SSR Mining Inc (SSRM) 2010 Q4 法說會逐字稿

Good day, everyone, and welcome to the fourth-quarter 2010 financial results and project 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 Silver Standard's President and Chief Executive Officer, Mr. John Smith. Mr. Smith, please begin, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to Silver Standard's fourth-quarter 2010 conference call, reviewing our financial performance and updating on our business.

On the call this morning we have Joe Phillips, our Senior Vice President, Operations and Development. Joe joins us from Pan American Silver, where he worked throughout South America building and operating mines. Also on the call we have Tom Yip, our Vice President, Finance, and CFO; John DeCooman, Vice President, Strategy and Business Development; and Ron Burk, our Chief Geologist.

Our financial statements, management discussion and analysis, and business update have been filed on SEDAR and are available on our website. We have a webcast accompanying our comments today, and it can be found at the web location referenced in the news release.

We will be making forward-looking statements on the call today, and I advise you to refer to the disclosure accompanying our news release and also on SEDAR.

So as we close off 2010 and enter 2011, Silver Standard has made significant progress in transition to a Company that not only has a demonstrated track record in exploration, but is strategically positioned to unlock value for its shareholders in other parts of our business.

Silver Standard sold its Snowfield and Brucejack properties for CAD450 million in December to Pretium Resources. This generated CAD233 million of gross cash proceeds and provided a 42.3% interest in Pretium going forward. The sale transaction provides exposure to project prospectivity and an attractive gold environment.

The Silver Standard balance sheet was strengthened by this transaction, and it allows us to deploy capital into our pipeline and in other opportunities. While it's giving us the funding to exploit our development schedule, importantly it also allows us to focus on the main silver belts in Mexico and South America. And on February 28 of this year, we reached an agreement to acquire the remaining interest in the San Luis's project in Peru from our joint venture partner, Esperanza Resources.

Upon completing of the acquisition, we will own 100% of the project, and under terms of the agreement, we will pay CAD17 million cash and transfer to Esperanza the 6.459 million shares in Esperanza that we hold, and we'll also grant them a 1% net smelter return royalty on future revenues. And with this, this consolidates our ownership in a high-value and near-development opportunity for Silver Standard.

Pirquitas, our operating mine, finished the year showing what it can do, and Joe and the team are now driving for consistency and predictable results. Our advance projects in the San Luis and Pitarrilla are now being progressed strongly, and exploration remains a focus and is well funded for 2011 to exploit value within the portfolio and also to seek new project opportunities.

Building our skills and capability particularly to develop and operate remains my focus. This is about having the right people in the right place at the right time, and developing an operating culture will take time, but we are already well underway with this.

We also understand the value of community support and the safety of our people. These are achieved through leadership and direct action, and are clear values for Silver Standard.

So, our leadership group has a defined strategy, and we aim to accomplish it. We have a framework in place, and the opportunities are out there to build value for us. 2010 provided us with a strong platform for the future.

So, returning to the primary purpose of the call, our fourth-quarter 2010 results, I'd like to hand over to Tom Yip, who will speak about these. Tom?

Thanks, John, and good morning, everybody.

We have completed our first full year of production since achieving commercial production in December of 2009. We continue to see sequential improvement quarter over quarter as we produced 2.1 million ounces of silver in the fourth quarter, for a total of 6.3 million ounces for the year.

In the fourth quarter, our cash costs, which includes direct mine costs less byproduct credits, was $9.47 per ounce and averaged $12.16 an ounce for the year. Our mine [expanding] of $6.5 million to $7 million per month has been very consistent all year. The cost per ounce variation is a function of production and byproduct credits.

In terms of revenue, we are totally leveraged to the market price of silver. We saw a steady rise during the first three quarters of the year, and the significant increase in the fourth quarter, which we averaged $26.93 per ounce. For the year, we averaged just short of $21.00 per ounce. The increase in production and silver prices helped the mine achieve positive operations, earnings, and cash flow for the second quarter in a row.

