Silver Standard Resources (Silver Standard) controls the largest in-ground silver resource of any publicly-traded silver company. With the market for silver remaining strong and opportunities to diversify into new project, Silver Standard’s future shines as brightly as its name.
But it wasn’t always easy. In its early days, Silver Standard was a successful project finder. But by the time Robert A. Quartermain, M.Sc., P.Geo., joined the firm as President in 1985, the silver markets had down turned. “Added to the market issues, many of Silver Standard’s employees who had been with the company since the 1940s were retiring,” said Quartermain. “We had two employees and a market capitalization of less than $2 million.
But in 1992, outside investors Jim Blanchard and Rick Rule approached Silver Standard with money for the company to begin exploring solely for silver. “We were able to raise $2 million with three million shares at 78 cents each, and then we started looking for silver projects,” said Quartermain. “It was important to find projects we could buy and keep the silver in the ground until the silver price got to a level where we could mine profitably,” he said.
The company’s acquisition trail was a success – taking in Bolivia, Peru, Mexico, Argentina, United States, Canada and Australia. The firm’s resources grew at between 25-30 percent annually, with exploration success and acquisitions in all resource categories and varying levels of reserves.
Today, Silver Standard has about 1.4 billion resource ounces in all categories spread amongst 17 projects in Argentina, Peru, Mexico, Canada, United States, Australia and Chile. Incorporated in December 1946, the company’s shares graduated from the Nasdaq Small-Cap Market in August 1996 to the Nasdaq National Market in October 2004. The company's shares commenced trading on the Toronto Stock Exchange on November 4, 2004. As President, Quartermain is responsible for strategic planning, acquisitions and funding operations.
Open Pit Mining in Argentina
Robert Quartermain, at the Pirquitas mine in Argentina.
Silver Standard is now moving ahead with its first open-pit mining operation at its wholly-owned Pirquitas mine in Argentina. It acquired the Pirquitas Project in 2002, buying a preliminary interest first and finalizing the purchase of the entire interest in 2004. The latest feasibility study update showed that it could produce almost 10 million ounces of silver per year. Production at Pirquitas is planned for late 2008. “We’ve been working in Argentina as a company since 1998, so we were familiar with the country and knew it had good geological potential,” said Quartermain.
The project is fully-permitted and Sunshine Mining & Refining Company had spent $25 million on a detailed feasibility study of the site. Noting the availability of labor, road access and exploration potential, Silver Standard acquired the project and decided to place it back in production. With total operating costs per ounce of silver below $3 and cash cost per ounce below $5 (including byproducts), the project was an attractive one that justified raising $171 million (Canadian) in a financing with Bear Stearns and Deutsche Bank as co-leads in a syndicate of underwriters.
“The project has a reserve of 107 million ounces, based on a $5.35/oz silver price,” said
Quartermain. “It is a zoned deposit. You have a silver core with tin grading into zinc. The zinc grades can assay anywhere from one percent up to three percent in the pit wall rock.”
With plans to expand the Pirquitas reserve using higher metal prices, Silver Standard’s engineers are reviewing their calculations for production capital costs, taking inflation and global commodity prices into account. They hope to have an update on the capital costs and overall mineral reserve late in 2007.
“We currently have about 250 people employed on site doing preliminary construction work, and getting the office area fixed up and ready to go,” said Quartermain. “We’ve also recently hired George Paspalas, who was the Senior Vice President with Placer Dome for 18 years, as our Senior Vice President of Operations, to oversee the project.”
Silver Standard has locked in prices on trucks and other rolling stock, and has facilities onsite to house and feed 300 people, including office staff. Training and computing systems are also already in place. The gas pipeline which will generate electric power is in the permitting process.
“The project continues to be very attractive – at current metal prices, it’s quite robust. There’s also a nice little sweetener with the project, and that’s indium,” said Quartermain, referring to the 13,000-18,000 kilos of indium per year that the company expects to recover in the mining process. The demand for indium has increased because of its applications in flat screen and panel screen televisions.
