South American Silver Corp December 2011 Corporate Presentation
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Transcript of South American Silver Corp December 2011 Corporate Presentation
Growing and advancing one of the world’s largest undeveloped silver and indium resources.
VALUE.GROWTH.VISION
Corporate PresentationDecember 2011
TSX: SAC, US OTC: SOHAF www.soamsilver.com
2
Cautionary NotesForward-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. Investors are advised to review the Company’s Annual Information Form filed at www.sedar.com for a detailed discussion of investment risks. 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.
Cautionary note regarding reserve and resource estimatesThe material in this presentation has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all resource and reserve estimates included in this presentation have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining and Metallurgy Classification System. NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the United States Securities and Exchange Commission (“SEC”), and resource and reserve information contained herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”. Investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category. The estimation of quantities of resources and reserves is complex, based on significant subjective assumptions and forward-looking information, including assumptions that arise from the evaluation of geological, geophysical, engineering and economic data for a given ore body. This data could change over time as a result of numerous factors, including new information gained from development activities, evolving production history and a reassessment of the viability of production under different economic conditions.Changes in data and/or assumptions could cause reserve estimates to substantially change from period to period. No assurance can be given that the indicated level of mineral will be produced. Actual production could differ from expected production and an adverse change in mineral prices could make a reserve uneconomic to mine. Variations could also occur in actual ore grades and recovery rates from estimates.
3
Investment Highlights
• Experienced management team with track record of successful project development and value creation
• Two large-scale deposits in South America• Malku Khota: one of the world’s largest silver-indium-gallium resources• Escalones: high potential copper-gold-silver deposit
• Updated 2011 PEA study doubles estimated production to 13.2 M oz silver, 80 tonnes of indium and 15 tonnes of gallium per year, for first 5 yrs
• Measured and Indicated resources expanded 60% to 230 M oz silver• Well defined business plan to drive shareholder value• Leveraged to silver nearly 4 oz of silver per share (6 oz silver equivalent)• Attractive investment value relative to peers at low value per oz• Exposure to the high-tech indium and gallium market• Potential value from new copper-gold-silver resource• Strong focus on community relations• Well financed into feasibility
South American Silver Corp.
4
World-Class DepositsTwo large-scale assets in South America
Malku Khota, silver-indium project, Bolivia (100%)• Bulk mineable open-pit, sediment hosted deposit• Low capital and operating costs as a heap leach or milling
operation• Update resource increases M&I 60% to 230 M oz silver
• Pre-Feasibility process started in 2011 & Feasibility in 2012• Resource expansion potential with only 4 km of 50 sq km property drill tested• Potential to be one of the top producing silver and indium mines• Funded into Feasibility
Escalones, copper-gold-silver project, Chile (100%)• Large scale target in world-class mining district near El Teniente• Exploration program and geophysics underway• Resource definition program in 2011• Potential significant copper, gold, silver deposit
Silver(Moz)
Indium(tonnes)
Gallium (tonnes)
AgEq(Moz)
M&I 230 1,481 1,082 354
Inferred 140 935 1,001 240
*AgEq=total contained metal using base case prices (Ag: $18/oz, In: $500/kg, Ga: $500/kg, Cu: $3/lb, Pb: $0.90/lb, Zn: $0.90/lb USD
5
Share Capitalization1
TSX:SAC, US OTC:SOHAF
Issued & Outstanding Fully Diluted1Warrants3Options2
101.9M 118.4M5.5M11.0M
• ~$160 million Market Capitalization (4)
