Jun 24 2013
Golden Minerals Company ("Golden Minerals" or "the Company") announced that it has suspended operations at its Velardena mine as of June 21, 2013, in order to conserve the asset until operating plans and prices for silver and gold indicate a sustainable cash margin for operations.
The employees at the Velardena mine were informed of the Company's decision in the afternoon of June 21, 2013. In February 2013 the Company anticipated 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. In May 2013 the Company projected a $5 million negative margin from the operations for the remaining three quarters of 2013 at prices of $1,500 gold and $25 silver. Metals prices have continued to decline and remain below these levels.
The Company is placing the mine and processing plants on a care and maintenance program to enable a re-start when operating plans and metals prices support a cash positive outlook for the property. Approximately 470 positions at the Velardena operations are being eliminated as a result of the suspension. The Company is presently negotiating the specific terms of a severance package with its labor unions. The Company plans to retain a core group of approximately 50 to 60 employees to facilitate a re-start of operations and to maintain and safeguard the longer term value of the asset.
The Company projects approximately $7 million of one-time costs in the second and third quarters 2013 for employee severance and other activities related to the suspension of operations and approximately $1 million in quarterly holding costs after the third quarter should operations remain suspended. The financial effect of unwinding Velardena's current working capital position is expected to be minimal, with cash proceeds from receivables and sales of existing inventory expected to offset payable accounts. With Velardena under a care and maintenance program, the Company anticipates a cash balance of approximately $14 million at year-end 2013. The Company plans to review whether an impairment of the Velardena asset is indicated for accounting purposes as it prepares financial statements for the quarter ending June 30, 2013.
During May 2013, the Company completed the San Mateo ramp providing access to the productive Santa Juana mining area. The completed ramp, which provides more efficient and less costly haulage capacity from the mine, should be helpful to the re-start economic analysis. During the suspension period, the Company plans to use the ramp to access mining areas to develop and evaluate re-start mining plans. The Company also plans to continue work on treatment options for gold-bearing pyrites produced at the mine, including autoclave, bioleach and roasting technologies.
The Company estimates payable production during the second quarter 2013 prior to the suspension of approximately 160,000 silver equivalent ounces, assuming a 50:1 ratio for gold to silver. This total is approximately 25 percent less than the record production achieved in the first quarter 2013 and reflects the effects of reduced production during the previously announced suspension of the property's explosives permit and 9 days without mining operations during the quarter resulting from the June 21 suspension of operations.
Separately, the Company is evaluating further general and administrative expense reductions, with the objective of reducing corporate general and administrative expense by about 25 percent from 2012 levels.
In property-related updates, the Company has received $250,000 for the farm out of a property in Zacatecas state, Mexico. In Argentina, the process of attracting a partner to move the El Quevar property forward is progressing with several interested parties reviewing data and conducting site visits. Additionally, the Company has signed an option agreement to acquire the Los Azules property in Chihuahua state, Mexico, which is located seven kilometers southwest of the San Francisco de Oro district.
Jeffrey G. Clevenger, Chairman, President and Chief Executive Officer, noted, "We achieved progress toward our 2013 objectives at Velardena with early completion of the San Mateo ramp and increasing rates of production of gold and silver. The Company believes its shareholders and other stakeholders will be best served when the Company conserves the Velardena asset during this period of falling silver and gold prices. We will take advantage of the suspension to address mine plans and operating inefficiencies for an eventual return to operations when metals prices and operational plans dictate. We sincerely regret the hardship this suspension brings to our employees and we are planning to provide severance payments to help cushion the immediate impact of the suspension."
About Golden Minerals
Golden Minerals Company is a Delaware corporation based in Golden, Colorado that owns the silver and gold Velardena Operations in Mexico and the evaluation stage El Quevar project in Argentina.