... look out below ..., page-11

potential growth in share capital watso has often mentioned that andean will have to raise more money. watso was just looking through this mornings reports, and noticed highland pacific. Back in march 2001, hig had a issued capital of approx 216m shares. In september 2001, the company announced a feasibility study for a gold project that they were looking at. it was supposed to be for a us$20m project. on a yearly basis after that, there seemed to be a share placement, and share purchase plan. the share capital is now about 550 m shares. watso is not sure if this figure takes into account the most recent share issues.

the point that watso wants to make, is that is always a good chance, that andean will have a blow out in the share capital, which means that share holders will have to keep on forking out money, as well as the chance of being watered down as well, as placements are made
just looking at the latest issue from highlands, it seems that the company issued 62m shares in the placement, and for the spp, there were about 15m shares to be issued - this is dilution of capital, to existing shareholders - and more so to medium, and large sized holders, as the spp is based on so many shares, per shareholder

in 2005, the share placement was for 40m shares, and a spp of 25 m shares (not sure if all spp shares were taken up) - once again, this is dilution

in 2003 there was a share issue of 50m shares, and a spp of 26m shares - ie further dilution

ok, in 2002, the spp was far greater than the placement, however once again, the spp would have watered down significantly medium, and large shareholders

ANDEAN

in dec 2004, approx 53m shares were placed

there is no need to go through all the placements, but it seems that andean have made a few placements and had one or two spp's, that would have diluted shareholders (particularly medium and larger ones). there was a pro rata issue last year some time

anway, it is clear, that there is very good prospects, for shareholder dilution, even if an investor coughs up more money for spp's

by accepting the kcn bid, then kcn have the financial muscle to proceed the project, with very little shareholder dilution