Issue link: http://resourceworld.uberflip.com/i/107613
term plan focused on mine development to gain more value for the high quality assets it controls. The Pirquitas Mine in Argentina was the first major development for Silver Standard, achieving commercial production in 2009. It is still ramping through its expansion phase. Pirquitas is an open pit mine located high in the Andean Mountains. The operation was constructed with full supporting infrastructure and a modern processing plant to sustain large pit development that could run for more than 10 years. This resulted in a relatively high, initial capital construction cost, but has contributed to lower operational costs. In 2012, the company was able to produce 8.6 million ounces of silver at Pirquitas, slightly exceeding management guidance for the year. During 2013, the company expects to produce more than 8.2 million ounces of silver and 20 million pounds of zinc. Cash costs are projected to come in between $17.00 to $18.50 per ounce of silver. This will contribute significantly to operating cash flow and provide strong margins if the price of silver trends higher during the year. Meanwhile, Silver Standard plans to continue exploration and definition drilling around the deposit area to define more resources and eventually upgrade them to reserves. The share value for Silver Standard has suffered along with most of the other silver players during the last two years. The company recently traded in the $15 range, and with about 81 february 2013 million shares outstanding that generates a market value of about $1.2 billion for the company. However, considering the cash position in the treasury is in the neighborhood of $200 million, the market is therefore valuing the producing Pirquitas Mine, plus all of the other silver projects, at only $1 billion. One may consider it ironic that the company was founded to build value through leverage to underpriced silver projects, and here we are 10 years into a silver bull market and the silver assets are still underpriced. The global silver leverage controlled by the company, with compliant published resource estimates of indicated classification or higher, amounts to more than 1.1 billion ounces in the ground. Investors that buy shares of Silver Standard today are therefore gaining leverage to silver for less than $1 per ounce in the ground. That would suggest there is plenty of upside potential for this story. The question then comes down to how to unlock some of that value. One option is to complete a transaction to vend one of the advanced projects in the portfolio. This strategy worked well in 2010 when Silver Standard closed a transaction to vend two of its properties that were more leveraged to gold. A deal was announced that netted $400 million in cash proceeds by selling the Brucejack and Snowfield properties in northern British Columbia, to newly launched Pretium Resources. Pretium is led by Robert Quartermain, the former President of Silver Standard. www.resourceworld.com 55