• Average 3 mo. trading volume 150,000 shares/day• $28 million in cash(1)
Major Shareholders •Zamin --19%•Private investors--18%•Management5 -- 8%
Institutional Ownership•Sprott Asset Management•Front Street•US Global
(1) As of Nov 17, 2011, (2) Weighted avg .exercise price $0.99 CAD (3) Weighted avg. exercise price $0.97 (4) As of Dec 5, 2011 (5) direct ownership only
6
Adding Value Through Resource Growth
2007
2008
2009
2010
2011
0
50
100
150
200
250
300
350
400
0
1000
2000
3000
4000
5000
6000
7000
8000
Series25 Series24 Series17 Series16
Mill
ion
Ou
nc
es
of
Silv
er
To
nn
es
of
Ind
ium
an
d G
alli
um
(C
om
bin
ed
)
IPO
7
Alexc
o
Silver
cres
t
US Gol
d
Golde
n M
iner
als
Sullid
en
MAG S
ilver
Orko
ECU
Sabin
a
Taho
e Res
ourc
es
So.Am
erica
n Silv
er
Bear C
reek
0
50
100
150
200
250
300
350
400
450
500
Comparative Silver Resources in the Americas
Source: Canaccord Report resource numbers as of January 11, 2011Note: All companies have projects in South and/or North America
Second largest development stage silver resource
Mill
ion
s o
f S
ilver
Ou
nce
s
Yukon(Canada)
MexicoEl Salvador
Mexico MexicoPeru
Peru Mexico Mexico Mexico Nunavut(Canada)
Guatemala BoliviaChile
Peru
Additional value of Indium and GalliumInferred Resources
M&I Resources
SouthAmerican
Silver
8
So.Am
erica
n Silv
erECU
Golden
Mine
rals
Sabina
Orko
MAG S
ilver
Tahoe
Res
ourc
es
Silver
cres
t
Esper
anza
US Gold
Sullide
n
Produ
cers
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
Enterprise Value per Silver Resource Oz By project development stage
Source: Canaccord & Intierra as of June 9, 2011,Note: All companies have projects in South and/or North America
Development Stage Average ~$3/oz
Advanced Development Stage Average ~$6/oz
EV of >$0.80 base on 230.3 million M&I oz Ag
Producer Average ~$20/oz
South
Amer
ican
Silver
Corp
.
9
Development Stage Value CurvePotential value growth with project advancement
Increased value through resource
expansion
Early StageExploration & Development
AdvancedDevelopment
Stage (Reserves)
Production
Average Enterprise Value per Oz of Silver by Stage
ResourceDefinition
PEA
PFS
FSPermits
Construct
Discovery
$3/oz
$6/oz
$20/oz
Source: 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.
Incr
easi
ng
Mar
ket
Val
ue
Take-Over offers or Partnerships
common at this stage
Production
Increasing value with project advancement
EscalonesProject
Malku Khota Project
10
$50 $500 $5,00010
100
1000
Arian
Castle
Extorre
Golden Predator
Silver Bull
Silver Quest
South American Silver
Tahoe
Enterprise Value (US$ Millions)
To
tal R
eso
urc
e S
ize
(M
oz'
s)Current Silver Company Market Valuations by Resource Size & Development StageSize of circle represents market valuation premium
in EV/oz
500
$2,000
SAC SAC SAC
Total Resource Ag Equivalent using (Ag +Au only at $25/oz and $1000/oz values) Source: Canaccord Report July, 2011 and Intierra, July, 2011Share prices as of Sept 7 2011,Note: All companies have projects in South and/or North America
Developers Adv. Developers Producers
$1,000
US Gold
$100 $200 $300
11
Positive Silver FundamentalsA paradigm shift for silver?• Major shift in supply/demand dynamic over past several years
• Silver still well below inflation adjusted highs of $140/oz ($50 in 1980)
• Silver is a “hybrid” precious and industrial metal due to its scarcity and unique properties including superior electrical and thermal conductivity, malleability, reflectance, and catalytic/biologic reactivity
• Price increases driven by 40% increase in investment demand and 21% increase in industrial demand for a total increase of 17% in 2010
• Total annual mine production growth only 2.5% last year with reduced contribution of by-product silver from copper and gold production
• Projected new mine supply anticipated to be consumed by new industrial demand through at least 2015
• Chinese imports up 4x since 2009 with change from net sellers of more than 100 M oz of silver in 2005 to net buyers of more than 120 M oz in 2010
• Few major new deposit discoveries and growing time lag from time of discovery to metal production
Source: 1) GFMS World Silver Survey 20112) BMO Capital Markets Global Mining Research April 2011
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
200
400
600
800
1000
1200
World Silver Demand
Industrial Applications
