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VANCOUVER,
BRITISH COLUMBIA--(Marketwire - March 20,
2012) - South American Silver Corp. (TSX:SAC)(PINKSHEETS:SOHAF) reports
the release of its audited consolidated financial statements for the
year ended December 31, 2011 and the related management's discussion
and analysis of financial position and results of operations
("MD&A"). The Company is also pleased to provide an
update on the Malku Khota silver-indium-gallium project in Bolivia and
the Escalones copper-silver-gold project in Chile. In this press release,
all amounts are expressed in U.S. dollars, unless otherwise indicated.
As at December 31, 2011, the Company had working capital of $26.3
million, including cash and cash equivalents of $26.6 million. With
these funds in place, the Company is in a very strong financial
position to accelerate the advancement of its Malku Khota project
toward feasibility, and its Escalones project to the preliminary
economic assessment stage.. Further details
including the full financial statements and information on each of the
Company's projects, including the resource estimate and Preliminary
Economic Assessment study at Malku Khota and the resource estimate at
Escalones, are available on the Company's website at www.soamsilver.com and on SEDAR at www.sedar.com.
President's Message
The year 2011 was a challenging one for equity markets in general, but
particularly for companies in the precious metals sector. With a
backdrop of both gold and silver bullion hitting or matching all time
high price levels early in the year, precious metals equities
experienced a prolonged consolidation period after a peak in the
producer and explorer/developer indices in December of 2010. As a
general barometer of the exploration/development stage resource market
in 2011, the TSX Venture Composite Index saw one of its worst
performances out of the past 10 years, second only to the market of
2008.
Though South American Silver also consolidated with the sector in 2011,
performing along with the Junior Gold and Silver Miners Index, the
Company saw a number of major fundamental achievements during the year
including a major expansion of the resource and production projections
on its Malku Khota silver-indium project and the discovery of a new 4
billion pound copper resource at the Company's Escalones copper-gold
project in Chile. On a two-year basis South American Silver
substantially outperformed the sector indices, with its share price
being up nearly 300% since January 2010.
At current valuations, South American Silver offers some of the best
value and leverage to silver of any development stage silver company in
the industry, with nearly 4 ounces of silver per share and nearly 8
ounces of silver equivalent value including the Company's copper,
indium and gallium resources. The year ahead should be an exciting one
as well, with pre-feasibility level studies underway at the Malku Khota
silver-indium project and a major Economic Assessment update due out
Q2-2012; and with exploration activities underway at the Escalones
copper-gold project to allow for an updated resource mid-2012 and a
first Preliminary Economic Assessment Study by Q4-2012. With the two
actively advancing projects the Company anticipates significant
resource and engineering updates in each of the next 3 quarters of 2012
which should deliver meaningful milestones for increasing shareholder
value.
Approach to business
South American Silver Corp.'s growth strategy has been to identify
mineral properties that have significant scale potential to develop
large resources in well established mining districts of Bolivia and
Chile. Management looks to leverage its exploration and development
expertise to bring additional resources and value to shareholders and
to reduce development risk and expense through its focus on community
relations and corporate social responsibility. The Company will
continue to look for additional opportunities that can bring value to
South American Silver's shareholders through its approach to business.
Responsible mining and community collaboration are a key part of South
American Silver's business strategy on its projects, where the Company
is committed to upholding high environmental and social standards while
focusing on delivering the financial growth its shareholders expect.
As part of the Company's ongoing community relations approach to Malku
Khota, community relations personnel are working closely with the
surrounding local communities. The Company will look to facilitate
local and regional economic development through the various stages of
project development.
Current market and economic conditions
After fairly volatile market conditions throughout last year, 2012 has
shown good relative strength with precious metals and precious metals
equities prices generally higher as of March 2012. Thus far in 2012,
prices for silver had steadily climbed to highs of nearly $36/oz by the
end of February, after ending 2011 below $28/oz and gold had reached
highs of nearly $1800/oz, up from early January prices of under
$1600/oz. Though the precious metals markets are showing strength
relative to the last couple of months of 2011, prices still remain
below 2011 highs of nearly $1900/oz and $50/oz for gold and silver,
respectively. While trending in a similar overall pattern to gold,
silver has continued to show greater overall volatility and is up
approximately 17% for the year to date compared with about 7% for gold.
Gold is up nearly 115% from its 1980 nominal high of $850/oz, whereas
silver remains 35% below the 1980 nominal high of $50/oz. On an
inflation-adjusted basis, silver still remains well below its highs of
$140/oz in real terms as does gold with its high from 1980 estimated at
$2350/oz in 2011 dollars.
Since early 2010, silver has nearly doubled in value, significantly
outperforming gold, which has increased by about 60% over the same
period. The current gold to silver price ratio of just under 50:1
remains well below its historic highs of 15-20:1 but is now well off of
its 2010 lows in the 60-80:1 range.
