SAC Updated December 2011 Corporate Presentation


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South American Silver's December 2011 Corporate Presentation. Learn about the Malku Khota silver, indium and gallium project in Bolivia and the Escalones copper, gold, silver project in Chile.

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SAC Updated December 2011 Corporate Presentation

  1. 1. Growing and advancing one of the world’s largest undeveloped silver and indium resources. VALUE.GROWTH.VISION Corporate Presentation December 2011 TSX: SAC, US OTC: SOHAF
  2. 2. Cautionary Notes 2 Forward-looking statements 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 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 estimates The 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. 3. Investment Highlights 3 • 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 o 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 o NI 43-101-qualified Indicated resource of 230.3 million ozs silver, 1,481 tonnes of indium and 1,082 tonnes of gallium and an Inferred resource of 140 million ozs silver, 935 tonnes indium and 1,001 tonnes gallium. Escalones: high potential copper-gold-silver deposit with an Inferrred resource of 3.8 billion lbs of copper and 610,000 oz of gold • Well defined business plan to drive shareholder value • Leveraged to silver over 4 oz of silver and 45 lbs of copper per share (8 oz silver equivalent) • Attractive investment value relative to peers at low value per oz • Anticipated low cost silver production at approximately $2.94/oz • Strong focus on community relations to proactively facilitate mutually beneficial relationships South American Silver Corp.
  4. 4. World-Class Deposits 4 Two large-scale assets in South America Malku Khota, silver-indium project, Bolivia (100%) • Pre-Feasibility process in H1 2012 & Feasibility start in H2 2012 • Bulk mineable open-pit, sediment hosted deposit • Low capital and operating costs as a heap leach or milling operation • 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 1) Ag Eq calculated using total contained metal for silver ($22/oz) and gold ($1200/oz) 2) Cu Eq calculated using total contained metal for copper ($3/lb), lead ($0.90/lb), zinc ($0.90/lb), and molybdenum ($16/lb) Silver (Moz) Indium (tonnes) Gallium (tonnes) Ag Eq (Moz) M&I 230 1,481 1,082 354 Inferred 140 935 1,001 240
  5. 5. World-Class Deposits 5 Two large-scale assets in South America 1) Ag Eq calculated using total contained metal for silver ($22/oz) and gold ($1200/oz) 2) Cu Eq calculated using total contained metal for copper ($3/lb), lead ($0.90/lb), zinc ($0.90/lb), and molybdenum ($16/lb) Escalones, copper-gold-silver project, Chile (100%) • Inferred Resource of 3.8 billion lbs of Cu, 56.9 million lbs of Mo, 610,000 ozs of Au and 16.8 million ozs of Ag • Phase II exploration program underway to include up to 7,000 meters of follow-up drilling, with step-out testing of the known mineralized zones and testing of new targets based on geochemistry and geophysics • Located within a world-renowned copper district near the world‘s largest underground copper mine, El Teniente In Situ Grade Tonnes Copper Gold Silver Moly Cu Eq Millions % g/t g/t ppm % 420.6 0.41 0.05 1.24 61.39 0.49 Total Contained Metal Copper Gold Silver Moly Cu Eq Mlbs Ozs Moz Mlbs Mlbs Inferred 3,835 610,000 16.8 56.9 4,503
  6. 6. Share Capitalization1 6 TSX:SAC, US OTC:SOHAF Issued & Outstanding Fully Diluted1Warrants3 Options2 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
  7. 7. 0 1000 2000 3000 4000 5000 6000 0 50 100 150 200 250 300 350 400 450 MillionPoundsofCopperEquivalent MillionOuncesofSilverEquivalent/ TonnesofIndiumandGallium(combined) In & Ga Inferred Resource In & Ga M&I Resource Ag Eq Inferred Resource Ag Eq M&I Resource Cu Eq M&I Resource Cu Eq Inferred Resource Adding Value Through Resource Growth 7 1) Ag Eq calculated using total contained metal for silver ($22/oz) and gold ($1200/oz) 2) Cu Eq calculated using total contained metal for copper ($3/lb), lead ($0.90/lb), zinc ($0.90/lb), and molybdenum ($16/lb) Ag Moz In+Ga tonnes 13500 12000 10500 9000 7500 6000 4500 3000 1500 Cu Mlbs IPO
