Golden Minerals Company (“Golden Minerals”, “Golden” or “the
Company”) (NYSE American and TSX: AUMN) today reported results from
a second Preliminary Economic Assessment (“PEA”) completed for its
Santa Maria silver and gold project located in southern Chihuahua
State, Mexico.
The PEA presents an updated assessment and
incorporates data accumulated since March 2017. It includes an
additional 77 hectares of mineral tenure acquired in August 2017
that cover the on-strike and downdip extensions of the Santa Maria
vein systems. It also incorporates information from a 22-hole,
4,800-meter drilling program completed in 2018. The new PEA shows
significant improvement in projected cash flow, metal production
and profitability compared to the previous study. Additionally, the
PEA includes an updated National Instrument 43-101 (“NI 43-101”)
compliant mineral Resource Estimate dated as of September 14,
2018.
Warren M. Rehn, President and Chief Executive
Officer of Golden Minerals Company, comments, “The Santa Maria
project offers Golden Minerals a low capital cost re-entry into
potential silver production in Mexico. Estimated future cash
flow and NPV have increased by about 50% based on the additional
resources in the study. The $1M start-up cost is at the lowest end
of the spectrum of capital cost requirements due to the project’s
proximity to existing process facilities and the existing
underground development. It is also important to point out that the
deposit is open at depth and there are numerous additional veins on
the property that have not yet been drilled.”
PEA Highlights
- After-tax net present value (“NPV”): (US)$10.6 million at a 5%
discount rate
- After-tax internal rate of return (“IRR”): 159.0%
- After-tax payback period: 10 months
- Total capital cost: $1.2 million, comprised of $1.0
million initial and $0.2 million sustaining capital
expenditures
- Pre-production development time: 6 months
- Life of mine (“LOM”) 4.2 years
- LOM after tax free cash flow $12.4 million
- LOM payable silver production 2.66 million oz.
- LOM payable silver equivalent production 3.13 million oz1
- LOM average silver grade 331 grams per tonne (“g/t”)
- LOM average gold grade 0.78 g/t
- Net cash cost $10.72 per payable ounce of silver 2
- All-in sustaining costs (“AISC”) $11.12 per payable silver oz.
2
1 Calculated using prices of Au $1,238/oz and Ag
$16.63/oz, or 74:1 gold: silver2 Cash cost and AISC are defined in
“Non-GAAP Financial Measures” below
Note: PEA parameters assume a silver price
of $16.63/oz and a gold price of $1,238/oz, which are the
three-year trailing average prices, per SEC reporting guidelines,
and a discount rate of 5%. All figures throughout this release are
expressed in US Dollars unless otherwise noted.
Key parameters of the PEA are shown in the
following sections. Please note the PEA is preliminary in nature
and includes Inferred Mineral Resources that are considered too
speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as Mineral
Reserves. Standalone economics have not been undertaken for the
Indicated Resources and as such no reserves have been estimated for
the project. There is no certainty that the economic results
described in the PEA will be realized. Mineral Resources that are
not Mineral Reserves do not have demonstrated economic
viability.
Financial Summary
After-tax economic results have been summarized
below.
