South American Silver Corporate Presentation, Q1, 2011
- 1. A Growth Focused Exploration & Development CompanyGrowing and advancing one of the worlds largest undeveloped silver and indium resources.TSX: SAC, US OTC: SOHAFCorporate PresentationQ1 2011www.soamsilver.com
- 2. Forward Looking StatementsCertain statements contained herein constitute forward-looking statements. Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as plans, intends, anticipates, should, estimates, expects, believes, indicates, targeting, suggests, potential, and similar expressions. These forward-looking statements are based on current expectations and entail various risks and uncertainties. Actual results may materially differ from expectations, if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. The Company assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. TSX:SACUS OTC:SOHAF
- 3. Investment HighlightsSouth American Silver Corp.Experienced management team with track record of successful project development and value creation
- 4. Two large-scale deposits in South America
- 5. Malku Khota: one of the worlds largest silver-indium resources
- 6. Escalones: high potential copper-gold deposit
- 7. Well definedbusiness plan to drive shareholder value
- 8. Leveraged to silver with nearly $40 of silver value per $1 invested
- 9. Attractive investment value relative to peers at low value per oz
- 10. Exposure to the high-tech indium market
- 11. Potential value from new copper-gold resource
- 12. Strong focus on community relations
- 13. Well financed into feasibilityTSX:SACUS OTC:SOHAF1
- 14. World-Class DepositsTwo large-scale assets in South America Malku Khota, Bolivia, silver-indium project
- 15. 100% owned, bulk mineable open-pit, sediment hosted deposit
- 16. Low capital and operating costs as a heap leach or milling operation
- 17. Resource expansion potential with only 4 km of 50 sq km property drill testedPEA and resource update in end of Q1-2011
- 18. Pre-Feasibility process to start in 2011 & Feasibility in 2012
- 19. Potential to be one of the top producing silver and indium mines
- 21. Escalones, Chile, copper-gold project
- 22. 100% controlled, large scale target in world-class mining district near El Teniente
- 23. Exploration program and geophysics to start Q1-2011
- 24. Resource definition program in 2011
- 25. Potential significant copper, gold, silver depositMalku KhotaEscalonesTSX:SACUS OTC:SOHAF2
- 26. Share Capitalization2TSX:SAC, US OTC:SOHAFIssued & OutstandingWarrantsOptionsFully Diluted198.3M114.8M8.4M8.1MMajor Shareholders Zamin19.7%
- 28. SAC Management1 --15%Institutional OwnershipSprott Asset Management
- 29. Front Street
- 30. K2 funds
- 31. Kudu Partners
- 33. ~$200 million Market Capitalization
- 34. Average trading volume 500,000 shares/day
- 35. Well financed with +$30 million estimated in cash at year end1
- 36. Potential NYSE-AMEX listing to increase visibility and liquidityAs of November 8, 2010 with proposed $28 million financing(1)On a fully diluted basis(2) As of February 21, 20113
- 37. Zamin Group - Strategic InvestmentA Key Regional PlayerWell funded regional player in South American resources industry with major projects in Brazil, Uruguay, Bolivia, and Chile
- 38. Strategic 19.7% investment positions SAC in strong financial and operational position to advance projects to feasibility
- 39. Track record of successfully facilitating South American project development through relationships with national and state governments in the region
- 40. Portfolio of South American projects with strong government support in permitting, rail and port infrastructure
- 43. Acquiring assets in Bolivia over past yearTSX:SACUS OTC:SOHAF4
- 44. Comparative Resources in the AmericasSecond largest development stage silver resource$1.50Millions of Silver Ounces & Enterprise Value Per Oz$0.58$7.26$2.88Millions of Silver Ounces$2.51$2.21$6.55$2.05$5.09$15.03$12.43$32.71MexicoEl. SalvadorMexicoMexicoMexicoPeruMexicoYukonArgentinaNunavutPeruGuatemalaBoliviaChileSource: CanaccordReport as of January 11, 2011Note: All companies have projects in South and/or North America5
- 45. Enterprise Value per Resource Oz ProducersAverage >$14/ozBy project development stageAdvanced Development Stage Average >$7/ozDevelopment Stage Average >$3/oz**Source: Canaccord Report January 17, 2011Share prices as of February 8, 2011,Note: All companies have projects in South and/or North America*EV/oz truncated to $206
