South American Silver February 2012 Corporate Presentation


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South American Silver's February 2012 Corporate Presentation. Learn about the Malku Khota silver-indium project in Bolivia and Escalones copper-gold project in Chile.

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South American Silver February 2012 Corporate Presentation

  1. 1. VALUE.GROWTH.VISION Growing and advancing one of the world’s largest undeveloped silver and indium resources.Corporate Presentation TSX: SAC, US OTC: SOHAFFebruary 2012
  2. 2. Cautionary NotesForward-looking statementsCertain statements contained herein constitute “forward-looking statements.” Forward-looking statements look into the future andprovide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include wordssuch 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 anduncertainties. Actual results may materially differ from expectations, if known and unknown risks or uncertainties affect ourbusiness, or if our estimates or assumptions prove inaccurate. Investors are advised to review the Company’s Annual InformationForm filed at for a detailed discussion of investment risks. The Company assumes no obligation to update orrevise 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 inCanada, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all resource and reserveestimates included in this presentation have been prepared in accordance with National Instrument 43-101 Standards ofDisclosure for Mineral Projects (―NI 43-101‖) and the Canadian Institute of Mining and Metallurgy Classification System. NI 43-101is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuermakes of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differsignificantly from the requirements of the United States Securities and Exchange Commission (―SEC‖), and resource and reserveinformation contained herein may not be comparable to similar information disclosed by U.S. companies. In particular, and withoutlimiting the generality of the foregoing, the term ―resource‖ does not equate to the term ―reserves‖. Investors should alsounderstand that ―inferred mineral resources‖ have a great amount of uncertainty as to their existence and great uncertainty as totheir economic and legal feasibility. It cannot be assumed that all or any part of an ―inferred mineral resource‖ will ever beupgraded to a higher category. The estimation of quantities of resources and reserves is complex, based on significant subjectiveassumptions and forward-looking information, including assumptions that arise from the evaluation ofgeological, geophysical, engineering and economic data for a given ore body. This data could change over time as a result ofnumerous factors, including new information gained from development activities, evolving production history and a reassessmentof 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 assurancecan be given that the indicated level of mineral will be produced. Actual production could differ from expected production and anadverse change in mineral prices could make a reserve uneconomic to mine. Variations could also occur in actual ore grades andrecovery rates from estimates. 2
  3. 3. Investment Highlights South American Silver Corp. • 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 Inferred resource of 3.8 billion lbs of copper and 610,000 oz of gold and 16.8 million ozs silver • Well defined business plan to drive shareholder value • More than $230 worth of metal in the ground per share (>$100 of silver, >$100 of copper, and >$30 of indium and gallium1 • Attractive investment value relative to peers at low value per oz • Anticipated low cost silver production at approximately $2.94/oz of silver2 • Strong focus on community relations to proactively facilitate mutually beneficial relationships1) $25 /oz silver, $3 /lb copper, $700/kg indium and gallium2) Net of base metal credits 3
