GOLDEN, Colo., June 18, 2014 /PRNewswire/ -- Golden Minerals Company ("Golden Minerals" or the "Company") (NYSE MKT: AUMN) (TSX: AUM) today announced plans for a July 2014 restart of mining at its Velardena Properties located in Durango state, Mexico. Once mining and processing are ramped up to approximately 285 tonnes per day (tpd) of sulfide ore in mid-2015, the Company expects output of approximately 1.0 to 1.2 million silver equivalent ounces per annum (including silver and gold but excluding lead and zinc), with cash costs between $12 and $15 per silver ounce net of by-product credits. Golden has completed a 9,000-meter drill program at Velardena in vein systems located largely outside the currently defined Canadian National Institute NI 43-101 compliant resource. That drill program represents the first known drilling of the Terneras vein system sulfides in the area below the historic mine workings. The Company's drilling, mine planning and analysis indicate that positive net cash flow may be achieved at the Velardena Properties at current silver and gold prices. An independent engineering firm participated in the preparation of the mining plan.
Chairman, President and Chief Executive Officer Jeffrey G. Clevenger noted, "Our team has worked diligently since the suspension of operations at Velardena to streamline the operation for a restart. A year ago we were looking at cash costs in excess of $30 per silver ounce and now we are excited to begin the ramp-up process to achieve costs and margins based on production at $12 to $15 per silver ounce. Once ramped up, our restart plans show incremental cash for the Company of about $5 to $8 million per year at today's prices (approximately $20 per ounce silver and $1,250 per ounce gold) as compared to holding the property for the future."
LOWER COST OPERATION
The Company plans to re-open Velardena as a leaner and lower cost mine. The Company has hired a new and proven team of mining professionals including a new General Manager and managers for both the mine and mill. By year end 2014, the property is projected to employ approximately 150 people, with approximately 100 employees under a new labor union agreement. This figure is less than one-third the number employed prior to June 2013 when the Company was running both sulfide and oxide plants and processing a combined total of approximately 500 tpd.
Shortly prior to suspending mining operations in 2013, Golden Minerals completed a 1.9 kilometer, production-sized access ramp into the Velardena mine. This ramp will provide more efficient and lower cost removal of mined material from the underground mine workings as compared to pre-suspension haulage primarily from a low capacity internal shaft.
The Company plans to re-open Velardena utilizing an overhand cut and fill mining method and slusher mucking in the stopes. This mining method should allow mining vein widths as narrow as 0.5 meters, which should significantly decrease dilution and allow higher grade material to be hauled to the mill. For conservative planning purposes, the Company has assumed dilution of the veins to one meter widths.
Going forward, the Company expects mining to focus on the San Mateo and Terneras vein systems. Drilling results and metallurgical studies indicate that these two systems, mined only intermittently by Golden in the past, contain higher grade material over more consistent widths in the 0.5 to 1.0 meter range, with significantly lower arsenic levels than those seen in the Santa Juana vein system that was the focus of previous mining activity. The Company expects that the lower arsenic will provide improved payment terms and metallurgical recovery of the metals.
TIMELINE OF ACTIVITIES
Golden Minerals plans to begin mining in the third quarter 2014, focused primarily in the San Mateo vein. The Company anticipates stockpiling mined material until the fourth quarter 2014, at which time we expect to commence processing mined material through the sulfide mill. Golden Minerals anticipates mining from both the San Mateo and Terneras vein systems during the fourth quarter 2014, with mining in the Terneras vein ramping up in the second quarter 2015. Plans call for sulfide mill processing of approximately 150 tpd during the fourth quarter 2014, with processing increasing to approximately 285 tpd in mid-2015. The Company expects to produce payable metals beginning in the fourth quarter 2014 of approximately 150,000 ounces of silver equivalents (including silver and gold but excluding lead and zinc), increasing to approximately 275,000 ounces of silver equivalents per quarter in mid-2015 when the ramp-up is completed. The plan forecasts cash costs per silver ounce, net of by-product credits, of approximately $30 in the fourth quarter 2014, decreasing to between $12 and $15 by mid-2015.
The mining plan calls for production of lead, zinc and gold-bearing pyrite concentrates. The mining plan is based on favorable results of preliminary metallurgical testing and the Company's expectation, based on the results of the 2014 drill program, that processed material will contain an average of approximately 4 grams per tonne gold and from 200 to 250 grams per tonne silver. As noted above, other than portions of the San Mateo vein, this material is not included in the Company's 43-101 resource or in the Company's reported mineralized material.
