Mexico: the land of silver

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Objective Capital's Global Resources Investment Conference 2011
Stationers' Hall, City of London
27-28 September 2011
Day 1- Session 6: Americas' focus
Speaker: George Cavey, Orko Silver

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Mexico: the land of silver

  1. 1. Mexico: the land of silver<br />George Cavey – Orko Silver<br />
  2. 2. @Objectivelive<br />GLOBAL RESOURCESINVESTMENT CONFERENCE 2011<br />Lead sponsor:<br />Media partners:<br />Other sponsors & participating organisations:<br />
  3. 3. On the Fast Track to Silver Production at La Preciosa<br />September 14, 2011<br />
  4. 4. Key Management & Directors<br />Gary Cope - President, CEO, and Director – Gary Cope has more than 30 years experience in corporate finance and corporate strategy, as well as significant experience with the financing of publicly held companies. Mr. Cope arranged the financing and was instrumental in the negotiations and sale of the South Kemess Deposit. <br />Mike Devji - Executive Vice-President and Director – Also President & CEO of Blackcomb Minerals Inc. An experienced financier of public companies, Mr. Devji led a group of investors who financed a 40% interest in the South Kemess Gold-Copper Deposit in British Columbia, Canada. That interest was subsequently sold for over $400 million.<br />George Cavey, P. Geo. - Vice-President Exploration and Director –35 years in exploration and consulting as the president of OreQuest Consultants. Past President of the Canadian Council of Professional Geoscientists. The 2004 recipient of the APEGBC C.J. Westerman Award. Also the recipient of the 2010 Canadian Professional Geoscientist Award, Canada’s highest honor for a Professional Geoscientist.<br />B.H. (Ben) Whiting, M.Sc., P.Geo. - Chief Geologist - 30 years experience in the international exploration and mining plus past Adjunct Professor at Queen's University. Mr. Whiting was awarded the Aaro Aho Foundation's prize in Economic Geology.<br />Art Freeze, P.Geo. - Consulting Geologist, Advisory Board Member –40 years experience in international exploration and project management. Technical Advisor and Director for several public mining companies as well as a consulting geologist for Goldcorp.<br />4<br />
  5. 5. Capital Structure September 14, 2011<br />Primary Listing: TSX Venture Exchange<br />Trading Symbol: OK <br />US OTC Pink Sheets: OKOFF<br />Frankfurt Exchange: OG3.F<br />Share Structure<br /> Issued: 129,446,979 <br /> Options: (average $0.55) 12,672,500          <br /> Fully diluted: 142,118,979<br />Working Capital CDN $13,800,000<br /> 52 Week Low/High CDN $1.40 to $3.25<br /> Current Price: CDN $2.57<br />Share Ownership (Fully diluted)<br /> Institutional ~ 35% - 40%<br /> Management ~ 15%<br /> Goldcorp, Inc. (NYSE: GG) ~ 3%<br /> Pan American (NASDAQ: PAAS) ~ 3%<br />5<br />
  6. 6. Company Highlights<br /><ul><li> La Preciosa, one of the world’s largest primary silver deposits is located in Durango, Mexico, theworld’s largest silver producer – 128.6 million oz in 2010.
  7. 7. Our 43-101 compliant Resource Estimate is now 175 Million Silver Equivalent Ounces (70% Indicated, 30% Inferred)
  8. 8. On April 14th 2009 Orko Silver signed a Joint Venture Agreement with Pan American Silver (NASDAQ: PAAS) to bring the La Preciosa deposit into production.
  9. 9. Orko is fully financed.