The fundamentals for both silver and gold appear to remain strongly
supportive for continued higher prices as governments continue to
combat economic concerns with stimulus strategies to encourage economic
growth and increase their sovereign debt. Increasingly, investors are
returning to hard assets as a store of value and hedge against
inflation and currency devaluation resulting in increased investment
demand for both silver and gold in all forms, including Exchange Traded
Funds (ETF's), new physical metal investment trusts, bars and coins.
For silver specifically, its hybrid nature as both a precious and
industrial metal shows in the significant increases last year in both
investment and industrial demand growth. Industrial demand for silver
is closely tied to global economic growth particularly in developing countries
with applications ranging from biomedical to high technology. Silver
appears to have resumed the multi-year trend prior to the recent global
economic crisis of increasing overall industrial demand and has been
accompanied by strong increases in investor demand. A recent industry
report on silver by Byron Capital highlighted that the sustained growth
in use of silver in technology usage alone may be enough to support
silver at twice the current price levels.
With mining production of silver only increasing at approximately 2.5%
annually and with by-product silver production from both gold and
copper mining flat to falling since 2003, even with rising silver
prices, anticipated continued growth in industrial use coupled with
strong investment demand would appear to support higher silver prices
going forward..
After correcting from highs of nearly $700/kg in November 2011, the
indium and gallium market has begun to show more strength in February
2012, currently trading at prices of nearly $600/kg, well above trough
pricing of around $500/kg during the global economic slowdown of
2008/2009. Recent developments in the indium and gallium markets
continue to suggest a compelling supply/demand dynamic for these high
technology metals.
The main usages for indium and gallium are in flat panel displays and
touch screens, high efficiency solar panels and high-efficiency, long
life LED lighting. Global indium and gallium consumption is anticipated
to continue to grow significantly in these rapidly expanding market
sectors.. In total, global indium use has
grown approximately ten times since 1990.
Base metals have also seen significant ranges in their prices over the
past year with copper falling from its high of nearly $4.50/lb in July
and August 2011 toward the $3.00/lb level in October 2011 with a recent
rebound back to $3.50/lb in November 2011 and nearly $4.00/lb as of
February 2012. Similarly zinc had fallen from $1.00/lb toward $0.80/lb,
rebounding recently to $0.90/lb in November 2011 and recently reaching
nearly $0.95/lb in March 2012. Recent price fluctuations in base metals
appear to have been driven largely by short term economic concerns and
general market volatility. Long term growth in demand for copper and
zinc is likely to continue to be driven largely by growth in developing
economies particularly in Asia where per capita consumption levels
remain well below that of more developed nations.
With the volatility in the general markets and in commodities, equities
in the sector have also seen significant swings in valuation over the
past 6 months. Silver equities have been particularly so, with the move
of the silver price toward its highs of $50/oz last spring, the
correction toward $30/oz during the fall and recent rebound toward
$35/oz today. Most silver equities saw consolidation from their spring
highs and many small cap and growth stage companies are below their
200-day moving averages, a level that has often acted as a significant
support level in the on-going bull market. The smaller cap explorer /
developers have seen a larger rebound from their December lows than the
larger cap producers significantly outperforming the larger companies
in the sector and suggesting that broader investment capital is
beginning to flow back into the sector. Traditionally late fall and
winter are the strongest seasonalities for the precious metals sector
and it appears that we may be moving into stronger markets since the
end of the year.
With one of the largest development stage silver and indium resources,
a significant new copper discovery in Chile, strong fundamentals and an
attractive valuation level relative to peers, South American Silver has
substantially outperformed both the metals and the silver and gold
equity indexes over the past 2 years and has been one of the strongest
performers on a year to date basis through March 2012.
Property review
Malku Khota
South American Silver's most advanced project is the Malku Khota
silver-indium-gallium project located in the world-class silver mining
district of central Bolivia, approximately 200 kilometers north of
Potosi. Malku Khota is one of the world's largest silver, indium and
gallium resources with a NI 43-101-qualified Indicated Resource of 255
million tonnes of mineralized material containing 230.3 million ozs of
silver, 1,481 tonnes of indium and 1,082 tonnes of gallium at a grade
of 28.7 g/t silver, 5.8 g/t indium and 4.3 g/t gallium (43.8 g/t silver
equivalent), and an additional Inferred Resource of 230 million tonnes
containing 140 million ozs of silver, 935 tonnes of indium, and 1,001
tonnes of gallium at a grade of 18.9 g/t silver, 4.1 g/t indium and 4.3
g/t gallium (33.0 g/t silver equivalent). An updated Preliminary
Economic Assessment study released in March 2011 showed robust
economics for a bulk-mineable heap leach operation with the potential
to be one of the largest new silver, indium and gallium producing mines
in development with over 13.2 million ounces of silver production
annually over the first 5 years. The project is road-accessible, with
commercial scale natural gas and electricity nearby.
