Resources up, profits down for Silver Standard (November 19, 2007)

Vancouver — Hoping good news can cancel out bad news in the minds of investors, Silver Standard Resources (SSO-T, SSRI-Q) announced an increase to the indicated resource at the company’s Pitarrilla silver project, then released third-quarter results showing a loss of $12.9 million.

Infill drilling in the Breccia Ridge zone of the Pitarrilla project in Durango state, Mexico, added 32.7 million contained ounces silver to the measured and indicated silver resource, which now stands at 383.1 million oz. More specifically, Pitarrilla now hosts measured resources of 27.2 million tonnes grading 120.6 grams silver per tonne and indicated resources of 106.6 million tonnes grading 81 grams silver. Pitarrilla also contains 76.2 million tonnes averaging 78.9 grams silver in the inferred category for another 193.2 million oz. silver.

Breccia Ridge hosts silver and base metal mineralization in large breccia zones near surface and in replacement zones in basal conglomerate and on the margins of high-angle rhyolite dykes. Breccia Ridge alone contributes 53% of the silver resources at Pitarrilla; its base metal mineralization is also significant. The zone hosts 71 million tonnes of 65.2 grams silver, 0.88% zinc, 0.32% lead and 0.03% copper in the indicated category, and 64.9 million tonnes of 74.6 grams silver, 0.91% zinc, 0.46% lead and 0.05% copper in inferred resources.

Five drills continue to infill drill at Breccia Ridge and a sixth rig is drilling stepouts. Work has begun on a 3-km-long underground ramp to better access the Breccia Ridge zone. Silver Standard expects to continue drilling at Pitarrilla into 2008 and plans to calculate a new resource estimate in the first half of next year. The company also plans to start a feasibility study within the next few months.

Running six drill rigs is a costly operation, however, and Pitarrilla exploration was only one of numerous expenses for Silver Standard in the third quarter. Those expenses added up to a third-quarter loss of $12.9 million, or 21 per share, compared with net earnings of $2.7 million for the third quarter of 2006.

The third-quarter loss came from a combination of stock-based compensation expenses of $4.5 million, a writedown for estimates of asset-backed commercial paper exposure of $4 million, foreign exchange losses of $2 million due to the strengthening of the Canadian dollar, and unrealized losses for United States dollar hedges of $1.9 million.

Property spending for the three months totalled $26.1 million, including $10 million for construction and mining equipment and $2.1 million for exploration at the Pirquitas silver property in Argentina, $5.3 million for Pitarrilla exploration, $2.9 million for exploration at the San Luis gold-silver property in Peru, and $2.8 million for exploration at the Snowfield gold property in Canada.

At the end of the third quarter, Silver Standard held $140.4 million in working capital with no long-term debt. The company has a 52-week trading range of $27.43-45.58, and has 62.3 million shares issued.

The good news-bad news combination did not affect Silver Standard’s share price significantly. On the news, its share price closed down 19 at $41.91 on volume of 295,000 shares traded.