Production Decision for PitarrillaMon, 10/21/2013 - 14:42
Q: What have been the critical success factors in the company’s growth strategy over the past decades?
A: Silver Standard was founded in 1946, when it operated the Silver Standard Mine in northern British Columbia. For many decades after that, the company’s management focused on prospective project acquisitions, with the goal of accumulating silver ounces in the ground and directly exposing its investors to silver. This strategy was effective until the mid-2000s when silver ETFs were created and the company moved into the development and operation stages. By 2006 the company had accumulated a large portfolio of silver projects along some of the most important silver belts in North and South America. As investors migrated to silver ETFs, Silver Standard had to change its strategy by becoming a silver producer, and began the construction of the Pirquitas Mine in Jujuy, Argentina. Pirquitas achieved commercial production in December 2009, with expected average production of between eight and 10 million ounces of silver per year. This strategy has allowed Silver Standard to control an extensive portfolio of projects ranging from grassroots to production. The company is now equipped with a diversified portfolio, a strong balance sheet and an experienced management team, and is well positioned to deliver growth and long term shareholder value.
Q: What has made Mexico a good location for exploring and developing silver mining projects for Silver Standard?
A: Mexico is a great country for the mining industry. It enjoys good exploration prospects, and it has put in place specific policies and procedures to allow mining companies to effectively move from exploration to production. Mexico has vast mining experience that dates back centuries. The current market conditions have affected all projects regardless of their jurisdictions, and Mexico still remains one of the preferred countries for mining, due to its long mining history, its legislation and its commitment to the mining industry.
Q: The company plans to roll out cost reduction plans in 2013. What changes will Silver Standard be making on its Mexican properties as a result of this strategy?
A: This is the dichotomy of business: some parts have to be managed for cost while others have to grow. Our Pitarrilla Project in Mexico, as well as our other exploration projects, remain part of our long term growth strategy. The cost reduction program is mainly focused on our operating mine and is not expected to have a significant effect on Pitarrilla. While we currently do not have any projects at the production stage in Mexico, risk management and safety remain a priority for us. We will continue to apply our safety standards and philosophy not only at our producing mine, Pirquitas, but at all of our properties globally.
Q: What characterizes Silver Standard’s M&A strategy?
A: Silver Standard’s M&A strategy is opportunistic in nature. We continually assess the market and look for opportunities to upgrade our portfolio. For us, a project or mine with a long life and a low cost profile would be considered a great M&A opportunity, and we have the balance sheet to make this happen.
Q: Silver Standard’s Pitarrilla property has the potential to become one of the largest silver mines in the country. What are the company’s priorities for this property?
A: As we position Pitarrilla for a production decision our focus remains on four key areas, which include acquiring the remaining surface rights; obtaining environmental and operating permits; continuing with engineering and infrastructure work; and implementing a financing plan. Currently, our main focus in Mexico is to position Pitarrilla for a construction decision at the end of the year. This will allow us to build and operate one of the largest open pit silver mines in the country and in the world, solidifying and diversifying our production profile. Concurrently, we have an ongoing exploration program through which we evaluate all of the projects in our portfolio.
Mexico is a great mining jurisdiction in which for Silver Standard to build and operate a mine. We have a strong team of mine builders and operators with over 500 years of combined experience. As a company, we have also gained valuable experience by building and operating our Pirquitas mine, which has not been an easy task given its high elevation and its location in a country with a non-mining culture. From that experience, we have taken away many lessons that we will apply at Pitarrilla and throughout the rest of our portfolio.