Returning to the total Company P&L, in the fourth quarter we reported net earnings of $376 million, or $4.75 per share, versus a loss of $9.1 million, or $0.13 per share, for the fourth quarter of 2009.

The main components of the fourth quarter's results are shown on this slide. At Pirquitas, we sold at 1.6 million ounces of silver, and after transportation deductions and refining costs, revenues were $45 million, cost of sales were $14 million, and depreciation and amortization was $7 million, resulting in earnings from the mine of $24 million.

The most significant item in the quarter is the sale of the Snowfield and Brucejack properties for an after-tax gain of [$316 million]. General and administrative costs for the quarter was $6.8 million as we added staff to the development and technical teams to advance our project pipeline. Stock-based compensation was $2.5 million as we continue to amortize the Black-Scholes value of previously granted options.

Net interest expense of $3.7 million relates to our convertible debenture.

For the year, we had net earnings of $346 million, or $4.44 per share, compared to a net loss of $13.2 million, or $0.19 per share in 2009.

At Pirquitas, we sold 5.9 million ounces at an average price of $21 per ounce for revenues of $112 million. Cost of sales were $76 million, depreciation and amortization was $26 million, which results in earnings from mine operations of $10 million.

The after-tax gain of $374 million on the sale of our properties is primarily Snowfield and Brucejack, which were sold in the fourth quarter, and Silvertip, which was sold in quarter one.

General and administrative costs for the year were $21 million, stock-based compensation was $8.9 million, and interest on our convertible debentures was $13.9 million, which is now expensed for the total year, while in 2009 it was capitalized to the construction cost for 11 of the 12 months.

In terms of cash flow, we began 2010 with $26 million, and during the year we increased to $105 million. We spent $11 million on our operating activities, which is primarily mine operations, less G&A costs and interest.

During the year, our financing activities resulted in net proceeds of $124 million, the majority of which was an equity financing completed in February of 2010 where we sold 6.7 million shares.

Investing activities include exploration and project spending of $53 million, which included $17.7 million at Pitarrilla, $6.4 million on San Luis, and the remainder of $29 million for exploration properties, including 21 of which occurred at Snowfield and Brucejack before we sold the properties. We have spent this level of spending over the past five years advancing our pipeline of projects.

At Pirquitas, we spent $50 million, of which $38 million was used to pay construction liabilities recorded in 2009. The remainder of $12 million was spent for sustaining capital. But we also spent $19 million on refundable value-added taxes.

Offsetting these expenditures, we sold marketable securities of $11 million and we sold properties, receiving net proceeds of $204 million, the majority of which was the Snowfield and Brucejack.

We ended the year with $232 million in cash, and then subsequent to the year end, in January an overallotment was exercised on the IPO of Pretium Resources to which we received further proceeds of $16.7 million. And as John has mentioned, we now hold approximately 42.3% of the outstanding shares of Pretium.

To summarize, we achieved a major milestone at Pirquitas, being cash positive in the last two quarters of 2010, and with the funds received from the sale of Snowfield and Brucejack, we are well positioned to advance our other development opportunities. Back to you, John.

Thanks, Tom. Now Joe Phillips will walk you through the operational progress at Pirquitas and also describe the work underway at our development projects, particularly San Luis and Pitarrilla. Joe?

Thanks, John, and good morning to everyone. It's a pleasure to be here at Silver Standard and participating in the growth of this exciting Company.

I've now had the opportunity to visit all of our operating and development projects in my first month here, and I'm excited about the potential which I see, not only at Pirquitas but in the development projects which we have advancing towards construction decisions.

For those of you who know me, you realize that I love to build and operate mines, and I look forward to helping Silver Standard achieve its mission of becoming a major silver producer.

I'd like to start my discussion with Pirquitas this morning. As Tom mentioned, Pirquitas had a strong finish to the year, producing 2.1 million ounces in the fourth quarter. The plant is beginning to operate in a steady state, and in addition we had the benefit of some nice high-grade in our Phase 1 pit, enabling us to make our 6.3 million ounce silver production guidance for the year.

