2013 News

South American Silver Files International Arbitration against Bolivian Government

30 April, 2013 – Vancouver, British Columbia – South American Silver Corp. (OTCQX: SOHAF, TSX: SAC) announced today that its wholly-owned subsidiary, South American Silver Limited ("South American Silver”), has commenced international arbitration proceedings against the government of Bolivia ("Bolivia” or the "Government”) under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) pursuant to the Agreement between the Government of the United Kingdom and the Government of Bolivia for the Promotion and Protection of Investments (the "Treaty”).

The arbitration has been commenced as a result of acts and omissions of the Governmentincluding the issuance of Supreme Decree No.1308 on August 1, 2012 (the "Decree”). The Decree revoked mining concessions covering the Malku Khota Mining Project (the "Project”) held by Compañia Minera Malku Khota S.A. (CMMK), a wholly-owned subsidiary of South American Silver Limited. These measures resulted in the complete expropriation of the Project without compensation. The arbitration claim is for Bolivia's breach of the Treaty and international law. Bolivia has breached the Treaty's requirement to provide full protection and security to foreign investors and their investments, as well as the Treaty's protections against, among other things, expropriation without just and effective compensation, unfair and inequitable treatment, and less favorable treatment than afforded to Bolivian nationals or nationals of third states.

Since the Decree, the company has made numerous attempts to open a dialogue with the Government with the aim of reaching an amicable resolution of the dispute, including receiving fair-value compensation. In late February 2013, the company was invited to attend a meeting set for 17th April, 2013 in La Paz, Bolivia. Attorneys representing South American Silver attended the April meeting but no resolution was reached and no compensation offered. The Decree stated clearly that the Bolivian state mining company, Corporación Minera de Bolivia (COMIBOL), would hire an independent firm to carry out a valuation of the investments made by CMMK within a period not to exceed one hundred and twenty (120) business days. However,no such valuation has been carried out, nor has an independent firm been hired to undertake the valuation.

Exploration commenced at Malku Khota in 2003 and work on the Project continued through the expropriation in August 2012. After completing a total of 42,700 meters of drilling in 121 diamond core holes, and undertaking metallurgical testwork, process development and engineering design, a Preliminary Economic Assessment (PEA) Update was filed on SEDAR on 13th May, 2011 in a NI 43-101 technical report (News Release NR 11-06 dated 16th May, 2011). The May 2011 PEA Update included economic modeling that indicated pre-tax net present value (NPV) at a 5% discount rate of:

• $704 million at metal prices of $18.00/oz silver and $500/kg indium
• $1.482 billion at $25.00/oz silver and $570/kg indium
• $2.571 billion at the $35.00/oz silver and $650/kg indium¹.

After the 2011 PEA Update, the pre-feasibility study (PFS) phase was started in June 2011. The ongoing work program, which was designed to expand mineral resources and enhance project economics, included the development of social and community programs to benefit indigenous communities, baseline studies for the environmental review and assessment program, exploration, metallurgical testwork, flowsheet development, engineering design and preparations to construct a modern 150 person exploration camp near the exploration site. The planned work programs including the PFS were not completed due to the expropriation.

Phillip Brodie-Hall, President and CEO of South American Silver said, "It is regrettable that we are forced to resort to international arbitration to resolve this matter. Bolivia chose to expropriate our mining concessions; it must now meet its legal obligations and compensate us for this significant loss. International arbitration gives us the means to pursue our case and we are very confident that it will deliver fair value compensation. We have a first-class team working on the case and, while we are open to dialogue with the Government, we are prepared to go the full distance in arbitration if that's what it will take to get fair value compensation. Our loyal shareholders deserve nothing less”

Now that the arbitration has been commenced, the Bolivian Government has thirty days torespond and an arbitration tribunal will be empanelled in the coming months. Thereafter, the tribunal will set a provisional timetable for the arbitration itself including a schedule for submission of a Statement of Claim, Statement of Defense and oral hearings. Unless there is a negotiated settlement of the dispute, it is expected that the arbitration could take up to 2-3 years from commencement of proceedings until rendering of a final award.

