Pirquitas to go into production (October 18, 2006)

Silver Standard Resources (SSO-V, SSRI-Q) will go ahead with construction of a mine at its Pirquitas silver project in Jujuy province, Argentina, which would produce about 9 million oz. silver annually.

With $191 million in the bank, Silver Standard made the production decision even though negotiations for debt financing for the project are not complete. A lead lender has done a due-diligence investigation on the project, but Silver Standard has been reluctant to commit to a large project hedge book, preferring to have more exposure to the silver price.

The company should name a primary contractor shortly, as it is now writing up a definitive agreement. It has secured a used ball mill for the plant and has picked the mining fleet off the lot.

A feasibility study on Pirquitas, updated last April, caluclated reserves of 18.9 million tonnes grading 176 grams silver per tonne, with 0.6% zinc and 0.2% tin. Consulting firm Hatch put its undiscounted net present value at US$125 million and its internal rate of return at 12.5%, based on a silver price of US$6.25 per oz. and a zinc price of US$1,200 per tonne (US55 per lb.).

Hatch had previously estimated the capital cost of the mine at US$146 million, plus US$12 million in refundable value-added tax. Silver Standard has said the project could be in production within two years of a development decision.