Moving into 2011, we're looking at a production forecast for silver of 8.5 million ounces, and year to date we are right on track with that forecast. In 2011, we will be settling into production of ore at close to our reserve grade of 185g of silver, focusing on removing bottlenecks and optimizing recoveries. As we develop further into our Phase 2 pit and begin mixing this ore into the plant feed, the grades will fluctuate from quarter to quarter, but this is built into our forecasts.

In March, we will have a stepped increase in our production capacity on the order of 1,000 tons per day when we install a new HP500 crusher in our tertiary crushing circuit. Until now, the crushing circuit has been basically starving the downstream circuits for feed. With this new crusher, the opposite will be true, and now the plant will begin to operate much closer to its designed capacity in all circuits.

Zinc has been a happy story for us since its discovery, and continuing with the start-up of the zinc circuit. Zinc production for the fourth quarter was 3.15 million pounds, on a pace exceeding our forecast of 10 million pounds for 2011.

We will have some interesting decisions this year as the zinc ore tends to be lower in silver and the silver ore lower in zinc. If current high silver prices continue, we may well be evaluating opportunities to stockpile some of the high zinc ore and move higher-grade silver ore into production.

With respect to tin, our production for the quarter was a modest 44,000 pounds. Anticipating some questions on tin, I'd like to take a moment and describe what I see as the situation with tin at Pirquitas. Firstly, tin has historically been and will continue to be an interesting upside in the production of silver at this mine. I do, however, think it's important to put tin in context with the rest of the operation.

Based upon current metal prices and our production forecast for 2011, silver will generate on the order of $250 million in revenue at Pirquitas. Zinc will generate byproduct credits of an additional $10 million. The tin circuit has the potential to increase the gross revenue by an additional $10 million to $12 million, or less than 4% of our total revenue.

It's clear that the best opportunities for us in the near term will be to increase operating rates and recoveries in the silver circuit, where a 1% improvement in silver recovery equals the operating profit potential of the entire tin circuit.

Historically, before Silver Standard acquired it, tin was produced in underground mines at Pirquitas by gravity methods akin to those typical in Bolivia. Our existing tin circuit at Pirquitas was designed after this model, but in the operation in the lower-grade reserves of our surface mine, we found tin to be much finer and having a preponderance of tin minerals, which do not respond well to gravity separation. Our goal in 2011 will be to take a step back and truly design and implement a tin circuit which is optimum for this type of mineralization, rather than trying to adapt the circuit currently in place.

I hope to be reporting during the coming year about our progress on this project, and I'm optimistic we'll be producing economic tin concentrates in the future. But in the meantime, our tin production will be erratic as we reconfigure and test the new circuits, so no tin guidance will be provided at this time.

In summary, Pirquitas is now maturing as a long-life, profitable, and efficient silver mine with production rates over its lifecycle between 8 million and 10 million ounces per year. We are fortifying our operating team, focusing on eliminating bottlenecks, and moving further towards a steady-state operation during 2011. Year to date, we are right on target for 8.5 million ounces of silver.

And now to discuss our development projects, I'd like to start with San Luis in Peru. In the fourth quarter, we submitted our environmental impact assessment to the Ministry of Mines, which is the permit application in Peru. The EIA is moving through the approval system, and as of this date we are right on track for approval.

We've also been continuing to develop our relationship with the communities over our mining concessions. We have a longstanding relationship with them from the original exploration of the project. Our negotiations at this time are focusing on agreeing on the types of community projects and support we will provide during the construction and operation of the mine. The communities have all expressed support for San Luis, and we see our negotiations moving forward positively towards conclusion.

At Pitarrilla in Mexico, our feasibility study on this large resource is moving forward for conclusion in mid-2011. We are very optimistic about this project and pursuing some creative options which could enable us to bring Pitarrilla to a construction decision and development as a mine more quickly.

