GOLDEN, Colo., Nov. 6, 2013 /CNW/ – Golden Minerals Company (“Golden Minerals” or the “Company”) (NYSE MKT: AUMN) (TSX: AUM) announces results for the quarter ending September 30, 2013.
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Financial Results
For the third quarter 2013, Golden Minerals recorded revenue of $0.5 million and costs of metals sold of $0.5 million from the Company’s Velardena Operations in Mexico. The Company suspended production at the Velardena property on June 19, 2013 and third quarter 2013 revenue represents inventory on hand as of the suspension date that was sold during the quarter. In the third quarter 2012, the Company recorded revenue of $7.1 million, cost of metals sold of $8.6 million and a negative gross margin of $1.5 million. The decrease in year over year revenue is due to the suspension of production in June, 2013. The Company recorded a net loss of $6.2 million in the third quarter 2013 as compared to a net loss of $63.3 million in the third quarter 2012. The 2012 net loss included a non-cash $57.2 million reduction in goodwill related to lower forecasted metals prices and changed operating plan assumptions for the Velardena property. Loss from operations in the third quarter 2013 was $6.4 million compared to $66.5 million in the third quarter 2012, with the difference attributable primarily to the 2012 reduction in goodwill and to lower costs of metals sold in 2013.
The Company’s cash and short-term investments balance on September 30, 2013 was $23.8 million as compared to $44.6 million on December 31, 2012. The decrease during the nine month period is due primarily to $6.7 million in operating losses at the Velardena Operations; $4.9 million in Velardena Operations capital and development expenditures; $4.6 million in suspension-related activities at the Velardena Operations, including care and maintenance costs; $3.4 million in exploration expenditures; $4.6 million in general and administrative expenses; and $2.2 million in El Quevar project expense; offset in part by net proceeds of $4.0 million from the sale of non-strategic exploration property interests and a decrease in working capital of $1.6 million primarily related to a reduction in inventories and receivables at the Velardena Operations.
Velardena Operations
On June 19, 2013 the Company suspended production at its Velardena Operations in Mexico. Earlier in the year the Company projected that the Velardena Operations would achieve operating cash neutrality during the third quarter 2013, assuming gold and silver prices of $1,600 per ounce and $30 per ounce, respectively. The Company’s production increased approximately 25 percent on a silver equivalent daily basis in the first half of the year compared to the previous year but prices decreased significantly below the $1,600 and $30 per ounce levels, with decreased prices being the principal reason for the suspension of operations. The Company has placed the mine and processing plants on care and maintenance to enable a restart when operating plans and then-current metals prices support a cash positive outlook for operations. Approximately 440 positions at the Velardena Operations have been eliminated as a result of the suspension and the Company has retained a core group of approximately 40 employees to facilitate a restart of operations and to maintain and safeguard the longer term value of the asset.
Since June 19, the Company has focused on developing and evaluating alternative plans for a restart of operations at Velardena. The Company continues work on a restart plan that could include a long hole stoping mining method for ore extraction, which would require initial capital costs of approximately $4.0 million to $5.0 million excluding working capital, and a nine month new stope development period followed by a ramp up in production. Additionally, the Company plans to review alternative high grade narrow vein mining methods to determine the most beneficial mining method for a potential restart.
The Company has been mapping and sampling underground veins containing higher grade shoots to verify mine modeling in support of restart planning. Generally, results to date have shown higher grades but narrower widths in the mineralized portions of the veins than previously modeled. Although the analysis is not complete, management believes the net result to date of this verification process has been to generally decrease the projected grades due to the dilution required to obtain workable mining widths utilizing the modified long hole stoping method.
Work continued in the third quarter on treatment options to improve gold recoveries from gold-bearing pyrites ore. Testing to date for an autoclave process and roasting technologies has demonstrated significant improvement in recoveries but both of these processes require a larger-scale mining project than data currently suggests is feasible. Other enhanced recovery technologies, including fine grinding and leaching, ferric chloride oxidation and leaching and other oxidation processes, have not demonstrated an economic benefit in lab testing thus far.
Additionally, the Company is actively searching for oxide feed from outside sources, which could enable a restart of the Velardena oxide plant ahead of and possibly during implementation of an economic restart operating plan.
El Quevar Update
In early 2013, Golden completed a 2,400 meter, 16-hole drilling program at the Quevar North and South areas at El Quevar. Results may represent a significant extension of the previously defined Yaxtche deposit and a mineralized zone at Quevar North similar in structural control to the Yaxtche zone. In order to advance El Quevar, the Company is actively soliciting a partner to move the project forward with additional drilling in these areas, drilling in other potential areas and evaluations.
