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SAC July 2011 Corporate Presentation
1. VALUE.GROWTH.VISION Growing and advancing one of the world’s largest undeveloped silver and indium resources. TSX: SAC, US OTC: SOHAF Corporate Presentation Q2 2011 www.soamsilver.com
2. Cautionary Notes 2 Certain 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.
33. Potential US listing to increase visibility and liquidityAs of May 24, 2011 As of July 18, 2011
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35. Strategic 19.7% investment positions SAC in strong financial and operational position to advance projects to feasibility
36. Track record of successfully facilitating South American project development through relationships with national and state governments in the region
37. Portfolio of South American projects with strong government support in permitting, rail and port infrastructure
41. Comparative Resources in the Americas 7 Second largest development stage silver resource Millions of Silver Ounces Source: Canaccord Report resource numbers as of January 11, 2011 Note: All companies have projects in South and/or North America
42. Enterprise Value per Resource Oz 8 Producer Average >$24/oz By project development stage EV of >$0.80 base on 230.3 million M&I oz Ag Advanced Development Stage Average ~$7/oz Development Stage Average ~$4/oz Source: Canaccord & Intierra as of June 9, 2011, Note: All companies have projects in South and/or North America
43. Development Stage Value Curve 9 Potential value growth with project advancement Production Average Enterprise Value per Oz of Silver by Stage Take-Over offers or Partnerships common at this stage $24/oz Construct Increased value through resource expansion Permits FS Increasing Market Value $7/oz PFS Resource Definition PEA $4/oz Advanced Development Stage (Reserves) Early Stage Exploration & Development Production Discovery Increasing value with project advancement 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.
44. Current Silver Company Valuations by Resource Size & Development Stage 10 Size of circle represents market valuation premium in EV/oz 500 EARLY DEVELOPER STAGE SAC SAC SAC ADVANCED DEVELOPER STAGE PRODUCER STAGE $2,000 Source: Canaccord Report July, 2011 Intierra, July, 2011 Share prices as of July 2011, Note: All companies have projects in South and/or North America
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46. Silver still well below inflation adjusted highs of $140/oz ($50 in 1980)
47. 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
48. Price increases driven by 40% increase in investment demand and 21% increase in industrial demand for a total increase of 17% in 2010
49. Total annual mine production growth only 2.5% last year with reduced contribution of by-product silver from copper and gold production
50. Projected new mine supply anticipated to be consumed by new industrial demand through at least 2015
51. 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
52. Few major new deposit discoveries and growing time lag from time of discovery to metal productionSource: 1) GFMS World Silver Survey 2011 2) BMO Capital Markets Global Mining Research April 2011
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54. Demand growth expected to continue to outstrip production growth(2)+17% total demand growth +40% investment demand +2.5% mine production +21% industrial demand Source: 1) GFMS World Silver Survey 2011 2) BMO Capital Markets Global Mining Research April 2011 12
55. Fabrication Demand for Silver by Sector 13 Growing technology uses for silver Millions of Silver Oz Source: CPM Silver Yearbook 2010 Not for reproduction without written CPM Group consent
56. Thin Film/Thick Film Demand Growth 14 Growing 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
57. Long Term Silver Ratios with Copper & Gold 15 Traditional benchmarks being challenged Silver showing relative strength Source: 1) Ian McAvity’s Deliberations On World Markets, May 4 2011
60. Reduced by-product silver production anticipated going forward from base metals(2)Source: 1) GFMS World Silver Survey 2005-2011 2) BMO Capital Markets Global Mining Research April 2011
64. One of the most scarce strategic metals due to low recycling and few primary producersTSX:SAC US OTC:SOHAF
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66. China is largest producer and consumer of indium and has imposed export quotas and tariffs like other key high-technology specialty metals
67. Indium market estimated to see 15-20% annual growth with most indium produced as by product of zinc refining growing at 1-3% annually
68. Current indium and gallium price ~$900-1000/kg up from global economic lows during 2008-2009 of $400-500/kg
69.
