Golden Minerals Reports Full Year 2018 Results
GOLDEN, Feb. 28, 2019 - Golden Minerals Company (“Golden Minerals”, “Golden” or “the Company”) (NYSE American and TSX: AUMN) has today announced financial results and a business summary for the full year ending December 31, 2018.
2018 Financial Highlights
- Revenue for full year 2018 of (all figures in approximate USD) $7.2 million and operating margin of $4.9 million related to the lease of the Company’s oxide plant at the Velardeña Properties to Hecla Mining Company (“Hecla”), compared to $6.7 million and $4.5 million, respectively, in 2017
- Loss from operations $2.0 million in 2018 compared to $3.9 million in 2017
- Net loss narrowed to $1.9 million or $0.02 per share in 2018, from $3.9 million or $0.04 per share in 2017
- Cash and equivalents balance of $3.3 million as of December 31, 2018, unchanged from the $3.3 million on hand as of December 31, 2017
- Zero debt, unchanged from year end 2017
- Received $4.0 million in exchange for selling our remaining interest in the Celaya exploration property to a subsidiary of The Electrum Group LLC
- Generated an additional $1.1 million cash from the sale and farm-out of non-strategic properties or subsidiaries
Business Summary and Project Updates
Oxide Mill Lease
2018 marked the third full year of the Company’s lease to Hecla of its oxide mill located at the Velardeña Properties in Durango State, Mexico. In October 2018, Hecla exercised its option to extend the lease for an additional period of up to two years, until December 31, 2020. Hecla maintains the right to terminate the lease with 120 days’ notice. Hecla processed approximately 142,000 tonnes of material through the plant in 2018 (compared to 131,000 tonnes in 2017), resulting in 2018 total revenue to Golden of $7.2 million. The $7.2 million is comprised of $4.9 million for direct plant charges and fixed fees, plus $2.3 million for reimbursable costs related to the services Golden provides under the lease. The $2.3 million of reimbursable costs are also reported as plant lease costs, resulting in a net operating margin of $4.9 million for the full year.
El Quevar
Golden Minerals advanced its El Quevar high-grade silver project (Salta province, Argentina) during 2018. In February, Golden announced results of an analysis and re-modeling of the data originally used in the Mineral Resource estimate covering the project’s Yaxtché deposit. The new analysis was conducted by Amec Foster Wheeler E&C Services, Inc., a Wood Group PLC company (“Wood”) and used updated geologic controls and a modeling method that optimized silver grade assuming mining would occur solely underground. The resulting new Technical Report estimated the following resources at Yaxtché:
| Tonnes | Silver | Ag Grade | |||
| (M) | (M oz) | (g/t) | |||
| El Quevar | |||||
| Indicated | |||||
| Sulfide | 2.6 | 41.1 | 487 | ||
| Oxide | 0.3 | 4.2 | 434 | ||
| Total | 2.9 | 45.3 | 482 | ||
| Inferred | |||||
| Sulfide | 0.3 | 4.1 | 417 | ||
| Oxide | 0.0 | - | - | ||
| Total | 0.3 | 4.1 | 417 | ||
Notes to accompany Mineral Resource table:
1) The independent Qualified Person who prepared the Mineral Resource estimate is Gordon Seibel, a Registered Member of the Society for Mining, Metallurgy and Exploration, RM SME, who is a Principal Geologist with Wood.
2) The effective date of the estimate is February 26, 2018. Mineral Resources are estimated using the CIM Definition Standards for Mineral Resources and Reserves (2014). Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
3) There are reasonable prospects for eventual economic extraction under assumptions of a silver price of $16.62/oz, employment of underground, mechanized, room‐and‐pillar mining methods, and that silver concentrates will be produced and sold to a smelter. Mining costs are assumed to be $55/t at a nominal production of rate 365,000 t/a. Concentrator and general and administrative (G&A) costs are assumed to be $30/t and $20/t respectively. Metallurgical recovery for silver is assumed to be 88.5%.
4) Reported Mineral Resources contain no allowances for hanging wall or footwall contact boundary loss and dilution. No mining recovery has been applied.
5) Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content.
Source: Amec Foster Wheeler E&C Services, Inc NI 43-101, Feb. 26, 2018. Cutoff grade 250 gpt Ag.
In September 2018, the Company completed a Preliminary Economic Assessment (“PEA”) that used this revised estimate of the Yaxtché deposit as a basis. The PEA contemplates a six-year underground mining operation using pre-existing and new underground development at a mine production rate of 1,200 tonnes per day using a post-pillar cut-and-fill mining method that will deliver 2.45 million tonnes of diluted sulfide material at an average grade of 409 g/t silver. As contemplated in the PEA, the mined material would be processed using a conventional single product flotation mill that would produce a silver-rich bulk concentrate suitable for sale. Please see the section entitled “PEA and Resource Estimate Cautionary Language” for further information.
