SSRI

Silver Standard Resources Inc. (SSRI)

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Silver Standard Resources (SSRI)

Q4 2012 Earnings Call

March 01, 2013 11:00 am ET

Executives

John Smith - Chief Executive Officer, President and Director

Ronald Burk - Vice President of Exploration

Gregory John Martin - Chief Financial Officer and Senior Vice President

Andrew Sharp - Vice President of Technical Services

Analysts

Ralph M. Profiti - Crédit Suisse AG, Research Division

Dan Rollins - RBC Capital Markets, LLC, Research Division

Andrew Kaip - BMO Capital Markets Canada

Jeffrey Wright - Global Hunter Securities, LLC, Research Division

Adam P. Graf - Dahlman Rose & Company, LLC, Research Division

Presentation

Operator

Good day, everyone, and welcome to the Silver Standard's Fourth Quarter 2012 Year-End Finals Results and Product Update Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to John Smith, President and CEO.

John Smith

Thank you, Kevin. Good morning, ladies and gentlemen. Welcome to Silver Standard's Fourth Quarter 2012 Conference Call, during which we'll provide a review of our financial performance and give an update on our business.

Joining me on the call this morning is Greg Martin, our CFO; Ron Burk, Vice President, Exploration. Also present is John DeCooman, Vice President, Business Development and Strategy; and Andrew Sharp, our Vice President, Technical Services. We also welcome into the company Alan Pangbourne, our new Senior Vice President of Projects.

Our financial statements and management's discussion and analysis have been filed on SEDAR and are also available on our website. To accompany our comments today, there is also an online webcast, and you'll find the information on this in our news release relating to the call. We will be making forward-looking statements today, and I refer you to the disclosure accompanying our slides, news release and also on SEDAR.

So now we will review progress in driving value within our business and positioning us strongly for the future. In my time as CEO of Silver Standard, we have focused on unlocking the value from our business. Each year, as a management team, we have systematically planned and delivered with this objective in mind. In 2010 and '11, it was ensuring funding was in place to allow us to develop the business and address the skills and experience we needed to be a truly successful mining company, and that included both technical and commercial capability.

In 2012, we focused on operating Pirquitas to plan quarter-by-quarter, notwithstanding the challenges in Argentina. We also made a significant step forward in driving value from the portfolio with the completion of a feasibility study for Pitarrilla, a large long-life mine that underpins our future.

As we step into 2013, we will keep delivering at Pirquitas and we are well-funded for our development opportunities. The convertible debt that we raised in January not only allows us to repay the existing convertible note due in March, but adds to our actually already strong balance sheet for Pitarrilla construction.

We have the people, the projects, a unique portfolio and an enviable balance sheet, the right elements for a great business. So now let me review our operations development activity, and I'll start with Pirquitas Mine in Argentina.

Our operating team at Pirquitas have delivered strong results, allowing us to exceed the high-end of the 2012 production guidance. We have had exploration success in the Cortaderas Valley, expanding the resource and identified future targets for 2013.

Mining cost for 2012 were $12.61 per ounce of silver produced, in line with our guidance of $11.85 to $12.85 per ounce. Costs are always a challenge in a high inflationary environment, but our management team in Argentina completed the year within guidance range. In 2013, cost management will continue to be a major focus area.

Over the past 2 years, we have successfully worked to make Pirquitas a reliable, steady-state silver mine with consistent operating performance, and I'm pleased to report that we enjoyed our fourth quarter of strong production. With 2.3 million ounces produced this quarter, we achieved a full year production record of 8.6 million ounces. Zinc production for the quarter was 3.2 million pounds, bringing our full year to 11.2 million pounds. Mining operations continued strongly, slightly exceeding forecast material movement for the quarter and for the full year. We have now mined Phase 1 of the San Miguel pit and are advancing new benches in the Phase 2 of the pit shell.

Operations and maintenance crews continue to maintain a high availability and efficient use of our mobile equipment, notwithstanding the challenging importation regime for critical parts and supplies into Argentina.

In 2013, as we advance into Phase 2 of the San Miguel pit, we mined through oxide and transition ore to reach the sulphides at the bottom of the pits. Managing this change in mining and processing is critical to our success in 2013, and hence, the reason our 2013 silver production guidance is unchanged from 2012. The qualities of sulphide ore are expected to increase through the year with the main challenge being quarter 1 and quarter 2. And on the marketing of concentrates, we are now delivering into our new sales agreements, allowing us now to fully optimize margin and value.

At our Pitarrilla Project in Mexico, we completed the feasibility study and delivered the 43-101 report to the market in December. We are very excited about this very significant project, which represents an opportunity for the company to build one of the largest silver mines in Mexico and one of the world's best business climates for mining. This is also a long-life mine of 32 years, with reserve totaling 479 million ounces of silver. It will produce 15 million ounces per year for the first 18 years of its life. With net cash cost of less than $11 per ounce, in real terms, this is, by any assessment, a significant project in the silver space.

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