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South American Silver Corporate Presentation
1. A Growth Focused Exploration & Development Company 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. 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 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. TSX:SAC US OTC:SOHAF
34. Potential NYSE-AMEX listing to increase visibility and liquidityAs of November 8, 2010 with proposed $28 million financing (1 (1) On a fully diluted basis (2) As of March 31, 2011 3
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36. Strategic 19.7% investment positions SAC in strong financial and operational position to advance projects to feasibility
37. Track record of successfully facilitating South American project development through relationships with national and state governments in the region
38. Portfolio of South American projects with strong government support in permitting, rail and port infrastructure
42. Comparative Resources in the Americas Second largest development stage silver resource $1.71 Millions of Silver Ounces & (Enterprise Value Per Oz) $0.72 $11.30 $3.37 Millions of Silver Ounces $2.17 $2.44 $8.08 $1.87 $5.82 $17.89 $9.13 $39.35 Mexico El. Salvador Peru Yukon Peru Mexico Nunavut Mexico Mexico Mexico Argentina Bolivia Chile Guatemala Source: CanaccordReport resource numbers as of January 11, 2011 Based Msy 24, 2011 share price Note: All companies have projects in South and/or North America 5
43. Enterprise Value per Resource Oz By project development stage Producer Average >$20/oz EV of >$0.85 base on 230.3 million M&I oz Ag Advanced Development Stage Average >$6/oz Development Stage Average >$3.50/oz Source: Canaccord & Intierra as of May 24, 2011, Note: All companies have projects in South and/or North America *EV/oz truncated to $25 6
44. Development Stage Value Curve 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 $20/oz Construct Increased value through resource expansion Increasing Market Value Permits FS $6/oz PFS Resource Definition PEA 3/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. 7
45. Current Silver Company Valuations by Stage Circle size represents EV/oz 500 EARLY DEVELOPER STAGE ADVANCED DEVELOPER STAGE US Gold PRODUCER STAGE Esperanza $2,000 Source: Canaccord Report January 17, 2011 Intierra, May 24, 2011 Note: All companies have projects in South and/or North America 8
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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 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
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53. Demand expected to outstrip production growth(2)Source: 1) GFMS World Silver Survey 2011 2) BMO Capital Markets Global Mining Research April 2011 9
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55. Reduced by-product silver production expected from base metal sector(2)Source: 1) GFMS World Silver Survey 2011 2) BMO Capital Markets Global Mining Research April 2011 11
59. One of the most scarce strategic metals due to low recycling and few primary producersTSX:SAC US OTC:SOHAF 11
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61. China is largest producer and consumer of indium and has imposed export quotas and tariffs like other key high-technology specialty metals
62. Indium market estimated to see 15-20% annual growth with most indium produced as by product of zinc refining growing at 1-3% annually
63. Current indium and gallium price ~$900-1000/kg up from lows of 2008-2009 of $400-500/kg
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65. Potential to represent 10% or more of global mine supply of indium and over 5% of global supply for gallium12
66. Indium Demand Growth Growing demand in high-tech markets 5 year projected demand growth End-use Market Demand (tonnes) 2010 total indium production level Growth assumptions based on data from Displaybank in LCD TV Association “LCD TV Matters”-Volume 3, Issue 2, February 2010 , Strategies Unlimited, August 2009 , Solarbuzz, Photon International, GFMS , Nanomarkets, and the US Department of Energy Critical Minerals Strategy Report 13
67. Indium Fundamentals World indium demand vs price (1969-2013*) Current Indium Price X Indium Demand Indium Price/kg ($US) Source: Indium: Global Industry Markets and Outlook, 9th Edition 2010 (Roskill) *2011-2013 Data are estimates only 14
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69. Member of Mercosur Regional trade organization with Brazil as largest trading partner
92. Moving into Pre-Feasibility in 2011 and Feasibility in 2012on average for the first 5 years of production See March 31, 2011 News Release for detailed resource estimate Total contained metal 17
99. Economic cut-off grade <15 g/t(at $18/oz Ag) 2AgEq comprised of all contained metals Economic cut-off grade comprised only of silver and indium 19
100. Mineralization High Grade Sandstone1160 g/t Silver Geological formations looking south from Limosna Malku Khota Sandstone Aroifilla Fm WaraWara Sandstone TSX:SAC US OTC:SOHAF 20
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102. Updated resource results increase total M&I oz to 230 Moz Ag (a 60% increase in M&I oz) plus an additional 140 M inferred Ag oz
