Golden Minerals Announces Second Quarter 2014 Results

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Aug 06, 2014, 05:10 ET

GOLDEN, Colo., Aug. 6, 2014 /PRNewswire/ -- Golden Minerals Company ("Golden Minerals" or the "Company") (NYSE MKT: AUMN) (TSX: AUM) today announced results for the quarter ending June 30, 2014.

Financial Results

The Company reported a net loss of $5.0 million in the second quarter 2014 compared to a net loss of $217.8 million in the second quarter 2013, with the difference attributable primarily to a $238.0 million impairment charge recorded in the second quarter 2013. The Company reported zero gross margin in the current quarter as compared to a negative gross margin of $3.6 million in second quarter 2013, due to a suspension of mining activity at the Velardena Properties between mid-June 2013 and June 30, 2014. Velardena care and maintenance costs were $1.2 million in the current quarter compared to $2.3 million in the second quarter 2013, with the difference due to the inclusion of shut down expenses in the 2013 figure. Exploration expenses were $1.7 million in the second quarter 2014 compared to $1.2 million in the year ago period, with the difference attributable primarily to 2014 drilling at the Company's Los Azules property in Mexico. Administrative expenses were $1.1 million in the current quarter compared to $1.6 million in the second quarter 2013.

The Company's cash and short-term investments balance on June 30, 2014 was $10.4 million as compared to $19.1 million on December 31, 2013. The $8.7 million decrease is due primarily to the expenditure of $2.5 million in care and maintenance and $1.0 million in drilling costs at our Velardena Properties; $2.3 million in other exploration expenditures; $0.8 million in maintenance and property holding costs at the El Quevar project; and $2.8 million in general and administrative expenses; offset in part by a reduction in working capital of $0.7 million primarily related to an increase in accounts payable for expenditures associated with drilling programs at the Velardena Properties and the Los Azules exploration project in Mexico.

Velardena Properties

During the second quarter 2014, Golden Minerals continued to evaluate plans for a restart of operations at the Velardena Properties, with the objective of implementing a plan that yields a sustainable cash margin for operations. On June 18, 2014 the Company announced it would restart mining activities in July 2014, with plans to begin processing mined material during the fourth quarter 2014. Mining started on July 1, 2014, and when mining and processing are ramped up through the second quarter 2015, the Company anticipates processing roughly an average of 285 tonnes per day at cash costs of between $12 to $15 per payable ounce of silver, net of gold, lead and zinc by-product credits. At that time, 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, and calculated at 60:1 silver to gold). Restart plans assume silver and gold prices of $20 and $1,250 per ounce, respectively, and show positive cash flow for the Company after the second quarter 2015. Please refer to the accompanying Form 10-Q for additional details related to Velardena's restart plan.

Also during the second quarter 2014, Golden completed a 9,000-meter drilling program at Velardena testing vein systems located largely outside the current 43-101 resource estimate. An independent engineering firm participated in the preparation of the mining plan. Drill results have guided restart plans in which mining is expected to focus on the San Mateo, Terneras and Roca Negra veins.

Exploration and Other Updates

During the first quarter 2014, the Company completed an initial 2,000-meter drilling program at the 233-hectare Los Azules property in Chihuahua, Mexico to test down dip targets on the previously mined vein system. Based upon phase one results, the Company subsequently conducted a phase two program and has now completed a total of 6,900 meters in 29 holes drilled from both surface and underground. The Company has suspended drilling pending phase two results which it expects to receive in the third quarter 2014.

During the second quarter Golden continued efforts to actively solicit a partner to advance the El Quevar project located in Salta, Argentina. Additionally, the Company continues to review strategic business opportunities, focusing on development or operating properties in North America, including Mexico.

Financial Outlook

The Company expects to have sufficient funding to continue its business strategy through 2014, ending the year with a cash balance of approximately $2.0 million. The Company intends to spend approximately $8.5 million on the following amounts during the third and fourth quarters of 2014: approximately $3.0 million of negative gross margin and start-up costs related to the restart of Velardena, $1.0 million of capital expenditures for mill improvements and slusher equipment; $0.5 million for ongoing maintenance and holding costs at El Quevar; $1.5 million on other exploration activities and property holding costs; and $2.0 million on general and administrative costs and $0.5 million in increased working capital.

Additional information regarding second quarter 2014 financial results may be found in the Company's 10-Q Quarterly Report 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 restarting operations at its Velardena Properties, the advancement of its El Quevar advanced exploration property in Argentina, and the exploration of properties in Argentina and Mexico.

Forward-Looking Statements

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.

