GOLDEN, Colo., Feb. 28, 2017 /PRNewswire/ — Golden Minerals Company ("Golden Minerals", "Golden" or the "Company") (NYSE MKT and TSX: AUMN) has today announced financial results for the full year ending December 31, 2016.
2016 Highlights- Generated a positive net operating margin (defined as lease revenue less lease costs) of $4.4 million in 2016 from the Velardena oxide plant lease compared to a negative net operating margin of $2.0 million in 2015 from a combination of the Velardena oxide plant lease and mining activities
- Granted Hecla Mining Company ("Hecla") the right to extend the oxide plant lease through the end of 2018
- Generated an additional $1.8 million in other operating income related to sales and farm-outs of non-strategic property and equipment
- Spent $3.7 million in exploration expenses to advance exploration properties including Santa Maria and Rodeo:
- At the Santa Maria property:
- Completed test mining and processing and sold concentrates containing silver and gold for approximately $0.3 million, which offset exploration costs for the year
- Began a mineral resource estimate and Preliminary Economic Assessment which were completed in February 2017
- At the Rodeo property, completed a 2,100-meter drilling program and began a mineral resource estimate which was completed in January 2017
- At the Santa Maria property:
- At the Santa Maria property:
- Completed test mining and processing and sold concentrates containing silver and gold for approximately $0.3 million, which offset exploration costs for the year
- Began a mineral resource estimate and Preliminary Economic Assessment which were completed in February 2017
- Completed test mining and processing and sold concentrates containing silver and gold for approximately $0.3 million, which offset exploration costs for the year
- Began a mineral resource estimate and Preliminary Economic Assessment which were completed in February 2017
- At the Rodeo property, completed a 2,100-meter drilling program and began a mineral resource estimate which was completed in January 2017
- Electrum Global Holdings ("Electrum") began exploration drilling in December 2016 on Golden's farmed-out Celaya silver and gold property through their 100 percent-owned subsidiary
- Cash and cash equivalents of $2.6 million with zero debt as of December 31, 2016, as compared to $4.1 million and $5.0 million face value convertible debt, respectively, as of December 31, 2015
- Net loss of $0.13 per share in 2016 compared to net loss of $0.48 per share in 2015
Business Summary
Oxide Mill Lease
In July 2015 the Company entered into a leasing agreement with Hecla to lease the Velardena oxide plant for an initial term of 18 months beginning July 1, 2015. During 2016 Hecla exercised its right to extend the initial 18-month term for six additional months until June 30, 2017, as permitted under the original lease agreement. The Company and Hecla also reached an agreement regarding an expansion of the tailings impoundment, at Hecla's cost, to accommodate Hecla's increased use of tailings capacity in excess of an agreed amount while preserving flexibility for future tailings expansions. In connection with the agreement regarding tailings impoundment expansion, Golden also granted Hecla the right to extend the lease for an additional 18 months following June 30, 2017, or until December 31, 2018.
Hecla is responsible for ongoing operation and maintenance of the oxide plant. During the year ended December 31, 2016, Hecla processed approximately 136,000 tonnes of material through the oxide plant, resulting in total revenues to Golden of approximately $6.4 million. Golden incurred costs of approximately $2.0 million related to the services it provides under the lease for a net margin of approximately $4.4 million during 2016. Hecla reached its intended processing throughput of approximately 400 tonnes per day during 2016 and, at this rate, net cash payments to Golden, net of reimbursable costs, should total approximately $0.4 million per month, including variable and fixed fees, or nearly $5.0 million annually.
Based on recent public disclosures by Hecla, Golden believes that Hecla has sufficient reserves at their San Sebastian mine to continue to process ore at current throughput rates at the Company's Velardena oxide plant through the end of 2018, should they elect to do so.
Sentient Loan Financing
The Company closed on a $5.0 million secured convertible loan borrowing from The Sentient Group ("Sentient") in October 2015. The proceeds from this loan enabled Golden to fund the suspension of mining and processing activities at the Velardena Properties and continue its long term business strategy into 2016. The loan was converted by Sentient in two separate transactions, in February 2016 and June 2016, into a total of 27,366,740 shares of Golden Minerals common stock. As a result, Golden Minerals' debt balance was reduced to zero. As of February 24, 2017, Sentient holds approximately 46 percent of the Company's 89.7 million issued and outstanding shares of common stock.
Santa Maria
The Company completed an underground drilling program of 2,200 meters in 24 drill holes in 2016, and has mined and processed a total of 7,500 tonnes of material since 2015. The average grade of the 7,500 tonnes mined and processed is 338 grams per tonne ("gpt") silver and 0.7 gpt gold. The Company completed an updated NI 43-101 mineral resource estimate and PEA that estimates an after-tax net present value of approximately $6.4 million at an 8 percent discount rate and an internal rate of return of 84 percent. (See the Company's February 15, 2017 press release for additional details.) In 2017, Golden plans to continue to optimize mining plans and obtain permits for the potential mining operation as considered in the current PEA. The Company also plans to conduct additional exploration work with the goal of expanding the deposit.
