South American Silver Corp.

South American Silver Corp.

August 19, 2010 10:25 ET

South American Silver Corp.'s Second Quarter President's Message and Project Update

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 19, 2010) - South American Silver Corp. (TSX:SAC)(PINK SHEETS:SOHAF)

President's Message

It's been another exciting quarter for South American Silver Corp. with advancement of both the Malku Khota Silver-Indium project in Bolivia and the Escalones Copper-Gold project in Chile. Over the past few months we have also initiated programs for broadening market awareness of the investment value opportunity in South American Silver. At over 5 ounces of silver per share, South American Silver offers one of the highest levels of leverage to rising metal prices of any company in the sector. With the recent completion of a financing in July, the Company is in a strong financial position to accelerate the advancement of its exploration and development activities.

To facilitate the advancement of its large scale projects, the Company recently announced the addition of two experienced mine development engineers to the management team. Together, Mr. Phillip Brodie-Hall, Vice President, Project Development and Mr. Andrew Clark, Manager, Project Implementation, bring a combined 65 years experience in project development and mine design, construction and management to the team. Along with Dr. David Dreisinger, Vice President, Metallurgy, the Company now has the core engineering group in place to manage the development process and expedite the Malku Khota Silver-Indium project to the feasibility stage.

The Company has also mobilized two additional drills to accelerate and expand the current program at Malku Khota. The program will focus on expansion drilling down dip and along the trend of the deposits especially in areas of higher grade. An updated resource estimate for the Malku Khota project is targeted in the second half of this year.

Additionally, the Company has continued metallurgical and process-related test work to further refine the leach recovery characteristics for silver and indium and associated gold, copper, lead and zinc mineralization. The test work to date supports the amenability of heap leaching and/or milling of the mineralized material at Malku Khota. Detailed engineering studies currently underway will be incorporated into an updated resource estimate and economic assessment study planned for the end of 2010.

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 opportunities in new projects that can bring value to its shareholders through its approach to business. Responsible mining and community collaboration are a key part of SASC's business strategy on all of its projects. The Company is committed to upholding high environmental and social standards while focusing on delivering the financial growth its shareholders expect.

Community relations are an important part of doing business in any country and Management believes that long-lasting social and economic benefits can flow to the communities in which South American Silver Corp. operates. In Bolivia, the Company has two full-time Community Relations personnel for the Malku Khota project. The Company has signed agreements of cooperation with each of the communities and will look for ways to facilitate economic development through the various stages of project development. As part of this approach, the Company has developed a proactive community relations program which represents all stake- holders for the transition from exploration to development and production.

Current Market and Economic Conditions

During the past 12 months the price of silver and gold has continued to rise from its lows of 2008 with gold and silver up approximately 30% and 34%, respectively on a 12 month basis as of early August. Both metals remain near their highs of late 2009 of $1,200/oz gold and $18.50/oz silver. Since 2005 the price of silver has had a 95% correlation to the gold price but with larger percentage swings both to the upside and during corrective periods. Prior to the 2008 markets the silver to gold ratio was an average of approximately 55:1 for many years suggesting that silver may be undervalued relative to gold at the current level of 65:1, based on gold at $1,200/oz and silver at $18.50/oz.

The fundamentals for both silver and gold appear strongly supportive for higher prices based on global monetary factors, and especially in terms of the investment demand both metals have seen over the past several years in all forms including Exchange Traded Funds (ETF's), bars and coins. For silver specifically, the increased use in industrial applications ranging from biomedical to high technology is notable as it has become an increasingly larger percentage of the total annual demand. Up until the recent global economic crisis, industrial demand for silver had risen consistently on an annual basis over the 6 year period starting from 2002. Total global silver supply peaked in 2005 and has been flat to falling since that year. With an anticipated rebound in industrial demand as the global economy comes back to life, the fundamentals look quite bullish for higher silver prices with a return to growing industrial demand coupled with continued strong investment demand and flat to falling total global supplies of silver.

Recent developments in the indium market also appear to present compelling supply/demand dynamics for the high technology metal. SMG Indium recently announced a new IPO for an indium market tracker due out in August or September 2010. This future US listed investment has been designed to stockpile raw indium metal and track the price of indium much like the recently introduced silver and gold ETF's. The gold and silver ETF's have significantly expanded investor exposure and demand for both metals in recent years. Over the past 5 years indium prices have ranged between $450/kg and $1,000/kg, with two of the past 5 years at over $1000/kg. Current indium prices are around $550/kg reflecting the recent global economic conditions.

