remeasured on each balance
      sheet date, with the adjustment charged to the Statement of Operations. The
      effect of remeasurement was to decrease (increase) the stock compensation
      expense by $36,042 for the year ended December 31, 2005 (2004 -
      ($215,769).





-
            75
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**





The
      impact of this US GAAP restatement, which has no impact on the Canadian GAAP
      financial statements, is as follows:





**Previously
                reported**
            
            **As
                restated**Net
                loss under US GAAP, December 31, 2004
            
            $
            (6,951,360
            )
            $
            (7,167,129
            )Cumulative
                net loss under US GAAP
            
            $
            (33,336,635
            )
            $
            (33,677,602
            )Loss
                per share
            
            $
            (0.10
            )
            $
            (0.10
            )





During
      2004, we adopted new Canadian GAAP rules regarding the utilization of the fair
      value based method to account for options granted to employees. U.S. GAAP does
      not yet require the fair value based method to account for employee based
      options. Since
      we
      granted options to employees in 2005, the retroactive adoption without
      restatement of the revised Canadian requirements has created differences between
      Canadian and U.S. GAAP with respect to the net loss for the year ended December
      31, 2005. There would however be no adjustment to retained earnings as well
      as
      contributed surplus at January 1, 2004 under U.S. GAAP as was required under
      Canadian GAAP





**d.**  **Warrants**


Under
                Canadian GAAP, no value was assigned to the warrants granted to the
                agents
                in connection with the private placement of 35,595,190 (2004 - 10,000,000)
                units which were issued in March 2005, December 2005 and March 2004
                (Note
                7). Under US GAAP, the warrants were valued on the closing date of
                the
                private placements, respectively, using the Black-Scholes option
                pricing
                model with the following weighted average assumptions:





**Agent
                Warrants****2005**
            
            **2004**Number
                of Warrants
            
            
            1,650,293
            
            
            1,000,000Risk-free
                rate
            
            
            4.33
            %
            
            2.73
            %Dividend
                yield
            
            
            Nil
            %
            
            Nil
            %Volatility
                factor of the expected market price of the Company’s common
                shares
            
            
            59
            %
            
            60
            %Weighted
                average expected life of the warrants (months)
            
            
            24
            
            
            18Value
                of warrants
            
            $
            198,273
            
            $
            72,761








-
            76
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**





The
      value
      of the agent warrants was charged as commission against share capital as share
      issuance costs per our accounting policy; thus there is no effect on
      shareholder’s equity.





**e.**  **Bank
      Loan**


Under
      Canadian GAAP, the corresponding entry to record the debt discount of $346,200
      related to the first tranche warrants and $263,800 related to the second tranche
      warrants granted to Macquarie Bank in connection with a credit facility (Note
      6)
      was charged to contributed surplus. Under US GAAP, as the Company is required
      to
      maintain its listed company status as part of the loan covenant, in accordance
      with Emerging Issues Task Force (“EITF”) 00-19. The fair value of the warrants
      was recorded as a liability. Subsequent to the initial measurement, the discount
      is remeasured on each balance sheet date based on the fair value of the warrants
      with the adjustment charged to the Statement of Operations. The effect of
      remeasurement was to increase the fair value of the liabilities by $704,892
      (2004 - Nil) which was debited to the Statement of Operations. These GAAP
      differences relate to compensation costs associated with warrants and would
      result in total liabilities under US GAAP purposes to be increased by $1,686,257
      from liabilities under Canadian GAAP to $5,658,762 as liabilities under US
      GAAP,
      as at December 31, 2005 (December 31, 2004 - $1,607,381). Under US GAAP, the
      fair value of the warrants is recognized on the Consolidated Balance Sheet
      as
      deferred financing costs and is amortized on a straight line basis over the
      term
      of the debt. This would result in total assets under US GAAP purposes to be
      $4,086,714, as at December 31, 2005 (December 31, 2004 -
      $2,282,245).





The
      fair
      value of the first tranche warrants, as at December 31, 2005, was calculated
      using the Black-Scholes option pricing model with the following assumptions:
      dividend yield - Nil; risk free interest rate - 3.53%; expected volatility
      of
      77.9% and an expected life of 12 months. The fair value of the second tranche
      warrants, as at December 31, 2005, was calculated using the Black-Scholes option
      pricing model with the following assumptions: dividend yield - Nil; risk free
      interest rate - 3.99%; expected volatility of 67.5% and an expected life of
      19
      months.





**f.**
            **New
                Accounting Pronouncements**


In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20
      and FASB Statement No. 3.” SFAS No. 154 changes the requirements for the
      accounting for and reporting of a change in accounting principle. This Statement
      applies to all voluntary changes in accounting principle. It also applies to
      changes required by an accounting pronouncement in the unusual instance that
      the
      pronouncement does not include specific transition provisions. The statement
      requires retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change. When it
      is
      impracticable to determine the period-specific effects of an accounting change
      on one or more individual prior periods presented, this statement requires
      that
      the new accounting principle be applied to the balances of assets and
      liabilities as of the beginning of the earliest period for which retrospective
      application is practicable and that a corresponding adjustment be made to the
      opening balance of retained earnings (or other appropriate components of equity
      or net assets in the statement of financial position) for that period rather
      than being reported in an income statement.








-
            77
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**





When
      it
      is impracticable to determine the cumulative effect of applying a change in
      accounting principle to all prior periods, this statement requires that the
      new
      accounting principle be applied as if it were adopted prospectively from the
      earliest date practicable. The adoption of revised SFAS No. 154 is not expected
      to have a material effect on our consolidated financial statements.





In
      March
      2005, the Financial Accounting Standards Board (“FASB”) issued Interpretation
      No. 47, “Accounting for Conditional Asset Retirement Obligations—an
      interpretation of FASB Statement No. 143.” This Interpretation clarifies that
      the term conditional asset retirement obligation as used in FASB Statement
      No.
      143, Accounting for Asset Retirement Obligations, refers to a legal obligation
      to perform an asset retirement activity in which the timing and (or) method
      of
      settlement are conditional on a future event that may or may not be within
      the
      control of the entity. The obligation to perform the asset retirement activity
      is unconditional even though uncertainty exists about the timing and (or) method
      of settlement. Thus, the timing and (or) method of settlement may be conditional
      on a future event. Accordingly, an entity is required to recognize a liability
      for the fair value of a conditional asset retirement obligation if the fair
      value of the liability can be reasonably estimated. The fair value of a
      liability for the conditional asset retirement obligation should be recognized
      when incurred—generally upon acquisition, construction, or development and (or)
      through the normal operation of the asset. Uncertainty about the timing and
      (or)
      method of settlement of a conditional asset retirement obligation should be
      factored into the measurement of the liability when sufficient information
      exists. Statement 143 acknowledges that in some cases, sufficient information
      may not be available to reasonably estimate the fair value of an asset
      retirement obligation. This Interpretation also clarifies when an entity would
      have sufficient information to reasonably estimate the fair value of an asset
      retirement obligation **.** The
      adoption of revised FIN 47 is not expected to have a material effect on our
      consolidated financial statements.