Photography
Jewelry and Silverware
Investment and Coins
Mill
ion
Ou
nce
s
Silver Supply/Demand Fundamentals
12
• Dramatically increased demand growth driven by strong investment demand plus increased industrial consumption(1)
• Demand growth expected to continue to outstrip production growth(2)
Source: 1) GFMS World Silver Survey 20112) BMO Capital Markets Global Mining Research April 2011
+17% total demand growth
+40% investment demand
+21% industrial demand
+2.5% mine production
+8% total supply growth
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
200
400
600
800
1000
1200
World Silver Supply
Mine production
Secondary Supply and Scrap
Government Sales
Mill
ion
Ou
nc
es
13
Growing World Investment Demand For Silver
Source: GFMS World Silver Survey 2011
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
50
100
150
200
250
300 World Silver Investment Demand
Investment Coins & Medals
Mill
ion
s o
f O
un
ce
s
14
Growing Demand for Silver in TechnologyBreakdown of key technology/industrial uses for silver
Source: CPM Silver Yearbook 2010Not for reproduction without written CPM Group consent
Mill
ions
of S
ilver
Oz
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11p0
100
200
300
400
500
Photovoltaic
Catalysts, alloys, solders and biocides
Electronics
15
Thin Film/Thick Film Demand GrowthGrowing demand in solar technology
Growth 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 Report
2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
5
10
15
20
0
10
20
30
40
50
Thin film cell productionThick film cell productionSilver Fabrication (million ounces)
Ph
oto
vo
lta
ic c
ell
pro
du
cti
on
(G
iga
wa
tts
)
Silv
er
fab
ric
ati
on
(m
illio
n o
un
ce
s)
PV related silver consumption
16
Silver Primary & By-Product Production(1)
• 70% of silver is by-product production from base metals and gold• By-product silver production is largely silver price inelastic • Reduced by-product silver production anticipated going forward from base metals(2)
Source: 1) GFMS World Silver Survey 2005-20112) BMO Capital Markets Global Mining Research April 2011
2003 2004 2005 2006 2007 2008 2009 20100
50
100
150
200
250
300
0
5
10
15
20
25Lead/Zinc
Primary
Copper
Gold
Silver Price
Mill
ion
s o
f O
un
ce
s o
f S
ilve
r
Silv
er
Pri
ce
(U
S$
)
17
Indium & Gallium – Two Key Strategic MetalsRapidly growing market for high-tech uses
Uses• Indium-tin oxide (ITO) a key component of flat panel displays (FPDs) and touch screens• High-efficiency CIGS (copper, indium, gallium, selenide) photo-voltaic thin-film solar
panels, and LED lighting • Fiber optics, specialized and transparent semiconductors
Supply
• Global indium use growing rapidly and could surpass available supply from by-product zinc refining at current price range
• One of the most scarce strategic metals due to low recycling and few primary producers
*
* Image from http://gotpowered.com
18
Indium & Gallium FundamentalsCompelling supply/demand dynamics
Indium and Gallium Supply/Demand dynamics
• Indium and gallium highlighted in UN and US DOE studies as a critical technology metals in potential shortage, along with several key rare earth metals, due to rapidly increasing growth, low recycling rates and low primary production
• China is largest producer and consumer of indium and has imposed export quotas and tariffs like on other key high-technology specialty metals
• Indium market estimated to see 15-20% annual growth with most indium produced as by product of zinc refining growing at 1-3% annually
• Current indium and gallium price ~$900-1000/kg up from global economic lows during 2008-2009 of $400-500/kg
• Gallium market estimated to be a conservative 15% annual growth rate which could increase significantly with more rapid growth in LED lighting and photovoltaics
Malku Khota annual indium and gallium production• Malku Khota projected to be one of the world’s largest indium & gallium producers
(80 tonnes and 15 tonnes per year)• Potential to represent 10% or more of global mine supply of indium and over 5% of
global supply for gallium• Opportunities for project financing from off-take agreements for indium & gallium
Sources: (1) US Dept. of Energy Critical Materials Strategy, Dec. 2010. (2)United Nations Environment Programme (UNEP) Special Report on Strategic Metals ,May 2011 .
