EXCLUSIVE INTERVIEW
Robert A. Quartermain on Where Silver Is Headed and How Silver Standard Resources Intends to Benefit
By Anthony Wile - July 23, 2009

Introduction: Robert A. Quartermain, M.Sc., P.Geo. is President and Chief Executive Officer of Silver Standard Resources Inc. Mr. Quartermain has been the President and a director of Silver Standard since 1985. He graduated from the University of New Brunswick with a Bachelor of Science degree in geology, and from Queen's University with a Master of Science degree in mineral exploration. Mr. Quartermain joined Teck Corp. as a geologist in 1981, and was in charge of drilling the David Bell Gold Mine at Hemlo. Mr. Quartermain has been involved as a director and/or officer of a number of public resource companies and is a member of the Silver Institute.

Daily Bell: Thanks for sitting down with us.

Robert Quartermain: My pleasure!

Daily Bell: Did you always have an interest in silver – or was it the study of geology that motivated you?

Robert Quartermain: Eastern Canada, where I grew up, has a long history of resource development – timber, fishing and mining – and I spent a lot of time outdoors in New Brunswick, so geology was a natural to me. That, together with the fact that the University of New Brunswick had (and has) a great geology department with some inspiring teachers. My interest in silver came later.

Daily Bell: How did you become involved in the mining industry? Was it with the Geological Survey of Canada?

Robert Quartermain: In my third year of my Bachelor's degree in geology I worked for the GSC in the Northwest Territories. While it has evolved over time, the role of the GSC was to provide sound regional data and maps about parts of Canada with economic potential for mineral resources. My next job as a student was working in exploration for a mining company and I have every year since.

Daily Bell: Tell us a little about the early years. Was it hard work, enjoyable or both?

Robert Quartermain: Both. I got experience in some remote areas of Canada that many Canadians might never have the opportunity to see, exploring for minerals as diverse as gold, uranium, lead and zinc and working long days. It was enjoyable because that's where I got my early experience managing logistically complex projects in hard-to-get-to places utilizing helicopters and drills with responsibility for many people.

Daily Bell: You hunted for uranium early in your career?

Robert Quartermain: Yes, in the Northwest Territories and Quebec. Canada has been an important producer of uranium for at least 60 years. But interest in nuclear power got a boost in the early 1970s following the OPEC oil embargo and countries like Canada and the United States were looking at nuclear energy to augment their oil imports. The time I spent in uranium exploration around Dubawnt Lake and later Natashquan in Quebec was during the heydays of uranium exploration in the Canadian Shield, when many of the near-surface deposits were discovered.

Daily Bell: Tell us about your experience with Essex Minerals.

Robert Quartermain: I worked for Essex for three seasons in the late 1970s. Essex was the Canadian exploration arm of US Steel which was exploring for uranium, gold and base metals in the Canadian Shield and the Yukon. I spent my time in the field running programs or in the office organizing the programs for successive seasons. In addition to the Northwest Territories exploring for uranium, I spent time on projects in Northern New Brunswick looking for base metals, in the Timmins camp exploring for gold and I spent 6 months on the Howards Pass lead-zinc prospect in the Yukon Territory constructing geological data drill sections.

Daily Bell: Before we get to Silver Standard, can you update our readers what happened after Essex? You went back to school? And what then? Bring us right up to Silver Standard. How did you come to run it?

Robert Quartermain: After working in the industry for three years I decided to return to school and obtain a graduate degree in mineral exploration from Queen's University and I completed my studies in 1981. Teck, then a growing and aggressive producer with an affinity for exploration, hired me. I first worked underground at the Lamaque Gold Mine in Quebec where I was an assistant mine geologist to get mining experience. The following year, Teck moved me to the emerging Hemlo gold camp in Ontario where I was responsible for exploration drilling of the David Bell Mine which is still producing gold today.

Following Teck's successes at Hemlo, Teck asked if I wanted to take a job in North Bay, Ontario, or to move to Vancouver to head Silver Standard, in which Teck had a 32% equity stake.

Of course, Vancouver, and the opportunity to build on Silver Standard's significant assets had a lot of appeal for a guy who knew something about rocks. I had a steep learning curve though: I didn't own a suit, and knew little about mining law, financial statements, exploration finance or public companies.