  10. 10. Aug 10th, 2011 Orko and Pan American release a new Resource Estimate (fully diluted resources) and a Preliminary Economic Assessment (PEA)
  11. 11. Positive PEA demonstrates a long robust mine life.</li></ul>6<br />
  12. 12. La Preciosa Mineral Resources <br />(Fully Diluted) <br />NI 43-101 Reserve & Resource Categories<br />Reserve Categories Resource Categories<br /> - Proven, Probable - Measured, Indicated, Inferred<br />*Estimated at a 50 :1 Silver/Gold ratio with metallurgical recoveries and refining charges assumed to be the same for Ag & Au<br />7<br />- The 2009 resource estimate of 146.3 million ounces was an undiluted estimate<br />
  13. 13. Preliminary Economic Assessment (PEA)<br />On Aug 10th, 2011 Orko and Pan American release a Preliminary Economic Assessment (PEA)<br /><ul><li>Demonstrates the potential for a 12 year mine
  14. 14. Annual production of 6.8 million oz Ag and 12,000oz Au (LOM)
  15. 15. Cash cost of $ $11.84/oz Ag
  16. 16. Capital costs of $270 million (PAA burden)</li></ul>8<br />
  17. 17. Sensitivity Analysis of La Preciosa<br />9<br />
  18. 18. 10<br />Internal Rate of Return (IRR%)<br />IRR%<br />
  19. 19. Internal Rate of Return (IRR) vs Metal prices<br />Internal Rate of Return<br />11<br />Silver $/oz, <br />Gold $/oz<br />
  20. 20. Net Present Value (NPV @ 5%) vsMetal Prices<br />Net Present Value ($ million) <br />12<br />Silver $/oz,<br /> Gold $/oz<br />
  21. 21. Cost of Production 2010 (actual)- 2011(estimate)<br />7.8 – Potential La Preciosa Production (million ounces)<br />8.8<br />*- Assumes the completion of a positive feasibility study<br />7.2<br />6.6<br /><ul><li>Assumes the completion of positive feasibility study
  22. 22. Assumes 91% Ag recovery and 65% Au recovery
  23. 23. Assumes Ag 250 g/t, Au 0.30 g/t
  24. 24. Assumes 10% dilution
  25. 25. Ag Eq = Ag/Au 60:1</li></ul>13<br />OK<br />Source: BMO Capital Markets<br />
  26. 26. Regional Map - Durango State, Mexico<br /><ul><li>45 minutes from the city of Durango
  27. 27. 45 minutes from International Airport
  28. 28. Access by paved highway
  29. 29. 8 km to national power grid
  30. 30. 8 km to rail lines
  31. 31. 2 hours by road/rail to smelter</li></ul>Located in the heart of Mexico’s prolific Sierra Madre Mining Belt,which hosts large silver deposits such as Fresnillo & Pitarrilla<br />14<br />
  32. 32. La Preciosa<br />The Joint Venture consists of a large land package of 32,400 hectares (~ 80,000 acres)<br />15<br />
  33. 33. La Preciosa Deposit – Mine Plan<br />Vertical Cross Section 2701980N<br />16<br />Vertical Cross Section 2701980N<br />
  34. 34. La Preciosa Exploration and Development<br />17<br />Completed<br /><ul><li>Orko&Pan Am diamond drilling -245,000 metres (796,000 feet or 151 miles) of core in 717 holes.
  35. 35. Geotechnicalpit-slope and mine support design (Golder Associates )
  36. 36. Metallurgical&petrographicalstudies (SGS Mineral Services)
  37. 37. Processingplant design studies (M3 Engineering)
  38. 38. EnvironmentalImpact Assessment (Clifton Associates )
  39. 39. Resource Estimate (Snowden Mining Consultants Inc.)
  40. 40. Preliminary Economic Assessment (Snowden Mining Consultants Inc.)</li></ul>Ongoing<br /><ul><li>Project engineering consulting for Orko (AMEC)
  41. 41. Community relations and surface rights purchase (Pan American)
  42. 42. Feasibility Study by April 13, 2012 (Pan American/Snowden?)</li></li></ul><li>Projected La Preciosa Timeline<br />PAN<br />AMERICAN <br />DEAL <br />SIGNED<br />* The terms of the JV agreement require PAAS to complete a feasibility study by April 13, 2012.<br />
  43. 43. Projected Annual Silver (Eq) Production<br />Silver Eq Ounces (millions)<br />Annual production (million ounces)<br />* - Assumes an ~10% increase in productivity with final engineering study results<br />La Preciosa’s potential production of more than 7 million ounces of silver annually represents more than 5% of Mexico’s annual silver production<br />19<br />
  44. 44. Potential Annual Silver (Eq) Production<br />Assumes 100% Orko interest <br />(Orko 45% interest = 4.2)<br />20<br />AgEq production estimate<br />* - does not include base metal credits<br />
  45. 45. World's Leading Primary Silver Mines<br />(2010 production in millions of ounces)<br />Source: The Silver Institute<br />21<br />
  46. 46. Significance of La Preciosa to PAA<br />22<br />* - Columns are assuming silver only (not silver equivalent - AgEq) for La Preciosa <br />
  47. 47. Upside for Orko<br /><ul><li>Pan American has spent more than US$16 million on exploration and development to complete a feasibility study
  48. 48. PAAS must contribute 100% of the funds necessary to develop and construct an operating mine, in consideration for a 55% interest in the joint venture
  49. 49. Orko will be fully carried and will end up owning 45% of a producing mine
  50. 50. PAAS is fast tracking La Preciosa to production for early 2014
  51. 51. AMEC and Orko have determined that the PEA is a conservative document, with upside expected in:
  52. 52. Resource estimate (lower cut-off grades)
  53. 53. Mining methods
  54. 54. Reduced dilution of many of the veins
  55. 55. Grade
  56. 56. Financial analysis-
  57. 57. 5% management fee included will disappear if 100% PAAS ownership(~$0.80 per oz Ag)
  58. 58. ~$30 million in sustaining capital to be moved to capital costs (100 % PAAS burden)
  59. 59. Net result will be lower costs per tonne, longer mine life</li></ul>23<br />
  60. 60. As of September 14, 2011<br />24<br /> ECU, OK, MAG, SVL, XAG, KTN, ORM, SOLUXG, EPZ, ASM, CJOGPR, FR, EDR, SLX, FVI, IPT<br />