Exploration Update
Recently Golden acquired the 233-hectare Los Azules property in Chihuahua, Mexico under a purchase agreement with Minera Socavato, a private Mexico mining company. The Company is continuing to rehabilitate an underground access tunnel as required for the planned underground drilling program. Although progress on the underground rehabilitation has been slower than expected, the Company plans to commence in the fourth quarter 2013 a drilling program of approximately 2000 meters to test the down dip continuation of the previously mined veins. Past production at Los Azules was estimated at 500,000 tonnes of 11 grams per tonne gold and 35 grams per tonne silver by Servicio Geologico Mexicano (p. 411 of Monografia Geologico-Minero del Estado de Chihuahua, 2007).
Golden has made significant progress with its ongoing strategy to rationalize its portfolio of exploration properties, realizing in 2012 and the first quarter 2013 exploration property sales totaling approximately $9.0 million including approximately $3.5 million for most of the Company’s exploration properties in Peru. The Company has also closed its office in Peru, relinquished properties no longer of interest, and has reduced its portfolio of about 80 properties containing about 730,000 hectares to about 40 properties containing about 320,000 hectares. Since 2011, the Company has reduced ongoing annual expenditures for the exploration program by approximately 75 percent.
Financial Outlook
During the fourth quarter 2013, the Company anticipates spending approximately $1.5 million for remaining suspension costs and care and maintenance activities at Velardena as well as $0.5 million for project costs at El Quevar. Additionally, the Company anticipates spending approximately $1.0 million on other exploration activities and property holding costs, $1.5 million on general and administrative costs, and $1.0 million related to insurance premium pre-payments and a further reduction of accrued liabilities relating to suspension activities at Velardena. The Company therefore anticipates a cash balance of approximately $18.0 million at year-end 2013, or $2.0 million higher than the Company’s previous estimate. Full-year 2013 general and administrative costs are estimated at approximately $6.1 million or 14 percent less than in 2012. Exploration expenses for full-year 2013 are estimated at approximately $4.8 million or 31 percent less than in 2012.
Additional information regarding third quarter 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 that owns the Velardena Operations in Mexico and the evaluation stage El Quevar project in Argentina. The Company is primarily focused on efforts to develop new operating plans for the Velardena mining operations, to advance El Quevar, and to further exploration as well as continue to monetize and rationalize exploration properties in South America and Mexico.
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 laws, including statements regarding estimated capital costs and time required to implement a potential long-hole stoping restart plan; current results from mine model verification procedures; anticipated costs in the fourth quarter 2013 related to the suspension of production at the Velardena Operations and continued care and maintenance of the assets, anticipated expenditures on exploration and El Quevar, and general and administrative costs; the continuation of planned activities during the production suspension period including activities related to validation of mine planning data, development and evaluation of potential new operating strategies; planned drilling on the Los Azules property; and anticipated year-end 2013 cash and cash equivalents. These statements are subject to risks and uncertainties, including unexpected events at the Velardena Operations, including higher than anticipated suspension or care and maintenance costs, accidents or damage to equipment or environmental or permitting problems; difficulties in or inability to develop a new operating plan for production at a sustainable cash positive margin, which could be caused by, among other things, inability to confirm the new mine model, variations in ore grade and relative amounts, grades and metallurgical characteristics of oxide and sulfide ores; labor or union problems; delays or failure in receiving or maintaining required government approvals or permits; technical, permitting, mining, metallurgical or processing issues; inability to identify a treatment option to improve gold recoveries; further decreases in silver and gold prices; loss of and inability to adequately replace skilled mining and management personnel; interpretations and changes in interpretations of geologic information; volatility or other changes in the U.S. and Canadian securities markets; availability and cost of materials, supplies and electrical power required for mining operations and exploration; fluctuations in costs and general economic conditions; changes in political conditions, tax, environmental and other laws; and diminution of physical safety of employees in Mexico, and other conditions in the countries in which the Company operates. 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 Annual Report on Form 10-K for the year ended December 31, 2012 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.
