Golden Minerals Reports Third Quarter Financial Results And Provides Business Update
GOLDEN, Colo., Nov. 6, 2014 /CNW/ -- Golden Minerals Company ("Golden Minerals" or the "Company") (NYSE MKT: AUMN) (TSX: AUM) today announced financial results for the quarter ended September 30, 2014 and provided a business and operational update.
Company Highlights
- Narrowed net loss to $3.6 million in the third quarter 2014 from $6.2 million in the third quarter 2013
- Started the sulfide mill and began processing at Velardena on November 3, 2014
- Completed mill improvements at Velardena including overhauling the electrical system, installing new concentrate filters and refurbishing flotation cells
- Re-started mining activities at Velardena on July 1, 2014
- Completed the sale of various non-strategic properties and equipment for proceeds of $1.0 million
- Completed exploration drilling at Los Azules: 7,475 meters in 30 holes
- Completed an initial drilling program at Santa Maria: 2,300 meters in 11 holes
- Completed an underwritten registered public offering and concurrent private placement for total net proceeds of $7.4 million
Financial Results
The Company reported a net loss of $3.6 million in the third quarter 2014 compared to a net loss of $6.2 million in the third quarter 2013. The difference is primarily attributable to a net gain of $0.7 million in the third quarter 2014 on various non-strategic property and equipment sales; $0.7 million higher interest and other income; $0.4 million lower administrative and stock-based compensation expenses; $0.3 million lower Velardena-related expenses; and $0.3 million lower depreciation and amortization-related expenses.
The Company's cash and cash equivalents balance on September 30, 2014 was $15.0 million compared to $19.1 million on December 31, 2013. The primary use of cash during 2014 was to fund startup and operations at Velardena ($6.0 million). Additional uses of cash included exploration expenditures ($3.2 million); general and administrative expenses ($3.2 million); and maintenance and property holding costs at El Quevar ($1.2 million). Expenditures were offset in part by net proceeds of $7.4 million received from an underwritten registered offering and private placement of common stock, and $1.0 million in proceeds received from non-strategic property sales.
Velardena Properties Update
The Company re-started mining activities at its Velardena Properties located in Durango State, Mexico on July 1, 2014 and began processing material from the mine on November 3, 2014. Velardena has been re-opened as a leaner and lower-cost mine with a new mine plan and new general, mine and mill managers. Initial activities focused primarily on mining material from the San Mateo and Roca Negra veins and on mine development to access the Terneras vein. Golden Minerals completed multiple improvements at the sulfide mill, including installing a new electrical system, new concentrate filters, and refurbished flotation cells. The Company is testing the new mill equipment and processes during mill ramp-up in November using low-grade material that was mined and stockpiled prior to the start-up of the mill.
By December 2014, the Company expects the mill to operate at full capacity at an average of 285 tonnes per day (tpd) and to continue at that rate going forward. Hiring has been accelerated to meet the ramp-up schedule and by year-end 2014, Golden Minerals expects to employ approximately 200 people, with about 130 employees under the new labor union agreement. This is less than one half of the employees prior to the June 2013 shutdown when the Company was running both sulfide and oxide plants and processing approximately 500 tonnes per day. The Company intends to mine from the San Mateo, Roca Negra and Terneras veins during the fourth quarter 2014, and mill feed grade is expected to gradually increase through the second quarter 2015 as new stopes in the mine are developed and as access to the Terneras vein expands.
After the second quarter 2015, the Company expects to produce between 250,000 and 300,000 ounces of silver equivalents per quarter at an average processing rate of 285 tpd of sulfide material. Silver equivalents include silver and gold but exclude lead and zinc, and are calculated at 60:1 silver to gold. The Company expects cash costs between $12 and $15 per payable silver ounce, net of by-product credits, assuming a price for by-product gold of $1,250 per ounce. "Cash cost per payable silver ounce net of by-product credits" is a non-GAAP financial measure defined below in this press release. Additional details related to Velardena's restart plan may also be found in the accompanying Form 10-Q.
