Silver Standard Ramping Up Pirquitas

VANCOUVER — Stalwart junior explorer Silver Standard Resources (SSO-T, SSRI-Q), a force in mineral exploration for over two decades, is set to become a significant silver producer as it ramps up production at its Pirquitas open-pit silver-tin-zinc mine in northern Argentina, about 355 km northwest of San Salvador de Jujuy.

Silver Standard president and CEO Robert Quartermain describes a transition from explorer to producer that has gone remarkably smoothly. “There really haven’t been any major bugs to work out,” he says.

Silver Standard is close to achieving two feats: Coming in almost on budget and making its first concentrate shipment close to on schedule.

In 2007, Silver Standard had forecasted the cost to build the 6,000-tonne-per-day mine at an altitude of between 4,000 and 4,500 metres at US$220 million. Now, however, Silver Standard says it will come in at US$230 million.

Though only over budget by 5%, a slim margin as compared to the revised forecasts of many other mining projects through 2007-09, when Quartermain addresses the 5% discrepancy he almost sounds apologetic. He explains that higher than expected inflation and wage costs were to blame for Silver Standard having overshot the mark.

The most he is willing to boast is that Silver Standard was close to getting capital expenditures right “because we have been operating in the country for a while and we made some assumptions about what inflation would run and so on.” These assumptions, as is plain to see, were close to spot on — despite the unpredictable global economic meltdown that subsequently rocked most countries’ finances, including Argentina’s.

Quartermain sounds equally contrite about delayed shipment of the first silver concentrate from Pirquitas. Having finished construction of the silver flotation circuit this winter, Silver Standard had forecasted it would make the shipment at the end of May. But Quartermain says Silver Standard still hasn’t made it and that the company continues to stockpile silver concentrate.

He says the shipment will likely go sometime in June.

The delay, he says, has to do with ensuring silver production goes smoothly at the plant as Silver Standard trains its workforce and accustoms itself to winter conditions at the mine site. With freezing temperatures at the mine, for example, that means calibrating heating to keep fluids in the plant’s machinery running.

For those efforts, playing with plant efficiencies and training what he boasts is a workforce that contains but a few expats, Quartermain heaps praise on Silver Standard’s senior vice-president of operations, George Paspalas, who came to the company in 2007 from Placer Dome, where he had been senior vice-president of technical development.

He says Paspalas has been focused on giving a mostly local workforce the skill set needed to operate the mine. For Paspalas and Silver Standard’s efforts, and to acknowledge the importance of the mine to the local and national economy, in April, Argentina’s president Cristina Fernandez de Kirchner attended the mine’s inauguration ceremony in San Salvador de Jujuy.

So, with production almost on schedule, will Silver Standard achieve the forecasted 6 million oz. silver in 2009 and 10 million oz. silver a year thereafter for the next 14 years? Though Quartermain does not back down from this year’s target, he does use pliable language, saying it is in the “six-million- ounce range” and that Silver Standard “will continue to revisit” the figure.

That could suggest production might come in shy of 6 million oz. silver. However, if the margins by which Silver Standard has so far been off are a guide, the difference could very well be negligible.

Beyond haggling over figures, to Silver Standard the mine represents a major first as it builds its production portfolio. Or as Quartermain puts it: “We look forward to the foundation the mine is to provide for us.”

Silver Standard’s other assets span the globe and range significantly in size. In B. C., for example, it owns the giant Snowfield project, where it has outlined an inferred resource of 661.8 million tonnes grading 0.7 gram gold per tonne and 1.8 grams silver for a whopping 14.3 million contained ounces gold. Alternatively, about 275 km south of Pirquitas, also in the province of Jujuy, Argentina, it has a 100% stake in the much humbler Diablillos project. The latest resource estimate there delineates 21.6 million indicated tonnes grading 0.922 gram gold and 111 grams silver.

With these, along with a dozen or so other properties at varying stages of development, there is reason to believe Silver Standard will grow its production in the coming years. Certainly, investors and analysts will be watching its success in generating profits at Pirquitas as a measure of its ability to bring other developments online.

In a 2007 feasibility study based on US$9.35-per-oz. silver, US$3.65per-oz. tin and US$1-per-lb. zinc, the project returned a strong net present value of US$334 million. And now with prestripping of the main orebody at Pirquitas complete, and Silver Standard already stockpiling ore destined for the plant, resolution of the mine’s profitability is not far off.

Currently, proven reserves at Pirquitas stand at 11 million tonnes grading 194.5 grams silver, 0.7% zinc and 0.26% tin. Probable reserves are 20 million tonnes grading 202.4 grams silver, 0.88% zinc and 0.2% tin.