A recently published UN study highlighted indium as a key specialty metal at risk of shortages due to rapidly increasing growth, low recycling rates and low primary production. Like many of the important rare-earth metals used in high-tech and green energy, China is the largest producer and consumer of indium and has imposed export quotas and restrictive tariffs on indium exports. As a response, both Japan and Korea, as the second and third largest users of the metal, have begun creating strategic stockpiles of indium to ensure security of their supply needs. Global indium use has been growing rapidly, up approximately ten times since 1990, and historically has been supplied primarily as a by-product of zinc metal refining. At current growth rates, it is estimated that by-product indium production may soon fall short of demand based on zinc production growth rates of only 1-3% per year and indium growth rates estimated at 15-20% per year.

Because of the unique optical and electrical properties of indium and its rapidly growing use in flat panel displays, touch screens, smart phones, high efficiency solar panels and high-efficiency, long life LED lighting, global indium consumption is anticipated to continue to grow significantly. In the past 5 years, the largest segment of the indium market for LCD panels has grown four times, solar panel growth utilizing either high silver or high indium technology has increased ten times, and the high efficiency, long life LED lighting market has seen compound annual growth rates of over 32%. With one of the world's largest NI 43-101 qualified resources of primary indium, South American Silver is uniquely positioned to benefit from this rapidly growing market.

Copper and zinc have also rebounded significantly from their lows of 2008 at less than $1.50/lb and $0.50/lb respectively to trade recently as high as $3.35/lb for copper and nearly $1.00/lb for zinc. Demand for copper and zinc is being driven largely by growth in Asia and particularly China and India where industrialization remains a long-term supporting factor for basic materials.

Most gold and silver related equities have traded down to sideways since the short term highs in May along with the actual metals, with many of the equities appearing to have recently established solid bases and looking to move higher as they move toward the more bullish fall season for precious metals. Equity prices of many exploration and development-stage companies have continued to remain more volatile than the larger producers and generally lower relative to historical levels. On a 12 month basis South American Silver Corp. has outperformed the key gold and silver equity indexes such as the broad Toronto Gold Index and the U.S. Amex Gold Miners Index basis, but remains at an attractive investment level particularly relative to its silver exploration/development peers.

Resource based economies have continued to benefit from the rebound in metal prices over the past year, particularly those in emerging markets. Economic figures show that Bolivia has continued to have one of the fastest growing GDP's in all of the Americas since 2006, with mining representing a key element of the economy. Bolivia has seen 3 major new silver mines come into production in the past 4 years, including two of the world's largest primary silver producers. This has helped push Bolivia to the 5th largest global silver producing country in the past couple of years.

Improving economic and political conditions have resulted in recent bond upgrades by Moody's and Fitch rating services, and a recent Mining Journal special edition on Bolivia has highlighted efforts by the current administration to attract new private investment for mining in Bolivia by providing a favourable regulatory framework, improving infrastructure including new road and rail corridors and hydro-electric power generation to facilitate economic development, and inviting industry input into proposed mining law changes.

Projects Update

Malku Khota Silver-Indium Project, Bolivia

South American Silver's most advanced project is the Malku Khota Silver-Indium 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 and indium resources with an NI 43-101- qualified indicated resource of 144.6 million ozs silver and 845 tonnes of indium (151 million tonnes grading 29.7 g/t silver and 5.6 g/t indium) and an additional inferred resource of 177.8 million ozs silver and 968 tonnes of indium (230 million tonnes grading 24.0 g/t silver and 4.2 g/t indium).

A Preliminary Economic Assessment ("PEA") was prepared by Pincock Allen & Holt Inc. in March 2009 which showed robust economics for a bulk-mineable heap leach operation with the potential to be one of the largest new silver and indium producing mines in development. Disseminated silver and indium mineralization at Malku Khota begins at the surface and remains open to further expansion laterally and at depth in a regionally extensive sandstone unit which spans over the entire property. The project is road-accessible, with commercial power within 15 kilometers of site.

The Company continues to have good relations with the surrounding communities. As part of the Company's ongoing community relations approach to Malku Khota, two full-time Community Relations personnel maintain regular contact with each of the surrounding local communities. Signed agreements of cooperation with each of the communities are in place and the Company will look for ways to facilitate economic development through the various stages of development for the project.