  4. 4. World-Class Deposits Two large-scale assets in South America Malku Khota, silver-indium project, Bolivia (100%) • Pre-Feasibility level update in Q2 2012 with Feasibility work starting 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 a 15 km trend drill tested on the 50 sq km property • Potential to be one of the worlds top producing silver and indium mines Silver Indium Gallium Ag Eq1 (Moz) (tonnes) (tonnes) (Moz) M&I 230 1,481 1,082 354 Inferred 140 935 1,001 2401)Silver Equivalent (Ag Eq) calculated using total contained metalusing 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
  5. 5. World-Class Deposits Two large-scale assets in South America 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 • Step-out testing of the known mineralized zones and testing of new geophysical targets • Located within a world-renowned copper district near the world‘s largest underground copper mine, El Teniente Total Contained Metal Copper Gold Silver Moly Cu Eq1 Mlbs Ozs Moz Mlbs Mlbs Inferred 3,835 610,000 16.8 56.9 4,503 In Situ Grade Tonnes Copper Gold Silver Moly Cu Eq1 Millions % g/t g/t ppm % 420.6 0.41 0.05 1.24 61.39 0.491)Copper Equivalent (Cu Eq) calculated using total contained metalfor copper ($3/lb), gold ($1200/oz), silver ($22/oz), and molybdenum($16/lb) and has not been adjusted for metallurgical recoveries. 5
  6. 6. Share Capitalization1 TSX:SAC, US OTC:SOHAF Issued & Outstanding Options2 Warrants3 Fully Diluted1 101.9M 11.0M 5.5M 118.4M • ~$160 million Market Capitalization (4) Major Shareholders • Average 3 mo. trading volume 150,000 shares/day •Zamin --19% • $28 million in cash(1) •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 6 $0.97 (4) As of Dec 5, 2011 (5) Direct ownership only
  7. 7. Adding Value Through Resource Growth Total resources with value shown relative to silver Ag Moz In+Ga tonnes Cu Mlbs 450 6000 Ag Eq Inferred Resource (Ag+Au only) 400 Ag Eq M&I Resource (Ag+Au only) In & Ga Inferred Resource (In+Ga only) 5000 Tonnes of Indium and Gallium2 (combined) Million Pounds of Copper Equivalent3 350 In & Ga M&I Resource (In+Ga only) Million Ounces of Silver Equivalent1/ Cu Eq Inferred Resource (Cu+Pb+Zn only) 300 4000 Cu Eq M&I Resource (Cu+Pb+Zn only) 250 3000 200 6000 150 4500 2000 100 3000 1000 50 1500 0 IPO 0Total resources for both Malku Khota and Escalones1) Ag Eq calculated using total contained metal for silver ($22/oz) and gold ($1200/oz) only2) Total combined tonnes of indium and gallium3) Cu Eq calculated using total contained metal for copper ($3/lb), lead ($0.90/lb), zinc 7($0.90/lb), and molybdenum ($16/lb) only
  8. 8. Comparative Silver Resources in the Americas Second largest development stage silver resource 500 450 Additional value of Indium and Gallium 400 Inferred ResourcesMillions of Silver Ounces 350 M&I Resources 300 250 200 150 100 50 0 Alexco Silvercrest US Gold Sulliden MAG Silver Orko Golden Tahoe South So.American Bear Creek Minerals Resources American Silver Silver Yukon Mexico Mexico Peru Mexico Mexico Mexico Guatemala Bolivia Peru (Canada) El Salvador Peru Chile Source: Canaccord Report and Intierra Note: All companies have projects in South and/or North America 8
  9. 9. Enterprise Value per Silver Resource Oz By project development stage Producer Average $16.00 ~$9/oz Advanced Development $14.00 Stage Average ~$6/oz EV of >$0.72 base on 230.3 million M&I oz Ag $12.00 $10.00 Development Stage Average ~$3/oz $8.00 $6.00 $4.00 $2.00 $0.00 South So.American Golden Orko MAG Silver Tahoe Silvercrest Sulliden US Gold Esperanza Producers American Silver Minerals Resources Silver Corp.Source: Canaccord & Intierra as of February 2, 2012,Note: All companies have projects in South and/or North America 9
  10. 10. Development Stage Value Curve Potential value growth with project advancement Average Enterprise Value per Oz of Silver by Stage Production Take-Over offers or Partnerships common Construct $9/oz Increasing Market Value Increased value at this stage through resource expansion Permits FS Malku Khota Project $6/oz 2x-3x potential Escalones PFS increase in Project Resource PEA market cap Definition 2x-5x potential increase in $3/oz market cap Early Stage Advanced Production Discovery Exploration & Development Stage Development (Reserves) Increasing value with project advancementSource: Recent average enterprise value per ounce of silver atvarious development stages for North and South American based 10projects. Canaccord, Wellington West and Company reports.