  8. 8. 0 50 100 150 200 250 300 350 400 450 500 Alexco Silvercrest US Gold Sulliden MAG Silver Orko Golden Minerals Sabina Tahoe Resources So.American Silver Bear Creek Comparative Silver Resources in the Americas 8 Source: Canaccord Report resource numbers as of January 11, 2011 Note: All companies have projects in South and/or North America Second largest development stage silver resource MillionsofSilverOunces Yukon (Canada) Mexico El Salvador Mexico Mexico Peru Peru Mexico Mexico Nunavut (Canada) Guatemala Bolivia Chile Peru Additional value of Indium and Gallium Inferred Resources M&I Resources South American Silver
  9. 9. $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 9 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
  10. 10. Development Stage Value Curve 10 Potential value growth with project advancement Increased value through resource expansion Early Stage Exploration & Development Advanced Development Stage (Reserves) Production Average Enterprise Value per Oz of Silver by Stage Resource Definition PEA PFS FS Permits 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. IncreasingMarketValue Take-Over offers or Partnerships common at this stage Production Increasing value with project advancement Escalones Project Malku Khota Project
  11. 11. Total Resource Ag Equivalent using (Ag +Au only at $25/oz and $1000/oz values) Source: Canaccord Report July, 2011 and Intierra, July, 2011 Share prices as of Sept 7 2011, Note: All companies have projects in South and/or North America US Silver Alexco Aurcana Bear Creek Esperanza Int'l Minerals Silvermex Sulliden Troy MAG Coeur d'Alene Endeavour First Majestic Great Panther Hecla Hochschild Pan American Silver Silver Standard Arian Castle Extorre Golden Predator Silver Bull Silver Quest South American Silver Malku Khota Current Value Tahoe 10 100 1000 $50 $500 $5,000 TotalResourceSize(Moz's) Enterprise Value (US$ Millions) Current Silver Company Market Valuations by Resource Size & Development Stage 11 Size of circle represents market valuation premium in EV/oz 500 $2,000 MK MK MK Total Resource Ag Equivalent using (Ag +Au only at $25/oz and $1000/oz values) Source: Canaccord Report July, 2011 and Intierra, July, 2011 Share 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 2011 PEA 2012 PFS/FS Production MK Value at Avg Valuation for each development stage
  12. 12. Positive Silver Fundamentals 12 A 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 2011 2) BMO Capital Markets Global Mining Research April 2011
  13. 13. 0 200 400 600 800 1000 1200 MillionOunces World Silver Demand Industrial Applications Photography Jewelry and Silverware Investment and Coins Silver Supply/Demand Fundamentals 13 • 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 2011 2) 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 0 200 400 600 800 1000 1200 MillionOunces World Silver Supply Mine production Secondary Supply and Scrap Government Sales
  14. 14. Growing Demand for Silver in Technology 14 Breakdown of key technology/industrial uses for silver Source: CPM Silver Yearbook 2010 Not for reproduction without written CPM Group consent MillionsofSilverOz 0 100 200 300 400 500 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p Photovoltaic Catalysts, alloys, solders and biocides Electronics
  15. 15. Silver Primary & By-Product Production(1) 15 • 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 2005-2011 2) BMO Capital Markets Global Mining Research April 2011 0 5 10 15 20 25 0 50 100 150 200 250 300 2003 2004 2005 2006 2007 2008 2009 2010 SilverPrice(US$) MillionsofOuncesofSilver Lead/Zinc Primary Copper Gold Silver Price
  16. 16. Indium & Gallium – Two Key Strategic Metals 16 Rapidly 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
  17. 17. Indium & Gallium Fundamentals 17 Compelling 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 .