Silver Standard’s Pirquitas mine facilities in Argentina.
The Pirquitas project had a $146 million capital cost estimate in 2006 when the feasibility study was updated by Hatch. Using current silver prices of $13, current zinc prices and current tin prices, the project would provide a 50 percent rate of return. And at a five percent discount rate, the project would have a net present value of between $400-500 million.
Looking ahead, Quartermain discussed the firm’s plans to spend about $30 million to drill close to 100,000 meters on five other projects in 2007. “We’re doing some drilling work (15,000 meters) on the Diablillos project this year, which is a gold-silver project in northern Argentina,” he said.
San Luis: Grassroots Discovery in Peru
The San Luis project, which is a joint-venture with Esperanza Silver in Peru, is a grassroots discovery. “We decided to go into Peru a couple years ago and explore for silver because Peru is the second largest silver producing country in the world,” said Quartermain.
“The first surface chip sample assayed 134 grams of gold and 2.2 kilos of silver across four meters. The area wasn’t staked, so we went in and staked a very large property package around the vein. We’ve since identified five other veins on the surface and have lots of other good exploration potential on the project.”
Examining drill results in San Luis, Peru.
On the main San Luis vein – the Ayelen vein – Silver Standard has identified a 550-meter strike length, an average of three to four meters in width and extending from surface 150 to 200 meters at depth. “It’s a very high grade gold project,” said Quartermain. “On the surface across the first 300 meters, the vein averaged somewhere on the order of 20 to 30 grams of gold and a kilo of silver.”
Satellite Findings in Mexico
A third project is Pitarrilla, in Durango State in Mexico. Silver Standard hired veteran prospectors and used ASTER satellite imagery to locate potential bulk silver mineralization in Mexico, which is the largest silver producing country in the world. They found an unstaked area in a major silver mining belt where the first chip samples ran five ounces of silver per ton.
“We now have 540 million ounces of silver drilled off in all categories, including 350 million ounces of measured and indicated resources and another 190 million ounces of inferred resources,” said Quartermain. “We have five drills on the property and we’re looking to bring in two more drills.”
“As we drill down from the surface, we think we have outlined an entire preserved epithermal system. Last fall we announced Hole 152, with 580 feet grading six ounces of silver. But within it was a zone that was 50 feet thick, which assayed 50 ounces of silver per ton, seven percent zinc, seven percent lead, and six percent copper.”
Earlier this year, Silver Standard’s board approved a US$12 million underground program to drive a ramp under the higher grade resource area. “We’re very excited about Pitarrilla,” said Quartermain. “We spent $40,000 to discover the project and it has delivered hundreds of millions of dollars of value back to our shareholders.”
Secondary Projects
Silver Standard’s secondary projects include the Snowfield gold property in northern British Columbia – two million ounces of measured and indicated, and another million ounces inferred – and the Maverick Springs gold-silver project in Nevada, which are both slated for drilling in 2007.
Here is the status of Silver Standards most active current projects:
PROJECT INTEREST ACTIVITIES
Pirquitas, Argentina 100% Detailed engineering underway, mill starting in Q4 2008
Pitarrilla, Mexico 100% Five drills, resource updates planned in Q4
San Luis, Peru 55% Two drills, infill and extension of high-grade
Diablillos, Argentina 100% 15,000 meters of drilling started in Q2
Snowfield, Canada 100% 15,000 meters of drilling to start in Q3
Maverick Springs, Nevada 100% Drilling Q3 to follow up high-grade intercepts from 2006
Despite mineralization that also contains gold, zinc, iridium, lead, tin and copper, silver is still almost 60 percent of the company’s total in-ground metal value. “We want to keep it that way, so we can remain the ‘Silver Standard’,” said Quartermain.
For more information on Silver Standard:
Paul LaFontaine
Director, Investor Relations
Toll-free in North America: (888) 338-0046
Direct: (604) 484-8212
Fax: (604) 689-3847
Email: invest@silverstandard.com
Web site: www.silverstandard.com