South American Silver Announces Receipt of Formal Decree and Provides Update on Plan of Action

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 2, 2012) - South American Silver Corp. (TSX:SAC)(PINKSHEETS:SOHAF) (the "Company") announces an update on its plan of action after receiving today official notice of a Nationalization Decree of its Malku Khota silver-indium project in Bolivia. South American Silver Limited, the Company's wholly owned Bermuda subsidiary, invested in Malku Khota through its Bolivian subsidiary, Compañía Minera Malku Khota S.A.

"We will continue to pursue all channels available to us," said Greg Johnson, President and CEO of South American Silver Corp. "This action plan includes the prospect of negotiating a resolution of the situation with the Bolivian government, or, if required, the pursuit of compensation for the full value of the project through international arbitration."

The Company reported last month that the Bolivian government had stated its intention to nationalize the Malku Khota project despite objections from the great majority of indigenous communities in the vicinity of the project, who had signed numerous resolutions of support for the Company and the Malku Khota project.

Other nationalization cases in Bolivia have been resolved through negotiation or compensation and several Bolivian officials have acknowledged publicly that compensation is due to South American Silver. In the oil and gas sector specifically, past affected companies subsequently negotiated new joint venture agreements with the Bolivian government.

During the months preceding the government's announced intent to nationalize the Malku Khota project, the Company and the vast majority of indigenous communities in the project area had received numerous assurances, including a signed accord with the Minister of Mines, which stated that the concessions were confirmed to be valid and that the Company should continue its exploration activities.

Accordingly, the Company is very disappointed with the government's announcements, but has been quick to respond and to take action. Over the past month, management has been pursuing all possible diplomatic options in addition to reaching out to the Bolivian government at all levels. In particular, the Company thanks the Canadian government for its strong support by raising this matter as a priority on a number of diplomatic fronts.

Even with the rising move toward resource nationalism in the region, including nationalizations of Red Electrica Corp's Bolivian electrical grid assets, Glencore's Colquiri mine and the cancellation of Jindal Steel's El Mutun iron project, mining is an important industry for Bolivia and these recent actions by the state send a strongly negative message to potential foreign investors and developers about the security of their investment in the developing country, investment that will be critical for addressing the extreme level of poverty in the long term. Additionally, Bolivian ministers are on record as having recently stated that other nationalizations had been repatriations of previously state-owned assets, unlike Malku Khota, and that foreign private investment would be respected and protected under the constitution.

To reach its full potential, the Malku Khota project will require a significant capital investment and specialized proprietary processing technology, which has been developed by South American Silver over the past four years in coordination with researchers from the University of British Columbia and SGS Lakefield Research, and that has been taken to patent by the Company.

As South American Silver continues to aggressively pursue all options to maximize the value from its Bolivian investments, management is also continuing to advance its promising Escalones project, a high potential copper-gold-silver project in Chile, with an inferred resource of 3.8 billion pounds of copper, 610,000 ounces of gold and 16.8 million ounces of silver. The first round of drilling this year has been completed and assays are anticipated to be available within two months. In addition, management will deliver a first Economic Assessment on Escalones in 2013, and is accelerating the work on this important project.

The Company has several essential components that position it well for the future: seasoned leadership, a healthy balance sheet, a large, attractive development project in a stable, mining-friendly jurisdiction, and proprietary acid chloride leach technology that gives it a competitive advantage for developing bulk mineable deposits that contain both precious and base metals.

The management team members at South American Silver have decades of technical and mining experience, much of it in North and South America, with a track record of successful project development and value creation with a focus on corporate social responsibility.

Mr. Johnson stated, "The Company is proud of its record of working collaboratively with the indigenous communities in Bolivia. South American Silver has worked closely with the local indigenous communities over the past several years providing significant direct employment on project-related jobs, as well as jointly developing programs with the communities to facilitate job training, education, agricultural enhancement and water management for long-term sustainable development."

"These community-inclusive approaches have been developed by our team over the past two decades with other companies in successfully working with indigenous communities in South America, Alaska, Canada and globally. Over the past year in Bolivia, we were focused on completing support agreements with all the local communities that would address how they wanted to see development proceed on their local lands."

Mr. Johnson continued, "The period ahead will be one of transition for the Company as we adjust our business strategy to advancing our Chilean copper-gold project, realizing value from our Bolivian investments, and focusing on opportunities that create long-term shareholder value."

About South American Silver Corp.

South American Silver Corp. is a growth focused mineral exploration company creating value through the exploration and development of the large scale Escalones copper-gold project in Chile and the Malku Khota project in Bolivia. 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 US OTC market as "SOHAF". Additional information related to South American Silver Corp. is available at www.soamsilver.com and on SEDAR at www.sedar.com.

Forward-looking statements

This release contains forward-looking statements which look into the future and to the effect of certain events on the business. Forward-looking statements may include words such as "plan", "continue", "prospect", "will", "potential", "accelerating", "future", "developing", "may", "ahead", "advancing", "opportunities", "promising", and "creating" and similar expressions. These forward-looking statements are based on current expectations, 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 actual events may differ materially from any future events 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 assumptions prove inaccurate. Therefore, the Company cannot provide any assurance that forward-looking statements will materialize. Although the Company has attempted to identify important factors that could cause actual events to differ materially from those contained in forward looking statements, there may be other factors that cause events to be materially different from those planned or expected. Factors that could cause events to differ materially from current expectations expressed or implied by the forward-looking statements, include, but are not limited to, the political and economic climate in Bolivia including the attitudes and actions of the Bolivian government related to foreign investment in Bolivia; the international arbitration process; and risks of the mineral exploration industry which may affect the advancement of the Escalones project, including possible variations in mineral resources or grade; metal prices; availability of sufficient financing to fund further required work in a timely manner and on acceptable terms; timely receipt of required permits; availability of equipment and qualified personnel; failure of equipment or processes to operate as anticipated; changes in project parameters as plans continue to be refined; 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: the ability of the Company to realize value from its investments in Bolivia through successful negotiation or international arbitration; the timely receipt of assay results for Escalones; the accuracy of current inferred resources and the interpretation of drill and other exploration results for Escalones; the timely receipt of required permits for Escalones; the availability of equipment and qualified personnel to advance for the Escalones project and 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.

This news release uses the term 'inferred resources' which is recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects), however, such term is not a defined term under SEC Industry Guide 7 and is not normally permitted to be used in reports and registration statements filed with the United States Securities and Exchange Commission. Investors are cautioned not to assume that any part or all of the 'inferred resources' will be upgraded or converted into 'indicated resources' or 'reserves' as defined under NI 43-101. In addition, 'inferred resources' have a great amount of uncertainty as to their existence, and economic and legal feasibility. Under Canadian rules, estimates of inferred resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for preliminary economic assessment as defined under NI 43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.

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 August 02, 2012.