  18. 18. 18 Indium Supply Mine Production and Refining Source: 1)Roskill ‗s Indium: Global Industry Markets and Outlook ,2010 BLEU: Belgium, Luxembourg Economic Union China, 45% Peru, 9%Canada, 9% Australia, 6% USA, 4% Mexico, 3% Other Countries, 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
  19. 19. 0 500 1000 1500 2000 2500 2010 2011E 2012E 2013E 2014E 2015E 2016E Solar Energy LED Lighting LCD Flat Panels Indium Demand Growth 19 Growing 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-useMarketDemand(tonnes) 2010 total indium production level 5 year projected demand growth
  20. 20. 0 200 400 600 800 1000 1200 1400 1600 1800 2000 0 500 1000 1500 2000 2500 Demand Price Indium Fundamentals World 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 IndiumDemand IndiumPrice/kg($US) X Current Indium Price
  21. 21. Silver Mines in Bolivia 21 One 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:SAC US OTC:SOHAF
  22. 22. Opportunity in Bolivia 22 An 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:SAC US OTC:SOHAF
  23. 23. Malku Khota Project 23 One of the world’s largest silver-indium resources 1) Average for the first 5 years of production 2) See March 31, 2011 News Release for detailed resource estimate 3) 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 4) Economic cut-off grade comprised only of silver and indium 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 Estimate2 Enrichment starts at surfaceHost rock sandstone with disseminated silver, indium, gallium, lead, zinc and copper 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
  24. 24. Malku Khota Project 24 Low 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
  25. 25. Malku Khota Drilling 25 Grade 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:SAC US OTC:SOHAF Mineralized Sandstones OPEN OPEN OPEN
  26. 26. Malku Khota Mineralization 26 • 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:SAC US OTC:SOHAF OPEN OPEN
  27. 27. Production Processes 27 From ore to metal • Large scale shovel and truck open pit mine • Oxide ore crushed in preparation for direct 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:SAC US OTC:SOHAF Crushing Leaching Metal Recovery & Processing Open Pit Mining Silver, Gold, Copper Indium & Gallium ingots Lead & Zinc concentrates
  28. 28. 2011 Economic Assessment1 28 (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/oz Indium : $500/kg Gallium: $500/kg $25/oz $570/kg $570/kg Mining Rate Life of Mine Ore Mined (LOM)2 Average Silver Grade 3 Average Indium Grade3 Ag Eq grade 158 M 1,184 191 M 135 M 88 M 212,962 10.5 M 78.9 12.7 M 9 M 5.87 M 14,198 Mid Case Base Case $185 M/yr $1,261 M $704 M 37.7% 27 months $287 M/yr $2,528 M $1482 M 63% 19 months Mid Case Total LOM Annual 40,000 tpd 15 years 200 M tonnes 42.4 g/t 7.55 g/t 58 g/t First 5 years Recent $430 M/yr $4,298 M $2571 M 92.9% 15 months Recent $35/oz $650/kg $730/kg 13.2 M 80.7 12.48 M 4.42 M 5.64 M 15,184 71% 15% 6% 5% 3% Share of Gross Revenue (at base case prices) Silver Indium & Gallium Copper Lead Zinc First 5 years cash flow Net cash flow NPV (5% discount rate)1 Internal Rate of Return Payback period (years) Recovered Metals Silver (oz) Indium (tonnes) Lead (lbs) Zinc (lbs) Copper (lbs) Gallium (kgs) (4) Base Case = 3 yr avg as of May 2011 Mid Case = 2 yr avg as of May 2011 Recent Case = 1 yr avg as of May 2011
  29. 29. Malku Khota PEA Update Projected Production Levels 29 Source: March 2011 Malku Khota PEA Values in US$ 0 2 4 6 8 10 12 14 16 18 20 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Production-SilverEquivalentOunces(Million) Production Year Copper Zinc Lead Indium & Gallium Silver Annual Average 13-20 Moz Silver Equivalent Production first 11 years
  30. 30. 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 Actual/AnticipatedAnnualAgProduction(Moz)Primary Silver Project Annual Production Rates 30 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 BHPBilliton Fresnillo BarrickGoldCorp. SumitomoCorp. PanAmericanSilver IndustriasPenoles GoldcorpInc. SouthAmericanSilverCorp. SabinaGold&Silver PolymetalMNPO Hochschild BearCreekMining Etibank YamanaGold CiaDeMinasBuenavertura Hochschild Hecla SilverStandardResources SilverStandardResources PanAmericanSilver Coeurd'Alene TahoeResources