19
Criticality Index for Clean Energy/Technology DevelopmentShowing Forecast Supply Shortages of Most Important Metals
Sources: (1) US Dept. of Energy Critical Materials Strategy, Dec. 2010.
Dy
Ga Ce La Te
In Eu
Nd Tb Y
Li Co Pr
Sm
Nd Dy
Ga In Li Te
Eu Y Tb
Ce Co La Pr
Sm
Short Term (0-5 Years) Long Term (5-15 Years)
4
3
2
1
4
3
2
1
1 2 3 4
Impo
rtan
ce
to c
lean
ene
rgy
Impo
rtan
ce
to c
lean
ene
rgy
1 2 3 4
low
low
hig
h
hig
h
Supply Risk Supply Risklow lowhigh high
Important Near Critical Critical
20
Indium SupplyMine Production and Refining
Source: 1)Roskill ‘s Indium: Global Industry Markets and Outlook ,2010BLEU: Belgium, Luxembourg Economic Union
China; 45%
Peru; 9%
Canada; 9%
Australia; 6%
USA; 4%
Mexico; 3%
Other Coun-tries; 23%
Indium Mine Production
China
Peru
Canada
Australia
USA
Mexico
Other Countries
China; 52%
S.Korea, 13%
Canada; 8%
Japan; 8%
BLEU; 6%
Germany; 3%
Russia; 3% Peru; 1% Others; 6%
Indium Refining
China
S.Korea
Canada
Japan
BLEU
Germany
Russia
Peru
Others
21
2010 2011E 2012E 2013E 2014E 2015E 2016E0
500
1000
1500
2000
2500Solar Energy
LED Lighting
LCD Flat Panels
Indium Demand GrowthGrowing demand in high-tech markets
Growth 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 Report December 2010
End-
use
Mar
ket
Dem
and
(ton
nes)
2010 total indium
production level
5 year projected demand growth
19701972
19741976
19781980
19821984
19861988
19901992
19941996
19982000
20022004
20062008
20102012
20140
500
1000
1500
2000
2500
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Demand
Price
Indium FundamentalsWorld indium demand vs price (1969-2011*)
Source: (1) Indium: Global Industry Markets and Outlook, 9th Edition 2010 (Roskill) *2011-2013 Data are estimates (2) 2011-2015 Estimates US Dept. Of Energy Critical Materials Strategy Dec. 2010. 16
Indi
um D
eman
dIndium
Price/kg ($US)
XCurrent Indium Price
23
Silver Mines in BoliviaOne of the world’s premier silver mining districts
• Historical district production of billions of ounces of silver
• Highly prospective & under-explored
• Increase from 9th largest global silver producer to 5th largest with completion of three major silver mines in past four years:
Pan American Silver – San Vicente Coeur D’Alene - San Bartolome Sumitomo - San Cristobal
TSX:SACUS OTC:SOHAF
24
Opportunity in BoliviaAn emerging resource based economy• Bolivian government encouraging private investment
• Member of Mercosur Regional trade organization with Brazil as largest trading partner
• Government bond ratings upgraded by Moody’s & Fitch
• Mining second largest economic sector
• One of the world’s premier silver districts with billions of ounces of silver production
• Planned $32 billion 5-7 year infrastructure build-out by Bolivian government for new rail and road corridors and hydropower generation
• Three Major silver mines built within last four years by Pan American Silver, Coeur D’Alene, and Sumitomo
• Substantial resource industry investments in Bolivia
Jindal Steel of India investing US$2.1 billion in giant El Mutun iron ore deposit
Petrobras of Brazil—Latin America’s largest publicly traded oil company – investing US$1 billion of new capital into the Bolivian gas fields
Repsol of Spain investing $1.6 billion to increase gas production in Bolivia
Petrobras and Repsol have announced new exploration initiatives in Bolivia in early 2011