Forward-Looking Statements

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 including the anticipated timing of restart activities at the Velardena Properties and ramp-up, mining and processing rates, veins to be mined and dilution levels; expected output amounts of salable and payable silver equivalent ounces; cash costs per ounce of payable silver net of by-product credits; expected cash outlay for re-start and ramp-up activities; anticipated positive net cash flow at the Velardena Properties and incremental cash for the Company at current silver and gold prices; anticipated expenditures in the second half of 2014 and anticipated year-end 2014 cash and cash equivalents. These statements are subject to risks and uncertainties, including changes in geological, geostatistical and other interpretations of the information from drill programs and previous mining experience ; reliability of metallurgical testing results and changes in interpretation; unfavorable interpretations of geologic information; delays or problems 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 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; unanticipated expenses including potential expenses on strategic business opportunities; changes in political conditions, in 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
Karen Winkler
Director of Investor Relations
(303) 839-5060
[email protected]

GOLDEN MINERALS COMPANY
CONSOLIDATED BALANCE SHEETS
(Expressed in United States dollars)
(Unaudited)

			June 30,	December 31,
			2014	2013
			(in thousands, except share data)
Assets
Current assets
	Cash and cash equivalents		$ 10,400	$ 19,146
	Trade receivables		-	25
	Inventories		384	449
	Value added tax receivable, net		1,775	1,765
	Prepaid expenses and other assets		923	1,091
		Total current assets	13,482	22,476
Property, plant and equipment, net			30,639	32,375
Prepaid expenses and other assets, non-current			-	30
		Total assets	$ 44,121	$ 54,881
Liabilities and Equity
Current liabilities
	Accounts payable and other accrued liabilities		$ 1,747	$ 1,365
	Other current liabilities		3,488	4,405
		Total current liabilities	5,235	5,770
Asset retirement obligation			2,589	2,602
Other long term liabilities			74	53
		Total liabilities	7,898	8,425

Commitments and contingencies
Equity
	Common stock, $.01 par value,
		100,000,000 shares authorized; 43,530,833 shares issued and outstanding for both periods	435	435
	Additional paid in capital		495,115	494,647
	Accumulated deficit		(459,327)	(448,626)
		Shareholder's equity	36,223	46,456
		Total liabilities and equity	$ 44,121	$ 54,881

GOLDEN MINERALS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Expressed in United States dollars) (Unaudited)

			Three Months Ended		Six Months Ended
			June 30,		June 30,
			2014	2013	2014	2013
			(in thousands, except share data)
Revenue:
	Sale of metals		$ -	$ 4,467	$ -	$ 10,297
Costs and expenses:
	Costs applicable to sale of metals (exclusive
		of depreciation shown below)	-	(8,145)	-	(17,017)
	Exploration expense		(1,653)	(1,240)	(3,253)	(2,764)
	El Quevar project expense		(421)	(586)	(755)	(1,673)
	Velardena project expense		-	(759)	-	(2,921)
	Velardena shutdown and care & maintenance costs		(1,208)	(2,329)	(2,457)	(2,329)
	Administrative expense		(1,150)	(1,633)	(2,805)	(3,530)
	Stock based compensation		(257)	(558)	(587)	(979)
	Reclamation and accretion expense		(49)	(46)	(98)	(88)
	Impairment of long lived assets		-	(238,020)	-	(238,020)
	Impairment of goodwill		-	(11,180)	-	(11,180)
	Other operating income, net		2	630	4	3,828
	Depreciation, depletion and amortization		(778)	(2,529)	(1,624)	(5,097)
		Total costs and expenses	(5,514)	(266,395)	(11,575)	(281,770)
	Loss from operations		(5,514)	(261,928)	(11,575)	(271,473)
Other income and (expense):
	Interest and other income, net		487	251	881	323
	Gain on foreign currency		(16)	(1,145)	(7)	(410)
		Total other income (expense)	471	(894)	874	(87)
	Loss from operations before income taxes		(5,043)	(262,822)	(10,701)	(271,560)
	Income tax benefit		-	45,017	-	47,495
	Net loss		$ (5,043)	$ (217,805)	$ (10,701)	$ (224,065)
Comprehensive loss:
	Unrealized gain on securities		-	-	-	90
	Comprehensive loss		$ (5,043)	$ (217,805)	$ (10,701)	$ (223,975)
Net loss per common share – basic
	Loss		$ (0.12)	$ (5.09)	$ (0.25)	$ (5.23)
Weighted average common stock outstanding - basic (1)			42,918,426	42,821,914	42,906,090	42,812,918