  31. 31. Global Silver Industry Cash Cost Curve 31 Anticipated low-cost silver production Cumulative Percentile of Silver Mine Production Cost TotalCashCostPerOunceofSilver Industry Average Cash Cost $5.27/oz Malku Khota 13.2 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
  32. 32. Escalones Copper-Gold-Silver project, Chile 32 High potential, large-scale target TSX:SAC US OTC:SOHAF Inferred Copper (%) Gold (g/t) Silver (g/t) Moly (ppm) Cu Eq (%) Copper (Mlbs) Gold (Ozs) Silver (Mozs) Moly (MLbs) Cu Eq (MLbs)Tonnes 420 M 0.41 0.05 1.24 61.39 0.49 3,835 610,000 16.8 56.9 4,503 • 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 • Inferred Resource of 3.8 billion lbs of copper, 56.9 million lbs of molybdenum, 610,000 ozs of gold and 16.8 million ozs of silver • Phase II exploration program underway
  33. 33. Escalones Project Logistics 33 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 Excellent existing infrastructure SAC property Gas pipeline Access Road 31 TSX:SAC US OTC:SOHAF
  34. 34. Drill Results Grade Thickness Map 34 Large-scale copper-gold-silver system • Open to expansion down dip and laterally • 30 diamond drill holes (12,666 meters) and 43 channel and road cuts (>2,100 meters) with >10,934 assay values collected through 2011 • Limited testing of porphyry system with most holes in replacement /skarn style mineralization TSX:SAC US OTC:SOHAF 32 CuEq GT AuEq GT Copper (%) x Thickness (m) Gold (g/t) x Thickness (m) 0 – 10 CuEq% GT 10 – 50 CuEq% GT 50 – 100 CuEq% GT 100 – 200 CuEq% GT >= 200 CuEq% GT 0 – 17 AuEq GT 17 – 85 AuEq GT 85 – 171 AuEq GT 171 – 342 AuEq GT >= 342 AuEq GT Metal Prices Copper - $1/lb Gold - $1000/oz Silver - $15/oz Moly - $15/lb
  35. 35. Escalones 35 Geological 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:SAC US OTC:SOHAF Alto Bajo
  36. 36. Mercator Minerals Copper Mountain Imperial Metals Capstone Mining Quadra FNX Augusta Resource Candente Copper Copper Fox Minera Andes Nevada Copper Taseko Mines Hana Mining Lumina Copper NGEx Resources Northern Dynasty Panoro Minerals Redhawk Western Copper 1000 10000 100000 $50 $500 TotalResourceSize(MlbsCu) Enterprise Value (US$ Millions) 36 Current Copper Company Market Valuations by Resource Size & Development Stage Size of circle represents market valuation premium in EV/lb Developers Adv. Developers Producers Escalones Current Stage $100 2.5cents/lbAvg Value 5cents/lb 15cents/lb ESC PFS/FS ESC Production Escalones Value at Avg Valuation for each development stage ESC $300 $1000 $2000
  37. 37. Community Relations 37 A 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:SAC US OTC:SOHAF
  38. 38. Project Milestones 38 Value drivers over the next 6-12 months • Malku Khota, silver-indium-gallium project, Bolivia 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* 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 H2 2011 for completion in H1 2012 • Major camp expansion to support up to 6+ drills • Feasibility work to begin in H2 2012 • Escalones, copper-gold-silver porphyry project, Chile Phase I exploration and geophysics program Initial resource estimate by end of 2011 Phase II drill program underway • Resource update Q2 2012 *Average first five years of production
  39. 39. 0 10 20 30 40 50 60 70 Silver ETF Sulliden US Gold Tahoe Resources MAG Silver Silvercrest Sabina Orko Silver Standard Bear Creek Golden Minerals So.American Silver South American Silver Corp. Leveraged to Silver 39 Value of silver per dollar invested SAC has some of the best leverage to silver of any development stage company with nearly $65 of silver value per $1 invested Source: Canaccord as of January 17, 2011, Share prices updated October 18, 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 Silver value per $1 invested Average value of silver ~$15 of silver per $1 invested* Additional value of Indium and Gallium