The incremental 2014 cash outlay to resume operations is estimated at $3 million. This is comprised of $1 million in re-start capital costs for mill improvements and slusher equipment plus $3 million of negative gross margin (revenue less cost of sales) in 2014, offset by approximately $1 million of avoided care and maintenance costs associated with holding the property in suspension. The Company also plans to explore possible sales of excess mining equipment which could offset part of the $3 million cash outlay.
About Golden Minerals
Golden Minerals is a Delaware corporation based in Golden, Colorado. The Company is primarily focused on efforts to create a new mining and processing plan for its Velardena Properties, the advancement of its El Quevar advanced exploration property in Argentina, and the exploration of properties in Argentina and Mexico.
Non-GAAP Financial Measures
Cash costs, after by-product credits, per payable ounce of silver produced is a non- GAAP financial measure that is widely used in the mining industry. Under generally accepted accounting principles in the United States (US GAAP), there is no standardized definition of cash cost, after by-product credits, per payable ounce of silver produced, and therefore the Company's forecasted cash costs may not be comparable to similar measures reported by other companies.
Forecasted cash costs were calculated based on the mining plan, and include all forecasted direct and indirect costs associated with the physical activities that would generate concentrate products for sale to customers, including mining to gain access to mineralized materials, mining of mineralized materials and waste, milling, third-party related treatment, refining and transportation costs, on-site administrative costs, and royalties. Forecasted cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Velardena mine. By-product credits include forecasted revenues from gold, lead, and zinc contained in the products sold to customers. Cash costs, after by-product credits, were divided by the quantity of payable silver forecasted to be produced during the period to arrive at cash costs, after by-product credits, per payable ounce of silver produced. Cost of sales is the most comparable financial measure, calculated in accordance with US GAAP, to cash costs. As compared to cash costs, cost of sales includes adjustments for changes in inventory and excludes net revenue from by-products and third-party related treatment, refining and transportation costs, which are reported as part of revenue in accordance with US GAAP.
Cautionary Note to U.S. Investors concerning Estimates of Resources
This press release uses the term "resources" which is defined in, and required to be disclosed by, Canadian NI 43-101. We advise U.S. investors that these terms are not recognized by the United States Securities and Exchange Commission (the "SEC"). The estimation of resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. Mineral resources are not mineral reserves, and U.S. investors are cautioned not to assume that mineral resources will be converted into reserves.
Cautionary Statement regarding Mineralized Material
"Mineralized material" as used in this press release, although permissible under SEC Industry Guide 7, does not indicate "reserves" by SEC standards. We cannot be certain that any deposits at the Velardena Properties will ever be confirmed or converted into SEC Industry Guide 7 compliant "reserves". Investors are cautioned not to assume that all or any part of mineralized material estimates will ever be confirmed or converted into reserves or that mineralized material can be economically as legally extracted.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and applicable Canadian securities legislation, including statements regarding the planned restart of mining at the Velardena property including the anticipated timing of restart activities and ramp up, mining and processing rates, veins to be mined and dilution levels, types of concentrates and amounts of salable and payable silver equivalent ounces to be produced, mining methods, cash costs per ounce of payable silver, net of by-product credits, employment levels, cash outlay, amounts of gold and silver contained in processed material, positive net cash flow at the Velardena Properties and incremental cash for the Company at current silver and gold prices, more efficient and lower cost removal of mined material due to the 2013 completion of the access ramp, potential improved payment terms due to lower arsenic in the Terneras and San Mateo vein systems. These statements are subject to risks and uncertainties, including results of additional drilling at Velardena; changes in geological, geostatistical and other interpretations of the information from drill programs; reliability of metallurgical testing results and changes in interpretation; unfavorable interpretations of geologic information; delays in commencing mining or processing or the ramp-up of same; mining or processing problems; mining and processing costs in excess of those anticipated; unexpected variations in mineral grades, types and metallurgy; fluctuations in relevant metal prices; technical, permitting, mining, metallurgical, recovery or processing issues; problems that delay or reduce underground mine and stope construction; operational changes or problems; failure of mined material to meet expectations; failure to meet expectations regarding mining and processing rates, saleable metals, cash costs, cash flow at the Velardena Properties and incremental cash for the Company, failure of veins to be mined to meet expectations; higher than anticipated cash outlays to resume operations; fluctuations in silver, gold, zinc and lead prices, costs and general economic conditions, changes in political conditions, tax, environmental and others laws in Mexico, and financial market conditions. Golden Minerals Company assumes no obligation to update this information. Additional risks relating to Golden Minerals Company may be found in the periodic and current reports filed with the Securities Exchange Commission by Golden Minerals Company, including the Company's Annual Report on Form 10-K for the year ended December 31, 2013.
Golden Minerals Company
Director of Investor Relations
SOURCE Golden Minerals Company