Golden Minerals Company
Karen Winkler
Director of Investor Relations
(303) 839-5060
[email protected]
GOLDEN MINERALS COMPANY | |||||
September 30, | December 31, | ||||
2013 | 2012 | ||||
(unaudited) | |||||
(in thousands, except share data) | |||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ 23,823 | $ 44,406 | |||
Investments | – | 242 | |||
Trade receivables | 244 | 1,291 | |||
Inventories | 492 | 3,388 | |||
Value added tax receivable | 1,739 | 4,422 | |||
Prepaid expenses and other assets | 815 | 1,044 | |||
Total current assets | 27,113 | 54,793 | |||
Property, plant and equipment, net | 39,418 | 280,905 | |||
Assets held for sale | – | 575 | |||
Goodwill | 487 | 11,666 | |||
Prepaid expenses and other assets | 63 | 163 | |||
Total assets | $ 67,081 | $ 348,102 | |||
Liabilities and Equity | |||||
Current liabilities | |||||
Accounts payable and other accrued liabilities | $ 1,900 | $ 6,232 | |||
Other current liabilities | 6,164 | 7,074 | |||
Total current liabilities | 8,064 | 13,306 | |||
Asset retirement obligation | 2,571 | 2,259 | |||
Deferred tax liability | – | 47,072 | |||
Other long term liabilities | 76 | 193 | |||
Total liabilities | 10,711 | 62,830 | |||
Commitments and contingencies | |||||
Equity | |||||
Common stock, $.01 par value, 100,000,000 shares authorized; 43,327,833 and 43,265,833 shares issued and outstanding, respectively | 433 | 433 | |||
Additional paid in capital | 494,459 | 493,175 | |||
Accumulated deficit | (438,522) | (208,246) | |||
Accumulated other comprehensive loss | – | (90) | |||
Parent company’s shareholder’s equity | 56,370 | 285,272 | |||
Total liabilities and equity | $ 67,081 | $ 348,102 | |||
GOLDEN MINERALS COMPANY | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
September 30, | September 30, | ||||||||
2013 | 2012 | 2013 | 2012 | ||||||
(in thousands, except share data) | |||||||||
Revenue: | |||||||||
Sale of metals | $ 500 | $ 7,063 | $ 10,797 | $ 18,384 | |||||
Costs and expenses: | |||||||||
Costs applicable to sale of metals (exclusive | |||||||||
of depreciation shown below) | (517) | (8,573) | (17,534) | (23,103) | |||||
Exploration expense | (1,024) | (1,207) | (3,788) | (5,419) | |||||
El Quevar project expense | (486) | (985) | (2,159) | (3,574) | |||||
Velardena project expense | (85) | (767) | (3,006) | (6,291) | |||||
Velardena shutdown and care & maintenance costs | (2,218) | – | (4,547) | – | |||||
Administrative expense | (1,078) | (1,934) | (4,608) | (5,787) | |||||
Stock based compensation | (305) | (308) | (1,284) | (831) | |||||
Reclamation and accretion expense | (47) | (40) | (135) | (185) | |||||
Impairment of long lived assets | – | – | (237,838) | – | |||||
Impairment of goodwill | – | (57,213) | (11,180) | (57,213) | |||||
Other operating income & (expenses), net | (31) | 264 | 3,615 | 479 | |||||
Depreciation, depletion and amortization | (1,083) | (2,774) | (6,180) | (6,617) | |||||
Total costs and expenses | (6,874) | (73,537) | (288,644) | (108,541) | |||||
Loss from operations | (6,374) | (66,474) | (277,847) | (90,157) | |||||
Other income and (expense): | |||||||||
Interest and other income, net | 186 | 162 | 509 | 2,323 | |||||
Royalty income | – | 14 | – | 371 | |||||
Gain (loss) on foreign currency | (127) | 368 | (537) | 802 | |||||
Total other income and (expense) | 59 | 544 | (28) | 3,496 | |||||
Loss from operations before income taxes | (6,315) | (65,930) | (277,875) | (86,661) | |||||
Income tax benefit | 104 | 2,614 | 47,599 | 5,574 | |||||
Net loss | $ (6,211) | $ (63,316) | $ (230,276) | $ (81,087) | |||||
Comprehensive loss: | |||||||||
Unrealized gain on securities | – | 166 | 90 | 107 | |||||
Comprehensive loss | $ (6,211) | $ (63,150) | $ (230,186) | $ (80,980) | |||||
Net loss per common share basic | |||||||||
Loss | $ (0.14) | $ (1.74) | $ (5.38) | $ (2.27) | |||||
Weighted average common stock outstanding – basic (1) | 42,857,347 | 36,318,747 | 42,827,891 | 35,762,251 | |||||
(1) Potentially dilutive shares have not been included because to do so would be anti-dilutive. | |||||||||
SOURCE Golden Minerals Company
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