- 46. Development Stage Value CurvePotential value growth with project advancementProductionAverage Enterprise Value per Oz of Silver by StageTake-Over offers or Partnerships common at this stage$14/ozConstructIncreased value through resource expansion Increasing Market ValuePermitsFS$7/ozPFSResourceDefinitionPEA$3/ozAdvancedDevelopment Stage (Reserves)Early StageExploration & DevelopmentProductionDiscoveryIncreasing value with project advancementSource: Recent average enterprise value per ounce of silver at various development stages for North and South American based projects. Canaccord, Wellington West and Company reports.7
- 47. Current Silver Company Valuations by StageCircle size represents EV/ozSource: Canaccord Report January 17, 2011Intierra, February 8, 2011Share prices as of February 831, 2011,Note: All companies have projects in South and/or North America8
- 48. Silver Supply/DemandSurging investment demand plus improving industrial consumption suggests continued demand growth with flat total supplyTotal Global SilverSupplyTotal Global SilverDemand& ETFsSource: GFMS World Silver Survey 20109
- 49. Silver Fundamentals PositiveFor continued higher pricesOne of the only precious metals not yet to hit all-time nominal highs from the 1980s ($35/oz and $50/oz 1980)
- 51. Continued increase in investment and industrial demand for silver
- 52. Annual mine production vs total demand remains in short-fall
- 53. Few new major deposit discoveries
- 54. Projected new production by analysts have failed to have been realizedTSX:SACUS OTC:SOHAF10
- 55. Indiuma key strategic metalRapidly growing market for high-tech uses UsesIndium-tin oxide (ITO) a key component of flat panel displays (FPDs) and touch screens
- 56. High-efficiency thin film solar panels (CIGS Photo-Voltaics), and LED lighting
- 57. Fiber optics, specialized and transparent semiconductorsSupplyGlobal indium use growing rapidly and could surpass available supply from by-product zinc refining at current price range
- 58. One of the most scarce strategic metals due to low recycling and few primary producersTSX:SACUS OTC:SOHAF11
- 59. Indium FundamentalsCompelling supply/demand dynamicsIndium Supply/Demand dynamicsIndium highlighted in UN and US DOE studies as a critical technology metal in potential shortage, along with several key rare earth metals, due to rapidly increasing growth, low recycling rates and low primary production
- 60. China is largest producer and consumer of indium and has imposed export quotas and tariffs like other key high-technology specialty metals
- 61. Zinc market growing at 1-3% annually with indium market estimated to be 15-20% annual growth
- 62. Current price ~$600/kg with five-year prices from $400/kg to over $1000/kgMalku Khota Annual Indium ProductionMalku Khota projected to be one of the worlds largest indium producers
- 63. Potential to represent 10% or more of global mine supplyTSX:SACUS OTC:SOHAF13
- 64. Indium DemandGrowing demand in high-tech markets5 year projected demand growth End-use Market Demand (tonnes)2010 total indium production levelGrowth assumptions based on data from Displaybank in LCD TV Association LCD TV Matters-Volume 3, Issue 2, February 2010 , Strategies Unlimited, August 2009 , Solarbuzz, Photon International, GFMS , Nanomarkets, and the US Department of Energy Critical Minerals Strategy Report14
- 65. Indium FundamentalsGlobal Zinc Production vs. U.S. Indium DemandU.S. Indium Demand (tonnes)Global Zinc Production (Millions of tonnes)Source: U.S Department of Energy: Critical Materials Strategy, December 2010; Global Zinc Production USGS Historical Statistics for Mineral and Material Commodities in the United States15
- 66. Key Metal Consumption vs ReservesRemaining Years of Supply Years of SupplyINDIUM16
- 67. Opportunity in BoliviaAn emerging resource based economy Bolivia experiencing its besteconomy in 30 years
- 68. Member of Mercosur Regional trade organization with Brazil as largest trading partner
- 69. One of the worlds premier silver districts with billions of ouncesof historical production
- 70. Planned $32 billion 5-7 year infrastructure build-out by Bolivian government for new rail and road corridors and hydropower generation
- 71. Three Major silver mines built within last four years by Pan American Silver, Coeur DAlene, and Sumitomo
- 72. Substantial resource industry investments in Bolivia