Exploration Update
The Company completed exploration drilling at its Los Azules project in Chihuahua State, Mexico during the third quarter with a project total of 7,475 meters in 30 holes. The final hole (not previously reported) went through the volcanic section and intersected altered breccias within the Parral Formation calcareous sediments and the alteration contained anomalous values in gold and silver. While Golden Minerals considers the volcanic-sediment contact prospective and is encouraged by the silicified breccias with anomalous gold values, it has opted to postpone further drilling at least until a National Instrument (NI) 43-101-compliant resource estimate is complete. In October the Company retained the firm of Tetra Tech to complete NI 43-101-compliant resource estimates on both the Los Azules and Santa Maria vein systems which are expected to be completed in Q1 2015.
On August 1, 2014, the Company entered into an agreement giving Golden Minerals the right to acquire for $1.6 million the Santa Maria mine, a privately-held gold and silver property located near the Parral District of southern Chihuahua State, Mexico and located approximately 20 kilometers from the Company's Los Azules project. The agreement calls for payments of $1.6 million over 1.5 years to complete the purchase. An initial option payment of $35,000 has been made and a $0.5 million option payment is due in January 2015.
Golden Minerals has recently completed a 2,300-meter, 11-hole initial drilling program at the Santa Maria mine. To date the Company has received assays for seven holes, four of which show strong silver and gold values, discussed in more detail in its November 4, 2014 press release. If results from the last four holes are also encouraging, the Company may implement a second drill program at Santa Maria.
Financing Activity
On September 10, 2014, the Company completed an underwritten registered public offering and concurrent private placement for total net proceeds of $7.4 million. The Company sold 3,692,000 units in the registered offering, priced at $0.86 per unit before discount to the underwriters, with each unit consisting of one share of the Company's common stock and a five year warrant to purchase 0.50 of a share of the Company's common stock at an exercise price of $1.21 per share. The Company sold an additional 5,800,000 units in a concurrent private placement to The Sentient Group, the Company's largest stockholder, at a price of $0.817 per unit, the same discounted price paid by the underwriter in the registered offering. Following the completion of the private placement and the offering, The Sentient Group holds approximately 27.2% of the Company's outstanding common stock (excluding restricted common stock held by the Company's employees).
Sale of Assets
During the quarter ended September 30, 2014 Golden Minerals sold 45 mining concessions totaling 770 hectares located in the Zacatecas District, Zacatecas State, Mexico, to Capstone Mining Group for US $700,000. The Company also entered into an option agreement with a private party to sell its 1,100-hectare Peruvian Otuzco property for US $450,000. At September 30, 2014 Golden Minerals had received $150,000 under this agreement, with the remainder payable in 2015 if the option is maintained and exercised. In addition, the Company sold miscellaneous surplus equipment located in Argentina for $130,000.
Financial Outlook
At September 30, 2014, the Company's cash and cash equivalents balance was $15.0 million. The Company expects to spend approximately $5.5 million on the following items during the fourth quarter 2014 and to end the year with a cash balance of approximately $9.5 million:
- $1.0 million for Velardena start-up costs including mining activities, plant capital and repairs
- $0.8 million of negative gross margin (defined as revenue less costs of sales; assumes metals prices of $20 per ounce silver and $1,250 per ounce gold)
- $0.3 million at the El Quevar project for ongoing maintenance activities and property holding costs
- $1.1 million on other exploration activities and property holding costs
- $1.1 million on general and administrative costs and $1.2 million in increased working capital
Additional information regarding third 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 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.