In late February 2019, the Company began a 3,000-meter, approximately $0.6 million drill program to further define the potential for additional mineralized material in both the Yaxtché deposit and the surrounding area. The Yaxtché deposit is open to both the west and east, and there are numerous drill intercepts with silver grades of potential economic interest in the nearby area that represent targets for further expansion. The Company intends to advance El Quevar as much as possible within the limits of its current exploration budget and remains open to finding a partner to contribute to the funding of further exploration and development.
Santa Maria
In September 2018, the independent firm of Tetra Tech completed a second PEA for the Santa Maria project that incorporates data accumulated since the previous March 2017 PEA, including an additional 77 hectares of mineral tenure acquired in August 2017 and information from a 22-hole, 4,800-meter drilling program conducted between August 2017 and April 2018. The September 2018 PEA shows improvement in projected cash flow, metal production and profitability compared to the previous study. Please see the section entitled “PEA and Resource Estimate Cautionary Language” for further information.
Celaya Farm-out
During 2018, Golden Minerals received $4.0 million from a wholly-owned subsidiary of Electrum Group LLC (“Electrum”) related to a farm-out agreement for the Company’s Celaya property in Mexico. In February 2018, Golden received $1.0 million in exchange for permitting Electrum to earn, at its option, an incremental 20% interest in the project. In September 2018, Golden sold its remaining interest in the Celaya property to Electrum for $3.0 million.
Yoquivo
In October 2018, the Company announced high-grade silver-gold assays from its Yoquivo project located in Chihuahua state, Mexico. Multiple silver-gold bearing epithermal veins were mapped and sampled, with the two most important veins being the San Francisco and Pertenencia veins. Golden is focusing exploration efforts on the Pertenencia vein, which appears to be more silver-rich compared to the San Francisco vein. Sampling of the Pertenencia vein is still in progress as is surface work in preparation for identifying the best drill targets. The Company expects to begin a drill program in 2019 to test the most promising portions of the veins, and a drilling permit has been obtained.
2019 Exploration
In 2019 Golden plans to focus exploration efforts primarily on exploration and evaluation activities at El Quevar, Yoquivo, Navegantes and other properties, primarily in North America. During 2019 the Company expects expenditures for the exploration program to total approximately $2.0 million, with approximately $0.3 million in property holding costs in Mexico and approximately $0.5 million in administrative and general reconnaissance costs in Mexico.
2018 Financial Results
The Company reported revenue of $7.2 million and a higher net operating margin of $4.9 million in 2018, compared to $6.7 million and $4.5 million in 2017, respectively. Both are wholly attributable to the lease of the Company’s Velardeña oxide plant to Hecla. Additionally, the Company recorded $5.1 million in other operating income in 2018 compared to $2.1 million in 2017. The 2018 amount consists primarily of $4.0 million related to the aforementioned Celaya transactions, $0.7 million related to the final sale of Golden’s interest in its Zacatecas properties, and $0.4 million related to the sale of two non-strategic Mexican subsidiaries.
Total expenses of $9.2 million in 2018 were $1.4 million lower than the $10.6 million of total expenses recorded in 2017. These figures include other operating income of $5.1 million in 2018 and $2.1 million in 2017 as detailed above. 2018 exploration expenses were $3.9 million compared to $3.1 million in 2017, reflecting increased activities at Santa Maria and other Mexico properties. El Quevar project expense increased to $1.3 million from $0.8 million in 2017, reflecting costs of preparing the 2018 technical reports and preparing for exploration drilling. Velardeña care and maintenance expenses were $1.9 million compared to $1.5 million in 2017, with the 2018 figure reflecting increased maintenance activities. Administrative expenses were $3.4 million in 2018 compared to $3.5 million in 2017 and include costs associated with being a public company.
The Company reported a net loss of $1.9 million or ($.02) per share in 2018 compared to a net loss of $3.9 million or ($.04) per share in 2017.