Pre-feasibility level engineering and metallurgical process work is
underway to further optimize the project production levels and process
flowsheet. These studies have looked at increasing overall scale and
potentially including a milling scenario for
higher grade material that leaches better when finely ground. An
updated NI 43-101 qualified Economic Assessment study based on the work
over the past year for Malku Khota is targeted for release in Q2-2012.
In addition, exploration activities are underway to support a planned 20,000 meter drill program. With the
typical conclusion of the rainy season in February, drill roads and
drill pads are being developed to support the start of drilling on the
project in March. This drill program will include infill drilling to
convert inferred resources to measured and indicated resources and
eventually into reserves and to test further resource expansion at
depth and between the two known deposits. To date, only about 30% of
the known prospective mineralized host stratigraphy at Malku Khota has
been drill tested. The 2012 drill program will also include drilling to
test several additional high-priority, near surface targets based on
surface sampling and geophysics.
Due to the bulk mineable and heap leachable nature of the deposit,
there remains excellent potential to continue to expand production
levels beyond the 13.2 million ounces of silver per year level in the
2011 Economic Assessment study through further optimization of the
resource and increases in overall mine throughput. Current optimization
studies are targeting expansion of annual silver production toward 18
to 20 million ounces per year as part of the updated Economic
Assessment and would make Malku Khota one of the largest producing
silver mines in the world.
Over the past year South American Silver has significantly broadened
its community relations activities and the Company has entered into
Impact and Benefit-type agreements with local indigenous communities to
facilitate local economic and business development through the various
stages of project implementation. The project contributes significantly
to the local economy and it is estimated that the construction phase
would likely create as many as 1,000 new jobs in the region with over
400 full time workers directly employed during mine operations.
Feasibility and baseline environmental work is planned to begin in the
second half of 2012. The Company anticipates continuing to build on its
community relations initiatives to support the feasibility and
permitting stages in 2012 and 2013.
Escalones
The Escalones copper-gold project is located in the world-class central
Chilean mining district which includes the nearby El Teniente deposit -
the world's largest underground copper mine. The project is accessible
by road and is approximately 100 kilometers south-east of Santiago.
South American Silver filed a detailed NI 43-101 technical report for
the Escalones resource estimate in February 2012.
The newly defined Inferred Resource of 420 million tonnes of
mineralized material contains 3.8 billion lbs of copper, 56.9 million
lbs of molybdenum, 610,000 ozs of gold and 16.8 million ozs of silver
at a grade of 0.41% copper, 0.05 g/t gold, 1.24 g/t silver and 61 ppm
molybdenum using a 0.2% Cu Equivalent cut-off grade (see December 19th,
2011 News Release). This is a copper-equivalent content of 4.5 billion
lbs of copper grading 0.49% based on approximate 3-year average metal
prices as of December 2011.
The Escalones deposit remains open to expansion laterally and down dip
with 90% of the current resource hosted in copper, gold and silver
replacement-style mineralization, and one drill hole testing
porphyry-style mineralization. Initial interpretation of a ZTEM and
aeromagnetic survey shows several large areas of untested conductivity
anomalies which may represent areas of potential additional sulfide
mineralization related to both replacement style and porphyry
mineralization. 2D and 3D modeling and interpretation of these
geophysical targets is in progress.
A Phase II exploration program is underway with two core drills
currently working on the site. Work will focus on understanding the
scale of the system by testing both porphyry and replacement-style
mineralized zones. Step out drilling will focus on known mineralized
areas and test new targets based on the recently completed aerial ZTEM
and magnetic surveys. The planned program will include 7,000 meters of
drilling to complete a resource update in mid-2012. Initial engineering
work including metallurgical testwork is planned to determine recovery
of copper, gold, silver and molybdenum and concentrate characteristics
for a Preliminary Economic Assessment study targeted for Q4-2012.
Updates on Escalones will be provided as drill results and geophysical
interpretations are completed.
Looking Forward
The year ahead should be an exciting one for South American Silver
Corp., with pre-feasibility level studies underway at the Malku Khota
silver-indium project and a major economic assessment update due out in
Q2-2012. A number of improvements in the process approach are being
considered for the next economic assessment that look to further
optimize more of the resource, increase annual production levels and
cash flows and look for opportunities to lower overall operating costs
on the project further.
In particular the technical team at South American Silver is focused on
adding shareholder value through a process of refining engineering with
the start of feasibility studies in the second half of 2012,
understanding the resource expansion potential and moving forward with
the permitting process while working closely with the local communities
to facilitate local economic and business development.
