Golden Minerals Announces Restart of Silver and Gold Mining Operations at Velardeña and Provides Update on Capital Resources
Golden Minerals Announces Restart of Silver and Gold Mining Operations at
Velardeña and Provides Update on Capital Resources
GOLDEN, Colo.--(BUSINESS WIRE)--June 5, 2023--Golden Minerals Company (“Golden
Minerals”, “Golden” or the “Company”) (NYSE American: AUMN and TSX: AUMN)
announced today that it plans to restart silver-gold mining operations at its Velardeña Properties
located in Durango State, Mexico, subject to the receipt of sufficient capital.
Warren M. Rehn, Golden’s President and Chief Executive Officer, stated, “I am very pleased to
announce that Golden Minerals’ board of directors has approved plans to restart mining
operations at Velardeña. The decision to begin operations again at Velardeña was primarily
based on vastly improved sales terms now available to us for the gold-rich pyrite concentrate that
is produced from flotation processing of Velardeña mineralized material, which permit us to
restart operations without the significant expense of the previously planned bio-oxidation
facility. Since the start of 2023, we successfully processed 3,000 tons of material mined in our
test mining activities in 2022 and we sold approximately 600 tons of these concentrates under the
improved terms with net receipts of approximately $1.5 million or about $500 per ton of mined
material. These recent sales augur well for the potential success of our restart plans. We
anticipate that we can start mining operations with minimal initial capital of approximately $0.5
million. Our internally developed mine plan projects the production of approximately 0.4 million
silver equivalent ounces1 during 2023, with the potential to ramp up to approximately 1.6 million
silver equivalent ounces per year thereafter. We have contracted for completion of an
independent technical report, which we expect will support our internal projections. We intend to
begin preparations to start mining immediately.”
Our internal mine plan calls for underground resue mining, starting with four active stopes
initially with processing at Velardeña’s Plant I flotation facility at an initial throughput rate of
approximately 80 tonnes per day (“tpd”). As underground development progresses, the number
of stopes is anticipated to steadily increase over a period of months until 15 to 18 stopes are
ultimately in continuous production. The mill is expected to reach a steady-state processing rate
of approximately 325 tpd by the end of the year. All required permits are already in place, and
because Plant I has recently been in use and processing previously mined Velardeña sulfide
material, after startup as development costs continue to exceed net revenue, the maximum cash
outflows of about $2.3 million, inclusive of the initial $0.5 million, are predicted to be paid back
within the first nine months of operations.
The Company, through engagement with an independent engineering firm, intends in the third
quarter of 2023 to update the March 2022 Technical Report Summary for Velardeña that was
previously completed (including plans for the previously contemplated but no longer required
bio-oxidation facility) in accordance with SEC SK-1300 guidelines. That report is available here,
for reference: Velardeña Technical Report Summary, Mar. 2022. It summarizes the underlying
model from which the Company’s current internally-developed forecasts have been developed.
1 Silver equivalent production estimate calculated based on $1,900 per ounce gold and $22.50
per ounce silver with 64% payable gold recovery and 81% payable silver recovery and does not
include lead and zinc, which will also be produced.
Current Company-developed forecasts for mining a portion of the published resource over an
approximate seven-year life of mine (“LOM”) estimate processing 700,000 - 800,000 tonnes of
material at Plant I, with LOM payable gold production of 60,000 - 70,000 ounces and LOM
payable silver production of 5.5 million - 6.5 million ounces. Operating costs are estimated at
$225 - $275 per tonne.
Capital Resources and Financial Outlook
The Company does not currently have sufficient resources to initiate the restart of mining
operations at Velardeña or to otherwise meet its expected cash needs during the twelve months
ending May 31, 2024. At May 31, 2023, our total cash resources were approximately $2.4
million and we have accrued accounts payable of approximately $1.7 million. The mining
operations at Rodeo have ceased, and although we continue to process ore from the Rodeo
stockpile, we do not expect to generate a significant amount of positive operating margin from
Rodeo going forward. The Company needs to raise additional cash in the very near term,
whether through the sale of non-core assets or equity financing, including the use of its ATM
program. In the absence of sufficient asset sales, equity financing or other external funding the
Company’s cash balance is expected to be depleted early in the third quarter of 2023. If
financing or asset sales are not available to us, we could be forced to liquidate our business. The
Company’s board of directors is considering various financing alternatives, sales of assets and
other available strategic alternatives to avoid that result.