We have, in fact, tied up the mills for the plant, since they are the equipment most likely to fall on the critical path for construction and operations. We are expanding our development team and have approved a development drilling program and metallurgical studies in the upper zones of the property to provide detailed metallurgical and design information for this fast-track project.

I came away very interested in our Diablillos project following my visits to Argentina. This project has the potential to take advantage of our infrastructure and presence in the north of the country and become another significant silver producer for Silver Standard. Our PEA is on schedule for completion by mid-2011, and as a part of our development work for this year, we'll be conducting additional drilling in the upper zones of the deposit, as well as advancing some additional metallurgical studies. Back to you, John.

Thank you, Joe. I'd now like to hand over to John DeCooman to talk about the Pretium transaction.

Thank you, John.

The Pretium transaction closed December 21, 2010. This was the result of a lot of thought and hard work by many people, and we considered a number of factors when deciding whether to monetize Snowfield and Brucejack projects. Most pressing was the multibillion-dollar capital cost and extended time to production.

However, the resulting transaction generated in excess of CAD230 million in gross cash proceeds and greatly improved our liquidity, as well as an equity interest in an attractive gold play. Importantly, though, it allows our geologists to re-engage with our extensive exploration portfolio, our project team to redeploy capital into our production growth opportunities, and our shareholders to participate in Pretium's upside. This is an excellent outcome for Silver Standard shareholders, and it leaves the Company in an excellent position as we look toward the future.

Thank you, John. Now I'd like to introduce Ron Burk, our Chief Geologist, to talk about our exploration plans for 2011. Clearly the Snowfield and Brucejack projects were a focus, but other areas also received attention. Ron?

Thank you, John.

I'm pleased to say that in 2011, we will, as in past years, continue to focus on building value through exploration. We have budgeted a range of exploration activities that includes generative programs, advanced target evaluations, and brownfield drilling campaigns. These programs will be conducted at no fewer than 12 projects.

It is also worth mentioning that a minimum of 38,000 meters of drilling is planned at projects in Argentina, Mexico, and Chile to test new targets, expand resources, and add reserves. We are particularly keen about our early-stage Nazas project, located 15 kilometers east of Pitarrilla.

The large Nazas property was put together in 2010 for its exceptional gold and silver prospectivity, and its proximity to Pitarrilla is a bonus for us. Preliminary exploration work at Nazas has already generated several high potential drilling targets, which will be tested this year.

Our exploration team looks forward to keeping you all updated throughout the year. Back to you, John.

Thanks, Ron. So, folks, these are the formal remarks that we wish to make this morning. I'll now respond to any questions that you may have. Thank you.

(Operator Instructions). Chris Lichtenheldt, UBS.

Thanks for all the great detail on the call. I just had a couple of questions. First, probably one for Tom. I'm wondering, it looks like there was a sizable foreign exchange gain in the fourth quarter. Is that just a revaluation of the Canadian balance sheet items? Or can you describe that a bit?

That's primarily the exchange difference from when we closed the Pretium transaction and received the large sum of cash in, into what we had to translate it at at the end of the year.

Okay. I see, great. Thank you. First, or then next, just a question in terms of the costs in Argentina, can you describe a little bit about what you're seeing there in terms of cost inflation? My understanding is Argentina is obviously undergoing some pressure on that front. Can you maybe help quantify that a bit?

Tom?

We are seeing a little inflation in Argentina. I think that we've done a great job in sort of holding the line.

Where we see most of the inflation is in the labor costs. Labor cost is approximately 20% of our operating costs. Going forward, our guidance has included a significant increase in these costs, and we're pretty comfortable in meeting those targets that we've put out.

Okay, thanks. Then, just maybe a couple of questions on Pirquitas again. Can you maybe tell us what the stripping ratios are, or have they been going up through 2010? It looks like maybe. Where are we at with that right now?

Chris, Joe, do you want to answer that one?

Yes, I'd be happy to. In fact, over the year, our stripping ratios have been going down because the predominance of our production has been coming out of the Phase 1 pit. That will come back to a balance, and I'm thinking it's in the range of five to one.