Kores of South Korea set to invest $210 million to develop the Corocoro copper project
Recently announced investments by Citic of China and LG/Posco of South Korea to develop major lithium resources
TSX:SACUS OTC:SOHAF
25
Malku Khota ProjectOne of the world’s largest silver-indium resources
1) Average for the first 5 years of production2) See March 31, 2011 News Release for detailed resource estimate3) Total contained metal using base case prices (Ag: $18/oz, In:
$500/kg, Ga: $500/kg, Cu: $3/lb, Pb: $0.90/lb, Zn: $0.90/lb USD
Silver(Moz)
Indium(tonnes)
Gallium (tonnes)
Copper (MLbs)
Lead(MLbs)
Zinc(MLbs)
AgEq3
(Moz)
M&I 230 1,481 1,082 120 453 247 354
Inferred 140 935 1,001 102 362 246 240
Malku Khota Project – 2011 Resource Estimate
26
Malku Khota ProjectLow projected capital and operating costs with established infrastructure• 50 square km, 100% owned, road accessible project• Low capital and operating costs on a per ounce basis• Potential to be one of the top primary silver and indium producing mines at 13.2 Moz
silver per year and 80 tonnes of indium1 • Project base case annual cash flows and NPV’s more than doubled• Open pit, bulk mineable and very scalable• Commercial electricity and natural gas nearby
1) Average for the first 5 years of production
27
Mineralization
Enrichment starts at surface Host rock sandstone with disseminated silver, indium, gallium, lead, zinc and copper
Open pit, bulk mineable silver-indium deposit
Average grade first five years:• Silver: 42.2 g/t (58 g/t Ag Eq) 1 • Indium: 7.55 g/t• Economic cut-off grade <15 g/t (at $18/oz Ag) 2
(1) AgEq comprised of all contained metals(2) Economic cut-off grade comprised only of silver and
indium
28
Malku Khota DrillingGrade thickness map
• 115 drill holes in current resource with updated resource Q1-2011
• Updated resource results increase total M&I oz to 230 Moz Ag (a 60% increase in M&I oz) plus an additional 140 M inferred Ag oz
• 2011 program to target conversion from resources to reserves & expansion drilling
• Mineralization begins at surface
• Deposit open along trend and down dip with excellent potential for expansion
• New discovery of higher grade zones and down dip expansion of surface mineralization
TSX:SACUS OTC:SOHAF
Mineralized
Sandstones
OPEN
OPEN
OPEN
29
Malku Khota Mineralization• Broad zones of continuous sediment hosted mineralization• Open at depth and along trend
LMD048: 286 meters grading 76 g/t AgEq Grade thickness values of over 21,500 g-m AgEq
TSX:SACUS OTC:SOHAF
OPEN
OPEN
30
Production ProcessesFrom ore to metal
• Large scale shovel and truck open pit mining operation
• Ore crushed in preparation for leaching
• Acid-chloride leaching captures silver, indium, copper, lead, zinc, gallium and gold
• Metal recovery in several steps:• Acid recovery• Silver-gold-copper cementation• Indium-gallium precipitation• Lead and zinc sulfides
• Downstream processing to metal products
TSX:SACUS OTC:SOHAF
Crushing
Leaching
Metal Recovery & Processing
Open Pit Mining
Silver, Gold, Copper
Indium & Gallium ingots
Lead & Zinc concentrates
31
2011 Economic Assessment1
(1) In US dollars, March 2011, PEA(2) LOM = Life of Mine(3) First 5 years of production (avg)
Metal Prices ($US)4
Base Case
Silver : $18/ozIndium : $500/kgGallium: $500/kg
$25/oz$570/kg$570/kg
Mining RateLife of MineOre Mined (LOM)2
Average Silver Grade 3
Average Indium Grade3
Ag Eq grade