  40. 40. Why South American Silver? 40 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 over 4 oz of silver and 45 lbs of copper per share (8 oz silver equivalent) • Attractive investment value relative to peers at low value per oz • Exposure to rapidly growing indium and gallium high-technology market • New copper-gold-silver resource and expansion at Escalones • Continued investor outreach to broaden market awareness of Company TSX:SAC US OTC:SOHAF 37
  41. 41. 41 TSX: SAC OTC: SOHAF Phone: 604.681.6926 1.855.681.6926 Greg Johnson President & CEO TSX:SAC US OTC:SOHAF
  42. 42. 42 Total Contained Metal - All Projects Ag Moz Au Ozs Ag Eq1 Moz In tonnes Ga tonnes In + Ga tonnes Cu Mlbs Pb Mlbs Zn Mlbs Mo Mlbs Cu Eq2 Mlbs M&I 230.3 230.3 1,481 1,082 2,563 120 453 247 330 Inferred 173.6 610,000 206.9 935 1,001 1,936 3,937 362 246 56.9 4,423 ESCALONES Approx. 0.02% Cu Cutoff In Situ Grade Total Contained Metal Resource Tonnes Cu Au Ag Mo Cu Eq Cu Au Ag Mo Cu Eq Category Millions % g/t g/t ppm % Mlbs Ozs Moz Mlbs Mlbs Inferred 420.6 0.41 0.05 1.24 61.39 0.49 3,835 610,000 16.8 56.9 4,503 MALKU KHOTA Approx. 10 g/t Ag Cutoff In Situ Grade Total Contained Metal Resource Tonnes Ag In Ga Cu Pb Zn Ag Eq Ag In Ga Cu Pb Zn Ag Eq Category Millions g/t g/t g/t % % % g/t Moz tonnes tonnes Mlbs Mlbs Mlbs Moz Measured 31 33.4 6.1 4.5 0.02 0.07 0.02 49.00 33.32 188 139 13.9 49 16 48.55 Indicated 224 27.3 5.8 4.3 0.02 0.07 0.05 43.20 196.96 1,293 943 106.4 405 231 311.45 Total M&I 255 28.1 5.8 4.3 0.02 0.07 0.04 43.77 230.28 1,481 1,082 120.3 453 247 358.80 Inferred 230 18.9 4.1 4.3 0.02 0.07 0.05 33.04 140.03 935 1,001 102.0 362 246 244.36 Resource Summary 1) The resource cut-off grade of 10 g/t silver equivalent is based only on the values of silver at $16/oz and indium at $550/kg. 2) The silver equivalent calculation uses base case metal pricing ( Ag at $18/oz, In at $500/kg , Ga at $500/kg, Cu at $3/lb, Pb at $0.90/lb,and Zn at $0.90 . 4) An economic cut-off grade of 0.2% copper equivalent represents a metal price of approximately $2.50/lb copper. 5) Copper Equivalent (Cu Eq %) calculations use $3.00/lb Cu, $1200/oz Au, $22/oz Ag, and $16/lb Mo and have not been adjusted for metallurgical recoveries 5) Ag Eq is calculated using total silver and gold contained metals at $1200/oz Au and $22/oz Ag 6) Cu Eq is calculated using total Cu, Pb, Zn, and Mo contained metals at $3/lb (Cu), $0.90/lb (Pb), $0.90/lb (Zn) and $16/lb (Mo).
  43. 43. Malku Khota NPV and Cash Flow 43 $0 $100 $200 $300 $400 $500 $600 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $15 $20 $25 $30 $35 $40 $45 $50 AverageNetCashFlow 1st5years(US$M) NPV@5%DiscountRate(US$M) Ag Price ($/oz) Net Present Value Average Net Cash Flow Source: March 2011 Malku Khota PEA Values in US$
  44. 44. 6.5 8.4 10.5 11.1 12.3 15.6 16.2 17 19.3 23.2 23.4 23.5 0 5 10 15 20 25 2011EP/CFSilver Producer Price to Cash Flow Multiples (P/CF)1 44 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
  45. 45. 45 TSX:SAC US OTC:SOHAF Relative Stock Performance SAC vs key silver & gold indices 18 month chart
  46. 46. 46 TSX:SAC US OTC:SOHAF Relative performance of Gold/Silver and the Producer/Development stage equity indices
  47. 47. Long Term Silver Ratios with Copper & Gold 47 Traditional benchmarks being challenged Source: 1) Ian McAvity‘s Deliberations On World Markets, May 4 2011 Silver showing relative strength
  48. 48. Criticality Index for Clean Energy/Technology Development 48 Showing 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 Importance tocleanenergy Importance tocleanenergy 1 2 3 4 low low high high Supply Risk Supply Risklow lowhigh high Important Near Critical Critical
  49. 49. Management & Directors 49 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. 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:SAC US 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.