SSRM

Business Context and Reporting Period

Company: Silver Standard Resources Inc. (SSRI)

Filing Type: Form 20-F (Annual Report)

Reporting Period: Fiscal year ended December 31, 2009

Business Overview: Silver Standard is a silver resource company with a portfolio of projects in seven countries. The reporting period marks a strategic transition from exploration and development to production. The company achieved production status at its Pirquitas Mine in Argentina on December 1, 2009. This is the company's first producing asset. All other properties remain in the exploration or development stage.

Key Financial Metrics (Year Ended Dec 31, 2009)

Note: Significant differences exist between Canadian and U.S. GAAP regarding the treatment of mineral property costs. Under U.S. GAAP, exploration costs are expensed as incurred, resulting in a significantly higher reported net loss.

Material Changes vs. Prior Period

• Revenue Generation: The company recorded $5.4 million in revenue in 2009, compared to zero revenue in 2008 and 2007, driven by the commencement of production at Pirquitas.
• Production Costs: For the month of December 2009, the cash production cost was $8.99 per ounce. Total cash operating cost (including royalties, taxes, and treatment charges) was $16.57 per ounce.
• Capital Expenditures: Total construction and development costs for Pirquitas reached $255 million by year-end, exceeding the previous estimate of $230 million due to ramp-up enhancements and general cost overruns.
• Exploration Spending: Exploration expenditures totaled $24.3 million in 2009, a decrease from $37.1 million in 2008, as focus shifted to the Pirquitas ramp-up.
• Asset Sales: In February 2010 (subsequent event), the company sold its Silvertip Project for $14.25 million, realizing an estimated after-tax gain of $12.1 million.

Guidance, Outlook, and Risks

Outlook and Guidance

• 2010 Production Target: Management plans to produce approximately 7 million ounces of silver in 2010.
• 2010 Cost Target: Targeted average cash production cost is $9.00 per ounce (net of by-product credits).
• Operational Status: The mill began processing transitional ore in Q1 2010, with full capacity processing of sulphide ore expected in Q2 2010. The tin circuit is commissioned and expected to operate in Q2 2010.

Management Commentary

Management highlighted the successful transition to a producing company but noted that profitability remains dependent on the Pirquitas Mine generating sufficient revenue to fund operations. The company continues to advance five other principal projects (San Luis, Pitarrilla, Diablillos, Snowfield, and Brucejack).

Risks and Contingencies

• Export Duty Dispute: Argentina levied a 10% export duty on concentrates in 2007. Despite a 1998 fiscal stability agreement, the company is paying the duty under protest while challenging its legality in Argentine courts.
• Single Customer Concentration: In 2009, 100% of concentrate sales were made to a single trading counterparty.
• Commodity Price Volatility: Profitability is highly sensitive to silver, gold, tin, zinc, and lead prices.
• Convertible Notes: The company has $138 million in 4.5% convertible senior notes due 2028. An event of default could require immediate repayment, potentially forcing the sale of assets.
• PFIC Status: The company believes it was a Passive Foreign Investment Company (PFIC) for 2008 and 2009, which may result in unfavorable U.S. tax consequences for U.S. shareholders.

Key Facts for Investor Verification

• Production Ramp-Up: Verify if the 2010 target of 7 million ounces and $9.00/oz cash cost is achieved, given the initial production costs of $16.57/oz in December 2009.
• Export Duty Resolution: Monitor the status of the legal challenge regarding the 10% Argentine export duty, as this directly impacts margins.
• U.S. GAAP vs. Canadian GAAP: Investors should reconcile the significant difference in net loss ($13.2M vs. $47.9M) to understand the impact of expensing exploration costs under U.S. GAAP.
• Liquidity Position: Confirm the utilization of the $107.8 million net proceeds from the February 2010 equity offering and the $12.1 million gain from the Silvertip sale.
• Debt Covenants: Review the covenants associated with the $138 million convertible notes to ensure no default triggers are activated by operational delays or cost overruns.