  11. 11. Current Silver Company Market Valuations by Resource Size & Development Stage Size of circle represents market valuation premium in EV/oz Developers Adv. Developers Producers MK Value at Avg Valuation Silver Standard Allied Nevada for each development stage Pan American Silver 1000 Coeur d‘Alene 2012 Bear Creek 2011 PFS/FS Production South American Silver PEA 500Total Resource Size (Mozs) Malku Khota Current Value MK MK MK Tahoe First Majestic Silvermex Silver Bull Hecla Hochschild 100 MAG Endeavour Esperanza Aurcana Troy Extorre Arian Castle Alexco Great Panther Golden Predator 10 $50 $100 $200 $300 $500 $1,000 $2,000 $5,000 Enterprise Value (US$ Millions)Total Resource Ag Equivalent using (Ag +Au only at $25/oz and $1000/oz values)Source: Canaccord Report and Intierra,Share prices as of Feb 2 2012 11Note: All companies have projects in South and/or North America
  12. 12. Positive Silver Fundamentals 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 productionSource: 1) GFMS World Silver Survey 20112) BMO Capital Markets Global Mining Research April 2011 12
  13. 13. Silver Supply/Demand Fundamentals • Dramatically increased demand growth driven by strong investment demand plus increased industrial consumption(1) • Demand growth expected to continue to outstrip production growth(2) World Silver Supply World Silver Demand +17% total +8% total demand supply 1200 Industrial Applications growth 1200 Mine production growth Photography Secondary Supply and Scrap Jewelry and Silverware +40% 1000 Government Sales 1000 Investment and Coins investment demand 800 800Million Ounces Million Ounces +2.5% mine 600 600 production 400 400 +21% industrial demand 200 200 0 0Source: 1) GFMS World Silver Survey 20112) BMO Capital Markets Global Mining Research April 2011 13
  14. 14. Growing Demand for Silver in Technology Breakdown of key technology/industrial uses for silver 500 Photovoltaic 400 Catalysts, alloys, solders and biocidesMillions of Silver Oz 300 Electronics 200 100 0 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p Source: CPM Silver Yearbook 2010 Not for reproduction without written CPM Group consent 14
  15. 15. 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) 300 25 Lead/Zinc Primary Copper 250 Gold 20 Silver Price Millions of Ounces of Silver 200 Silver Price (US$) 15 150 10 100 5 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010Source: 1) GFMS World Silver Survey 2005-20112) BMO Capital Markets Global Mining Research April 2011 15
  16. 16. Indium & Gallium – Two Key Strategic Metals 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 * flat panel displays LED lighting thin film solar* Image from 16
  17. 17. Indium & Gallium Fundamentals 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 $400-500/kg • Gallium market estimated to be a conservative 15% annual growth rate which could increase significantly with more rapid growth in LED lighting and photovoltaics Malku Khota annual indium and gallium production • Malku Khota projected to be one of the world‘s largest indium & gallium producers (80 tonnes and 15 tonnes per year) • Potential to represent 10% or more of global mine supply of indium and over 5% of global supply for gallium • Opportunities for project financing from off-take agreements for indium & galliumSources: (1) US Dept. of Energy Critical Materials Strategy, Dec.2010. (2)United Nations Environment Programme (UNEP) Special 17Report on Strategic Metals ,May 2011 .
  18. 18. Indium Demand Growth Growing demand in high-tech markets 2500 Solar EnergyEnd-use Market Demand (tonnes) LED Lighting 5 year 2000 LCD Flat Panels projected demand growth 1500 1000 2010 total indium 500 production level 0 2010 2011E 2012E 2013E 2014E 2015E 2016E Growth assumptions based on data from Displaybank in LCD TV Association ―LCD TV Matters‖-Volume 3, Issue 2, February 2010 , Strategies Unlimited, August 2009 , Solarbuzz, Photon International, GFMS , Nanomarkets, and the US Department of 18 Energy Critical Minerals Strategy Report December 2010
  19. 19. Indium Fundamentals World indium demand vs price (1969-2011*) 2500 2000 1800 Indium Price/kg ($US) 2000 1600 DemandIndium Demand 1400 Price 1500 1200 Current Indium Price X 1000 1000 800 600 500 400 200 0 0Source: (1) Indium: Global Industry Markets and Outlook, 9th Edition 2010 (Roskill)*2011-2013 Data are estimates (2) 2011-2015 Estimates US Dept. Of EnergyCritical Materials Strategy Dec. 2010. 16