Daily Bell: You started with two employees, a debt of $225,000 and a market capitalization of around $1.5 million. Where are you today?

Robert Quartermain: Well, we have close to 600 employees, US$107.7 million in cash at March 31, 2009, a market cap of US$1.2 billion, and sole ownership of the Pirquitas Mine, now ramping up, and which at full production will be among the largest primary silver mines in the world.

Daily Bell: Explain the kind of drilling you've done to advance Silver Standard. Were there technological wrinkles that allowed you to be successful?

Robert Quartermain: A lot of geological skills, science and some luck precede drilling, which is the most expensive step in early-stage property exploration. To commit to a drill program that could cost shareholders a lot of money, you should have considerable evidence for the potential of success.

In mining, size matters: large resources are better able than small resources to sustain a company through economic cycles. So we've always been interested in projects that have scale, definable environmental impacts (so that shareholders aren't unduly damaged with reclamation issues in the future) and sufficient economic potential to warrant the substantial risks that shareholders take on in early stage exploration.

Since the 1980s, I'd say there've been a series of refinements in each of the types of investigations for property assessment. With geochemistry, the increased sensitivity of tests and the broader range of pathfinder elements that can be used to detect the signatures of hidden deposits have been very helpful in defining some of our targets.

Aerial photography for mapping and topography has given way to satellite imagery which can provide different levels of information such as structure and alteration patterns in new and old areas of exploration or mining.

Computer miniaturization is providing us with new field tools with real time capabilities. For example, survey instruments, which might be airborne with helicopters or fixed wing, can be downloaded after a day of field work and generate geophysical pattern maps that could correlate with potential ore bodies at depths of up to several hundred meters. There are now hand-held sensors that can give you approximate geochem data for rock/core samples. This means you can get readings in the field. You don't have to wait weeks for an assay laboratory to send back results that might encourage different tactics in a drilling campaign.

And a number of computer programs that we use are capable of generating three-dimensional models of our deposits using drill data. These models are useful in further exploration and in mine development planning.

Daily Bell: Is the mining industry ready for another technological leap forward?

Robert Quartermain: I think what we can expect are continued refinements to existing tools that I've already mentioned, in conjunction with enhanced computer software and perhaps the application of deep drilling techniques used in the energy sector for deep-seated targets – which I think will be the next frontier since most of the easily exploitable deposits have likely been discovered.

I don't foresee, for example, the revolution for gold deposits that occurred in the 1980s when heap leaching of copper ores was perfected for low-grade oxide gold ores. But advances in unlocking refractory ore would certainly enable a number of known mineral occurrences to be mined.

Daily Bell: Here's something we've heard coming down the pike. If there were a form of green heap leaching – a kind of mining that was even more efficient but didn't hurt the environment, do you think it would be of great benefit to the industry?

Robert Quartermain: Mineral deposits are naturally occurring concentrations of a variety of elements, some of which can produce compounds that negatively impact an ecosystem when exposed to air and water. In fact, these telltale compounds can be the clues to new mineral discoveries.

If something like "green heap leaching" were possible, we are still left with the greater issues of how best to mitigate the release of potentially harmful chemicals from waste rock and tailings, and do it in a manner that is cost effective and can stand the test of time.

Daily Bell: Are you generally optimistic about the mining industry? Do you think it is in a good place – especially junior mining?

Robert Quartermain: The global population exceeded 6 billion people at the end of the 20th century and there are estimates of between 8 – 12 billion people by the end of the 21st century. We know that people in China and India entering the middle class today want the same kinds of things we take for granted in the West. That means that demand for consumer products and therefore metals will continue to expand, while the supply of easily exploitable mines is diminishing. So, yes, I'm certain the future is bright for mining. This will be positive for established miners and the juniors which are often the companies first in an area to find a mine.

Daily Bell: The regulations coming out of Vancouver, are they hurting the mining industry. Is it becoming over-regulated? Or is it right-regulated?

Robert Quartermain: I think the reforms that have taken place globally in the last 15 years have created a more level playing field for all investors since much of the reporting, technical and financial, is more standardized. And this facilitates easier corporate comparisons.