103. 2011 program to target conversion from resources to reserves & expansion drilling
105. Deposit open along trend and down dip with excellent potential for expansion
106. New discovery of higher grade zones and down dip expansion of surface mineralization21
107. New Exploration Results Discovery of broad continuous mineralization horizon LMD048: 286 meters grading 76 g/t Ag Eq Grade thickness values of over 21,500 g-m AgEq OPEN OPEN TSX:SAC US OTC:SOHAF 22
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109. Excellent potential to expand resourcesWara Wara Area Sucre Area Concession Boundary Limosna Area Continuation of favourable sedimentary host rocks TSX:SAC US OTC:SOHAF 23
118. Downstream processing to metal productsCrushing Leaching Metal Recovery & Processing Silver, Gold, Copper Indium & Gallium ingots Lead and Zinc concentrates TSX:SAC US OTC:SOHAF 24
119. 2011 Economic Assessment Metal Prices ($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 25
120. Near Term Mine Development Projects MalkuKhota one of largest near-term producers at over 13 Moz/yr Estimated potential annual silver production of new development projects anticipated within the next 2-4 years Barrick Gold 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 CobarConsilidated 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 26
121. Global Silver Industry Cash Cost Curve Anticipated low-cost silver production Cumulative Percentile of Silver Mine Production Cost Malku Khota 13.25 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 27
122. Advancing to Production Development Timeline for MalkuKhota 2011 Pre-Feasibility Studies 2012 Feasibility Study 2013-14 Projected Mine Development TSX:SAC US OTC:SOHAF 28
138. Objectives to facilitate economic development in communities as part of project exploration, development and construction activities
139. Project construction will see workforce of over 1,000 with mine workforce of 400 or more*Business for Social Responsibility, San Francisco, CA 33
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141. 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*
142. 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
143. Cash flows, project valuations and rates of return significantly expanded over previous studies
149. Potential for significant deposit of copper, gold and silver*Average first five years of production 34
150. Leveraged to Silver 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 $40 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 35
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152. Track record of discovery and successful project development
153. Growing shareholder value through resource expansion and advancing projects up the development value curve toward feasibility
160. 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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162. 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
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168. Board of Directors Strong industry and financial experience Ralph Fitch, Executive ChairmanGreg Johnson, President and CEO Antonio Canton, Director - Mr. Canton is an independent consultant for international companies in marketing, finance and real estate. He is a director of a number of Swiss companies and brings to the board extensive experience in accounting and finance. Peter Harris, Director - Mr. Harris is an engineer with over 40 years of mining industry experience including as Senior VP and Chief Operating Officer at Nova Gold Resources Inc., and Senior VP of Project Development at Placer Dome Inc. He has been involved in the construction and operation of over 20 different mines in North and South America, Africa, Australia and Papua New Guinea. William Murray, Director - Mr. Murray is an engineer in the mining industry with over 33 years of experience in construction management and project evaluation in North America and Africa. He currently serves as the executive chairman and director of Polymet Mining Corp. Mr. Murray has been involved in numerous successful projects while working at Fluor Daniel, Denison Mines, Optimum Project Services and Anglo American Corp. in South Africa. Paul Haber, Director - Mr. Haber is a Chartered Accountant and a Certified Public Accountant with a strong background in US/Canadian accounting and finance. Presently manages Haber & Co. Ltd. Has previously been Chief Financial Officer and Corporate Secretary of a TSX Venture listed company. John Watson, Director - Mr. Watson has been the President of a TSX Venture Exchange listed company since 2002. He is also the manager/member of a limited liability corporation that owns and manages commercial real-estate. Tina Woodside, Director - Ms. Woodside is currently the head of the corporate finance department in Gowlings’ Toronto office and a member of the firm’s National Executive Committee. Ms. Woodside practices corporate and securities law with particular emphasis on corporate finance, mergers and acquisitions and corporate governance matters. TSX:SAC US OTC:SOHAF