In
      December 2004, FASB issued SFAS No. 153 to amend Opinion 29 by eliminating
      the
      exception for non-monetary exchanges of similar productive assets and replaces
      it with general exception for exchanges of non-monetary assets that do not
      have
      commercial substance. A non-monetary exchange is defined to have commercial
      substance if the future cash flows of the entity are expected to change
      significantly as a result of the exchange. The
      adoption of revised SFAS No. 153 is not expected to have a material effect
      on
      our consolidated financial statements





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued (“SFAS”)
      No. 123R (revised 2004), “Share-Based Payment.” SFAS No. 123(R) requires the
      Company to measure all employee stock-based compensation awards using a fair
      value method and record such expense in its consolidated financial statements.
      In addition, SFAS No. 123(R) requires additional accounting related to the
      income tax effects and additional disclosure regarding the cash flow effects
      resulting from share-based payment arrangements. For public entities that do
      not
      file as a small business issuer, SFAS No. 123(R) is effective for the first
      annual reporting period beginning after December 15, 2005.





We
      are
      assessing the effect on the consolidated financial statements as a result of
      implementation of these new U.S. standards.





-
            78
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**





**g.**
            **Impact
                on Consolidated Financial
                Statements**


The
      impact of the above on the consolidated financial statements is as
      follows:





**Dec.
                31, 2005**
            
            **Dec.
                31, 2004**Shareholders’
                equity, end of year, per Canadian
              GAAP
            
            $
            21,480,321
            
            $
            11,194,559Adjustment
                for mineral properties and deferred
              exploration
                costs
            
            
            (4,470,174
            )
            
            (2,827,655
            )Adjustment
                for mineral property and deferred
              exploration
                cost portion of investment
            
            
            (17,505,938
            )
            
            (7,345,840
            )Loss
                on revaluation of liability for warrants subject to registration
                rights
            
            
            (704,892
            )
            
            --Adjustment
                for the debt discount
            
            
            (610,000
            )
            
            (346,200
            )Shareholders’
                equity (Capital Deficit), end of year, per US GAAP
            
            $
            (1,810,683
            )
            $
            674,864





**Period
                  from**
                **July
                  1, 1994**
                **(inception)**
                **through**
                **December
                  31,**
                **2005****Year
                  Ended****Dec.
                  31,**
              
              **Dec.
                  31,****2005**
              
              **2004**(restated)*Net
                  loss for the period, per Canadian GAAP
              
              $
              (3,634,060
              )
              $
              (2,058,905
              )
              $
              (20,526,310
              )Adjustment
                  for acquisition of Scotia
              
              
              --
              
              
              --
              
              
              (248,590
              )Adjustment
                  for compensation expense
              
              
              569,140
              
              
              302,614
              
              
              (5,453,160
              )Loss
                  on revaluation of liability for warrants subject to registration
                  rights
              
              
              (704,892
              )
              
              --
              
              
              (704,892
              )








-
            79
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**





Adjustment
                for deferred exploration costs, net
            
            
            (1,642,519
            )
            
            (1,912,356
            )
            
            (4,470,174
            )Adjustment
                for investment
            
            
            (10,160,098
            )
            
            (3,282,713
            )
            
            (17,505,938
            )Adjustment
                for variable intrinsic value
            
            
            36,042
            
            
            (215,769
            )
            
            (304,925
            )Net
                loss for the period, per U.S. GAAP
            
            $
            (15,536,387
            )
            $
            (7,167,129
            )
            $
            (49,213,989
            )Basic
                and diluted net loss per common share, per U.S. GAAP
            
            $
            (0.18
            )
            $
            (0.10
            )


*
      See note (c) above




**Dec.
                31, 2005**
            
            **Dec.
                31, 2004**Total
                liabilities, per Canadian GAAP
            
            $
            3,972,505
            
            $
            914,981Adjustment
                for the debt discount
            
            
            610,000
            
            
            346,200Adjustment
                for amortization of debt discount
            
            
            (238,635
            )
            
            --Adjustment
                to recognize warrant liability
            
            
            610,000
            
            
            346,200Loss
                on revaluation of liability for warrants subject to registration
                rights
            
            
            704,892
            
            
            --Total
                liabilities, per US GAAP
            
            $
            5,658,762
            
            $
            1,607,381





**Dec.
                31, 2005**
            
            **Dec.
                31, 2004**Total
                asset, per Canadian GAAP
            
            $
            25,452,826
            
            $
            12,109,540Adjustment
                for mineral properties and deferred
              
              exploration
                costs
            
            
            (4,470,174
            )
            
            (2,827,655
            )








-
            80
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**





Adjustment
                for mineral property and deferred exploration cost portion of
                investment
            
            
            (17,505,938
            )
            
            (7,345,840
            )Adjustment
                for deferred financing costs
            
            
            610,000
            
            
            346,200Amortization
                of deferred financing costs
            
            
            (238,635
            )
            
            -Total
                assets, per US GAAP
            
            $
            3,848,079
            
            $
            2,282,245





**Dec.
                31, 2005**
            
            **Dec.
                31, 2004**
            
            **Period
                from July 1,**
              **1994
                (inception) through**
              **December
                31, 2005**Cash
                flows used in operating activities under Canadian GAAP
            
            $
            (1,441,846
            )
            $
            (904,368
            )
            $
            (9,521,315
            )Adjustment
                related to investment
            
            
            (11,595,709
            )
            
            (4,103,062
            )
            
            (17,437,005
            )Adjustment
                related to mineral properties
            
            
            (1,617,352
            )
            
            (1,885,914
            )
            
            (16,511,917
            )Cash
                flows used in operating activities under US GAAP
            
            $
            (14,654,907
            )
            $
            (6,893,344
            )
            $
            (43,470,237
            )Cash
                flows used in investing activities under Canadian GAAP
            
            $
            (12,817,344
            )
            $
            (5,630,440
            )
            $
            (31,054,434
            )Adjustment
                related to investment
            
            
            11,595,709
            
            
            4,103,062
            
            
            17,437,005Adjustment
                related to mineral properties
            
            
            1,617,352
            
            
            1,885,914
            
            
            16,511,917Cash
                flows used in investing activities under US GAAP
            
            $
            395,717
            
            $
            358,536
            
            $
            2,894,488





During
      1995, we issued 336,814 Common Shares for the acquisition of Scotia Prime
      Minerals, Incorporated (“Scotia”). Under U.S. GAAP, these shares would be valued
      at $248,590, the fair market value of the shares issued. This value, plus the
      $17,215 of net liabilities of Scotia assumed by the Company, would have been
      recorded as property rights at the acquisition date under U.S.
      GAAP.