The next phase of the program will include in-fill confirmatory
drilling to move inferred resources into measured and indicated
resources as well as test expansion along trend and down dip and
potentially continue to expand the project resources which remain open
in all directions.
We believe that the above will support the move toward a fairer market
valuation for the Malku Khota project reflecting the world class scale
of the resource, production potential and economics.
At the Escalones copper-gold project, the on-going exploration program
is anticipated to begin to highlight the exceptional value of that
newly discovered resource as well. The exploration activities underway
are expected to allow for an updated resource by mid-2012 and a first
Preliminary Economic Assessment Study by Q4-2012.
In the months ahead, we are committed to reporting on a number of
important project milestones which we believe will broaden shareholder
value as we advance each of our South American projects through the
next stages of development.
Greg S. Johnson, President & CEO
About South American Silver Corp.
South American Silver Corp. is a growth focused mineral exploration
company creating value through the exploration and development of the
Malku Khota (100%) project in Bolivia, one of the world's largest
undeveloped silver-indium-gallium deposits, and the large-scale
Escalones (100%) copper-gold project in Chile. The Company's approach
to business combines the team's track record of discovery and
advancement of large projects, key operational and process expertise,
and effective community relations to increase shareholder value.
Management has extensive experience in the global exploration and
mining industry with much of that focused in Bolivia, Chile, Peru and
Argentina. The Company's shares are listed on the Toronto Stock
Exchange under the symbol "SAC" and on the US OTC market as
"SOHAF". Additional information related to South American
Silver Corp. is available at www.soamsilver.com and on SEDAR at www.sedar.com
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", "targeting", "anticipates",
"should", "estimates", "expects",
"believes", "indicates", "suggests",
"targeted", "scheduled", "will" and
"may" and similar expressions. This release contains
forward-looking statements. These forward-looking statements are based
on current expectations and various estimates, factors and assumptions
and involve known and unknown risks, uncertainties and other factors.
Information concerning mineral resource estimates, preliminary economic
assessments, and the interpretation of exploration programs and drill
results may also be considered as a forward-looking statement; as such
information constitutes a prediction of what mineralization might be
found to be present and economically mineable if and when a project is
actually developed.
It is important to note that: Readers are cautioned not to place undue
reliance on these statements as the Company's actual results,
performance or achievements may differ materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements if known or unknown risks, uncertainties or
other factors affect the Company's business, or if the Company's
estimates or assumptions prove inaccurate. Therefore, the Company
cannot provide any assurance that forward-looking statements will
materialize. Factors that could cause results or events to differ materially
from current expectations expressed or implied by the forward-looking
statements, include, but are not limited to, possible variations in
mineral resources or grade; metal prices; availability of sufficient
financing to fund further required work in a timely manner and on
acceptable terms; changes in project parameters as plans continue to be
refined; availability of equipment; failure of equipment or processes
to operate as anticipated; local community support, and political,
regulatory, environmental and other risks of the mining industry and
other risks more fully described in the Company's annual information
form filed and publicly available on SEDAR a www.sedar.com. Although the Company has attempted
to identify important factors that could cause actual results to differ
materially from those contained in forward looking statements, there
may be other factors that cause results to be materially different from
those planned, estimated, forecasted, projected or expected. Readers
are cautioned not to place undue reliance on the forward-looking
statements contained in this press release. Subject to applicable laws,
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.
The material assumptions that were applied in making the forward
looking statements in this release or referenced in this release
include, but are not limited to: the accuracy of current inferred and
indicated resources, the preliminary economic assessment and the
interpretation of drill and other exploration results; and execution of
the Company's existing plans and further exploration and development
programs for its properties, any of which may change due to changes in
the views of the Company or if new information arises which makes it
prudent to change such plans or programs.
Subject to applicable laws, 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. Unless otherwise
indicated, forward-looking statements in this release describe the
Company's expectations as of March 20, 2012.
This press release uses the terms 'measured resources', 'indicated
resources' and 'inferred resources' which are terms recognized and
required by Canadian regulations (under National Instrument 43-101
Standards of Disclosure for Mineral Projects), however, these terms are
not defined terms under SEC Industry Guide 7 and normally are not
permitted to be used in reports and registration statements filed with
the United States Securities and Exchange Commission. Investors are
cautioned not to assume that any part or all of the mineral deposits in
these categories will be converted into reserves. In addition,
'inferred resources' have a great amount of uncertainty as to their
existence, and economic and legal feasibility. It cannot be assumed
that an inferred resource will be upgraded to a higher category. Under
Canadian rules, estimates of inferred resources may not form the basis
of feasibility or pre-feasibility studies, or economic studies except
for preliminary economic assessment as defined under NI 43-101. Investors
are cautioned not to assume that part or all of an inferred resource
exists, or is economically or legally mineable.
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