Cash and Financial Outlook
The Company reported a cash and equivalents balance of $3.3 million at year end 2018, equal to the $3.3 million held at year end 2017. Cash inflows during 2018 totaled $10.8 million and included:
- $4.9 million of net operating margin from the oxide plant lease
- $4.0 million from the sale of Golden’s interest in the Celaya property to Electrum
- $0.8 million net of commitment fees and other offering-related costs, from the LPC Program
- $0.7 million from the final sale of nonstrategic mineral claims to Santacruz Silver Mining LLC
- $0.4 million from the sale of two inactive subsidiaries in Mexico
Expenditures during 2018 totaled $10.8 million and included the following:
- $3.9 million in exploration expenditures, including work at Santa Maria and other properties
- $1.9 million in care and maintenance costs at the Velardeña Properties
- $1.3 million in evaluation activities, care and maintenance and property holding costs at El Quevar
- $3.4 million in general and administrative expenses
- $0.3 million related to an increase in working capital
In addition to the $3.3 million cash balance at December 31, 2018, during 2019 Golden expects to receive approximately $4.6 million in net operating margin from the oxide plant lease. In addition, since December 31, 2018 the Company received $0.2 million from the sale of its common stock under the LPC equity program. Currently-budgeted expenditures for full year 2019 are approximately:
- $2.0 million on exploration activities and property holding costs related to our portfolio of exploration properties, including project assessment and evaluation costs related to Yoquivo and other properties
- $1.5 million at the Velardeña Properties for care and maintenance
- $1.2 million at El Quevar to fund ongoing exploration and evaluation activities, care and maintenance and property holding costs
- $3.1 million on general and administrative costs
The Company does not intend to allow its cash balance to drop below acceptable levels during 2019. Therefore, the Company intends to take appropriate actions, which may include sales of certain of the Company’s nonstrategic exploration assets, reductions to the Company’s currently budgeted level of spending, and/or raising additional equity capital through sales under the ATM or LPC equity programs or otherwise.
Additional information regarding full year 2018 financial results may be found in the Company’s Annual Report on Form 10-K which is available on the Golden Minerals website at www.goldenminerals.com.
About Golden Minerals
Golden Minerals is a Delaware corporation based in Golden, Colorado. The Company is primarily focused on advancing its El Quevar silver property in Argentina and on acquiring and advancing mining properties in Mexico with emphasis on areas near its Velardeña processing plants.
Data Verification - El Quevar
The drill data supporting the Mineral Resource estimate were collected between 2006 and 2011, and there has been no drilling on the property since 2011. Qualified Persons from independent engineering consulting firm Pincock Allen and Holt (PAH) and now part RPMGlobal visited the site during the 2011 drill program. PAH observed and interviewed Golden Minerals personnel in the procedures of core handling, sampling, logging and sample security that were performed at the Golden Minerals base camp. PAH concluded that the drilling density, core recovery, and drill hole location surveying were industry standard and acceptable for use in resource estimation.
PAH also reviewed sample preparation procedures, assaying methods and QA/QC protocols when all drill results were available. PAH noted that overall the sample preparation, analysis and security are industry standard and would not introduce a general bias into resource estimation.
Wood independently compiled the assay data directly from the assay laboratories and compared the data to the database supplied by Golden Minerals which included all of the drill data that had previously been verified by PAH. Wood considers the database to be acceptable to support Mineral Resource estimation. Mr. Gordon Seibel visited the El Quevar Project from March 20-23, 2018.
PEA and Resource Estimate Cautionary Language
The resource estimate is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.
The PEA is preliminary in nature. Both PEA’s for El Quevar and Santa Maria include Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA based on these Mineral Resources will be realized. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
Qualified Person
The technical contents of this press release have been reviewed and approved by Warren M. Rehn, M.Sc., a Qualified Person for the purposes of NI 43-101. Mr. Rehn has over 33 years of mineral exploration experience and is a QP member of the Mining and Metallurgical Society of America. Mr. Rehn is President, Chief Executive Officer and a Director of Golden Minerals Company.
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 relating to plans for exploration at various properties and our openness to finding a partner to help fund exploration and development at El Quevar; plans to begin a drilling program at El Quevar and productivity projections from the El Quevar PEA; cash flow, production and profitability projections from the Santa Maria PEA; exploration efforts at Yoquivo, including exploration of the Pertenencia vein and plans to begin a drill program; and financial projections, including budgeted expenditures and the anticipated net operating margin from the Velardeña oxide plant lease. These statements are subject to risks and uncertainties, including changes in interpretations of geological, geostatistical, metallurgical, mining or processing information and interpretations of the information resulting from future exploration, analysis or mining and processing experience, new information from exploration or analysis, unexpected variations in mineral grades, types and metallurgy, fluctuations in silver metal prices, reasonability of the economic assumptions at the basis of the results of the Santa Maria PEA, lower than anticipated revenue from the oxide plant lease as a result of delays or problems at Hecla’s mine or the oxide plant, earlier than expected termination of the oxide plant lease, increases in costs and declines in general economic conditions, and changes in political conditions, in tax, royalty, environmental and other laws in Mexico, and financial market conditions. 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 Securities and Exchange Commission by Golden Minerals, including the Company’s Annual Report on Form 10‐K for the year ended December 31, 2018.