  20. 20. Silver Mines in Bolivia 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 CristobalTSX:SAC 20US OTC:SOHAF
  21. 21. Opportunity in Bolivia 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 resourcesTSX:SAC 21US OTC:SOHAF
  22. 22. Malku Khota Project One of the world’s largest silver-indium resources Malku Khota Project – 2011 Resource Estimate2 Silver Indium Gallium Copper Lead Zinc AgEq3 (Moz) (tonnes) (tonnes) (MLbs) (MLbs) (MLbs) (Moz) M&I 230 1,481 1,082 120 453 247 354 Inferred 140 935 1,001 102 362 246 240 Host rock sandstone with disseminated Enrichment starts at surface 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, 41) 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) 224) Economic cut-off grade comprised only of silver and indium
  23. 23. Malku Khota Project 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 nearby1) Average for the first 5 years of production 23
  24. 24. Malku Khota Drilling Grade thickness map • 115 drill holes in current resource with OPEN 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 Mineralized Ag oz Sandstones • 2012 program to target conversion from resources to reserves & expansion drilling OPEN • 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 OPENTSX:SAC 24US OTC:SOHAF
  25. 25. 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 OPEN OPENTSX:SAC 25US OTC:SOHAF
  26. 26. Production Processes From ore to metal Open Pit Mining • Large scale shovel and truck open pit mine • Oxide ore crushed in preparation for direct Crushing leaching • Four years of metallurgical test work with SGS Leaching labs on acid leach process • Acid-chloride leaching captures silver, indium, copper, lead, zinc, gallium and gold Metal Recovery & Processing • Metal recovery in several steps: • Acid recovery • Silver-gold-copper cementation Silver, Gold, Copper • Indium-gallium precipitation • Lead and zinc sulfides Indium & Gallium ingots • Downstream processing to metal products Lead & Zinc concentratesTSX:SAC 26US OTC:SOHAF
  27. 27. 2011 Economic Assessment1 Metal Prices ($US)4 Base Case Mid Case Recent Mining Rate 40,000 tpd (3 yr avg) (2 yr avg) (1 yr avg) Life of Mine 15 years Silver : $18/oz $25/oz $35/oz Ore Mined (LOM)2 200 M tonnes Indium : $500/kg $570/kg $650/kg Average Silver Grade 3 42.4 g/t Gallium: $500/kg $570/kg $730/kg Average Indium Grade3 7.55 g/t Ag Eq grade 58 g/t Share of Gross Revenue First LOM (at base case prices) Recovered Metals Total 5 years Annual Silver (oz) 158 M 13.2 M 10.5 M Indium (tonnes) 1,184 80.7 78.9 5% 3% Silver Lead (lbs) 191 M 12.48 M 12.7 M 6% Zinc (lbs) 135 M 4.42 M 9M Copper (lbs) Indium & 88 M 5.64 M 5.87 M Gallium (kgs) Gallium 212,962 15,184 14,198 15% Copper Base Case Mid Case Recent First 5 years cash flow $185 M/yr $287 M/yr $430 M/yr 71% Net cash flow $1,261 M $2,528 M $4,298 M Lead NPV (5% discount rate)1 $704 M $1482 M $2571 M Internal Rate of Return 37.7% 63% 92.9% Payback period (years) 27 months 19 months Zinc 15 months(1)In US dollars, March 2011, PEA (4) Base Case: 3 yr avg prices as of May 2011(2)LOM = Life of Mine Mid Case: 2 yr avg prices as of May 2011(3)First 5 years of production Recent Case: 1 yr avg prices as of May 2011 27(avg/yr)
  28. 28. Malku Khota PEA Update Projected Production Levels 13-20 Moz Silver Equivalent Production first 11 years 22Production - Silver Equivalent Ounces (Million) Copper 20 Zinc 18 Lead 16 14 Indium & Gallium 12 Silver 10 Annual Average 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Production Year Source: March 2011 Malku Khota PEA Values in US$ 28
  29. 29. Actual/Anticipated Annual Ag Production (Moz) 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 Coeur dAlene Pan American SilverSource: CPM Silver Yearbook 2011 Silver Standard Resources Silver Standard Resources Producing Mine Hecla Hochschild*Based on mine production of 13.2 Moz /year for first five years Development Stage Project Cia De Minas Buenavertura Yamana Gold Etibank29 Bear Creek Mining Hochschild Polymetal MNPO Xtrata South American Silver Corp. Goldcorp Inc. Industrias Penoles Pan American Silver Tahoe Resources Sumitomo Corp. Target to increase production to 18-20 Moz Barrick Gold Corp. Primary Silver Project Annual Production Rates Fresnillo Malku Khota one of largest emerging producers at over 13 Moz/yr BHP Billiton