-
            81
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
                PRINCIPLES - continued**







We
      continue to account for stock-based compensation awarded to employees using
      the
      intrinsic method. Consequently, related pro-forma information as described
      in
      SFAS No. 123 has been disclosed, as follows:




**Year
                  Ended****Dec.
                  31,**
              
              **Dec.
                  31,****2005**
              
              **2004**Net
                  loss for the period under U.S. GAAP as reported
              
              $
              (15,536,387
              )
              $
              (7,167,129
              )Deduct:
                  Total stock-based employee compensation expense determined under
                  fair-value-based method for all awards.
              
              
              (569,140
              )
              
              (302,614
              )Pro-forma
                  net loss for the period
              
              $
              (16,105,527
              )
              $
              (7,469,743
              )Basic
                  and diluted net loss per common share - pro-forma
              
              $
              (0.18
              )
              $
              (0.11
              )




The
      fair
      value of each option granted was estimated on the date of grant using the
      Black-Scholes option-pricing model with assumptions as disclosed in Note
      7.







**13.**
            **SUBSEQUENT
                EVENTS**





**a.**
            Subsequent
                to December 31, 2005, we issued 410,000 shares for the exercise of
                stock
                options and 6,097,742 common shares for the exercise of purchase
                warrants
                for net proceeds of $3,297,223.





**b.** In
      February 2006, MAI, MSC and Hochschild signed an agreement to terminate the
      mandate letter for project financing of the San José project with Standard Bank
      and signed a new mandate letter for such financing with Macquarie. We agreed
      to
      pay breakup fees and reimburse other sunk costs totaling approximately $572,000.
      Some of these costs may be refunded to us depending on the terms and conditions
      to be negotiated in the definitive project financing agreement.





The
      new
      mandate letter signed with Macquarie provides a limited recourse project finance
      loan facility of up to $45 million consisting of a $40 million senior amortizing
      term loan and a $5 million subordinated tranche. The facility is subject, among
      other things, to bank due diligence and certain








-
            82
            -





**MINERA
      ANDES INC.**


**“An
      Exploration Stage Corporation”**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(U.S.
      Dollars)**





**13.**
            **SUBSEQUENT
                EVENTS - continued**





regulatory
      approvals. The commercial terms of the loan are customary for a loan of this
      nature and include certain fees and expenses with interest rates of Libor +
      2.85% and 4.85% for the term loan and subordinated tranche, respectively. We
      are
      not required to repay our $4 million mezzanine financing to Macquarie as a
      condition of the project financing.





**c.** On March
      8,
      2006, we completed a second private placement with Mr. McEwen and sold
      13,156,689 units at a price of Cdn$0.35 per unit for gross proceeds of
      Cdn$4,604,841 (US$3,970,703). Each unit consists of one common share and
      one-half of one common share purchase warrant. One whole common share purchase
      warrant entitles the holder to purchase one additional common share at an
      exercise price of Cdn$0.55 per share at any time prior to the earlier of: a)
      the
      date which is the 15th trading day after receiving notice from Minera Andes
      that
      the weighted average price of the common shares on the TSX Venture Exchange
      has
      been equal to or greater than C$1.00 for a period of 20 consecutive trading
      days
      commencing 120 days after the date of issuance of the warrants, and b) March
      8,
      2008.





The
      agents received a cash commission of 5% of the gross proceeds of the financing
      and 322,339 broker warrants, equal to 2.45% of the aggregate number of units
      sold. Each broker warrant upon exercise will entitle the holder to acquire
      one
      common share at an exercise price of Cdn$0.55 per common share at any time
      prior
      to the earlier of: a) the date which is the 15th trading day after receiving
      notice from Minera Andes that the weighted average price of the common shares
      on
      the TSX Venture Exchange has been equal to or greater than C$1.00 for a period
      of 20 consecutive trading days commencing 120 days after the date of issuance
      of
      the warrants, and b) March 8, 2008.





All
      securities issued in the private placement are subject to a four-month hold
      period expiring on July 9, 2006.





**d.**  In
      March
      2006, Macquarie exercised its warrants from the second tranche of Macquarie’s
      loan to MAI to acquire 3,987,742 of our Common Shares at an exercise price
      of
      Cdn$0.62 per share for proceeds of Cdn$2,472,400. We used part of the proceeds
      to repay principal and interest outstanding in the amount of $2,000,000 and
      $18,926, respectively, related to the second tranche of our loan from
      Macquarie.








-
            83
            -





**ITEM
                8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**




None.





**ITEM
      8A. CONTROLS AND PROCEDURES**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to our management, including our President and Chief Financial Officer, as
      appropriate, to allow timely decisions regarding required disclosure. Our
      disclosure controls and procedures are designed to provide a reasonable


level
      of
      assurance of reaching our desired disclosure control objectives. In designing
      and evaluating the disclosure controls and procedures, management recognized
      that any controls and procedures, no matter how well designed and operated,
      can
      provide only reasonable assurance of achieving the desired control objectives,
      and management necessarily was required to apply its judgment in evaluating
      the
      cost-benefit relationship of possible controls and procedures. Our President
      and
      Chief Financial Officer have concluded that our disclosure controls and
      procedures are effective in reaching that level of assurance.





As
      of the
      end of the period being reported upon, we carried out an evaluation, under
      the
      supervision and with the participation of management, including our President
      and Chief Financial Officer, of the effectiveness of the design and operation
      of
      our disclosure controls and procedures. Based on the foregoing, our Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures were effective.





**ITEM
      8B. OTHER INFORMATION**





None.







-
            84
            -





**PART
      III**





**ITEM
      9** .  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS**





Information
      with respect to our directors, executive officers and significant employees
      is
      set forth below.