Golden Minerals Company
CONSOLIDATED BALANCE SHEETS
(Expressed in United States dollars)
| December 31, | December 31, | ||||||||
| 2018 | 2017 | ||||||||
| (in thousands, except share data) | |||||||||
| Assets | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 3,293 | $ | 3,250 | |||||
| Short-term investments | 330 | 238 | |||||||
| Lease receivables | 481 | 314 | |||||||
| Inventories, net | 229 | 242 | |||||||
| Value added tax receivable, net | 14 | 148 | |||||||
| Prepaid expenses and other assets | 1,188 | 745 | |||||||
| Total current assets | 5,535 | 4,937 | |||||||
| Property, plant and equipment, net | 7,109 | 8,140 | |||||||
| Total assets | $ | 12,644 | $ | 13,077 | |||||
| Liabilities and Equity | |||||||||
| Current liabilities | |||||||||
| Accounts payable and other accrued liabilities | $ | 1,702 | $ | 1,556 | |||||
| Deferred revenue, current | 293 | 293 | |||||||
| Other current liabilities | 12 | 9 | |||||||
| Total current liabilities | 2,007 | 1,858 | |||||||
| Asset retirement and reclamation liabilities | 2,683 | 2,495 | |||||||
| Deferred revenue, non-current | 307 | 600 | |||||||
| Other long term liabilities | 10 | 43 | |||||||
| Total liabilities | 5,007 | 4,996 | |||||||
| Commitments and contingencies | |||||||||
| Equity | |||||||||
| Common stock, $.01 par value, 200,000,000 shares authorized; 95,620,796 and 91,929,709 shares issued and outstanding respectively | 955 | 919 | |||||||
| Additional paid in capital | 517,806 | 516,284 | |||||||
| Accumulated deficit | (511,124 | ) | (509,082 | ) | |||||
| Accumulated other comprehensive loss | — | (40 | ) | ||||||
| Shareholders' equity | 7,637 | 8,081 | |||||||
| Total liabilities and equity | $ | 12,644 | $ | 13,077 | |||||
Golden Minerals Company
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in United States dollars)
| The Year Ended December 31, | |||||||||
| 2018 | 2017 | ||||||||
| (in thousands except per share data) | |||||||||
| Revenue: | |||||||||
| Oxide plant lease | $ | 7,217 | $ | 6,691 | |||||
| Costs and expenses: | |||||||||
| Oxide plant lease costs | (2,289 | ) | (2,189 | ) | |||||
| Exploration expense | (3,909 | ) | (3,091 | ) | |||||
| El Quevar project expense | (1,266 | ) | (822 | ) | |||||
| Velardeña shutdown and care and maintenance costs | (1,889 | ) | (1,589 | ) | |||||
| Administrative expense | (3,355 | ) | (3,512 | ) | |||||
| Stock based compensation | (226 | ) | (296 | ) | |||||
| Reclamation expense | (210 | ) | (196 | ) | |||||
| Other operating income, net | 5,138 | 2,093 | |||||||
| Depreciation and amortization | (1,171 | ) | (952 | ) | |||||
| Total costs and expenses | (9,177 | ) | (10,554 | ) | |||||
| Income (loss) from operations | (1,960 | ) | (3,863 | ) | |||||
| Other income and (expense): | |||||||||
| Interest and other (expense) income, net | 112 | 37 | |||||||
| Loss on foreign currency | (84 | ) | (53 | ) | |||||
| Total other income (loss) | 28 | (16 | ) | ||||||
| Income (loss) from operations before income taxes | (1,932 | ) | (3,879 | ) | |||||
| Income tax | (13 | ) | (13 | ) | |||||
| Net income (loss) | $ | (1,945 | ) | $ | (3,892 | ) | |||
| Comprehensive income (loss), net of tax: | |||||||||
| Unrealized gain (loss) on securities | — | (95 | ) | ||||||
| Comprehensive income (loss), net of tax: | $ | (1,945 | ) | $ | (3,987 | ) | |||
| Net income (loss) per common share — basic | |||||||||
| Loss | $ | (0.02 | ) | $ | (0.04 | ) | |||
| Weighted average Common Stock outstanding - basic (1) | 94,003,165 | 90,468,606 | |||||||
(1) Potentially dilutive shares have not been included because to do so would be anti-dilutive.
For additional information please visit http://www.goldenminerals.com/ or contact:
Golden Minerals Company
Karen Winkler, Director of Investor Relations
(303) 839-5060 or Investor.relations@goldenminerals.com
SOURCE: Golden Minerals Company