158 M1,184191 M135 M88 M212,962
10.5 M78.9 12.7 M9 M5.87 M14,198
Mid Case
Base Case$185 M/yr$1,261 M$704 M37.7%27 months
$287 M/yr$2,528 M$1482 M63%19 months
Mid Case
TotalLOM
Annual
40,000 tpd15 years200 M tonnes42.4 g/t7.55 g/t58 g/t
First 5 years
Recent$430 M/yr$4,298 M$2571 M92.9%15 months
Recent$35/oz$650/kg$730/kg
13.2 M80.7 12.48 M4.42 M5.64 M15,184
71%
15%
6%5%3%
Share of Gross Revenue(at base case prices)
Silver
Indium & Gallium
Copper
Lead
Zinc
First 5 years cash flow Net cash flow NPV (5% discount rate)1
Internal Rate of ReturnPayback period (years)
Recovered MetalsSilver (oz)Indium (tonnes)Lead (lbs)Zinc (lbs)Copper (lbs)Gallium (kgs)
(4) Base Case = 3 yr avg as of May 2011Mid Case = 2 yr avg as of May 2011Recent Case = 1 yr avg as of May 2011
32
Malku Khota PEA Update Projected Production Levels
Source: March 2011 Malku Khota PEAValues in US$
1 2 3 4 5 6 7 8 9 10 11 12 13 14 150
2
4
6
8
10
12
14
16
18
20
22Copper
Zinc
Lead
Indium & Gal-lium
Silver
Annual Average
Production Year
Pro
du
cti
on
- S
ilve
r E
qu
iva
len
t O
un
ce
s (
Mill
ion
)
13-20 Moz Silver Equivalent Production first 11 years
33
Malku Khota NPV and Cash Flow
$15 $20 $25 $30 $35 $40 $45 $50$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$0
$100
$200
$300
$400
$500
$600
Net Present Value
Average Net Cash Flow
Ag Price ($/oz)
NP
V @
5%
Dis
co
un
t R
ate
(U
S$
M)
Av
era
ge
Ne
t C
as
h F
low
1s
t 5
ye
ars
(U
S$
M)
Source: March 2011 Malku Khota PEAValues in US$
34
Coeur
D'A
lene
Mini
ng
Hochs
child
Mini
ng
Hecla
Mini
ng
Endea
vour
Silv
er
Pan A
mer
ican
Silver
Avera
ge o
f Pro
duce
rs
First M
ajest
ic
Fortu
na S
ilver
Fresn
illo
Silver
Sta
ndar
d
Silver
Whe
aton
Silver
corp
0
5
10
15
20
25
6.5
8.4
10.5 11.112.3
15.6 16.217
19.3
23.2 23.4 23.5
20
11
E P
/CF
Silver Producer Price to Cash Flow Multiples (P/CF)1
Source: BMO Capital Markets Global Mining Research Report, April 3, 2011 (share prices as of March 31 2011)(1) At $30/oz of silver (2) Using PEA base, mid and recent case prices(3) First 5 year average (4) Using avg. P/CF of 15.6x at $30/oz Ag
Malku Khota PEA Projected Cash Flows
Price Ag/oz2 $18/oz $25/oz $35/oz
CF/yr3 $185 M $287 M $430 M
Valuation at Avg. P/CF4 $2,886 M $4,477.2 M $6,708 M
35
San B
arto
lome
(Boli
via)
Alamo
Dorad
o (M
exico
)
La P
itarill
a (M
exico
)
Diablill
os (A
rgen
tina)
Green
s Cre
ek (U
SA)
Arcat
a (P
eru)
Uchuc
chac
ua (P
eru)
El Pen
on (C
hile)
Gümüs
köy
(Tur
key)
Coran
i (Per
u)
Pallan
cata
(Per
u)
Dukat
(Rus
sia)
Hacke
tt Rive
r (Can
ada)
Malk
u Kho
ta (B
olivia
)
Peñas
quito
(Mex
ico)
Juan
icipio
(Mex
ico)
Navida
d (A
rgen
tina)
Escob
al (G
uate
mala
)
San C
risto
bal (
Bolivia
)
Pascu
a La
ma
(Chil
e)
Fresn
illo (M
exico
)
Cannin
gton
(Aus
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Ac
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Mo
z)Primary Silver Project Annual Production Rates
Source: CPM Silver Yearbook 2011*Based on mine production of 13.2 Moz /year for first five years
Malku Khota one of largest emerging producers at over 13 Moz/yr
Producing Mine
Development Stage Project
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36
Global Silver Industry Cash Cost CurveAnticipated low-cost silver production
Cumulative Percentile of Silver Mine Production Cost
Total C
ash C
ost P
er Ou
nce o
f Silver
Industry AverageCash Cost$5.27/oz
Malku Khota13.2 Mozs/yr (1)
~ $2.94/oz (2)