If we are successful in raising sufficient capital to restart mining operations at Velardeña during
July 2023, and if we are successful in executing the mine plan described above, the forecasted
net operating margin from the Velardeña Properties during the twelve-month period ended May
31, 2024 is expected to be between $1.7 million and $2.0 million. This twelve-month period
includes one-time costs related to restarting operations. As the mine reaches planned capacity to
feed the processing plant approximately 325 tonnes per day, the second half of 2024 is forecast
to be more favorable, generating a positive operating margin higher than what is expected during
the first eleven months of operations. Net operating margin is defined as revenue from the sale of
metals less the cost of metals sold. Our internal estimate for the net operating margin at
Velardeña assumes gold prices average $1,900 per ounce and silver prices average $22.50 per
ounce. The actual amount received in net operating margin from both Rodeo and Velardeña
during the period may vary significantly from the amounts specified above due to, among other
things: (i) unanticipated variations in grade, (ii) challenges associated with our proposed mining
plans, including difficulties in controlling grade dilution, (iii) decreases in commodity prices
below those used in calculating the estimates shown above, (iv) variations in expected
recoveries, (v) increases in operating costs above those used in calculating the estimates shown
above, or (vi) interruptions in mining.
There is no assurance that the Company will be successful in achieving the positive operating
margins at Velardeña described above. Specifically, the anticipated net operating margin from
the Velardeña Properties is not based on the results of a full feasibility study. While the
Company believes its internal estimates are realistic, the lack of a full feasibility study may
increase the uncertainty associated with the estimates.
In addition to the estimates described above, the Company expects to collect approximately $1.5
million in VAT accounts receivable from the Mexican government; however, the timing for
receipt of these payments is uncertain.
Update on Unifin dispute
As previously disclosed, the Company is party to a lawsuit in Mexico brought by Unifin
Financiera, S.A.B. de C.V. (“Unifin”). Unifin is alleging that a representative of the Company’s
subsidiary, Minera William, S.A. de C.V. (“Minera William”) signed certain documents in July
2011 purporting to bind Minera William as a guarantor of payment obligations owed by a third
party to Unifin in connection with that third party’s acquisition of certain drilling equipment. At
the time the documentation was allegedly signed, Minera William was a subsidiary of ECU
Silver Mining prior to the Company’s acquisition of ECU in September 2011. A preliminary
hearing on the lawsuit was held on June 2, 2023 and the trial hearing has been scheduled for June
30, 2023. Unifin is seeking recovery for as much as US$12.5 million. Because the Velardeña
mine and processing plants are held by Minera William, any adverse outcome of the action may
have a material impact on our ability to restart production at Velardeña.
About Golden Minerals
Golden Minerals is a gold and silver producer based in Golden, Colorado. The Company is
primarily focused on producing gold and silver from its Rodeo Mine, advancing its Velardeña
and Yoquivo properties in Mexico and, through partner-funded exploration, its El Quevar silver
property in Argentina, as well as acquiring and advancing selected mining properties in Mexico,
Nevada and Argentina.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and applicable Canadian securities legislation, including statements regarding the
Company’s plan to restart mining operations at the Velardeña properties, including the potential
timing of restart, production expectations, required capital to restart and ramp-up operations,
potential plant processing rate, projected payable gold and silver production, operating costs and
net operating margin; the Company’s expected near-term cash needs; collection of
approximately $1.5 million in VAT accounts receivable from the Mexican government and the
need to raise additional cash in the near-term to avoid depletion of the Company’s cash balance
early in the third quarter of 2023. These statements are subject to risks and uncertainties,
including increases in costs and declines in general economic conditions; changes in current
payable terms for gold-bearing pyrite concentrates; changes in political conditions, in tax,
royalty, environmental and other laws in the Mexico and other market conditions; unanticipated
variations in grade; challenges associated with our proposed mining plans, including difficulties
in controlling grade dilution; decreases in commodity prices below those used in calculating the
estimates shown above; variations in expected recoveries; increases in operating costs above
those used in calculating the estimates shown above; interruptions in mining; or an adverse result
in the pending Unifin lawsuit. Golden Minerals assumes no obligation to update this information.
Additional risks relating to Golden Minerals may be found in the periodic and current reports
filed with the SEC by Golden Minerals, including the Company’s Annual Report on Form 10-K
for the year ended December 31, 2022.
Follow us at www.linkedin.com/company/golden-minerals-company/ and
https://twitter.com/Golden_Minerals.
For additional information please visit http://www.goldenminerals.com/.
Contacts
Golden Minerals Company
Karen Winkler, Director of Investor Relations
(303) 839-5060