IKN

full of sound and fury, Signifying nothing

Mining PRs and the Ottotrans™, part ten

Well here we are again. Part ten could’ve been any number of ECU Silver, MAG Silver or Nadagold press releases, but after a while it gets to be no type of challenge. So today’s Ottotrans™ picks on a new victim, South American Silver (SAC.to), a strange thing with a strange silver/indium project deep in the heart of Evolandia. The occasion is today’s press release.

Here’s what it says:

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South American Silver Corp. announces that it has initiated discussions on the Malku Khota silver-indium project with various interested parties in China, Japan and South Korea. The purpose of these discussions has been to explore the possibility of securing a strategic alliance in the form of a marketing, off take or investment agreement. Several groups have expressed interest in learning more about the Malku Khota project and discussions are ongoing but there can be no assurance that a strategic alliance will result from these efforts.

As demonstrated in the recently released Preliminary Economic Assessment (Scoping) Study (“PEA”)- see SASC PR09-03, March 20, 2009- Malku Khota has the potential of becoming one of the world’s largest future sources of indium. The PEA was prepared by Pincock, Allen & Holt and showed that at a production rate of 20,000 tpd, Malku Khota could produce 27,000 kg. of indium per year for 36 years and if the project were expanded to 40,000 tpd, could represent approximately 10% of the world’s current production. Indium is a key ingredient metal in a number of consumer electronic applications and its current primary application is being used as a coating for the flat panel displays. It is also increasingly being used in the solar energy industry where Copper, Indium, Gallium Selenides (CIGS) are becoming a key semiconductor material in the high efficiency photovoltaic cells. In recent years the price of indium has ranged from US$250 to US$1,000 per kg. The current price is approximately US$350/kg.

Ralph Fitch, President and CEO of the Company, noted that “This is a positive development for the Company and shows that Malku Khota is a becoming a recognized project in the minds of consumers and other producers. The presence of gallium, in addition to indium, has added interest to Malku Khota. Gallium is also a strategic metal with similar applications to indium in the electronics and solar photovoltaic fields that we think will attract the interest of consumers and producers and further the development of a strategic alliance. We will be estimating the gallium resource when we complete the next resource update for Malku Khota.”

With respect to the program in Asia, the Company has retained the consulting services of Mr. Michael Mason, Managing Partner of Mineral Services LLC, based in Garden City, New York. Mr. Mason has been working with the Company in developing these Asian contacts and he has a wide range of professional experience in Asia, particularly in the field of mineral product marketing and sales contract negotiations. In that capacity he has been associated with such projects as the Escondida Copper Project in Chile and the Olympic Dam Project in Australia. He was involved in the development of the strategic marketing plan for placing the complex lead, zinc and bulk concentrates produced at the San Cristobal Project in Bolivia.

Malku Khota is a large, disseminated silver-indium deposit in west central Bolivia with associated gold, copper and lead credits. The present 43-101 resource includes an indicated resource of 144.6 million oz. of silver and 845 thousand kgs. of indium and an inferred resource of 177.8 million oz. of silver and 968 thousand kgs. of indium. The PEA demonstrated a net cash flow of US$1.23 billion, cash costs (net of credits) of US$3.74/oz silver, a pre-tax IRR of 50.7%, capital cost of US$104 million and a 1.4 years payback. SASC management believes that there is significant upside potential to expand the resource and to optimize the project economics. The metallurgical testing continues to indicate that the deposit is leachable with an acid-chloride solution and will not require the conventional, higher capital cost milling method normally associated with other silver deposits.

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And here’s what it means

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South American Silver Corp. announces that the small ad it placed online in the “Ali Baba Dot Com” website has finally attracted a couple of people who got us to phone them. The purpose of these discussions has been to see how long we could keep them on the line until they realized they’d have to wait until we actually got round to mining the stuff before they could buy it. Several groups have expressed interest in getting a free trip to Bolivia with the excuse of learning more about the Malku Khota project and discussions are ongoing but there can be no way on this planet we’re stumping up for their airfares.