70. Potential to represent 10% or more of global mine supply of indium and over 5% of global supply for gallium
71. Opportunities for project financing from off-take agreements for indium & gallium TSX:SAC US OTC:SOHAF
72. 19 Indium Supply Mine Production and Refining Source: 1)Roskill ‘s Indium:Global Industry Markets and Outlook ,2010
73. Indium Demand Growth 20 Growing demand in high-tech markets 5 year projected demand growth End-use Market Demand (tonnes) 2010 total indium production level Growth assumptions based on data from Displaybank in LCD TV Association “LCD TV Matters”-Volume 3, Issue 2, February 2010 , Strategies Unlimited, August 2009 , Solarbuzz, Photon International, GFMS , Nanomarkets, and the US Department of Energy Critical Minerals Strategy Report
74. Indium Fundamentals World indium demand vs price (1969-2013*) Current Indium Price X Indium Demand Indium Price/kg ($US) Source: Indium: Global Industry Markets and Outlook, 9th Edition 2010 (Roskill) *2011-2013 Data are estimates 16 21
100. Moving into Pre-Feasibility in 2011 and Feasibility in 2012Malku Khota Project – 2011 Resource Estimate Update Average for the first 5 years of production See March 31, 2011 News Release for detailed resource estimate Total contained metal
107. Economic cut-off grade <15 g/t(at $18/oz Ag) 2AgEq comprised of all contained metals Economic cut-off grade comprised only of silver and indium
108. 27 High Grade Sandstone1160 g/t Silver Malku Khota Mineralized Sandstones Geological formations looking south from Limosna Malku Khota Sandstone Aroifilla Fm Wara Wara Sandstone TSX:SAC US OTC:SOHAF
109.
110. Updated resource results increase total M&I oz to 230 Moz Ag (a 60% increase in M&I oz) plus an additional 140 M inferred Ag oz
111. 2011 program to target conversion from resources to reserves & expansion drilling
125. Downstream processing to metal productsCrushing Leaching Metal Recovery & Processing Silver, Gold, Copper Indium & Gallium ingots Lead & Zinc concentrates TSX:SAC US OTC:SOHAF
126. 2011 Economic Assessment 31 Metal Prices ($US) Mid Case Recent Base Case Mining Rate Life of Mine Ore Mined (LOM)3 Average Silver Grade 2 Average Indium Grade2 Ag Eq grade 40,000 tpd 15 years 200M tonnes 42.2 g/t 7.55 g/t 58 g/t $35/oz $650/kg $730/kg Silver : $18/oz Indium : $500/kg Gallium: $500/kg $25/oz $570/kg $570/kg LOM Annual First 5 years Total Recovered Metals Silver (oz) Indium (tonnes) Lead (lbs) Zinc (lbs) Copper (lbs) Gallium (kgs) 158 M 1,184 191M 135 M 88 M 212,962 13.2 M 80.7 12.48M 4.42M 5.64M 15,184 10.5 M 78.9 M 12.7 M 9 M 5.87 M 14,198 Base Case Mid Case Recent First 5 years cash flow Net cash flow NPV (5% discount rate)1 Internal Rate of Return Payback period (years) $185M/yr $1,261M $704M 37.7% 27 months $287M/yr $2,528M $1482M 63% 19 months $430M/yr $4,298M $2571M 92.9% 15 months In US dollars, March 2011, PEA First 5 years of production (average) LOM = Life of Mine
127. Near Term Mine Development Projects 32 Malku Khota one of largest emerging producers at over 13 Moz/yr Barrick Gold Estimated potential annual silver production of new development projects anticipated within the next 2-4 years South American Silver Pan American Silver Bear Creek Mining Gold Resource Corp Silver Standard Polymetal MNPO Bear Creek Mining Fortuna Silver Mines Hochschild Mining Minco Silver Corp Andean Resources Wildcat Silver Corp. Continental Minerals Corp Aurcana Corp Yamana Gold Cobar Consolidated Alexco Resource Augusta Resource Malachite Resources Kimberley Metals CS T Mining Group Silvercorp Metals Ltd Silver Standard Hellas Gold SA CBH Resources Argent Minerals Silvercorp Metals Conquest Mining Troy Resources Antofagasta Source: CPM Silver Yearbook 2011 *Based on mine production of 13.2 Moz /year for first five years
128. Global Silver Industry Cash Cost Curve 33 Anticipated low-cost silver production Cumulative Percentile of Silver Mine Production Cost Lowest 25% Percentile Cash Costs Malku Khota 13.2 Mozs/yr (1) ~ $2.94/oz (2) Total Cash Cost Per Ounce of Silver Industry AverageCash Cost $5.27/oz Source: GFMS World Silver Survey 2011 Average first 5 years of production Silver cash costs after credits ($US)/oz