Okay. So as you move into Phase 2, it will be similar to that, again, five to one, or --

It tends to balance out over -- it goes up and down. It's hard to give you an average number. I'm sorry.

That's no problem. I was going to ask a similar question on the grade. As you mentioned, that's going to be bouncing around, but you'll be closer to reserve grade. Will that be -- what might the range we would expect to see between quarters? Like 150 to 250, or not that wide?

Oh, no, it's not going to be that wide. It'll probably be in a tighter range from, say, 170 to 190.

Okay, good, thanks. And then, finally, the tin circuit that you're obviously still working on, do you have an estimate of how much you expect to spend this year on trying to -- or are you just going to continue to do testing before you make any real capital deployment?

That's exactly correct. We have a bit of testing left to do. There's a fair amount of equipment on site, installed, but I'm not -- I can't tell you what configuration or what it will take. But it's not going to be a big number.

Joe, Chris, I think the answer that Joe has given is right. I think -- there is a tin circuit there, but we are going back to look at the fundamentals and see how best we can recover maximum tin out of the process.

And necessarily, once we complete that project, we'll have a better view as to capital. But I don't think it's going to be a big number.

Okay, so is it possible to be a whole new circuit and you'll allocate the existing tin circuit to improving the silver, or you will work with that?

No, they're very, very different types of equipment. So, we -- it's useful equipment. We may end up using it on a different project, but we just have to wait and see.

Ralph Profiti, Credit Suisse.

Thanks for taking my question. It looks like 9,000 meters drilled at Pirquitas in the second half of 2010. Ron, maybe, of the 38,000, if I heard your comments correctly, for 2011, how much drilling is going to be done at Pirquitas? And as you look forward to this updated reserve resource statement coming in the second half, are we looking at perhaps some underground potential or sort of a bigger pushback of the pit mid-life of this mine?

For this year, we have approximately the same amount of drilling planned as we drilled in 2010, in the order of 10,000 meters. Some of that -- a significant proportion of that drilling will be going towards, hopefully, expanding the current configuration of the pit, so looking for additional -- or better defining, I should say, better defining our resources in the San Miguel deposit, which is where the pit is. And then, another proportion of that -- of those funds will be going toward so-called brownfields exploration outside of the pit, but where we have some very interesting targets developing.

I see. Great, thanks very much. And maybe just a housekeeping item. Can I get the zinc price assumption you're using on your cash operating cost guidance for 2011? Was that sort of a forward curve or a consensus?

We just used $1.00 per pound, Ralph.

That's great, guys. Thanks for the color. Appreciate it.

Trevor Turnbull, Scotia Capital.

I had a question with respect to the guidance for 2011. You talked about, I think, the all-in cash operating costs. Correct me if I'm wrong, I thought I read it was $15. Do you have a sense on a more life-of-mine basis, assuming, of course, that reserves and resources aren't going to change everything? But that's a fair bit higher than we would've expected originally to see in 2011. Just wondering how the life-of-mine trend -- how you're thinking about that in terms of costs coming down from this year going forward.

Maybe I can have a go at that, and let Tom follow up. I think, for us, we know that we're not at steady state at Pirquitas.

So, the issue for 2011 is we're on trend and we're going towards 8.5 million ounces. We've got a profile that looks like between 10 million to 8 million ounces over life of mine, so we'll push it higher. And as Tom alluded, the costs at Pirquitas are pretty much fixed, and so, really, the more ounces that we win, the lower our cost per ounce gets.

Clearly, we've got zinc in just now. But we still have the byproduct credit to come in from tin when that comes back. So for us, we are not really in steady state, and I think if we look at our cost structure over life of mine, that will considerably improve.

The tension against that, obviously, is we're sitting in Argentina. There is inflation, but we manage our fixed costs really hard. Tend to not look at our fixed cost per unit at the moment because if we manage our fixed costs well and maximize every ounce that we can and all the byproducts, we end up with the best results. Tom, I don't know if you want to add more to that.