Bolivia has been involved in over fifteen "nationalizations”, the majority of which have taken place after President Morales came to office. A number of the cases have reached negotiated settlements and at least five others are pending. Bolivia's reserves of cash and gold were estimated at $13.62 billion as of December 31, 2012, up from US$3 billion when Morales came to office in 2006. Bolivia's credit rating was upgraded by all three major rating agencies in 2012, the most recent being Fitch Ratings upgrade from B+ to BB- in October 2012. Bolivia has demonstrated that it has ready access to international funding, having had a $500 million 10-year bond offering significantly oversubscribed in August 2012 at an interest rate of only 4.875%. The IMF recently forecast that Bolivia will be one of the fastest growing economies in South America with an expected GDP growth rate in 2013 of 4.8%.

Mr. Brodie-Hall went on to say "It is not a question of whether Bolivia is capable of meeting its obligation to compensate the company for the expropriation; it clearly has the financial capacity.”

About South American Silver Corp.

South American Silver Corp. (the "Company”) is a growth focused mineral exploration company creating value through the exploration and development of the large scale Escalones copper-gold project in Chile, the realization of value from the Malku Khota project in Bolivia and the pursuit of new opportunities. South American Silver Limited is a company incorporated in the Bermuda Islands, an overseas territory of the United Kingdom, which through its wholly owned Bahaman subsidiaries: Malku Khota Ltd, G.M. Campana Ltd. and Productora Limited., owns one hundred per cent of the outstanding shares of Compañía Minera Malku Khota S.A., a Bolivian company, holder of the Malku-Khota mining concessions until their nationalization by the Bolivian Government. The Company's approach to business combines the team's track record of discovery and advancement of large projects, key operational and process expertise, and a focus on community relations and sustainable development. Management has extensive experience in the global exploration and mining industry. The Company's shares are listed on the Toronto Stock Exchange under the symbol "SAC” and on the OTCQX as "SOHAF”. Information related to South American Silver Corp. is available at soamsilver.com and on SEDAR at www.sedar.com

Further information regarding South American Silver's arbitration claim can be found on the company's website at soamsilver.com

Robert Gill
Investor Relations


soamsilver.com

Forward-looking Statements

Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as "will”, ”pursue”, "expect”, "creating”, "realization” and similar expressions. This release contains forward-looking statements. These forward-looking statements are based on current expectations and various estimates, factors and assumptions and involve known and unknown risks, uncertainties and other factors.

Readers are cautioned not to place undue reliance on these statements as the Company's actual results, performance or achievements may differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements if known or unknown risks, uncertainties or other factors affect the Company's business, or if the Company's estimates or assumptions prove inaccurate. Therefore, the Company cannot provide any assurance that forward-looking statements will materialize. Information from the 2011 PEA Update may also be considered forward-looking information. The 2011 PEA Update was prepared to broadly quantify the Malku Khota Project's capital and operating cost parameters and to provide guidance on the type and scale of future Project engineering and development work that would be needed to ultimately define the Project's likelihood of a positive feasibility determination and optimal production rate. It was not prepared to be used as a valuation of the Project nor should it be considered to be a final feasibility study on which a commercial production decision could be made. The criteria, methods and estimates were preliminary and involved a high level of subjective judgment. Factors that could cause results or events to differ materially from current expectations expressed or implied by the forward-looking statements, include, but are not limited to risks of the mineral exploration industry which may affect the advancement of the Escalones project; availability of sufficient financing to fund further required work in a timely manner and on acceptable terms; the political and economic climate in Bolivia including the attitudes and actions of the Bolivian government related to foreign investment in Bolivia and the response of the Bolivian government to the filing of the Notice of Arbitration; the advancement of the international arbitration process in a customary manner; the outcome of the international arbitration process; and other risks more fully described in the Company's Annual Information Form filed and publicly available on SEDAR at www.sedar.com. The assumptions made in developing the forward-looking statements include: execution of the Company's existing plans and further exploration and development programs for Escalones, which may change due to changes in the views of the Company or if new information arises which makes it prudent to change such plans or programs, the ability of the Company to realize value from its investments in Bolivia pursuant to the international arbitration process; the advancement of the international arbitration process in the customary manner; and the availability of new attractive exploration targets at a cost acceptable to the Company. Subject to applicable laws, the Company assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. Unless otherwise indicated, forward-looking statements in this release describe the Company's expectations as of April 30, 2013.