Andean American Reports That its Subsidiary Sinchao Metals is to Combine its Business with Southern Legacy Minerals

TORONTO, ONTARIO -- (Marketwire) -- 03/02/12 -- Andean American Gold Corp. ('Andean' or the 'Company') (TSX VENTURE: AAG)(FRANKFURT: AQN) is pleased to report that its subsidiary company Sinchao Metals Corp. ('Sinchao') (TSX VENTURE: SMZ) and Southern Legacy Minerals Inc. ('Southern Legacy'), a private mineral exploration company organized under the laws of the State of Idaho, announced today that they have entered into an agreement (the 'Agreement') to combine the two companies by means of a share exchange or statutory arrangement (the 'Transaction').

The Transaction will consolidate a majority of Sinchao's deposit claims, located within the Yanacocha-Hualgayoc mining district in the department of Cajamarca, Northern Peru, and form a diversified mineral exploration company (the 'Resulting Issuer') with base and precious metals properties in Peru, Chile and Colombia. Sinchao and Southern Legacy have agreed to combine through Sinchao acquiring all of the issued and outstanding common shares of Southern Legacy by means of a share exchange on the basis of 0.8352 of a common share of Sinchao for each one common share of Southern Legacy (the 'Exchange Ratio'). The Transaction has been unanimously approved by the boards of directors of both companies.

PRIMARY OBJECTIVES OF THE TRANSACTION:

Sinchao will combine with Southern Legacy, a private exploration company led by a seasoned management team with extensive mineral exploration and development experience in South America. Southern Legacy's principal mineral projects include mining concessions contiguous to Sinchao's project in Peru and the Puchuldiza gold deposit in northern Chile. The objectives of the Transaction include:

--  Amalgamating the two companies' portfolios of projects to facilitate a
    better valuation of their mineral resources and potential for
    development;
--  Combining the strengths of the two management teams' relationships with
    local government officials, community members and property owners in
    South America to expedite the recovery of property titles previously
    understood to form part of the Sinchao land holdings;
--  Providing Southern Legacy with a streamlined process for listing their
    assets on the TSX Venture Exchange;
--  Creating a strong pro forma balance sheet following the proposed
    financing; and
--  Forming a diversified portfolio of projects in Peru, Chile and Colombia.

'This transaction effectively provides Andean shareholders with approximately $9.8 million value from what will be a 19.8% interest in the newly combined company which is expected to have a market capitalization of $50 million prior to a C$7 million financing, and on completion of the financing, Andean will own 17.3% of the newly combined company. Furthermore, by consolidating Sinchao's properties in Northern Peru with those held by Southern Legacy, the new company will be better positioned to develop these mineral assets,' said David Rae, President and CEO of Andean.

TRANSACTION DETAILS:

Pursuant to the terms of the Agreement, Sinchao will acquire all of the issued and outstanding common shares of Southern Legacy by means of a share exchange or statutory arrangement on the basis of 0.8352 of a common share of Sinchao for each one common share of Southern Legacy (the 'Exchange Ratio'). It is anticipated that upon closing, Southern Legacy shareholders will hold 70% of the pre-financing shares outstanding with Sinchao shareholders holding 30%. In addition, outstanding options and warrants of Southern Legacy will also be exchanged for options and warrants of Sinchao adjusted to give effect to the Exchange Ratio. Southern Legacy is an arm's length party to both Sinchao and Andean American Gold Corp. (Sinchao's largest shareholder).

Sinchao anticipates (i) completing an offering of C$7 million of subscription receipts ('Subscription Receipts'), the terms of which have not yet been finalized and the proceeds from which will be held in escrow pending completion of the Transaction, and (ii) completion of a consolidation of its common shares based on a consolidation ratio to be calculated as follows ((6 x the issuance price of each Subscription Receipt):1). Upon completion of the Transaction, all outstanding Sinchao options and warrants will additionally be adjusted to reflect the consolidation. The foregoing consolidation ratio calculation is designed to ensure that Sinchao is provided with a valuation of approximately $15 million as part of the Transaction. This represents approximately a 67% premium to Sinchao's 20-day volume-weighted average share closing price for the 20 trading days up to and including March 1, 2012.

Following completion of the Transaction, the company's name will be changed to 'Southern Legacy Minerals Inc.' or another name acceptable to the parties. The resulting issuer will have a board of directors comprised of five members, four being nominees of Southern Legacy and one being a nominee of Sinchao. It is anticipated that management of the Resulting Issuer will be comprised of the existing management of Southern Legacy or their nominees.

Prior to completion of the Transaction, Andean intends to exercise its 2,222,222 Sinchao warrants, priced at $0.12 per warrant, thereby increasing its interest in Sinchao from 64.95% to 65.8%. Upon completion of the Transaction and following the C$7 million financing referred to above, Andean will own approximately 17.3% of the combined company which is expected to have market capitalization of $57 million. On completion of the Transaction, Andean will be re-paid for all outstanding loans and advances previously made to Sinchao and Andean will hold its interest in Sinchao as an asset held for sale.