- 73. Jindal Steel of India investing US$2.3 billion for 50% interest in El Mutun iron ore deposit
- 74. Petrobras of BrazilLatin Americas largest publicly traded oil company investing US$1 billion of new capital into the Bolivian gas fields
- 75. Repsol of Spain investing $1.6 billion to increase gas production in BoliviaTSX:SACUS OTC:SOHAF17
- 76. Silver Mines in BoliviaOne of the worlds premier silver mining districtsHistorical district production of billions of ounces of silver
- 77. Highly prospective & under-explored
- 78. Increase from 9th largest global silver producer to 5th largest with completion of three major silver mines in past four years:
- 79. Pan American Silver San Vincente
- 80. Coeur DAlene - San Bartolome
- 81. Sumitomo - San CristobalTSX:SACUS OTC:SOHAF18
- 82. Malku Khota ProjectOne of the worlds largest silver-indium resourcesIndicated: 145 M oz of silver &845 tonnes of indiumInferred: 178 M oz of silver & 968 tonnes of indium50 square km, 100% owned, road accessible project, long life open pit mine
- 83. low capital and operating costs and high internal rate of return
- 84. Potential to be one of the top primary silver and indium producing mines
- 85. Located on the Bolivian Altiplano at around 3,800-4,200m elevationTSX:SACUS OTC:SOHAF19
- 86. Established InfrastructureLow projected capital and operating costsOpen pit, bulk mineable
- 88. Commercial power within 15km
- 89. Access to waterTSX:SACUS OTC:SOHAF20
- 90. MineralizationOpen pit, bulk mineable deposit Host rock sandstone with disseminated silver, indium, gallium, lead, zinc and copperEnrichment starts at surface Average grade first ten years: Silver: 38.6 g/t (60 g/t Ag Eq)
- 91. Indium: 8.1 g/t
- 92. Economic cut-off grade <10 g/t(at $15/oz Ag)TSX:SACUS OTC:SOHAF21
- 93. MineralizationHigh Grade Sandstone1160 g/t SilverGeological formations looking south from LimosnaMalku KhotaSandstoneAroifilla FmWaraWaraSandstoneTSX:SACUS OTC:SOHAF22
- 94. Malku Khota DrillingGrade thickness map75 drill holes in current resource with updated resource for Q1-2011
- 95. 2010 program focused on in-fill & confirmatory drilling
- 96. 2011 program to target conversion from resources to reserves & expansion drilling
- 97. Mineralization begins at surface
- 98. Deposit open along trend and down dip with excellent potential for expansion
- 99. New discovery of higher grade zones and down dip expansion of surface mineralizationTSX:SACUS OTC:SOHAF23
- 100. New Exploration ResultsDiscovery of broad continuous mineralization horizonLMD048: 286 meters grading 76 g/t Ag Eq Grade thickness values of over 21,500 g-m AgEqTSX:SACUS OTC:SOHAF24
- 101. Malku Khota DepositOnly 4km of 50 sqkm property drill testedWara Wara Area2010 program focused on in-fill and confirmation drilling for PEA Update
- 102. Excellent potential to expand resourcesSucre AreaLimosna AreaContinuation of favourable sedimentary host rocksTSX:SACUS OTC:SOHAF25
- 103. Production ProcessesFrom ore to metalOpen Pit MiningLarge scale shovel and truck open pit mining operation
- 104. Ore crushed in preparation for leaching
- 105. Acid-chloride leaching in captures silver, indium, copper, lead, zinc, gallium and gold
- 106. Metal recovery in several steps:
- 107. Acid recovery
- 110. Lead and zinc sulfides
- 111. Downstream processing to metal productsCrushingLeachingMetal Recovery & ProcessingSilver barsIndium ingotsLead and Zinc concentratesTSX:SACUS OTC:SOHAF26
- 112. Summary of PEA 2009Updated PEA with expanded throughput for Q1 2011Pincock, Allan and HoltHeap Leach Operation 20,000 Tonnes per Day Base Case Silver Price: US$13.30/ozBase Case Indium Price: US$530/kgIn US dollars, March 2009, PEA by Pincock Allan and Holt. Updated study utilizing higher production levels and new cost estimates anticipated Q1-2011First ten years of production27
- 113. Advancing to ProductionDevelopment TimelineThe project is at the PEA stage and may change substantially in terms of size and costas further exploration, engineering and metallurgical testing are completed 2013-1420122011Pre-Feasibility StudiesFeasibility StudyProjectedMine DevelopmentTSX:SACUS OTC:SOHAF28