129. Advancing toward Production 34 Development Timeline for Malku Khota 2011 Pre-Feasibility Studies 2012 Feasibility Study 2013-14 Projected Mine Development TSX:SAC US OTC:SOHAF
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131. Located near one of the worlds largest underground copper mines at El Teniente
132. Historic drilling shows >1% copper grades at surface and untested porphyry system grading 0.6% copper
136. Escalones Project Logistics 36 Excellent existing infrastructure Ownership: 100% through lease Location: 35km E of El Teniente Elevation: 3800m 70 square kilometer property Road accessible located 100 km southeast of Santiago Gas pipeline across property 30 Drill holes completed to date SAC property Gas pipeline Access Road TSX:SAC US OTC:SOHAF 31
139. Limited testing of porphyry system with most holes in replacement /skarn style mineralizationTSX:SAC US OTC:SOHAF 32
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141. Large scale porphyry target with intercept of 176 m @ 0.6% copper with additional credits from silver, gold, and molybdenumAlto Bajo TSX:SAC US OTC:SOHAF
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143. Jim Mallory, VP Operations and Social Responsibility – 35 years industry experience previously with Silver Standard, NovaGold, & Barrick (Placer Dome)
144. Miguel Reynaga, Director of Community Relations - 16 years experience with Newmont at their Inti-Raymi (Kori Kollo) Mine in Bolivia
145. Objectives to facilitate economic development in communities as part of project exploration, development and construction activities
146. Project construction will see workforce of over 1,000 with mine workforce of over 400 or more*Business for Social Responsibility, San Francisco, CA
147.
148. Updated 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*
149. 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
150. Cash flows, project valuations and rates of return significantly expanded over previous studies
156. Potential for significant deposit of copper, gold and silver*Average first five years of production
157. Leveraged to Silver 41 Value of silver per dollar invested Silver value per $1 invested SAC has some of the best leverage to silver of any development stage company with nearly $45 of silver value per $1 invested Average value of silver <$8 of silver per $1 invested* Source: Canaccord as of January 17, 2011, Share prices updated May 24, 2011 Note: all companies have projects in South and/or North America Calculated using $25/oz Ag. Dollar value of silver per $1 invested = (silver resource/shares outstanding) x $25/oz silver) divided by share price Value only shown for silver with no contribution from other metals
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159. Track record of discovery and successful project development
160. Growing shareholder value through resource expansion and advancing projects up the development value curve toward feasibility
161. Leveraged to silver with nearly 4 oz of silver per share (6 ozs Ag equivalent)
167. 43 TSX: SAC OTC: SOHAF Phone: 604.681.6926 1.855.681.6926 www.soamsilver.com Greg Johnson President & CEO TSX:SAC US OTC:SOHAF
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169. SAC undervalued relative to peers at >$0.80 Enterprise Value/oz vs average of more than $4/oz for early stage resourcesTSX:SAC US OTC:SOHAF
170. Management & Directors 45 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 Head of Business Development at ENRC and has held various financial advisory positions including for private equity groups such as Campbell Lutyens, was Director of Metals & Mining Investment Banking for Credit Suisse, and a key member of the capital markets team for Citigroup European Investment Bank. 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. Greg 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. William Filtness (Chief Financial Officer)is a Chartered Accountant with over 20 years of financial experience in the mining industry. Phillip Brodie-Hall (Vice President of Project Development) 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. James Mallory (Vice President of Operations & Social Responsibility) hasover 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:SAC US OTC:SOHAF