  30. 30. Global Silver Industry Cash Cost Curve Anticipated low-cost silver production Cumulative Percentile of Silver Mine Production Cost Lowest 25% Percentile Total Cash Cost Per Ounce of Silver Cash Costs Malku Khota 13.2 Mozs/yr (1) ~ $2.94/oz at 3 yr avg prices(2)(3) ~ $2.01/oz at 2 yr avg prices(2)(3) ~ $0.86/oz at 1 yr avg prices(2)(3) Industry Average Cash Cost $5.27/oz Source: GFMS World Silver Survey 2011(1) Avg first 5 years of production (2) Silver cash costs after credits ($US)/oz(3) 3 year average price: Ag $18, In $500, Ga $500, Cu $3, Pb $0.90, Zn $0.90 302 year average price: Ag $25, In $570, Ga $570, Cu $3.70, Pb $1, Zn $11 year average price: Ag $35, In $650, Ga $730, Cu $4.30, Pb $1.20, Zn $1.10 , all as of May 2011
  31. 31. Escalones Copper-Gold-Silver project, Chile High potential, large-scale target Inferred Copper Gold Silver Moly Cu Eq Copper Gold Silver Moly Cu Eq1 Tonnes (%) (g/t) (g/t) (ppm) (%) (Mlbs) (Ozs) (Mozs) (Mlbs) (Mlbs) 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 underway1) Cu Eq calculated using total contained metal at $3.00/lbCu, $1200/oz Au, $22/oz Ag, and $16/lb Mo and has not beenadjusted for metallurgical recoveries 31
  32. 32. Escalones Project Logistics Excellent existing infrastructureOwnership: 100% through lease SAC propertyLocation: 35km E of El Teniente Gas pipeline Access RoadElevation: 3800m• 70 square kilometer property• Road accessible located 100 km southeast of Santiago• Gas pipeline across propertyTSX:SAC 32US OTC:SOHAF 31
  33. 33. Drill Results Grade Thickness Map 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 CuEq GT AuEq GTCopper (%) x Thickness (m) Gold (g/t) x Thickness (m) Metal Prices 0 – 10 CuEq% GT 0 – 17 AuEq GT Copper - $1/lb 10 – 50 CuEq% GT 17 – 85 AuEq GT Gold - $1000/oz 50 – 100 CuEq% GT 85 – 171 AuEq GT Silver - $15/oz 171 – 342 AuEq GT Moly - $15/lb 100 – 200 CuEq% GT >= 200 CuEq% GT >= 342 AuEq GTTSX:SAC 33US OTC:SOHAF 32
  34. 34. Escalones 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 Alto BajoTSX:SACUS OTC:SOHAF 34
  35. 35. Current Copper Company Market Valuations by Resource Size & Development Stage Size of circle represents market valuation premium in EV/lb Developers Adv. Developers Producers Avg Value 2.5cents/lb 5cents/lb 15cents/lb 100000 Escalones Value at Avg ValuationTotal Resource Size (Mlbs Cu) for each development stage Augusta Resource Northern Dynasty Taseko Mines Quadra FNX Minera Andes Candente Copper Lumina Copper Nevada Copper Imperial Metals 10000 Escalones Western Copper PFS/FS Capstone Mining Current Stage NGEx Resources Panoro Minerals Hana Mining Mercator Minerals ESC ESC ESC Production Copper Fox Redhawk Copper Mountain 1000 $50 $100 $300 $500 $1000 $2000 Enterprise Value (US$ Millions)Source: Canaccord Report November, 2011 35
  36. 36. Community Relations 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 moreTSX:SACUS OTC:SOHAF 36
  37. 37. Project MilestonesValue 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* Cash flows, project valuations and rates of return significantly expanded over previous studies • Major camp expansion to support additional drills • Infill and expansion drilling program beginning Q1 2012 • Updated Economic Assessment in Q2 2012 • Feasibility work to begin in H2 2012 • Escalones, copper-gold-silver porphyry project, Chile Phase I exploration and geophysics program complete Initial resource estimate completed Phase II drill program underway • Resource update mid-2012 • Preliminary Economic Assessment in Q4 2012*Average first five years of production 37
  38. 38. Leveraged to Silver Additional value Value of silver per dollar invested of Indium and Gallium Additional value of Copper Silver value per $1 invested 50 SAC has some of the best leverage to silver of any development 45 stage company with almost $50 of silver value per $1 invested 40 35 30 25 Average value of silver ~$11 of silver per $1 invested* 20 15 10 5 0 Silver ETF US Gold Sulliden Tahoe MAG Silver Orko Golden Silvercrest Silver Bear Creek South American So.American Resources Minerals Standard Silver Corp. SilverSource: Canaccord as of January 24, 2012, Share prices updated Feb 2 2012Note: all companies have projects in South and/or North AmericaCalculated using $25/oz Ag. Dollar value of silver per $1 invested = (silverresource/shares outstanding) x $25/oz silver) divided by share price 38Value only shown for silver with no contribution from other metals. Cu value calculatedusing $2.25