Pursuant to the terms of the Agreement, the completion of the Transaction is conditional upon a number of items, including, without limitation, approval of the shareholders of Sinchao and Southern Legacy, receipt of all necessary regulatory approval, formalization of the legal structure of the Transaction, no material adverse change occurring with respect to either Sinchao or Southern Legacy, compliance by both parties with their respective obligations under the Agreement, holders of no greater than 5% of the common shares of either Sinchao or Southern Legacy exercising dissent rights, and completion of the Subscription Receipt financing.

The Agreement includes customary non-solicitation covenants by both Sinchao and Southern Legacy together with customary exemptions to permit the respective boards of directors to exercise their fiduciary duties. In addition, the agreement provides for a mutual break fee of C$500,000 payable by Sinchao or Southern Legacy, as applicable in certain situations where the Agreement is terminated or the Transaction is not completed.

In connection with the execution of the Agreement, the officers and directors of both Sinchao and Southern Legacy, as well as Andean, have entered into lock-up agreements pursuant to which they have agreed to vote in favour of the Transaction and to not take any actions which are contrary to the completion of the Transaction.

The boards of directors of Sinchao and Southern Legacy, as well as Sinchao's majority shareholder, Andean have determined that the proposed business combination is in the best interests of their respective companies, based on a number of factors, including a fairness opinion received from Sinchao's financial advisor, the details of which will be provided to shareholders in the management information circular to be provided to Sinchao shareholders. Each company's board of directors unanimously approved the terms of the proposed business combination and recommend that their respective shareholders vote in favour of the transaction.

Full details of the business combination will be included in the management information circular that Sinchao will prepare and file with the regulatory authorities and mail to its shareholders in connection with the special meeting of the Sinchao shareholders to be held to consider the transaction in accordance with applicable law.

ABOUT ANDEAN AMERICAN GOLD CORP.

Andean is an international mining and exploration company focused on value growth through the development of gold and copper projects in Peru and currently has two key assets: the 31,600 hectare Invicta gold-silver-copper advanced exploration stage project and 64.95% (65.8% once it has exercised its 2,222,222 warrants) of Sinchao Metals Corp., owner of the Sinchao gold-silver-copper exploration project. Once the abovementioned Transaction is complete, Andean will own 17.3% of the newly combined company referred to in this press release which expects to change its name to Southern Legacy Minerals Inc.

ABOUT SINCHAO METALS CORP.

Sinchao Metals Corp. is a Canadian-based mineral exploration company, publicly traded since 2006, and listed on the TSX Venture Exchange under the symbol SMZ. The Company owns a gold-silver-copper-zinc-Lead exploration project in the Yanacocha-Hualgayoc mining district in the department of Cajamarca, Northern Peru. The Company is a subsidiary of Andean American Gold Corp., which currently owns approximately 64.95% of its outstanding shares.

ABOUT SOUTHERN LEGACY MINERALS INC.

Southern Legacy Minerals Inc. is a private Idaho-based mineral exploration company with exploration projects in Chile, Colombia and Peru. Southern Legacy is led by a seasoned management team with extensive mineral exploration and development experience in South America. The principal mineral projects of Southern Legacy include interests in mining concessions contiguous to the Sinchao Project in Peru and the Puchuldiza gold deposit in northern Chile.

For further information about Andean American Gold Corp. please visit the Company's website at www.aaggold.com or view the Company's documents on SEDAR at www.sedar.com.

On behalf of Andean American Gold Corp.,

David Rae

This news release may contain forward-looking information within the meaning of the Securities Act (Ontario) ('forward-looking statements'). Such forward-looking statements may include the Company's plans for its mineral projects, the overall economic potential of its properties, the availability of adequate financing and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements expressed or implied by such forward-looking statements to be materially different. Such factors include, among others, risks and uncertainties relating to potential political risks involving the Company's operations in a foreign jurisdiction, uncertainty of production and costs estimates and the potential for unexpected costs and expenses, physical risks inherent in mining operations, currency fluctuations, fluctuations in the price of gold and other metals, completion of economic evaluations, changes in project parameters as plans continue to be refined, the inability or failure to obtain adequate financing on a timely basis, and other risks and uncertainties, including those described in the Company's Financial Statements, Management Discussion and Analysis and Material Change Reports filed with the Canadian Securities Administrators and available at www.sedar.com.

This press release is not an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification or registration under the securities laws of such jurisdiction. The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended and such securities may not be offered or sold within the United States absent an applicable exemption from U.S. registration requirements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts:

Andean American Gold Corp.

David Rae

President and CEO

416-368-9500
drae@aaggold.com


Andean American Gold Corp.

Linda Dorrington

Investor Relations

905-491-6852
ldorrington@aaggold.com
www.aaggold.com