Of course, this costs companies and their shareholders more financial resources but we don't see as many flagrant behaviors as we used to – and I think that's better for everyone associated with public markets.

Daily Bell: You are knowledgeable about gold and silver as money. Why are so many of your peers less so?

Robert Quartermain: I can't speak for my peers but I've had the opportunity to travel to many countries with rich resources, hard-working people and dynamic cultures – and very different economic fortunes. I'm curious, and I ask questions and fortunately I have met many knowledgeable people who understand fiat currencies and what these can do for countries' fortunes and the social contract with their citizens. Gold and silver are considered money because as Aristotle explained – they are convenient, consistent, durable, divisible and have intrinsic value.

Daily Bell: Why doesn't the mining industry emphasize the value of silver and gold as a non-inflatable, non-degenerating resource?

Robert Quartermain: I believe that's the job of the World Gold Council, which is largely supported by the gold mining industry. For our part, most Silver Standard shareholders know something about precious metals before they purchase their initial shares. We attempt to emphasize your point as often as we can.

Daily Bell: Tell us more about the success story that is Silver Standard. Update us on your position. Generally, update us on the Silver Standard story. And tell us the role that Rick Rule played in the land bank model.

Robert Quartermain: Well, we have the largest silver resource base of any of the publicly traded primary silver companies and we are currently in the process, with our Pirquitas Mine, of moving reserves into revenues. Pirquitas will be among the largest primary silver mines in the world with an average annual output of 10 million ounces a year for almost 15 years.

We also have a very active pipeline of projects – San Luis in Peru, Pitarrilla in Mexico and Diablillos in Argentina – for which we're moving resources into reserves.

While we maintain a silver focus, an increasing proportion of the value of Silver Standard's projects is in gold, primarily the result of our successes at our wholly-owned Snowfield gold project in British Columbia. That's a lot of activity for any company to take on, and I expect we'll generate a news flow for the rest of this year and next year.

You asked about Rick Rule, who together with Jim Blanchard in New Orleans and several other investors, offered to finance silver acquisitions and exploration by Silver Standard 15 years ago – very close to silver's cyclical bottom. The combination of our exploration successes and the property resources that we purchased at rock bottom prices enabled us to build a silver "land bank". Our plan was (and is) to acquire and develop these resources provided they offer investors an adequate reward for the capital they've risked.

Daily Bell: Give us an update on the Silver Standard projects. Where do you stand as a producer – which is a goal.

Robert Quartermain: We are presently ramping up production at Pirquitas. While we are processing jig tails from historic operations, we are stockpiling ore from the open pit as well as concentrate for shipment. When Pirquitas is at full production, it will produce an average 10 million ounces of silver annually over a projected 14-year mine life, making it one of the largest primary silver mines on the globe.

We expect to receive shortly a feasibility study for the San Luis gold-silver project in Peru. For Pitarrilla in Mexico, we just received a pre-feasibility study on the proposed underground mining of some of the resources at Breccia Ridge, as the first stage of several in the development of Pitarrilla, one of the largest silver discoveries in the last decade. We discovered Pitarrilla and we own 100% of the project.

At Diablillos in Argentina, we completed an in-house scoping study that may lead to a new pre-feasibility study. And at Snowfield in British Columbia, we have six drills on site, for both infill and exploration drilling, and hope to have a new resource by year-end.

Daily Bell: Are you with Silver Standard for the duration? What is your ultimate goal for Silver Standard?

Robert Quartermain: At 54, I think I still have a lot of shelf life in the industry. As for the ultimate goal for Silver Standard, I'd say we're already the silver standard for exploration; what's left to do is to become a premier silver mining company with an enduring legacy of quality projects.

Daily Bell: Let's talk a bit more about economic issues. Where do you see silver headed?

Robert Quartermain: Silver has developed a strong investment following because of the simplicity of holding silver through the silver ETFs and this strength has helped support prices during a period of weaker industrial demand. I believe silver has a bright future that will come with the resumption of global economic growth.

That's when silver's unique properties for which there are no substitutes will start to shine. For example, silver is the best electrical conductor and doesn't spark when a current is applied, making it an ideal material for electronics and, in particular, solders. Silver is also anti-bacterial and is finding a myriad of uses in improving hygiene, from the home to hospitals.