Financial Results Summary |
Financial Results |
Post-Tax ($M) |
Cumulative Cash Flows (LOM) |
$12.4 |
Net Present Value (5%) (Base Case) |
$10.6 |
Net Present Value (8%) |
$9.7 |
Net Present Value (10%) |
$9.1 |
Internal Rate of Return (IRR) |
159.0% |
Payback |
0.8 years |
Total Capital Costs |
$1.2 |
Key Model Parameters
TEM Results |
Description |
|
|
Unit Cost
($/t-milled) |
|
Total
Value ($000s) |
|
|
NSR |
|
$146.27 |
|
$45,055 |
|
|
Land Acquisition |
|
($2.97) |
|
($915) |
|
|
Net Revenue |
|
$143.30 |
|
$44,140 |
|
Operating Costs |
|
|
|
|
|
|
Mining |
|
$49.31 |
|
$15,188 |
|
|
Processing |
|
$43.26 |
|
$13,324 |
|
|
G&A |
|
$1.34 |
|
$412 |
|
|
Lease |
|
$0.75 |
|
$230 |
|
|
Operating Costs |
|
$94.65 |
|
$29,154 |
|
|
Operating Margin |
|
$48.65 |
|
$14,986 |
|
Capital Costs |
|
|
|
|
|
|
Mining |
|
- |
|
$370 |
|
|
Infrastructure |
|
- |
|
$525 |
|
|
Owner Costs |
|
- |
|
$316 |
|
|
Capital Costs |
|
- |
|
$1,211 |
|
Estimate of Tax |
|
|
|
|
|
|
Federal Tax |
|
- |
|
$0 |
|
|
Special Mining Tax |
|
- |
|
($1,170) |
|
|
Precious Metals
Tax |
|
- |
|
($225) |
|
|
Estimate of Tax |
|
- |
|
($1,395) |
|
|
Cash
Flow |
|
- |
|
$12,380 |
|
|
NPV 5% |
|
- |
|
$10,593 |
|
|
IRR |
|
- |
|
159.3% |
|
|
Payback (months) |
|
- |
|
10 |
|
|
|
|
|
|
|
|
General Assumptions
General Assumptions |
Description |
Units |
Value |
Market Prices |
|
|
|
Gold1 |
|
$/oz |
$1,238 |
|
|
Silver1 |
|
$/oz |
$16.63 |
|
Taxes |
|
|
|
Federal Tax2 |
|
% |
|
30.0% |
|
|
Special Mining Tax |
|
% |
|
7.5% |
|
|
Precious
Metals Tax |
|
% |
|
0.5% |
|
Financial |
|
|
|
Discount
Rate |
|
% |
|
5.0% |
|
1 Three-year trailing average prices, per SEC reporting
guidelines2 Not applied due to Net Operating Losses |
|
Process Summary
Process Summary |
Description |
Units |
Value |
|
Payable Metal Recoveries |
|
|
|
Sulfide |
|
|
|
|
Gold |
|
% |
83% |
|
|
Silver |
|
% |
91% |
|
|
Transition |
|
|
|
|
Gold |
|
% |
89% |
|
|
Silver |
|
% |
94% |
|
|
Oxide |
|
|
|
|
Gold |
|
% |
85% |
|
|
Silver |
|
% |
73% |
|
Recovered Metals |
|
|
|
Gold |
|
koz |
6.5 |
|
|
Silver |
|
koz |
2,745 |
|
|
|
|
|
|
|
Capital Estimates
Initial capital costs of $1.0 million are
anticipated to be very low due to the utilization of an existing
third-party mill for processing and an existing equipment fleet
from the Company’s Velardeña Properties. Sustaining capital
is estimated at just $0.2 million over the mine life and includes
closure costs.
Capital Cost Estimate Summary |
|
Description |
Initial
Capital ($000s) |
|
Sustaining
Capital ($000s) |
|
Total
Capital ($000s) |
|
|
Mining |
$370 |
|
$0 |
|
$370 |
|
|
Infrastructure |
$525 |
|
$0 |
|
$525 |
|
|
Owner's Costs |
$128 |
|
$188 |
|
$316 |
|
|
Total |
$1,023 |
|
$188 |
|
$1,211 |
|
Mining Operations and
Milling
The PEA estimates a 4.2-year underground mining
operation using pre-existing and new underground development at an
average mine production rate of 218 tonnes per day, using a
combination of cut-and-fill and sublevel stoping. It is currently
envisioned that both mixed and sulfide materials will undergo toll-
milling at a local third-party facility with sulfide flotation
circuits. Oxide material will be cyanide leached at the same
toll-milling facility. Santa Maria is estimated to deliver 150k
tonnes of diluted sulfide mineralized material to the mill at an
average grade of 378 g/t silver equivalent (“AgEq”), 116k tonnes of
diluted oxide material at an average grade of 428 g/t AgEq and 42k
tonnes of diluted transitional material at an average grade of 278
g/t AgEq.
Mineral Resource Estimate Dated
September 14, 2018
In conjunction with the PEA, Tetra Tech prepared
an updated Mineral Resource estimate in compliance with NI 43-101
at Santa Maria.