Two additional drills are being mobilized to the project to accelerate the current drill program and allow for testing of additional high priority targets. The program has been expanded to 6,500 meters of diamond drilling and an additional 5,000 meters of rotary drilling. Drilling is focused on expansion down dip and along the trend at the Limosna and Wara Wara deposits, especially in areas of higher grade mineralization, in preparation for an updated resource estimate at the end of this year. Nine holes totaling 3,708 meters have been completed to date in 2010 with assays anticipated to be released over the next several months as results are finalized and interpreted.

Since completion of the PEA in March 2009, South American Silver's focus has been on expansion drilling at Malku Khota, and ongoing metallurgical and process-related test work to refine the leach recovery characteristics of the silver, indium and associated lead, zinc and copper mineralization in both heap leach and milling approaches. The test work to date supports the amenability of heap leaching and/or milling of the mineralized material at Malku Khota applying the same type of process as used in copper oxide SX-EW heap leach mining or by the indium refineries that process by-product indium from zinc smelting.

More detailed engineering studies are underway for the balance of 2010 that will further refine metallurgical recoveries anticipated by representative mineralized zones throughout the deposit and define the potential location of mine facilities, infrastructure required to support the operation and a plan for implementation utilizing local resources as much as possible. This information will be the basis for a number of optimization studies that will be applied to a range of operating scenarios combining different throughput and production rates and leaching processes to be incorporated in the updated Preliminary Economic Assessment planned for the end of 2010.

Escalones Copper-Gold Project, Chile

The Escalones copper-gold-molybdenum porphyry and skarn prospect in central Chile is located approximately 100 kilometres south-east of Santiago by road. The property is 35 kilometres east of El Teniente, the world's largest underground copper mine, and shows high grades of mineralization at surface at over >1% copper with significant gold, silver and molybdenum credits. Exploration has focused on a large, 4 square kilometre area of alteration, and shallow drilling has intersected zones of 75 to 100 metres grading over 1% and a single deeper hole intercepted 176 metres of porphyry mineralization grading 0.6% copper. These grades and significant widths of mineralization indicate the presence of a strong mineralizing system at Escalones.

At the Escalones copper-gold project, the Company has completed initial geological modeling and is developing an exploration plan that would include geophysics and drilling that could lead to the development of an initial copper-gold-silver resource at this large scale, high potential porphyry project by 2011.

Looking Forward

One of the Company's strategic objectives for 2010 is the completion of an updated resource and Preliminary Economic Assessment at the Malku Khota Silver-Indium project. This will include more detailed metallurgical and engineering studies, as well as drilling at the Limosna and Wara Wara Sucre Zones to better define the higher grade areas and to expand on the resource. The Company also looks to add value at the Escalones copper-gold project by rapidly advancing it to the resource definition stage by 2011.

This is an exciting time at South American Silver, and in the months ahead we look forward to reporting a number of project milestones that we believe will create value for shareholders in the near term and for the longer term. I would like to thank all of our shareholders for their continued support, and also to thank our dedicated employees and management team for their work that has positioned the Company to become a leading growth focused precious metals company.

Greg S Johnson, President and 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 100% owned Malku Khota Silver-Indium project in Bolivia, one of the world's largest undeveloped silver and indium deposits, and the 100% owned large-scale Escalones 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 over 100 years of combined experience in the global exploration and mining industry with much of that focused in Bolivia, Chile, Peru and Argentina. The Company's common 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 and on SEDAR at

Certain statements contained herein constitute "forward-looking statements". These forward-looking statements include, but are not limited to, statements regarding estimated mineral resources, milestones for 2010 and the company's and its properties' growth potential including shareholder value. Forward-looking statements express, as at the date of this press release, the Company's plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results. Forward-looking statements are based on certain assumptions, including the key assumptions and parameters on which such estimates are based, involve risks and uncertainties and there can be no assurance that such statements will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements. 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, grade or recovery rates; availability of sufficient financing to fund planned or further required work in a timely manner and on acceptable terms; changes in project parameters as plans continue to be refined; failure of equipment or processes to operate as anticipated; political, regulatory, environmental and other risks of the mining industry; sustained favourable commodities prices; increased market awareness of the company; continued project development and other risks more fully described in the Company's Annual Information Form filed and publicly available on SEDAR at There can be no assurance that the Company's properties will be commercialized. 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.

This press release uses the terms '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 ("NI 43-101")). 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.

Contact Information

  • South American Silver Corp.
    Greg Johnson
    President & CEO
    South American Silver Corp.
    Richard Doran
    Executive Vice President