**Name**
            **Age**
            **Positions
                Held**Allen
                V. Ambrose
            49
            President
                and DirectorBrian
                Gavin
            52
            Vice-President
                of Exploration, Director of MASAWilliam
                V. Schara
            49
            Chief
                Financial OfficerJorge
                Vargas
            64
            Director
                and President of MASAGary
                A. Craig
            57
            DirectorJohn
                Johnson Crabb
            80
            DirectorA.D.
                (Darryl) Drummond
            69
            DirectorBonnie
                L. Kuhn
            40
            Secretary
                and Director








**Allen
      V. Ambrose,** ***President
      and Director,*** has
      26
      years of experience in the mining industry and has been a director of Minera
      Andes since November 1995. Mr. Ambrose was employed by Degerstrom from 1988
      to
      2003. Prior to joining Degerstrom, Mr. Ambrose was a geologist for Cyprus
      Minerals, Kidd Creek Mines, Molycorp, Boise Cascade and Dennison Mines. Mr.
      Ambrose has extensive experience in all phases of exploration, project
      evaluation and project management and has worked as a geologist consultant
      in
      the U.S., Venezuela and most recently Argentina. He holds a B.Sc. degree in
      Geology from Eastern Washington University. While consulting for Gold Reserve
      Corporation, he was a co-discoverer of the auriferous massive sulfide exposure
      that led to their acquisition of the Brisas project in Venezuela. Mr. Ambrose
      sat on the board of directors of Cadre Resources Ltd. until March 2001 and
      has
      been a director of Century Mining Corporation (formerly Saxony Explorations
      Ltd.) and Samba Gold Inc. (formerly Kaieteur Resource Corporation) since July
      2002. He is also a director of Mexivada Mining Corporation since November 2005
      and a director of Rockgate Capital Corporation since October 2005.





**Brian
      Gavin,** ***Vice
      President of Exploration, Director of MASA*** ,
      has 26
      years of experience in exploration geology. Mr. Gavin has extensive experience
      in all phases of exploration, project evaluation and project management in
      the
      search for precious and base metals, industrial minerals and has worked in
      the
      field as project manager and consultant in the U.S., Mexico, Nigeria, Argentina
      and in Romania. He holds a B. Sc. (Honours) degree in Geology from the
      University of London and M. S. degree in Geology and Geophysics from the
      University of Missouri-Rolla. From 1981 to 1993, he was a consultant with Ernest
      K. Lehman & Associates, which is a geological mining consulting firm. From
      1993 to 2003, he was employed by Degerstrom. Mr. Gavin has served as an officer
      and director of Franconia Minerals Corporation since June 2001.





**William
      V. Schara** , ***Chief
      Financial Officer,*** is
      a
      certified public accountant (CPA) with over 22 years accounting and financial
      experience including 11 years in the mining industry. He has been CFO of Minera
      Andes since April 2005. Mr. Schara has extensive international experience and
      has worked with international accounting firms PricewaterhouseCoopers (formerly
      PriceWaterhouse) and Deloitte & Touche (formerly





-
            85
            -





Deloitte
      Haskins & Sells). He began work in the mining industry in 1995 with Yamana
      Gold Inc. (“Yamana”) (formerly Yamana Resources Inc.) and rose to the position
      of Vice President of Finance and Chief Financial Officer of Yamana, a TSX listed
      gold company. He has served as a director of Marifil Mines Ltd. since September
      2004 and Little Squaw Gold Mining Co. since March 2005.





**Jorge
      Vargas,** ***President
      and Director of MASA and MSC*** ,
      received his law degree in 1967 from the National University of Buenos Aires,
      Argentina. He has been in private practice since 1967. Dr. Vargas also studied
      mining law at the Law Faculty of the University of Mendoza and was on the
      organizing committee of the First International Water Rights Conference in
      Mendoza in 1968. Dr. Vargas is a registered attorney in the provinces of Mendoza
      and San Juan, and at the Federal level.





**Gary
      A. Craig,** ***Director*** ,
      has
      been a director since April 12, 2002. Mr. Craig has a degree in Civil
      Engineering and is currently Vice President of Operations for N.A. Degerstrom,
      Inc. His responsibilities for Degerstrom include managing 350 employees at
      various job sites throughout the U.S. and Argentina. Before his employment
      with
      Degerstrom, Mr. Craig worked 27 years for Dravo Corporation. The last 20 years
      with Dravo he worked as project manager for a phosphate mining operation, where
      he oversaw 100 employees.





**John
      Johnson Crabb,** ***Director*** ,
      graduated from the University of British Columbia in 1951 with a Masters Degree
      in Geology and has been a director of Minera Andes since November 1995. He
      was a
      director of Inland Resources, Inc. from 1985 to November 1995. Mr. Crabb was
      the
      director of Pegasus Gold Inc. and Vice President of Exploration for Crowsnest
      Resources Ltd., a wholly owned subsidiary of Shell Canada.





**A.D.
      (Darryl) Drummond,** ***Director*** ,
      is a
      Ph.D. and a professional engineer and has been a director of Minera Andes since
      June 1996. He graduated from the University of British Columbia with a B.A.Sc.
      and an M.A.Sc. in Geological Engineering .
      He
      obtained his Ph.D. in Geology from the University of California at Berkeley
      in
      1966. Dr. Drummond has over 40 years of experience in the mining industry
      including mineral deposit evaluation of precious metal, base metal and
      industrial mineral types in such countries as Argentina, Canada, Chile, China,
      Costa Rica, Ecuador, Guyana, Mexico, Philippines, United States of America
      and
      Venezuela. He has been a director of Valgold Resources Ltd. since March 27,
      2003, a director of Gold Port Resources Ltd. since December 16, 2004, and a
      director of Samba Gold Inc. since January 12, 2005.