Classification |
Cutoff
Grade |
Tonnes |
Ag g/t |
Au g/t |
AgEq g/t |
Ag
toz |
Au
toz |
AgEq
toz |
AgEq g/t |
(M) |
(k) |
(M) |
Measured |
180 |
42,000 |
271 |
0.83 |
333 |
0.37 |
1.13 |
0.45 |
Indicated |
180 |
170,000 |
291 |
1.04 |
368 |
1.59 |
5.7 |
2.01 |
Inferred |
180 |
261,000 |
272 |
0.9 |
346 |
2.3 |
7.61 |
2.92 |
Notes:
- Cutoff grade and Ag equivalent calculated using metal prices of
$16.63 and $1,238 per troy ounce of Ag and Au with a ratio of 74:1,
the 3-year trailing average as of the end of May 2018;
- Cutoff applied to diluted Ag equivalent block grades using
recoveries of 90% and 80% Ag and Au;
- Columns may not total due to rounding.
Property Title and
Ownership
Golden Minerals has the right to acquire the
Santa Maria property under two separate option agreements
representing the total concessions that comprise the property for
additional payments of $1.2 million, payable through April 2022.
The first option agreement covers concessions acquired in August
2014 and requires an additional $0.6 million be paid by continuing
to make minimum payments of $0.2 million in each of the years 2019
through 2021. In addition, until the total due under the first
option agreement has been paid, the property owners have the right
to 50% of any net profits from mining activities from the
concessions related to the option, after reimbursement of all costs
incurred by us since April 2015, to the extent that such net profit
payments exceed the minimum payments. The second option
agreement covers concessions acquired in August 2017 and requires
an additional $0.6 million be paid by making additional payments of
$0.2 million in each of the years 2019 through 2021.
PEA Information
The discounted cash flows in the PEA are
provided post-tax and are prepared in compliance with National
Instrument 43-101 of the Canadian Securities Administrators. Tetra
Tech is an independent engineering firm that served as principal
author of the PEA prepared on behalf of the Company. The following
Qualified Persons from Tetra Tech will co-author the technical
report that will be filed on SEDAR within 45 days of this news
release: Dante Ramírez, PhD, MMSA QP, and Leonel López, AIPG-
Geol. Eng. QP, SME-RM. Each of these Qualified Persons has
reviewed and approved the information presented in this news
release that was derived from the sections of the PEA study for
which they were responsible. Each of the named Qualified
Persons is independent of Golden Minerals.
The contents of this press release have been
reviewed and approved by Warren M. Rehn, M.Sc., QP MMSA (#01449QP),
a Qualified Person for the purposes of NI 43-101. Mr. Rehn
has over 33 years of mineral exploration experience and is
President, Chief Executive Officer and a Director of Golden
Minerals Company.
Data Verification
Tetra Tech authors of this and previous
technical reports prepared for the Company visited the Santa Maria
site to conduct data verification activities on multiple occasions
in conjunction with the 2015 and 2017 reports. Data verification
conducted during site visits included observations of drill hole
collar locations and orientations, drill core, channel sample
locations, channel sample collection, underground mine accesses, on
mineralized structure drifts and stopes, stockpiled oxide material
from waste backfill mucking. The deposit was witnessed in
underground workings and at the surface but was not traversed in
its entirety. Confirmatory sampling of drill core was not completed
due to the sparseness of mineral intervals; the author did not want
to eliminate the physical record of previously halved core for the
purposes of verification.
Drill hole collars and their orientations were
observed in the field using a compass and handheld global
positioning system (GPS). Verification of collars locations and
orientations were found to correspond to those provided by Minera
Cordilleras, a Mexican wholly-owned subsidiary of Golden
Minerals.
Core boxes containing mineralized intervals of
the following drill holes SM14-04 and SM14-09 were made available
for visual review. The textures observed are typical of epithermal
veins including banding of quartz and sulfide minerals, quartz
flooding, brecciation, and oxidation. In addition to visually
reviewing core on site, the author has reviewed core photos of
mineral intervals and spot checked the assay database provided with
assay certificates from the laboratory.