  39. 39. 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 • More than $230 worth of metal in the ground per share (>$100 of silver, >$100 of copper, and >$30 of indium and gallium)1 • 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 Company1) $25 /oz silver, $3 /lb copper, $700/kg indium and gallium 39 37
  40. 40. TSX: SAC OTC: SOHAF Phone: 604.681.6926 1.855.681.6926 AppendixTSX:SAC 40US OTC:SOHAF
  41. 41. Resource Summary MALKU KHOTA In Situ Grade Total Contained MetalApprox. 10 g/t Ag Cutoff1 Ag In Ga Cu Pb Zn Ag Eq2 Ag In Ga Cu Pb Zn Ag Eq2Resource Tonnes g/t g/t g/t % % % g/t Moz tonnes tonnes Mlbs Mlbs Mlbs MozCategory MillionsMeasured 31.0 33.40 6.10 4.50 0.02 0.07 0.02 49.00 33.32 188.00 139.0 13.9 49 16 48.55Indicated 224.0 27.30 5.80 4.30 0.02 0.07 0.05 43.20 196.96 1,293.00 943.0 106.4 405 231 311.45Total M&I 255.0 28.10 5.80 4.30 0.02 0.07 0.04 43.77 230.28 1,481.00 1,082.0 120.3 453 247 358.80Inferred 230.0 18.90 4.1 4.3 0.02 0.07 0.05 33.04 140.03 935 1,001 102 362 246 244.36Mineral resources in the above table were estimated as of March 30, 2011 for the Preliminary Economic Assessment Update Technical Report for Malku Khota by Allan Armitage, Ph.D., P.Geo, ofGeoVector Management Inc.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). ESCALONES In Situ Grade Total Contained Metal Approx. 0.2% Cu Cutoff3 Cu Au Ag Mo Cu Eq4 Cu Au Ag Mo Cu Eq4Resource Tonnes % g/t g/t ppm % Mlbs Ozs Moz Mlbs MlbsCategory MillionsInferred 420.6 0.41 0.05 1.24 61.39 0.49 3,835 610,160 16.8 56.9 4,503Mineral resources in the above table are as reported in the Dec 19 2011 Press Release using estimates prepared by Allan Armitage, Ph.D., P.Geo, and J. Campbell, BSc, PGeo of GeoVector Management Inc.3) An economic cut-off grade of 0.2% copper equivalent represents a metal price of approximately $2.50/lb copper.4) 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 TOTAL RESOURCES Total Contained Metal - Malku Khota and Escalones Combined Ag Au Ag Eq5 In Ga In + Ga Cu Pb Zn Moly Cu Eq6Resource Moz Kozs Moz tonnes tonnes tonnes Mlbs Mlbs Mlbs Mlbs MlbsCategoryM&I 230.28 230.3 1,481.00 1,082.0 2,563.0 120.3 453 247 330Inferred 156.83 610.16 190.11 935.00 1001.00 1936.00 3937.02 362.16 246.15 56.87 4,4235) Ag Eq is calculated using total silver and gold contained metals at $1200/oz Au and $22/oz Ag6) 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). 41
  42. 42. Relative Stock PerformanceSAC vs. key silver & gold indices SAC Producer and Explorer/Developer Equities Peak December 2010 Silver price peak Gold Price Peak Silver Producers peak Correction in Explorer/Developers Accelerates into the end of the yearTSX:SAC 42US OTC:SOHAF
  43. 43. Relative performance of Gold/Silver and theProducer/Development stage equity indicesExplorer/Developers and Producer Equities undervalued relative to metals Gold Price Peak Silver price peak Producer and Explorer/Developer Equities Peak December 2010 Historically, metals and miners move together Correction in Explorer/Developers Accelerates into the end of the year Potential value gain to equities to catch up with metals pricesTSX:SAC 43US OTC:SOHAF
  44. 44. Long Term Silver Ratios with Copper & Gold Traditional benchmarks being challenged Silver showing relative strengthSource: 1) Ian McAvity‘s Deliberations On WorldMarkets, May 4 2011 44
  45. 45. Criticality Index for Clean Energy/Technology DevelopmentShowing Forecast Supply Shortages of Most Important Metals Short Term (0-5 Years) Long Term (5-15 Years) high high 4 Dy 4 Nd Dyto clean energy to clean energy Ce La In Nd Tb In Importance Importance Ga Ga Eu Y Tb 3 Te Eu Y 3 Li Te Ce Co Li Co Pr 2 2 La Pr Sm Sm low low 1 1 1 2 3 4 1 2 3 4 low Supply Risk high low Supply Risk high Important Near Critical CriticalSources: (1) US Dept. of Energy Critical Materials Strategy,Dec. 2010. 45