Source: GFMS World Silver Survey 2011(1) Average first 5 years of production(2) Silver cash costs after credits ($US)/oz
Lowest 25% Percentile Cash
Costs
37
Escalones Copper-Gold-Silver project, ChileHigh potential, large-scale target
• 70 square km, road accessible, large scale system in well established mining district
• Located near one of the worlds largest underground copper mines at El Teniente
• Historic drilling shows >1% copper grades at surface and untested porphyry system grading 0.6% copper
• Additional significant gold, silver and molybdenum credits
• Exploration program underway
• Resource estimate targeted for 2nd half of 2011
TSX:SACUS OTC:SOHAF
38
Escalones Project Logistics
Ownership: 100% through leaseLocation: 35km E of El TenienteElevation: 3800m
• 70 square kilometer property
• Road accessible located 100 km southeast of Santiago
• Gas pipeline across property
• 30 Drill holes completed to date
Excellent existing infrastructure
SAC propertyGas pipelineAccess Road
31TSX:SACUS OTC:SOHAF
39
Drill Results Grade Thickness MapLarge-scale copper-gold-silver system
• Open to expansion down dip and laterally
• Strong historic drill results
• Limited testing of porphyry system with most holes in replacement /skarn style mineralization
TSX:SACUS OTC:SOHAF 32
40
EscalonesGeological cross-section• Enriched zones with high grades of replacement style mineralization starting at surface
at over >1% copper with significant gold and silver
• Large scale porphyry target with intercept of 176 m @ 0.6% copper with additional credits from gold, silver, and molybdenum
TSX:SACUS OTC:SOHAF
AltoBajo
41
Community RelationsA key to successful project development• Recent key addition to community relations team:
• Jim Mallory, VP Operations and Social Responsibility – 35 years industry experience previously with Silver Standard, NovaGold, & Barrick (Placer Dome)
• Objectives to facilitate economic development in communities as part of project exploration, development and construction activities
• Project construction will see workforce of over 1,000 with mine workforce of over 400 or more
TSX:SACUS OTC:SOHAF
42
Project MilestonesValue drivers over the next 6-12 months
• Malku Khota, silver-indium-gallium project, BoliviaUpdated resource estimate & PEA more than doubles annual production to
13.2 M oz of silver, 80.7 tonnes of indium and 15 tonnes of gallium per year*Updated resource results show 60% increase in M&I ounces to 230 M oz of
silver with an additional 140M oz inferred, and indium to 1,481 tonnes M&I and 935 tonnes inferred
Cash flows, project valuations and rates of return significantly expanded over previous studies
Pre-Feasibility work has started for the second half of 2011 • Major camp expansion to support up to 6-8 drills• Feasibility work to begin in 2012
•Escalones, copper-gold-silver porphyry project, ChileExploration and Geophysics program underwayDrill program to begin late in 2011• Target for initial resource estimate by end of 2011• Potential for significant deposit of copper, gold and silver
*Average first five years of production
43
Silve
r ETF
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US Gold
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MAG Silve
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So.Ameri
can Si
lver
0
5
10
15
20
25
30
35
40
45
South A
mer
ican
Silver
Corp
.