- 114. Near Term Mine Development ProjectsSAC one of largest near-term producers at 20,000 tpdAnnual estimated potential silver production of new development projects anticipated in the next 2-4 yearsBarrick 25Bear CreekMillions of OuncesSo American SilverAlexco Resource CorpFresnillo PlcPan AmericanGold ResourceAndean ResourcesWildcat Silver CorpBear CreekMinmetals, Jiangxi CopperFortuna SilverAugusta ResourceSilvermex ResourcesGreystar ResourcesYukon Zinc Corp.Antofagasta plcGabriel ResourcesCobarConsilidatedChina MinmetalsNorsemont MiningChariot ResourcesJinchuan GroupAntofagasta plcIntrepid MinesOxianaVale29Source: CPM Silver Yearbook 2010
- 115. Global Silver Industry Cash Cost CurveAnticipated low-cost silver productionCumulative Percentile of Silver Mine Production CostMalku Khota6.4 Mozs/yr~ $3.75/ozTotal Cash Cost Per Ounce of SilverIndustry AverageCash Cost$5.25/oz Source: GFMS World Silver Survey 201030
- 116. Escalones-Copper-Gold project, ChileHigh potential, large-scale target70 square km,100% controlled, road accessible, large scale system
- 117. Located in world-class copper mining district near El Teniente
- 118. Historic drilling shows >1% copper grades at surface and untested porphyry system grading 0.6% copper
- 119. Additional significant gold, silver and molybdenum credits
- 120. Exploration drill program targeted for Q1 2011
- 121. Resource estimate targeted for 2nd half of 2011TSX:SACUS OTC:SOHAF31
- 122. EscalonesExplorationOwnership: 100% through LeaseLocation: 35km E of El TenienteElevation: 3800m6,889 hectares Escalones porphyry prospect located 97 km southeast of Santiago in central Chile12,666m drilled in 30 DDH 10,159m in the skarn
- 123. 500m in the porphyrySAC propertyGas pipelineAccess Road32
- 124. Drill Results Grade Thickness MapLarge-scale porphyry systemOpen in all directions
- 125. Strong historic resultsTSX:SACUS OTC:SOHAF33
- 126. EscalonesGeological cross-sectionEnriched zones with high grades at surface at over >1% copper with significant gold and molybdenum
- 127. Large scale porphyry target intercept of 176 m @ 0.6% copper with additional gold, silver and molybdenumAltoBajoTSX:SACUS OTC:SOHAF34
- 128. Community RelationsA key to successful project developmentAssistance of BSR* to develop proactive community relations strategy
- 129. Two full-time indigenous community relations officers working in region
- 130. Objectives to facilitate economic development in communities*Business for Social Responsibility, San Francisco, CA35
- 131. Project MilestonesValue drivers over the next 6-12 monthsMalku Khota Silver and Indium Project, Bolivia
- 132. Updated resource estimate targeted Q1 2011 & PEA at higher throughput Q1-2011
- 133. Pre-feasibility targeted to begin in Q2, 2011 and feasibility in 2012
- 134. Escalones Copper and Gold porphyry project, Chile
- 135. Exploration and Geophysics program beginning early 2011
- 136. Target for initial resource estimate in 2nd half of 2011
- 137. Potential for significant deposit of copper, gold and silverTSX:SACUS OTC:SOHAF36
- 138. Leveraged to SilverValue of silver per dollar investedSilver value per $1 invested SAC has some of the best leverage to silver of any development stage company with nearly $40 of silver value per $1 investedAverage value of silver <$8 of silver per $1 invested*Source: Canaccord as of January 17, 2011, Share prices updated February 8, 2011Note: all companies have projects in South and/or North AmericaCalculated using $25/oz Ag. Dollar value of silver per $1 invested = (silver resource/shares outstanding) x $25/oz silver) divided by share priceValue only shown for silver with no contribution from other metals37
- 139. Why South American Silver?Investment highlightsWorld-class scale projects with excellent expansion potential
- 140. Track record of discovery and successful project development
- 141. Growing shareholder value through resource expansion and advancing projects up the development value curve toward feasibility
- 142. Leveraged to silver with nearly$40 of silver value per $1 invested
- 143. Attractive investment value relative to peers at low value per oz
- 144. Exposure to rapidly growing Indium high-technology market
- 145. Potential new value from copper resource definition and expansion
- 146. Continued investor outreach to broaden market awareness of Company
- 147. Potential near-term NYSE-AMEX listing in the U.S.TSX:SACUS OTC:SOHAF38
- 148. TSX: SACOTC: SOHAFPhone: 604.681.69261.855.681.6926www.soamsilver.comGreg JohnsonPresident & CEOTSX:SACUS OTC:SOHAF39
- 149. Relative Stock PerformanceSAC outperforming key silver & gold indicesTrading liquidity increasing with average volume of 500,000 shares/day