As part of the data verification, 18 channel
samples were selected to be re-sampled and submitted to ALS for
analysis. The samples were chosen by the author of this report and
were collected on the ramp and the East side of the 1890-meter
level. The collection of the samples from within the mine was
witnessed by the author. The samples were delivered to ALS
Chihuahua where the sample preparation facility was toured. The
original samples from the project database are compared to the
check samples, the chart axes have been log base 10
transformed. The results of the verification sampling
correspond well to those provided by Minera Cordilleras.
As such, the quality of data collected by Minera
Cordilleras meets industry standard practice and is sufficient to
support the estimation of Mineral Resources.
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 in acquiring and
advancing mining properties in Mexico with emphasis on areas near
its Velardeña processing plants.
Cautionary Note to United States
Investors Regarding Estimates of Indicated and Inferred Mineral
Resources
This press release uses the terms "Mineral
Resources", "Indicated Mineral Resources" and "Inferred Mineral
Resources" which are defined in, and required to be disclosed by,
NI 43-101. We advise U.S. investors that these terms are not
recognized under the SEC Industry Guide 7. Accordingly,
the disclosures regarding mineralization in this news release may
not be comparable to similar information disclosed by Golden
Minerals in the reports it files with the SEC. The
estimation of measured resources and indicated resources involves
greater uncertainty as to their existence and economic feasibility
than the estimation of proven and probable reserves. The estimation
of inferred resources involves far greater uncertainty as to their
existence and economic viability than the estimation of other
categories of resources. US investors are cautioned not to
assume that any or all of Minerals Resources are economically or
legally mineable or that these Mineral Resources will ever be
converted into Mineral Reserves. In addition, the SEC
normally only permits issuers to report mineralization that does
not constitute SEC Industry Guide 7 compliant “reserves” as
in-place tonnage and grade without reference to unit amounts.
U.S. investors are urged to consider closely the disclosure in our
Annual Report on Form 10-K and other SEC filings.
Non-GAAP Financial Measures
Cash cost per payable silver ounce is a non-GAAP
financial measure calculated by the Company as set forth below and
may not be comparable to similar measures reported by other
companies. Cash cost includes all 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. Cash cost does not include depreciation,
depletion, amortization, exploration expenditures, reclamation and
remediation costs, financing costs, income taxes, or corporate
general and administrative costs not directly or indirectly related
to Santa Maria. Cash cost is divided by the number of
payable silver ounces generated by the plant for the period to
arrive at cash cost per payable ounce of silver.
All-in sustaining costs (“AISC”) includes cash
cost plus on-site exploration, reclamation and sustaining capital
costs. AISC is divided by the number of payable silver ounces
generated by the plant for the period to arrive at AISC per payable
ounce of silver.
Cost of sales is the most comparable financial
measure, calculated in accordance with GAAP, to cash cost. As
compared to cash cost, cost of sales includes adjustments for
changes in inventory and excludes third-party related treatment,
refining and transportation costs, which are reported as part of
revenue in accordance with GAAP.
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 regarding the Santa Maria PEA
results (including cost estimates, assumption of silver and gold
prices, development timing, expected cash flows and life of mine
and production expectations); future activities at Santa Maria, the
likelihood of future expansion of the deposit, and the possibility
of future development; and estimates of mineral resources for the
Santa Maria project. These statements are subject to risks and
uncertainties, including, but not limited to: the
reasonability of the economic assumptions at the basis of the
results of the Santa Maria PEA and technical report; 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; declines in general economic conditions;
fluctuations in exchange rates and changes in political conditions,
in tax, royalty, environmental and other laws in Mexico and
financial market conditions; new information from drilling programs
or other exploration or analysis; unexpected variations in mineral
grades, types and metallurgy; fluctuations in silver and gold
prices; and failure of mined material or veins mined to meet
expectations. 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 SEC by
Golden Minerals, including the Company’s Annual Report on Form 10-K
for the year ended December 31, 2017.
For additional information please visit
http://www.goldenminerals.com/ or contact:Golden Minerals
CompanyKaren WinklerDirector of Investor Relations(303)
839-5060Investor.relations@goldenminerals.com
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