I think that was good. And the only thing I would add, Trevor, is that when you get from our $9.00 guidance to the $15.00 guidance, that $6.00 spread is basically off-site costs, and because we are seeing a higher silver price, parts of those off-site costs are dependent on the higher -- or reflective of the higher silver price.

I understand. Just, you brought up a point, too, about things getting better earlier -- sorry, you were speaking with respect to a 1% bump in the silver recovery at this stage of the game, it equates to essentially what the entire tin production would help you with annually. Where do you ultimately see being able to get silver recoveries up to? Is there a target you're shooting for there?

I'll let Joe talk about that one, Trevor. But, yes.

They haven't put a cap on it for me yet. But certainly we're going to be spending a lot of attention on that. It would be a little bit premature to try to predict an upside potential, but I do think there is an improvement there for us to work.

But there is upside still to work with there.

Yes, sir.

So, that's what Joe has done at the mine, Trevor, is to take the tin circuit off the mine, treat it as a special project, and get the mine really focused on the business of the day, which is maximizing silver production and recovery.

And if we can get that to happen, we've had good indications through fourth quarter on the recoveries. The better we get feed and consistency, the better we make recoveries. So, it's open ended at this point, but we are seeing some real good progress, and as Joe says, every percentage we get is a real win and negates the loss of tin. But then we'll bring the tin back in, which will ultimately make it even better. So, the right things are being progressed in 2011.

Okay, and maybe just a quick housekeeping question or two for Tom. With respect to the cost of sales, is that based on the silver sold in the period or silver produced?

Trevor, it's based on the silver sold in the period.

Okay. And I was just trying to work out -- kind of back calculate the cost of sales. So based on silver sold, does that -- it includes, obviously, the cash production costs. Does that include, say, the TCRCs and export issues and all of that?

That also -- it includes the export taxes that traditionally would've -- you might have seen it down below in the tax line, so we had to move it up during the last quarter.

And TCRCs are in there as well?

They're actually a deduct from the revenue line on our official P&L.

Okay, so that's where they're at. Okay. And then, if I can ask just one more general question, you've done a great job cleaning up things at Silver Standard, rationalizing a lot of the assets and your JVs and things. Should we think about you in terms of even doing potential acquisitions at this stage of the game?

Trevor, we've got a great portfolio that we'll exploit. The issue for me is we're now financed. We've got the money, we've got the projects, and the real value for Silver Standard comes through just expediting and exploiting that.

We will clearly look for the right kind of M&A opportunity, but we recognize by its nature it's opportunistic. So we look for the right things and the right shape, but the good thing is that we don't have our -- we don't have a definite need to do anything. It's more, really, if there is something that fits in terms of [near] production, then we'll have a look at it. But the main game for us is exploiting the large resource base we have in the business.

Craig West, GMP Securities.

Just maybe to follow up on Trevor's questions on the operating cost numbers, it was good to see your on-site costs dip down below $10.00. You've made some good progress there over the last few quarters. But on the off-site costs, the $6.50 that you're paying, can you break that down for us again, how much taxes and how much TCRCs, and then maybe talk a little bit about your treatment and refining charges? Are you doing that on a one-off spot basis or are you still looking to secure some longer-term contracts there? What kind of improvements are possible on that $6.50 off-site cost level?

Thanks, Craig. Tom, can you help out?

Yes, Craig, the split between the $6.00 increment that we see getting you from the cash of the production cost to the cash operating cost, we call it, about half of it is royalties and export taxes.

The other half is our TCRCs, and with respect to the TCRCs, we had purposely gotten into a contract in the early part of last year to take care of the variability that would've come out of the mine because we just weren't sure of the consistency that we were going to get, so by its very nature, it was a little more onerous than we would've liked. So, for after the second quarter, I think we'll be out to market again to see if we can get -- do better on the TCRC contract.

My second question is on the recoveries. You had really nice improvement quarter over quarter there. I'm just curious, is there some relationship between recoveries and grade, a constant tail impact there that you can talk about?