- 150. SAC undervalued relative to peers at <$0.50/oz vs average of more than $1.70/oz for early stage resources and >$3.00/oz for >200Moz resourcesTSX:SACUS OTC:SOHAF
- 151. Management TeamA track record of successRalph Fitch, Executive ChairmanCo-founder of South American Silver, High Desert Gold, and General Minerals
- 152. Key role in discovery of Collahuasi copper porphyry , Malku Khota, Vizcachitas, and Escalones deposits Greg Johnson, President and CEOCo-founder of NovaGold, key role in growing company from $50 million to $2 billion market capitalization
- 153. Recognized for discovery and advancement of the 40 M oz Donlin Creek gold deposit for NovaGold and BarrickWilliam Filtness, Chief Financial OfficerChartered Accountant with twenty plus years of financial experience, including Manager, Corporate Development at Aurizon MinesFelipe Malbran, Vice President of ExplorationExtensive experience in exploration management in Bolivia, Chile, Peru and Argentina
- 154. Key role in discovery of MalkuKhota, Vizcachitas, and Escalones depositsPhillip Brodie-Hall, Vice President of Project DevelopmentGlobal industry experience in engineering construction and project development experience covering nearly every aspect of evaluation, feasibility studies and project development in the mining and mineral processing industriesDavid Dreisinger,Vice President of MetallurgyProfessor and Industrial Research Chair in Hydrometallurgy at the University of British Columbia (UBC)
- 155. Actively involved in developing and commercializing hydrometallurgical process at a number of operating mines in Australia and Southeast Asia.Richard Doran, Vice President and corporate secretaryFormer VP Investor Relations for General Minerals and Marketing Manager for Chevron ResourcesAndrew Clark,Manager of Project ImplementationGlobal industry experience in the design and management of industrial, mining, materials handling, chemical and petrochical projects from feasibility studies through to commissioning and handover of completed facilities. Xavier Gonzales Yutronic,General Manager Compa単鱈a Minera Malku Khota S.A.Mining Industry experience in finance, accounting, logistics, human resources and community relations at Comsur S.A., SinchiWayra (Glencore) from 2005-2007, and Compa単鱈aMinera Malku Khota S.A. from October 2008 to dateTSX:SACUS OTC:SOHAF
- 156. Board of DirectorsStrong industry and financial experienceRalph Fitch, Executive ChairmanGreg Johnson, President and CEOAntonio Canton, Director - Mr. Canton is an independent consultant for international companies in marketing, finance and real estate. He is a director of a number of Swiss companies and brings to the board extensive experience in accounting and finance.Peter Harris, Director - Mr. Harris is an engineer with over 40 years of mining industry experience including as Senior VP and Chief Operating Officer at Nova Gold Resources Inc., and Senior VP of Project Development at Placer Dome Inc. He has been involved in the construction and operation of over 20 different mines in North and South America, Africa, Australia and Papua New Guinea. William Murray, Director - Mr. Murray is an engineer in the mining industry with over 33 years of experience in construction management and project evaluation in North America and Africa. He currently serves as the executive chairman and director of Polymet Mining Corp. Mr. Murray has been involved in numerous successful projects while working at Fluor Daniel, Denison Mines, Optimum Project Services and Anglo American Corp. in South Africa. Paul Haber, Director - Mr. Haber is a Chartered Accountant and a Certified Public Accountant with a strong background in US/Canadian accounting and finance. Presently manages Haber & Co. Ltd. Has previously been Chief Financial Officer and Corporate Secretary of a TSX Venture listed company. John Watson, Director - Mr. Watson has been the President of a TSX Venture Exchange listed company since 2002. He is also the manager/member of a limited liability corporation that owns and manages commercial real-estate.Tina Woodside, Director - Ms. Woodside is currently the head of the corporate finance department in Gowlings Toronto office and a member of the firms National Executive Committee. Ms. Woodside practices corporate and securities law with particular emphasis on corporate finance, mergers and acquisitions and corporate governance matters. TSX:SACUS OTC:SOHAF