  46. 46. Indium Supply Mine Production and Refining Indium Mine Production Indium Refining Peru, 1% Russia, 3% Others, 6% Germany, 3 % China China Peru S.Korea Other Countries, 23 BLEU, 6% Canada % Canada China, 45% Japan, 8% Japan Mexico, 3% Australia China, 52% BLEU USA, 4% USA Canada, 8% Germany Mexico S.Korea, 13 Russia Other % Peru, 9% Countries PeruAustralia, 6% Others Canada, 9% Source: 1)Roskill ‗s Indium: Global Industry Markets and Outlook ,2010 46 BLEU: Belgium, Luxembourg Economic Union
  47. 47. Management & Directors Ralph Fitch (Executive Chairman) is an explorationist with over 40 years of global experience, a co-founder of South American Silver andGreg Johnson (President/CEO & Director) has over 25 years mining former Chief Geologist for Chevron Minerals credited with several industry experience in corporate finance, project development and major discoveries in South America. exploration. A s a co-founder of NovaGold, he played a key role in Antonio Canton (Director) is consultant and director to a number of growing that company from $50 million in value to over $2 billion market international companies in marketing, finance and real estate. capitalization advancing 3 major projects through to Feasibility. Tony Cau (Director) is COO at Zamin Ferrous. With over 30 years ofPhillip Brodie-Hall (Chief Operating Officer) has over 35 years experience experience in the mining, construction and heavy manufacturing in engineering construction and project development. He has participated in industries, he has been involved in mine development and expansion nearly every aspect of evaluation, feasibility studies and project projects around the world for groups like BHP, SNC-Lavalin, and development in the mining industry. Bateman Engineering.William Filtness (Chief Financial Officer) is a Chartered Accountant with Jeffrey Couch (Director) is the Managing Director and Head of over 20 years of financial experience in the mining industry. Investment & Corporate Banking, Europe and London for BMODavid Dreisinger (Vice President of Metallurgy) is Professor and Industrial Capital Markets. He has held various financial and business Research Chair in Hydrometallurgy at the University of British Columbia. development positions and has extensive investment banking and He is actively involved in developing and commercializing capital markets experience with groups such as Credit hydrometallurgical process at a number of mines worldwide. Suisse, Citigroup, and Klienwort Benson.Felipe Malbran (Vice President of Exploration) has over 25 years Paul Haber (Director) is a Chartered Accountant and a Certified Public experience in exploration management in South America including key Accountant, and previously CFO of a TSX-V company and Chairman roles in the discovery of Malku Khota, Vizcachitas, and Escalones. of the Audit Committee for South American Silver.James Mallory (Vice President of Operations & Social Responsibility) Peter Harris (Director) is a mining engineer with over 40 years of has over 30 years of mining industry experience in large-scale mine industry experience including construction and operation of over 20 management, operations and construction for companies including Barrick mines around the world with groups such as Barrick (Placer Dome) (Placer Dome), Silver Standard, and NovaGold. and NovaGold.Andrew Clark (Manager of Project Implementation) has over 30 years William Murray (Director) is an engineer in the mining industry with global industry experience in the development, design, management and over 35 years of experience in construction management and project construction of industrial mining projects. evaluation with groups including Fluor Daniel, DenisonRichard Doran, (Vice President & Corporate Secretary) has extensive Mines, Optimum Project Services and Anglo American Corp. industry experience including with General Minerals and as Marketing John Watson (Director) is President of a TSX -V listed company and Manager for Chevron Minerals. Manager of a limited liability corporation in commercial real-estate.Xavier Gonzales Yutronic (General Manager Compañía Minera Malku Tina Woodside (Director) is the head of Gowlings’ corporate finance Khota S.A.) has experience in management, finance, and community department and practices corporate and securities law focused on relations in the mining industry including with Glencore, and Comsur S.A. corporate finance, M&A and corporate governance matters. TSX:SAC 47 US OTC:SOHAF