NON-GAAP Financial Measure
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 (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 for the Velardena Properties 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 Properties. 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 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 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 mining and processing activities at the Velardena Properties, including the anticipated timing of mill ramp-up, planned testing of sulfide mill improvements, anticipated processing rates and grade improvements in mined material and the timing thereof, expected employment levels, 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; potential additional drilling and work at Los Azules and Santa Maria; preparation of resource reports on the Los Azules and Santa Maria projects and the timing thereof; anticipated expenditures in the fourth quarter 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 mining or processing or the ramp-up of same at the Velardena Properties; 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 and cash costs per ounce of payable silver net of by-product credits; failure of veins mined to meet expectations; higher than anticipated cash outlays to resume operations; delays in obtaining resource reports on the Los Azules and Santa Maria projects; 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
Investor.relations@goldenminerals.com
| GOLDEN MINERALS COMPANY | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| (Expressed in United States dollars) | ||||||
| (Unaudited) | ||||||
| September 30, | December 31, | |||||
| 2014 | 2013 | |||||
| (in thousands, except share data) | ||||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ 14,955 | $ 19,146 | ||||
| Trade receivables | - | 25 | ||||
| Inventories | 662 | 449 | ||||
| Value added tax receivable, net | 1,394 | 1,765 | ||||
| Prepaid expenses and other assets | 614 | 1,091 | ||||
| Total current assets | 17,625 | 22,476 | ||||
| Property, plant and equipment, net | 30,006 | 32,375 | ||||
| Prepaid expenses and other assets, non-current | - | 30 | ||||
| Total assets | $ 47,631 | $ 54,881 | ||||
| Liabilities and Equity | ||||||
| Current liabilities | ||||||
| Accounts payable and other accrued liabilities | $ 1,875 | $ 1,365 | ||||
| Other current liabilities | 2,755 | 4,405 | ||||
| Total current liabilities | 4,630 | 5,770 | ||||
| Asset retirement obligation | 2,635 | 2,602 | ||||
| Other long term liabilities | 74 | 53 | ||||
| Total liabilities | 7,339 | 8,425 | ||||
| Equity | ||||||
| Common stock, $.01 par value, 100,000,000 shares authorized; 53,022,833 and 43,530,833 shares issued and outstanding for the respective periods |
530 |
435 | ||||
| Additional paid in capital | 502,701 | 494,647 | ||||
| Accumulated deficit | (462,939) | (448,626) | ||||
| Shareholder's equity | 40,292 | 46,456 | ||||
| Total liabilities and equity | $ 47,631 | $ 54,881 | ||||
| GOLDEN MINERALS COMPANY | ||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||||||||||
| (Expressed in United States dollars) (Unaudited) | ||||||||||
| Three Months Ended | Nine Months Ended | |||||||||
| September 30, | September 30, | |||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||
| (in thousands, except share data) | ||||||||||
| Revenue: | ||||||||||
| Sale of metals | $ - | $ 500 | $ - | $ 10,797 | ||||||
| Costs and expenses: | ||||||||||
| Costs applicable to sale of metals (exclusive of depreciation shown below) | - | (517) | - | (17,534) | ||||||
| Exploration expense | (1,009) | (1,024) | (4,262) | (3,788) | ||||||
| El Quevar project expense | (489) | (486) | (1,244) | (2,159) | ||||||
| Velardena project expense | (2,034) | (85) | (2,034) | (3,006) | ||||||
| Velardena shutdown and care & maintenance costs | - | (2,218) | (2,457) | (4,547) | ||||||
| Administrative expense | (782) | (1,078) | (3,587) | (4,608) | ||||||
| Stock based compensation | (181) | (305) | (768) | (1,284) | ||||||
| Reclamation and accretion expense | (50) | (47) | (148) | (135) | ||||||
| Impairment of long lived assets | - | - | - | (237,838) | ||||||
| Impairment of goodwill | - | - | - | (11,180) | ||||||
| Other operating income, net | 687 | (31) | 691 | 3,615 | ||||||
| Depreciation, depletion and amortization | (751) | (1,083) | (2,375) | (6,180) | ||||||
| Total costs and expenses | (4,609) | (6,874) | (16,184) | (288,644) | ||||||
| Loss from operations | (4,609) | (6,374) | (16,184) | (277,847) | ||||||
| Other income and (expense): | ||||||||||
| Interest and other income, net | 882 | 186 | 1,763 | 509 | ||||||
| Gain (loss) on foreign currency | 115 | (127) | 108 | (537) | ||||||
| Total other income (expense) | 997 | 59 | 1,871 | (28) | ||||||
| Loss from operations before income taxes | (3,612) | (6,315) | (14,313) | (277,875) | ||||||
| Income tax benefit | - | 104 | - | 47,599 | ||||||
| Net loss | $ (3,612) | $ (6,211) | $ (14,313) | $ (230,276) | ||||||
| Comprehensive loss, net of tax: | ||||||||||
| Unrealized gain on securities | - | - | - | 90 | ||||||
| Comprehensive loss | $ (3,612) | $ (6,211) | $ (14,313) | $ (230,186) | ||||||
| Net loss per common share – basic | ||||||||||
| Loss | $ (0.08) | $ (0.14) | $ (0.33) | $ (5.38) | ||||||
| Weighted average common stock outstanding - basic (1) | 45,029,388 | 42,857,347 | 43,621,634 | 42,827,891 | ||||||
| (1) | Potentially dilutive shares have not been included because to do so would be anti-dilutive. |
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SOURCE Golden Minerals Company
