Precious-metals bull run revitalizes Silver Standard

Scott Simpson,
Published: Monday, December 11, 2006
Source: Vancouver Sun

It took two decades, but Robert Quartermain is finally seeing silver prices that will transform his company from prospect to producer.

The precious metal is posting its best year, unadjusted for inflation, in almost a quarter century and that recovery means new opportunity for companies such as Silver Standard Resources.

The Vancouver-based junior mining venture is celebrating its 60th anniversary today — and moving ahead with only the second full-blown mine project in its history.

By 2009, production will be underway at Silver Standard’s Pirquitas mine in Argentina — a project that will put this small but venerable operator on the map as a major international silver producer.

“We did have a mine in the early days,” Quartermain said in a recent interview. “It was before my tenure here at Silver Standard. From 1947 through to 1958 we actually operated the Silver Standard mine, which was a small high-grade silver mine up near Hazelton, just north of Smithers.”

The company had $700,000 in the bank when the mine closed — small change by today’s standards but “a lot of money” in 1958.

“They used that to start exploration and acquire projects, which kept us going all these years — we’ve had interests in mines, we’ve sold interests in mines, we’ve been able to get revenue, and that’s kept the company going until now.”

Quartermain took over in 1985 — which is pretty much the last time silver showed any signs of vigor as a commodity.

“We’ve had shares that have either gone to other junior companies, or to the majors. All along there have been these streams of cash that have allowed us to continue to do our work.”

Pirquitas was formerly an operating mine and was scooped up by Silver Standard in a series of acquisitions in 2002 and 2004 after the former owners went bankrupt during an Argentinian peso crisis.

A feasibility study last year “showed that for $146 million we could get it back in production and produce almost 10 million ounces of silver a year. We made a decision to proceed on that because of the good, elevated silver price we already have.”

As recently as August 2005, silver was trading in the $6 per ounce range, but has since climbed to $14 an ounce.

The company waited for over a year before announcing it would go ahead with Pequitas, as envisioned in a feasibility study.

“We’re currently sitting on $192 million Canadian. Then we have about another $100 million of marketable securities and physical silver. So we’ve got a very strong balance sheet, enough to meet the capital requirements of the project.”

Quartermain notes that the company has a long list of projects that could follow Pequitas.

“Over the past 20 years silver has been in a bear market and there hasn’t been new exploration, or new projects coming on — which is why we’ve been able to acquire 17 projects, many of which were previous mines.

“We were quite contrarian when we acquired them.”

Meanwhile, global silver stockpiles have been declining, and there’s a marked absence of new mines poised to feed new product into a strong market.

ssimpson@png.canwest.com