Daily Bell: What is your opinion of the current economic crisis. Do we see a V-shaped recovery?

Robert Quartermain: It seems unlikely. What we've witnessed so far is a tremendous contraction in credit due to excesses in housing markets in the United States, the U.K. and some European countries. It's difficult to see how the American consumer, hobbled by homes worth considerably less than they were two years ago, will lead the U.S. economy out of recession, and by extension, the rest of the world. It appears the U.S. is in for a period of debt consolidation and a build-up in savings.

So it may be that China, India and Brazil become the near-term engines for global growth and that may take time to develop to historical levels.

Daily Bell: Could we perhaps see a reversion to a gold and silver market standard?

Robert Quartermain: There are many who believe that citizens would benefit from a monetary system disciplined by some form of link such as to precious metals rather than printing presses. The next steps should become clearer in the run-up to the G-20 meetings in Washington in October.

Daily Bell: Does gold remain undervalued?

Robert Quartermain: Relative to the explosive growth in money supply since the Bretton Woods Agreement, probably. But we need to remind ourselves that central banks are the dominant holders of global gold reserves. They can control the ebb and flow of gold to other central banks and to investors around the world. There are arguments that the current market price is fully valued if the current spot price is the maximum people are prepared to pay.

Daily Bell: How about silver?

Robert Quartermain: From the point of view of a mining company, silver prices are good. From the perspective of many of our shareholders, not good enough.

Daily Bell: What countries are most hospitable to mining today?

Robert Quartermain: I think that would depend on your risk tolerance. We have a diversified portfolio and our projects, after years of consideration and experience, are located among the signatories to the North American Free Trade Agreement – Canada, the United States and Mexico – as well as Argentina, Chile, Peru and Australia. There are many good research documents that investors can access to determine favourable mining jurisdictions based on mining law, access and a positive political disposition to mining.

Daily Bell: On behalf of all of our readers we thank you for sharing your views on the silver market with us and, in particular, why Silver Standard Resources is well positioned for future growth.

Robert Quartermain: Thank you for giving me the opportunity.

After Thoughts

Robert Quartermain is legendary in the field of silver mining and has built a topnotch company in an era when metals prices have fluctuated severely. Here's some more on Silver Standard, from the website:

Silver Standard has the largest published in-ground silver resource of any publicly-traded silver company, with a pipeline of projects in Argentina, Peru, Mexico, Canada, Chile, the United States and Australia. We are making the transition to production with aggressive development on our core properties and the construction of our Pirquitas mine in northern Argentina, where commissioning is scheduled to commence in the fourth quarter of 2008.

This is an admirable accomplishment in that it is difficult to build a world-class company at any time, let alone one in the metals industry. Of course, as the Daily Bell has pointed out numerous times, silver is likely an even better investment than gold based on the price movement of the two metals relative to the dollar. Gold and silver have both moved up sharply in the 2000s but the silver-to-gold ratio remains out of whack from a historical perspective.

It is almost inevitable that silver will move up further – and perhaps faster than gold. Silver has always been the people's metal, more easily afforded than gold and more liquid as well when it comes to introducing the metal into the economy. I do not personally hold any shares of Silver Standard, but I am certainly an admirer of what Bob has built. It is companies like Silver Standard that will provide the precious metal in increasingly large quantities when the time comes in this business cycle for silver to become even more in demand. More from Silver Standard's project development:

Pirquitas will be among the largest open pit primary silver mines in the world, with average annual silver production of 10.9 million ounces, and with significant contributions from tin and zinc. Other key projects we are advancing include the high-grade, gold-silver San Luis joint venture project in the Ancash Department of Peru, and our Pitarrilla silver project in Durango State, Mexico.

Bob Quartermain has put Silver Standard Resources in a good position to benefit from what will likely be the next leg up for silver. More than that, Bob has pursued his professional agenda with a good deal of financial literacy. Unlike many mining execs, Bob obviously understands the monetary arguments behind silver and why it is a money metal, not merely a commodity. The silver mining industry needs more executives like Bob – but we are lucky to have him creating value in the mining industry for this ancient and most useful metal.

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