  61. 61. What Others are Saying<br />Byron Capital Markets – Jeff Wu, Mining Analyst – Aug 2011 “The PEA deeply underestimates La Preciosa’seconomic value.”<br />GMP – Kevin Reid, Director -“We highlight Orko Silver as a unique investment opportunity in the silver sector, offering good metal price exposure to silver and exploration upside through its La Preciosa project in Durango, Mexico, but with a lower risk profile than typical for a preproduction silver play as its JV agreement with senior producer Pan American Silver offloads construction financing risk (OK is fully carried through to production) and reduces overall development risk (Pan American is an experienced mine builder). While we see good upside to our fundamental target, we also believe that the structure of the JV with Pan American makes Orko Silver a potential M&A target. ”<br />Pan American Silver – Geoff Burns, President – Aug 2011 -“It is a very interesting project  for Pan American …it has a solid silver production profile, has a relatively long mine life, and is located in a good mining jurisdiction…At current silver prices, the project economics become extremely robust. We will be moving forward aggressively to complete a Feasibility Study and to position ourselves for a construction decision…”<br />25<br />
  62. 62. Orko Silver Corp. Share Price Chart – September 14, 2011<br />Increase Ag $<br />PAA JV announced<br />Confusion over PAA JV<br />Analyst Reports Released<br />Soft TSX market<br />Private Placement Announced<br />Understanding of PAA JV<br />6th Resource Estimate<br />February 2011<br />
  63. 63. Why Orko Silver?<br /><ul><li>La Preciosa is one of the world’s largest primary silver deposits
  64. 64. La Preciosa’s superb location offers an infrastructure advantage
  65. 65. Pan American is advancing La Preciosa to production, early 2014
  66. 66. Excellent potential to expand the silver resources
  67. 67. Orko has a fully carried interest into production
  68. 68. Better leverage in Orko shares than Pan American shares; the current share price doesn't factor in any potential takeover premium
  69. 69. Significant upside in lower costs and higher productivity when engineering studies are concluded and incorporated into the Feasibility Study
  70. 70. Orko is fully financed
  71. 71. Share price doesn't factor in an increase in the price of silver, PAAS could forward sell at today’s Ag price
  72. 72. Orko’s economic share of production is closer to 57% to reflect $0 capital cost (GMP)
  73. 73. Share price doesn't factor in increased confidence generated from a full Feasibility Study (Q2 - 2012) </li></ul>27<br />
  74. 74. Contact Information<br />1180 - 999 West Hastings Street<br />Vancouver, B.C. Canada V6C 2W2<br />Phone: +1.604.687.6310<br />Fax: +1.604.687.6365<br />Email: info@orkosilver.com<br />Web: www.orkosilver.com<br />TSX Venture Exchange: OK<br />US OTC Pink Sheets: OKOFF<br />Frankfurt Exchange: OG3.F<br />28<br />
  75. 75. Forward-Looking Statements<br />This presentation of Orko Silver Corp. (the “Company”) contains “forward-looking information” within the meaning of the United States “Private Securities Litigation Reform Act of 1995” and applicable Canadian securities legislation. Statements containing forward-looking information express, as at the date of this presentation, the Company’s plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results and the Company does not intend, and does not assume any obligation to, update such statements containing the forward-looking information. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans,” “projects” or “projected,” “expects” or “does not expect,” “is expected,” “estimates,” “forecasts,” “scheduled,” “intends,” “anticipates” or “does not anticipate,” or “believes,” or variations of such words and phrases, or statements that certain actions, events or results “may,” “can,” “could,” “would,” “might” or “will be taken,” “occur” or “be achieved.” Statements containing forward-looking information include, but are not limited to, statements with respect to the anticipated economic returns of any of the Company’s projects, the expected results from exploration activities, the economic viability of the development of newly discovered ore bodies, the accuracy of mineral resource estimates, future production levels, the requirements for additional capital, the results of drilling, and Orko Silver’s commitment to, and plans for developing, newly discovered and existing mineralized structures.<br />Statements containing forward-looking information involve known and unknown risks, uncertainties, and other factors that may cause the actual results, level of activity, performance, or achievements of Orko Silver and its operations to be materially different from those expressed or implied by such statements. Such factors include, among others, the actual results of current exploration activities, future prices of silver and gold, unpredictable risks and hazards relating to the development of La Preciosa, and the speculative nature of exploration and development. 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 anticipated, described, estimated, assessed, or intended. There can be no assurance that any statements containing forward-looking information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, undue reliance should not be placed on statements containing forward-looking information.<br />This presentation has been prepared by the Company and has not been reviewed or approved by Pan American Silver.George Cavey, P.Geo., is the Qualified Person responsible for the preparation of the scientific and technical information related to the Company’s operations that is included in this presentation.<br />29<br />
  76. 76. www.orkosilver.com<br />

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