As demonstrated in the recently released Preliminary Economic Assessment (Scoping) Study (“PEA”)- see SASC PR09-03, March 20, 2009- Malku Khota has the potential of becoming one of the world’s largest future sources of investment relations bullshit. The PEA was prepared by Pincock, Allen & Holt and showed that in our little dreamworld at a production rate of 20,000 tpd, Malku Khota could produce 27,000 kg. of indium per year for 36 years and if the project were expanded to 40,000 tpd, could represent approximately 10% of the world’s current production. Indium is a key ingredient metal in a number of consumer electronic applications and its current primary application is being used as a coating for the flat panel displays. It is also increasingly being used in the solar energy industry where Copper, Indium, Gallium Selenides (CIGS) are becoming a key semiconductor material in the high efficiency photovoltaic cells. In recent years the price of indium has ranged from US$250 to US$1,000 per kg. The current price is approximately US$350/kg and it’s dropping fast because the world is now being oversupplied with the stuff, mainly from those Teck guys in Canada and mines in China which have restarted processing from their copious zinc mineral. I mean, it’s their fault in the first place that the price shot to $1,000/kg when they stopped refining the stuff back in 2002 and here they are starting to produce again, so now those bastards are dumping on the market we haven’t got a cat in hell’s chance, really.

Ralph Fitch, President and CEO of the Company, noted that “The fact that the telephone actually rang for a change is a positive development for the Company and shows that Malku Khota is a becoming a recognized project in the minds of the three people who answered the Ali Baba Dot Com advert. The presence of gallium, in addition to indium, has added interest to Malku Khota. Gallium is also a strategic metal with similar applications to indium in the electronics and solar photovoltaic fields that we think will attract the interest of consumers and producers and further the development of a strategic alliance. We will be estimating the gallium resource when we complete the next resource update for Malku Khota.”

With respect to the program in Asia, the Company has decided to use up shareholder cash on the consulting services of Mr. Michael Mason, Managing Partner of Mineral Services LLC, based in Garden City, New York. Mr. Mason was the dude who said to us that AliBaba Dot Com might work and he has a wide range of professional experience in Asia, particularly in the field of mineral product marketing and sales contract negotiations. In that capacity he has been associated with such projects as the Escondida Copper Project in Chile and the Olympic Dam Project in Australia. He was involved in the development of the strategic marketing plan for placing the complex lead, zinc and bulk concentrates produced at the San Cristobal Project in Bolivia which afterwards bankrupted Apex Silver and sent their stock from U$20 to zero.

Malku Khota is a large, disseminated silver-indium deposit in the middle of a country that won’t let a gringo miner make a profit, with uneconomic traces of gold, copper and lead. The present 43-101 resource includes an indicated resource of 144.6 million oz. of silver and 845 thousand kgs. of indium and an inferred resource of 177.8 million oz. of silver and 968 thousand kgs. of indium, so if you think the “company has” all that metal you’d better go check what the words “indicated” and “inferred” really mean in 43-101 parlance. The PEA demonstrated a net cash flow of US$1.23 billion, cash costs (net of credits) of US$3.74/oz silver, a pre-tax IRR of 50.7%, capital cost of US$104 million and a 1.4 years payback. But we neglect to mention how we’re using a 0% discount to NPV when any serious, unscammy operation would offer up the 8% or 10% discount numbers and not feed a bunch of bullshit to people. In fact at a 10% discount the NPV drops from $1,233m to $325m and that’s still wildly assuming indium sells at $530/kg instead of today’s $350/kg. The SASC management believes that there is significant upside potential to expand their back pockets at the expense of you suckers and to optimize their personal economics. The IR testing continues to indicate that the shareholder base is leachable with a continual share placement solution and will require the conventional, low cost pumphouse method normally associated with other silver deposits.

All previous Ottotrans™ available here.

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