Joe?

Undoubtedly, there was a bit of a boost from the higher grades, but I think it's a combination of the two. We are making some improvements in the operations as well, improving our reagent dosing and control, and paying a lot closer attention to the milling, so it's a combination of the two. And I think the improvements we are going to see this next year will be real improvements.

But there's nothing like consistency, Craig, to be able to optimize and tune the system.

In the fourth quarter, we got into the sulfides and really this year, 2011, for us is about getting consistent production, repeatable, that we can work on. So the whole focus for 2011 is about getting our systems and processes to work, building up on the volumes, and if we do that and shift the bottlenecks, we'll get the maximum ounces out. So that's really the -- get on the average grade material, get the crusher sorted on in the first quarter, then get the second, third, and fourth quarters working well, and keep building and building through, and then, 2011 is going to be our first real year of consistent production.

I agree completely. It would be nice to see those consistencies. I just didn't -- I was trying to get a better feel for whether we're looking for consistent recoveries in the low 70s or the high 70s for 2011. And I guess it's maybe too early to say as you've really just got your first quarter of processing sulfides here.

Yes, that's right, but Joe is focused on getting -- he knows the gearing and the value that we get by getting maximum recovery. The good thing about maximum recovery is it's also good operating practice. If you're chasing that, you're addressing a number of fundamentals in production. So, that all bodes well.

Last question, and then I'll get off the line. I got -- I caught the PEA for Diablillos is sort of mid-2011. Timing for any study from Pitarrilla this year? I missed that.

Pitarrilla, we are going to come out with the underground midyear.

But what you also alluded to is we are having a look at other opportunities to effectively get a soft start in Mexico. So, the issue with the underground is we're going to come out with some bulk mining method, and naturally that's going to be a large capital, long time to production. So, we're going to have a look at other things that we can do in that resource because that's only one zone of about five zones' opportunity at Pitarrilla, and we've got five oxide zones that we're having a look at as well.

So, we are looking at, one, not taking the eye off the ball in the underground, keeping that moving as quickly as possible, but at the same time looking for other opportunities that can help us get a softer start and compressed schedule. And the bang of the [bowl] mills were clearly an indication that we're trying to look at what we can do to compress that schedule.

Thanks, guys. Nice improvements.

[Tim Lee], [Solomon Partners].

My question is actually, I guess, along -- following up the previous question about some of the timing of the other projects here. Especially, actually, San Luis, now that you've -- impressive consolidating ownership, when would you hope to, if you receive the permits and everything comes in place, when would you hope to begin construction and start production there?

Hi, Tim. San Luis is -- we've got our DIA in progress just now, so that's going through the ministry, and we're working as hard as we can to try and make that as -- answering all the questions to get that through the process as quickly as possible.

Concurrently, we are working on the land agreements with the communities that we have. We have two main community groups, but we have others, and really getting -- making sure that we get land access and, as Joe says, we work with them on the projects and they see the value of us is our concurrent activity with that EIA.

That probably takes us to, realistically, to third quarter this year as to when we can hope that we can start to see some movement around there. But the challenge that we've got, Tim, is it's not a process that has a defined end it. It's in our interest, and we've put a lot of people on the ground at San Luis to try and help us with land agreements and with the environmental impact submission.

So we're really focused hard in getting that through, and be assured as soon as that happens, we will -- we're doing some basic engineering. We're really geared towards an early start as quickly as possible.

How long would you expect construction to take on that?

Joe, do you want to have that?

Yes. Typically after a construction decision, that's a process that takes from 1.5 years to two years.

And actually, that's all the questions I have. Thank you.

Chris Lichtenheldt, UBS.

Thanks, again. I had a follow-up on Pirquitas. I wonder if you can describe the zinc recovery that you're assuming in your 2010 guidance and how that compares to where you'd like to see that going forward?

Zinc was a process that really wasn't contemplated originally in the project. So, it's one that we're kind of learning as we go.

