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11/10/11

South American Silver (SAC.to): It's not what they say, it's what they don't say

South American Silver (SAC.to), the junior developing the Mallku Khota silver project in Bolivia and run by arch-sophist Greg Johnson, reported its 3q11 numbers this evening along with the usual blah-de-blah you get from a company with more style than substance. But scratch the surface and you get to see that not all is going swimmingly Chez SAC.to.
Let's start with this NR dated March 31st 2011 (last day of 1q11) that went heavy on the pomp and circumstance while announcing the company's PEA (scoping study) results and included the line "Budget of $16 million approved for 2011 with Pre-Feasibility activities beginning in Q2."

Next, we skip to the 2q11 report NR here, which noted that, "During the 2nd quarter ended June 30, 2011, expenditures at the Malku Khota project totaled approximately U.S.$1.0 million."

And so we get to tonight's NR for the 3q11 numbers that has this line: "During the 3rd quarter ended September 30, 2011, expenditures at the Malku Khota project totaled approximately U.S. $0.9 million."

And while we're at it, both quarterly NRs noted in more than one spot that community relations work was ongoing, with meetings and suchlike. Also both the 2q11 and 3q11 NRs said, in the exact same words, that the cash had been spent this way: "Work focused on metallurgical testing, environmental baseline data collection, community meetings and various engineering optimization studies."

And what does all this mean? Well, we can fluff around and start throwing different marginal possibilities into the mix, but when it comes right down to it there are only two real possibles looking at us. Either...
1) South American Silver (SAC.to) plans to spend $14.1m on the project in 4q11, or...
2) Locals aren't letting SAC.to drill.
And when you start poking around the interwebnetpipes and start picking up on stories of how protests by locals (yup you guessed it) have stopped activities at Mallku Khota and accuse the company of polluting nearby lakes and poisoning their trout farms therein, a little bit of sense is made.

The tough part for SAC.to is that the prohibited drilling is the number one most important thing the company has to to move the project from its current PEA level to the Pre-Feasibility (PFS) level. According to that 43-101 compliant technical report published in May 2011, the recommendations for moving to the PFS started, first and foremost, with this:
"Carry out infill drilling of the deposits in the early stage of the PFS to ensure that sufficient Inferred Resources are promoted to Measured and Indicated categories to support the decision to proceed to DFS."

Then came a list of other things it needed to do, but the infill drilling was given top priority for a good reason. That's because you can include inferred resources in a PEA but you can't include them in a PFS and as nearly half the mineralized tonnage at Mallku Khota is still in the inferred category, if you can't include that little lot in the mix your numbers are not going to impress. But of course, the teeny tiny little fact that the SAC.to isn't allowed to drill at its project, when drilling is the single most important ingredient in the PFS that's supposedly coming out in 2012, isn't mentioned in the company literature at all. After all, it is a Canadian junior mining company run by an Ex-NadaGold director. Waddya expect?