Leveraged to SilverValue of silver per dollar invested
SAC has some of the best leverage to silver of any development stage company with nearly $45 of silver value per $1 invested
Source: Canaccord as of January 17, 2011, Share prices updated May 24, 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 metals
Silver value per $1 invested
Average value of silver <$16 of silver per $1 invested*
Additional value of Indium and Gallium
44
Why South American Silver?Investment highlights
• World-class scale projects with excellent expansion potential
• Track record of discovery and successful project development
• Growing shareholder value through resource expansion and advancing projects up the development value curve toward feasibility
• Leveraged to silver with nearly 4 oz of silver per share (6 ozs Ag equivalent)
• Attractive investment value relative to peers at low value per oz
• Exposure to rapidly growing indium and gallium high-technology market
• Potential value from new copper-gold-silver resource definition and expansion at Escalones
• Continued investor outreach to broaden market awareness of Company
TSX:SACUS OTC:SOHAF 37
45
TSX: SACOTC: SOHAF
Phone: 604.681.69261.855.681.6926
www.soamsilver.com
Greg JohnsonPresident & CEO
TSX:SACUS OTC:SOHAF
46
Relative Stock PerformanceSAC vs key silver & gold indices
TSX:SACUS OTC:SOHAF
• Trading liquidity increasing with average volume of 150,000 shares/day• SAC undervalued relative to peers at >$0.80 Enterprise Value/oz vs average of more than $4/oz for early stage resources
Relative performance of Gold/Silver and the Producer/Development stage equity indices
47TSX:SACUS OTC:SOHAF
48
Long Term Silver Ratios with Copper & GoldTraditional benchmarks being challenged
Source: 1) Ian McAvity’s Deliberations On World Markets, May 4 2011
Silver showing relative strength
49
Management & DirectorsGreg Johnson (President/CEO & Director) has over 25 years mining
industry experience in corporate finance, project development and exploration. A s a co-founder of NovaGold, he played a key role in growing that company from $50 million in value to over $2 billion market capitalization advancing 3 major projects through to Feasibility.
Phillip Brodie-Hall (Chief Operating Officer) has over 35 years experience in engineering construction and project development. He has participated in nearly every aspect of evaluation, feasibility studies and project development in the mining industry.
William Filtness (Chief Financial Officer) is a Chartered Accountant with over 20 years of financial experience in the mining industry.
James Mallory (Vice President of Operations & Social Responsibility) has over 30 years of mining industry experience in large-scale mine management, operations and construction for companies including Barrick (Placer Dome), Silver Standard, and NovaGold.
Felipe Malbran (Vice President of Exploration) has over 25 years experience in exploration management in South America including key roles in the discovery of Malku Khota, Vizcachitas, and Escalones.
David Dreisinger (Vice President of Metallurgy) is Professor and Industrial Research Chair in Hydrometallurgy at the University of British Columbia. He is actively involved in developing and commercializing hydrometallurgical process at a number of mines worldwide.
Andrew Clark (Manager of Project Implementation) has over 30 years global industry experience in the development, design, management and construction of industrial mining projects.
Richard Doran, (Vice President & Corporate Secretary) has extensive industry experience including with General Minerals and as Marketing Manager for Chevron Minerals.
Xavier Gonzales Yutronic (General Manager Compañía Minera Malku Khota S.A.) has experience in management, finance, and community relations in the mining industry including with Glencore, and Comsur S.A.
TSX:SACUS OTC:SOHAF
Ralph Fitch (Executive Chairman) is an explorationist with over 40 years of global experience, a co-founder of South American Silver and former Chief Geologist for Chevron Minerals credited with several major discoveries in South America.
Antonio Canton (Director) is consultant and director to a number of international companies in marketing, finance and real estate.
Tony Cau (Director) is COO at Zamin Ferrous. With over 30 years of experience in the mining, construction and heavy manufacturing industries, he has been involved in mine development and expansion projects around the world for groups like BHP, SNC-Lavalin, and Bateman Engineering.
Jeffrey Couch (Director) is the Managing Director and Head of Investment & Corporate Banking, Europe and London for BMO Capital Markets. He has held various financial and business development positions and has extensive investment banking and capital markets experience with groups such as Credit Suisse, Citigroup, and Klienwort Benson.
Paul Haber (Director) is a Chartered Accountant and a Certified Public Accountant, and previously CFO of a TSX-V company and Chairman of the Audit Committee for South American Silver.
Peter Harris (Director) is a mining engineer with over 40 years of industry experience including construction and operation of over 20 mines around the world with groups such as Barrick (Placer Dome) and NovaGold.
William Murray (Director) is an engineer in the mining industry with over 35 years of experience in construction management and project evaluation with groups including Fluor Daniel, Denison Mines, Optimum Project Services and Anglo American Corp.
John Watson (Director) is President of a TSX -V listed company and Manager of a limited liability corporation in commercial real-estate.
Tina Woodside (Director) is the head of Gowlings’ corporate finance department and practices corporate and securities law focused on corporate finance, M&A and corporate governance matters.