We started out at about a 39% recovery as a target, and that's gone up and bounced up around 50% and back down. We're still learning a bit about the circuit, but somewhere in that range, I think, is realistic.

(Operator Instructions). John Tumazos, Very Independent Research.

Many companies have a process, sometimes they visualize it almost like a pyramid where they might identify projects, begin to gather information, have enough information to target drill holes, build up to a resource, pre-fees, fees, production, et cetera. And clearly, the formation of Pretium was a major step in setting priorities. Could you review the total number of exploration projects in the Company? And maybe the number five to 10 that didn't quite merit a mention in your prepared remarks, but are receiving meaningful attention in dollars. We realize that Silver Standard has great breadth and depth of opportunity.

Thanks, John. That's a good question. It's one that we wrestled with from a point of view of the amount of opportunity we have and the [bulk quarter] the team built that gives us a foundation to build Silver Standard is clearly one of the unique advantages that we have.

One of the other things that we wrestle with is one of focus and discipline of focus. So the issue is, with all those opportunities, Ron and the team go through a rigorous process of deciding what is the prospectivity? Which ones to promote and push forward, what looked like getting the best wins? And that does change. That's fairly dynamic, and I think you gave the example of Nazas that came in in 2010. It's now got more prominence because of its prospectivity individually, but also, uniquely, its proximity to -- it's within 15 kilometers of Pitarrilla, but I'll let Ron maybe talk about the overall portfolio and how we focus on what we decide to do year by year. Ron?

Yes, thank you. This year -- overall, Pitarrilla has probably in the order of 50 properties throughout the Americas and a couple in Australia as well.

I would say this year we will have in the order of 12 projects that will be actively explored, and probably half of those, or more than half, will be drilled. The projects that we'll see the greatest amount of drilling will be the Nazas project, the San Agustin project in -- also in Mexico, Pirquitas, and Pitarrilla. That's where the bulk of the drilling will be done, but we'll have smaller drilling programs at probably three or four other of our active projects this year.

And then, the other thing that we'll be working hard on this year will be reviewing our extensive property portfolio and categorizing properties that have not seen a lot of attention over the past few years, categorizing those projects to those that really should be more actively explored by ourselves, and then those that possibly represent candidates for farm-out or joint venture opportunities. I hope that answers your question.

It's a very mighty task. I remember sitting a couple years ago at the Denver gold show with an old friend who was CEO of a company with some Western U.S. heap leach gold properties, and he explained to me very carefully, as oil was over $100, that 0.1 gram gold or any detectable gold was viable for heap leaching. That's $1,000 gold or $100-plus oil. So, it's hard to determine a basis to drop properties where $34 silver almost anything is economic if there is mineralization.

That's very true, John. It's -- we did go through a process of -- and for us, there's a number of vectors about what we would work and what's best developed by us and what's best developed by others.

Clearly from a point of view, grade is a big issue. Size of the resource and the different categories is an issue, but things like the Snowfield and Brucejack, the primary decision there was around just the capital. $3.5 billion was beyond us, so clearly, that said, this is something that's best developed by others.

Even if it's only $3.5 billion, you'd do triple backflips.

Yes, that's right. So, we'll look at the other portfolio, and some will be either too big or too little or in the wrong place for us, and that's more the reason we make the decision on, rather than anything else at this point in time.

But it's a continued process. Continued process. And you say, it's fairly dynamic. Price has got an issue to do with it, but the gestation from taking something that's an expedition through to metal, you're probably in a four-year horizon. So, we have to look at the long run -- our long-run view of price has got an impact on what we decide to do or not. Thanks, John.

Thank you, and I'm showing no further questions or comments at this time. I'd like to turn the call over to Mr. John Smith for any closing remarks.

Thanks, everybody, for attending and being on the call this morning. And hopefully, the call has given you a sense that Silver Standard is well positioned for growth and we've got an extensive portfolio.

We're continuing to ramp up at Pirquitas, and I think we offer compelling value for our investors. So, thank you very much again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect and have a wonderful day.