**Bonnie
      L. Kuhn** ***,
      Secretary and Director,*** has
      been
      the Secretary and a director of Minera Andes since June 1997 and was Chief
      Financial Officer from May 2000 to March 2005. From January 2005, Ms. Kuhn
      has
      been self-employed. From July 2001 to January 2005, Ms. Kuhn was a senior
      associate of Field LLP, Barristers and Solicitors. She had been a solicitor
      with
      the firm Ogilvie and Company, Barristers and Solicitors, Calgary, Alberta,
      from
      January 1994 to December 31, 1998. Ogilvie and Company of Calgary changed its
      name to Armstrong Perkins Hudson LLP in 1999. From January 1, 1999 to June
      2001,
      Ms. Kuhn was a partner with Armstrong Perkins Hudson. From August 1993 to
      December 1994, Ms. Kuhn was a Crown prosecutor with the Government of Alberta,
      Department of Justice. Ms. Kuhn is a member of the Law Society of Alberta and
      the Canadian Bar Association. She obtained her LLB from the University of
      Manitoba in 1989. Ms. Kuhn was a director of Talon Petroleums Ltd., an oil
      and
      gas exploration company, from September 1997 to September 1999. Ms. Kuhn was
      a
      director of Aludra Inc. from April 2002 to October 2004. Ms. Kuhn was a director
      of Tajzha Ventures Ltd., an oil and gas exploration company from October 2000
      to
      April 2005. Ms. Kuhn is an officer and director of Franconia Minerals
      Corporation since August 1998.





We
      have
      five directors, one of whom is an executive officer. Directors serve terms
      of
      one year or until their successors are elected or appointed. No remuneration
      of
      any kind has been paid to any director, in their capacity as such, and there
      is
      no intention that they will be remunerated in that capacity in the immediate
      future. We reimburse expenses incurred by directors in connection with their
      activities on our behalf.





-
            86
            -








**Section
      16(a) Beneficial Ownership Reporting Compliance**





Based
      on
      the exemption in Exchange Act Rule 3a12-3(b), this item does not apply because
      Minera Andes is, and at all times during the applicable reporting period has
      been, a foreign private issuer as defined in Exchange Act Rule
      3b-4.





**Code
      of Ethics**





At
      this
      time, we have not adopted a formal code of ethics that applies to our President
      and Chief Financial Officer. We have, however, followed an informal code of
      ethics requiring Board of Director approval of any transaction in which our
      President or our Chief Financial Officer has a material interest. We believe
      this procedure reasonably deters material wrongdoing and promotes honest and
      ethical conduct from our executive officers.





A
      draft
      formal code of ethics has been prepared and will be submitted to the Board
      of
      Directors for approval in the first half of 2006. After adopting a formal code
      of ethics, we intend to disclose substantive amendments to and waivers from
      that
      code of ethics on our Web site at http://www.minandes.com.





**ITEM
      10. EXECUTIVE COMPENSATION**





**Summary
      of Executive Compensation**





The
      following table sets forth compensation paid, directly or indirectly, by Minera
      Andes during the last fiscal year for services rendered by Allen Ambrose,
      President, Brian Gavin, Vice President of Exploration, and William Schara,
      Chief
      Financial Officer (“Named Executives”).





**Summary
      Compensation Table**





Annual
                Compensation
            
            Long
                Term CompensationExecutive
            
            Fiscal
                Year
            
            Salary
              ($)
            
            Other
                Annual Compensation
              ($)
            
            Securities
                Underlying Options/SARs (#)Allen
                V. Ambrose (1)
              President
            
            
            2005
              2004
              2003
            
            
            109,236
              109,236
              109,236
            
            
            16,137(2)
              15,085
              12,013
            
            
            575,000
              370,000
              510,000Brian
                Gavin (1)
              Vice
                President of Exploration
            
            
            2005
              2004
              2003
            
            
            109,236
              109,236
              109,236
            
            
            16,137(3)
              15,382
              12,013
            
            
            400,000
              370,000
              510,000William
                V. Schara
              Chief
                Financial Officer
            
            
            2005
              2004
              2003
            
            
            75,600
                (4)
              0
              0
            
            
            8,883(5)
              0
              0
            
            
            200,000
              0
              0





Notes:





-
            87
            -











(1)
            For
                Fiscal Years 2003 and prior, Allen Ambrose and Brian Gavin, as employees
                of Degerstrom, provided services under the Operating Agreement (See
                "Description of the Business") which services were invoiced to us
                under
                the Operating Agreement.





(2)
            During
                the 2005 fiscal year, the following benefits were provided to Mr.
                Ambrose:


401K
                  Match
              $4,369Medical
                  Insurance
              $11,768





(3)
            During
                the 2005 fiscal year, the following benefits were provided to Mr.
                Gavin:


401K
                Match
            $4,369Medical
                Insurance
            $11,768





(4)
            Mr.
                Schara became CFO of Minera Andes in April 2005 and previously worked
                as a
                consultant for Minera Andes from December 2004 to March 2005. Salary
                of
                $75,600 only includes wages paid as
                CFO.





(5)
            During
                the 2005 fiscal year, the following benefits were provided to Mr.
                Schara:


Medical
                Insurance
            $8,883








**Stock
      Options Granted in 2005**





The
      following table sets forth certain information concerning individual stock
      options granted to the Named Executives during the year ended December 31,
      2005.





**Option
      Grants in the Last Fiscal Year**





Executive
            
            Number
                of
              Securities
                Underlying Options Granted
            
            Percentage
                of
              Total
                Options
              Granted
                to
              Employees
                in
              Fiscal
                Year
            
            Exercise
              Price
              (Cdn$/Share)
            
            Expiration
              DateAllen
                V. Ambrose
            
            
            575,000
            
            
            25
            %
            $
            0.60
            
            
            December
                28, 2010Brian
                Gavin
            
            
            400,000
            
            
            17.4
            %
            $
            0.60
            
            
            December
                28, 2010William
                V. Schara
            
            
            200,000
            
            
            8.7
            %
            $
            0.60
            
            
            December
                28, 2010





**Aggregated
      Option Exercises**





The
      following table sets forth certain information concerning the number of shares
      covered by both exercisable and unexercisable stock options as of December
      31,
      2005. Also reported are values of "in-the-money" options that represent the
      positive spread between the respective exercise prices of outstanding stock
      options and the fair market value of our Common Shares as of December 31, 2005.





-
            88
            -


**Fiscal
      Year-End Option
      Values**





Executive
            
            Shares
                Acquired on Exercise
            
            Value
                Realized
            
            Number
                of Shares Underlying Options at Fiscal Year End
              Exercisable
                Unexercisable
            
            Value
                of Unexercised In-the-Money Options at Fiscal
              Year
                End (1) (2)
              Exercisable
                UnexercisableAllen
                V. Ambrose
            
            
            0
            
            $
            0
            
            
            1,615,000
            
            
            0
            
            $
            152,971
            
            $
            0Brian
                Gavin
            
            
            0
            
            $
            0
            
            
            1,440,000
            
            
            0
            
            $
            145,466
            
            $
            0William
                V. Schara
            
            
            0
            
            $
            0
            
            
            250,000
            
            
            0
            
            $
            10,292
            
            $
            0





Notes:





(1)
            
            There
                were 1,615,000 stock options for Mr. Ambrose, 1,440,000 stock options
                for
                Mr. Gavin and 250,000 stock options for Mr. Schara that were in-the-money
                as of December 31, 2005. On December 31, 2005 the closing price of
                the
                Common Shares on TSX-V was
                Cdn$0.65.





(2)
            
            The
                currency exchange rate applied in calculating the value of unexercised
                in-the-money options was the late New York trading rate of exchange
                for
                December 31, 2005 as reported by the*Wall
                Street Journal*for conversion of United States dollars into Canadian dollars was
                U.S.$1.00 = Cdn$1.1628or Cdn$1.00 =
                U.S.$0.86.





**Stock
      Option Plan**





The
      board
      of directors adopted a stock option plan (the "Plan") which was approved with
      amendments by the shareholders of the Company at the Annual and Special Meeting
      of Shareholders held on June 26, 1996, which was subsequently amended at our
      Annual and Special Meeting of Shareholders held on June 26, 1998, June 23,
      1999,
      September 3, 2003 and May 19, 2005. The purpose of the Plan is to afford the
      persons who provide services to Minera Andes or any of its subsidiaries or
      affiliates, whether directors, officers or employees of Minera Andes or its
      subsidiaries or affiliates, an opportunity to obtain a proprietary interest
      in
      Minera Andes by permitting them to purchase Common Shares and to aid in
      attracting, as well as retaining and encouraging the continued involvement
      of
      such persons with us. Under the terms of the Plan, the board of directors has
      full authority to administer the Plan in accordance with the terms of the Plan
      and at any time amend or revise the terms of the Plan provided, however, that
      no
      amendment or revision shall alter the terms of options already granted. The
      aggregate number of shares to be delivered upon exercise of all options granted
      under the Plan shall not exceed 20% of the issued and outstanding Common Shares
      up to a maximum of 9,000,000 shares. No participant may be granted an option
      under the Plan which exceeds the number of shares permitted to be granted
      pursuant to rules or policies of any stock exchange on which the Common Shares
      is then listed.





Under
      the
      Plan, the exercise price of the shares covered by each option shall be
      determined by the directors and shall be not less than the closing price of
      our
      Common Shares on the stock exchange or stock exchanges on which the shares
      are
      listed on the last trading day immediately preceding the day on which the stock
      exchange is notified of the proposed issuance of option, less any discounts
      permitted by the policy or policies of such stock exchange or stock exchanges.
      If an option is granted within six months of a public distribution of our Common
      Shares by way of prospectus, then the minimum exercise price of such option
      shall, if the policy of such stock exchange or stock exchanges requires, be
      the
      greater of the price determined pursuant to the provisions of the Plan and
      the
      price per share paid by the investing public for our Common Shares acquired
      by
      the public during such public distribution, determined in accordance with the
      policy of such stock exchange or stock exchanges. Options granted under the
      Plan
      will not be transferable and, if they are not exercised, will expire one (1)
      year following the date the optionee ceases to be director, officer, employee
      or
      consultant of Minera Andes by reason of death, or ninety (90) days after ceasing
      to be a director, officer, employee or consultant of Minera Andes for any reason
      other than death.





-
            89
            -











At
      December 31, 2005, 1,009,000 options were available for grant under the
      Plan.








**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS**




The
      following table sets forth certain information regarding the beneficial
      ownership, as of March 24, 2006, of the Common Shares by (i) each person known
      by us to own beneficially more than 5% of the Common Shares, (ii) each director
      of Minera Andes, (iii) the Named Executive Officers (iv) all directors and
      executive officers as a group. Except as otherwise noted, we believe the persons
      listed below have sole investment and voting power with respect to the Common
      Shares owned by them.





**Shares**
              **Named
                Executive**
              **Officers
                and Directors****Beneficially**
              **Owned
                (1)**
            **Percentage
                of**
              **Common
                Shares (1)**Allen
                V. Ambrose
            1,832,200
                (2)
            1.40111
                E. Magnesium RoadSpokane,
                WA 99208John
                Johnson Crabb
            320,000
                (3)
            0.25111
                E. Magnesium RoadSpokane,
                WA 99208Gary
                A. Craig
            290,000 (4)
            0.223303
                N. Sullivan RoadSpokane,
                WA 99216A.D.
                (Darryl) Drummond
            300,000 (5)
            0.23111
                E. Magnesium RoadSpokane,
                WA 99208Brian
                Gavin
            1,610,400
                (6)
            1.23111
                E. Magnesium RoadSpokane,
                WA 99208Bonnie
                L. Kuhn
            449,500 (7)
            0.35111
                E. Magnesium RoadSpokane,
                WA 99208William
                V. Schara
            250,000 (8)
            0.19111
                E Magnesium RoadSpokane,
                WA 99208





-
            90
            -








**5%
                or Greater Shareholders**Robert
                McEwen
            42,857,143
                (9)
            29.833rdFloor99
                George StreetToronto,
                ON M5A 2N4Sprott
                Asset Management Inc.
            9,858,009
                (10)
            7.54Royal
                Bank Plaza, South TowerSuite
                2700Toronto,
                ON M5J 2J1Macquarie
                Bank Limited
            8,870,420
                (11)
            6.42Metals
                and Energy Capital DivisionLevel
                1, No. 1 Martin PlaceSydney,
                NSW 2000Australia**All
                directors and****executive
                officers****as
                a group (7 persons)**
            5,052,100
                (12)
            3.77





Notes:





(1)
            Shares
                which the person or group has the right to acquire within 60 days
                after
                March 24, 2006 are deemed to be outstanding in determining the beneficial
                ownership of the person or group and in calculating the percentage
                ownership of the person or group, but are not deemed to be outstanding
                as
                to any other person or group. Percentage ownership has been calculated
                based on a total of 129,381,042 shares
                outstanding.




(2)
            Includes
                stock options entitling the holder to acquire 160,000 shares upon
                payment
                of Cdn$0.40, 150,000 shares upon payment of Cdn$0.31, 360,000 shares
                upon
                payment of Cdn$0.59, 370,000 shares upon payment of Cdn$0.55, and
                575,000
                shares upon payment of Cdn$0.60.





(3)  Includes
      stock options entitling the holder to acquire 60,000 shares upon payment of
      Cdn$0.40, 40,000 shares upon payment of Cdn$0.31, 75,000 shares upon payment
      of
      Cdn$0.59, 40,000 shares upon payment of Cdn$0.55, and 75,000 shares upon payment
      of Cdn$0.60.





(4)
            Includes
                stock options entitling the holder to acquire 60,000 shares upon
                payment
                of Cdn$0.40, 40,000 shares upon payment of Cdn$0.31, 75,000 shares
                upon
                payment of Cdn$0.59, 40,000 shares upon payment of Cdn$0.55, and
                75,000
                shares upon payment of Cdn$0.60.





(5)
            Includes
                stock options entitling the holder to acquire 75,000 shares upon
                payment
                of Cdn0$0.59, 50,000 shares upon payment of Cdn$0.55, and 75,000
                shares
                upon payment of Cdn$0.60.





(6)
            Includes
                stock options entitling the holder to acquire 160,000 shares upon
                payment
                of Cdn$0.40, 150,000 shares upon payment of Cdn$0.31, 360,000 shares
                upon
                payment of Cdn$0.59, 370,000 shares upon payment of Cdn$0.55, and
                400,000
                shares upon payment of Cdn$0.60.





(7)
            Includes
                stock options entitling the holder to acquire 80,000 shares upon
                payment
                of Cdn$0.40, 60,000 shares upon payment of Cdn$0.31, 120,000 shares
                upon
                payment of Cdn$0.59, 80,000 shares upon payment of Cdn$0.55, and
                100,000
                shares upon payment of Cdn$0.60.





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(8)
            Includes
                stock options entitling the holder to acquire 50,000 shares upon
                payment
                of Cdn$0.61 and 200,000 shares upon payment of
                Cdn$0.60.





(9)
            Robert
                McEwen beneficially owns 29.83% of our shares (including warrants
                to
                acquire 14,285,714 common shares).





(10)
            Sprott
                Gold and Precious Minerals Fund beneficially owns 6.78% of our shares
                (including warrants to acquire 1,363,636 common shares) through which
                Sprott Asset Management Inc. exercises investment discretion and
                voting
                authority in respect to the shares. In addition, Sprott Strategic
                Offshore
                Gold Fund Ltd. Holds .77% of our shares through which Sprott Asset
                Management Inc. exercises investment discretion and voting authority
                in
                respect to the shares.





(11)
            Macquarie
                Bank Limited beneficially owns 6.42% of our shares (including warrants
                to
                acquire 8,870,420 common shares) through which Macquarie Bank Limited
                exercises investment discretion and voting authority in respect to
                the
                shares.





(12)
            Includes
                stock options to acquire520,000
                shares upon payment of Cdn$0.40, 440,000 shares upon payment of Cdn$0.31,
                1,065,000 shares upon payment of Cdn$0.59, 950,000 shares upon payment
                of
                Cdn$0.55, 50,000 shares upon payment of Cdn$0.61, and 1,500,000 shares
                upon payment of Cdn$0.60.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





During
      2005 and 2004, we incurred the following transactions with related parties:
      geological consulting to a director totaling $3,266 and $0, and legal fees
      to
      firms in which Bonnie L. Kuhn, a director and officer of Minera Andes, is an
      associate, totaling $45,970 and $81,412, respectively. The above noted
      transactions were in the normal course of operations and were measured at the
      exchange amount, which is the amount of consideration established and agreed
      to
      by the related parties.





**ITEM
      13. EXHIBITS**





The
      Exhibits listed in the Index to Exhibits at the end of this report are included
      as part of this Form 10-KSB.




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





**a.**
            **Audit
                Fees**


The
      fees
      billed for each of the fiscal years ended December 31, 2005 and December 31,
      2004 for professional services rendered by BDO Dunwoody LLP for the audit of
      our
      annual financial statements and review of financial statements included in
      our
      quarterly reports on Form 10-QSB or services that are normally provided by
      BDO
      Dunwoody in connection with statutory and regulatory filings or engagements
      for
      each of those fiscal years were $83,129 and $35,500, respectively.





**b.**
            **Audit
                Related Fees**


There
      were no other audit related fees in fiscal 2005 or 2004.





**c.**
            **Tax
                Fees**


Aggregate
      fees billed by BDO Dunwoody for tax compliance, tax advice and tax planning
      for
      each of the fiscal years ended December 31, 2005 and December 31, 2004 were
      $2,865 and $2,134, respectively. These fees include fees relating to the reviews
      of tax returns, tax consulting and planning.





**d.**
            **All
                Other Fees**


Fees
      billed by BDO Dunwoody for products or services, other than those services
      covered in Item 14(a) and (b) were $5,592 and $4,880 for the fiscal years ended
      December 31, 2005 and December 31, 2004. These fees relate to various corporate
      matters.




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**e.**
            **Audit
                Committee Approval of Audit and Non-Audit
                Services**


In
      2004,
      the Audit Committee pre-approved the use of BDO Dunwoody for specific
      tax-related services. The Audit Committee set a specific annual limit on the
      amount of such tax-related services we obtained from BDO Dunwoody, and required
      management to report the specific engagements to the Audit Committee. All other
      non-audit services other than the pre-approved services set forth above and
      any
      services that exceed the annual limits set forth in the policy must be
      pre-approved by the Audit Committee.









































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**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**MINERA
      ANDES INC.**


Registrant







By: /s/
      Allen V. Ambrose


Allen
      V.
      Ambrose, President








Date: **** March
      31, 2006








In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.








Date:****March
                31, 2006
            By:/s/
                Allen V. AmbroseAllen
                V. Ambrose, Directorand
                Principal Executive OfficerDate:****March
                31, 2006
            By:/s/
                John Johnson CrabbJohn
                Johnson (Jack) Crabb, DirectorDate:****March
                31, 2006
            By:/s/
                Gary A. CraigGary
                A. Craig, DirectorDate:****March
                31, 2006
            By:/s/
                A.D. DrummondA.D.
                (Darryl) Drummond, DirectorDate:****March
                31, 2006
            By:/s/
                Bonnie L. KuhnBonnie
                L. Kuhn, Director and SecretaryDate:****March
                31, 2006
            By:/s/
                William V. ScharaWilliam
                V. Schara, PrincipalAccounting
                and Financial Officer






































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**INDEX
      TO EXHIBITS**





**Exhibit****Number**
            **Description**2.1
            Asset
                and Share Acquisition Agreement between MASA, NADSA, Minera Andes
                Degerstrom, Brian Gavin, Jorge Vargas, and Enrique Rufino Marzari
                Elizalde, dated March 8, 1995, as amended on April 19, 1996 (incorporated
                by reference to Exhibit 2.1 to Minera Andes’ Registration Statement on
                Form 10-SB (the “Form 10-SB”)).2.2
            Arrangement
                between Minera Andes and Scotia Prime Minerals, Inc. (incorporated
                by
                reference to Exhibit 2.2 to the Form 10-SB).3.1
            Articles
                of Incorporation (incorporated by reference to Exhibit 3.1 to the
                Form
                10-SB).3.2
            Bylaws
                (incorporated by reference to Exhibit 3.2 to the Form
                10-SB).10.1
            Conveyance
                Agreement between NADSA and N.A. Degerstrom, Inc., dated July 1,
                1994
                (incorporated by reference to Exhibit 10.1 to the Form
                10-SB).10.2
            Conveyance
                Agreement between NADSA and N.A. Degerstrom, Inc., dated July 1,
                1994
                (incorporated by reference to Exhibit 10.2 to the Form
                10-SB).10.3
            Operating
                Agreement between Minera Andes and N.A. Degerstrom, Inc. dated March
                15,
                1995 (incorporated by reference to Exhibit 10.3 to the Form
                10-SB).10.4
            Share
                Option Agreement between Minera Andes and Jorge Vargas, dated March
                15,
                1995 (incorporated by the reference to Exhibit 10.4 to the Form
                10-SB).10.5
            Share
                Option Agreement between Minera Andes and Enrique Rufino Marzari
                Elizalde,
                dated March 15, 1995 (incorporated by reference to Exhibit 10.5 to
                the
                Form 10-SB).10.6
            Special
                Warrant Indenture between Minera Andes and Montreal Trust Company
                of
                Canada, dated December 13, 1996 (incorporated by reference to Exhibit
                10.18 to the Form 10-SB).10.7
            Purchase
                Warrant Indenture between Minera Andes and Montreal Trust Company
                of
                Canada, dated December 13, 1996 (incorporated by reference to Exhibit
                10.19 to the Form 10-SB).10.8
            Agreement
                dated April 30, 1996 between Minera Andes and Waiata Resources for
                the
                provision of financial advisory services (incorporated by reference
                to
                Exhibit 10.20 to the Form 10-SB).10.9
            Amended
                Stock Option Plan, dated June 26, 1996, as amended June 26, 1998,
                as
                amended June 23, 2000 (incorporated by reference to Exhibit 10.15
                to the
                Form 10-KSB for the fiscal year ended December 31,
                2000).10.10
            Purchase
                and Sales Agreement (Chubut cateos, Mina León I, Mina León II and Leleque)
                dated August 28, 2000 between Minera Andes S.A. and Cordon Leleque
                S.A.
                (incorporated by reference to Exhibit 10.17 to the Form 10-KSB for
                the
                fiscal year ended December 31, 2000).10.11
            Purchase
                and Sales Agreement (Chubut cateos, Willimanco) dated August 28,
                2000
                between Minera Andes S.A. and Minera El Desquite S.A. (incorporated
                by
                reference to Exhibit 10.18 to the Form 10-KSB for the fiscal year
                ended
                December 31, 2000).10.12
            Option
                and Joint Venture Agreement (El Pluma/Cerro Saavedra properties,
                now
                referred to as San José) between Minera Andes and Mauricio Hochschild
                & Cia. Ltda. dated March 15, 2001 (incorporated by reference to
                Exhibit 10.19 to the Form 10-KSB for the fiscal year ended December
                31,
                2000).








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10.13
            Amendment
                to the Option and Joint Venture Agreement (El Pluma/Cerro Saavedra
                properties, now referred to as San José) between Minera Andes and Mauricio
                Hochschild & Cia. Ltda. of March 15, 2001 dated May 14, 2002
                (incorporated by reference to Exhibit 10.20 to the third quarter
                2002
                10-QSB).10.14
            Second
                Amendment to the Option and Joint Venture Agreement (El Pluma/Cerro
                Saavedra properties, now referred to as San José) between Minera Andes and
                Mauricio Hochschild & Cia. Ltda. of March 15, 2001 dated August 27,
                2002 (incorporated by reference to Exhibit 10.21 to the third quarter
                2002
                10-QSB).10.15
            Key
                Executive Employment Contract between Allen Ambrose and Minera Andes,
                effective January 1, 2003 (incorporated by reference to Exhibit 10.15
                to
                the Form 10-KSB for the fiscal year ended December 31,
                2002).10.16
            Key
                Executive Employment Contract between Brian Gavin and Minera Andes,
                effective January 1, 2003 (incorporated by reference to Exhibit 10.15
                to
                the Form 10-KSB for the fiscal year ended December 31,
                2002).10.17
            Amendment
                to Key Executive Employment Contract between Allen Ambrose and Minera
                Andes (incorporated by reference to Exhibit 10.1 to the third quarter
                2003
                10-QSB).10.18
            Amendment
                to Key Executive Employment Contract between Brian Gavin and Minera
                Andes
                (incorporated by reference to Exhibit 10.1 to the third quarter 2003
                10-QSB).10.19
            Amended
                Stock Option Plan dated September 3, 2003 (incorporated by reference
                to
                Exhibit 10.1 to the third quarter 2003 10-QSB).10.20
            Settlement
                Agreement dated December 2, 2003 between Minera Andes Inc. and N.A.
                Degerstrom, Inc. (incorporated by reference to Exhibit 10.20 to the
                Form
                10-KSB for the fiscal year ended December 31, 2003).10.21
            Macquarie
                Bank Limited Credit Agreement dated December 10, 2004 (incorporated
                by
                reference to Exhibit 10.21 to the Form 10-KSB for the fiscal year
                ended
                December 31, 2004).10.22
            Amended
                Stock Option Plan dated May
                19, 2005. *21.1
            List
                of
                subsidiaries.*23.1
            Consent
                of BDO Dunwoody
                LLP.*31.1
            Certification
                of President (PrincipalExecutive Officer) pursuant to Section 302 of the Sarbanes-Oxley
                Act
                of 2002.*31.2
            Certification
                of Chief Financial
                Officer(Principal Financial Officer) pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*32.1
            Certification
                of President pursuantto 18 U.S.C. Section 1350, as adopted, pursuant to Section 906
                of the
                Sarbanes-Oxley Act of 2002.*32.2
            Certification
                of Chief Financial
                Officer pursuantto 18 U.S.C. Section 1350, as adopted, pursuant to
                Section 906 of the Sarbanes-Oxley Act of
                2002.*





*
      Exhibits filed herewith






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