Golden Minerals Company (“Golden Minerals”, “Golden” or “the
Company”) (NYSE American and TSX: AUMN) has announced positive
results from the Preliminary Economic Assessment (“PEA”) for its
100%-controlled El Quevar silver project located in Salta Province,
Argentina.
“We are very pleased with the results of this
PEA, as the report confirms the potential for a profitable mining
operation at El Quevar’s Yaxtché deposit, with annual production of
around 5 million oz. silver. We also see substantial opportunity to
expand the size of the known resource and therefore improve the
overall mine life economics. While the PEA considers only the
Yaxtché deposit as outlined in the February 2018 resource estimate,
the Yaxtché deposit is still open for potential expansion on strike
at both ends, and Golden Minerals has identified numerous
prospective targets that lie outside the current resource area but
within the larger 57,000-hectare property. We believe we have
an excellent opportunity to further enhance the scale and economic
significance of the El Quevar project through additional
exploration,” notes Warren M. Rehn, President and Chief Executive
Officer of Golden Minerals Company.
Amec Foster Wheeler E&C Services, Inc., a
Wood company (“Wood”), an independent engineering company, has
prepared the technical report for Golden Minerals Company on the
results of the PEA compiled in accordance with Canadian National
Instrument 43-101 “Standards of Disclosure for Mineral Projects”
(“NI 43-101”). The economic model was assembled by Samuel
Engineering, based on capital and operating cost estimates from
John E. Thompson LLC and Samuel Engineering. The full technical
report will be filed on SEDAR within 45 days of this press
release.
PEA Highlights
- After-tax net present value (“NPV”): (US)$45 million at a 5%
discount rate
- After-tax internal rate of return (“IRR”): 17.0%
- After-tax payback period: 3.4 years
- Total pre-production capital cost: $97 million, including
$16 million contingency
- Pre-production development time: 2 years
- Life of mine (“LOM”) 6 years, based on the subset of the
Mineral Resource estimate in the PEA mine plan
- LOM free cash flow $80 million
- LOM payable silver production 29 million oz.
- LOM average silver grade 409 grams per tonne (“g/t”)
- Post start-up cash cost $9.10 per payable ounce of silver
1
- Post start-up all-in sustaining costs (“AISC”) $9.45 per
payable silver oz. 1
1 Cash cost and AISC are defined in “Non-GAAP
Financial Measures” below.
Note: PEA parameters assume a silver price
of $16.66/oz and a discount rate of 5%. All figures
throughout this release are expressed in US Dollars unless
otherwise noted.
Key parameters of the PEA are shown in the
following sections.The PEA is preliminary in nature and includes
Inferred Mineral Resources that are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be categorized as Mineral Reserves.
Standalone economics have not been undertaken for the Indicated
Resources and as such no reserves have been estimated for the
Project. There is no certainty that the economic results described
in the PEA will be realized. Mineral Resources that are not Mineral
Reserves do not have demonstrated economic viability.
Financial Summary
El Quevar’s after-tax economic results have been
summarized below.
Table 1 |
Financial Results Summary |
Financial Results |
Post-Tax($M) |
Cumulative Cash Flows (LOM) |
$ 79.8 |
Net Present Value (5%) (Base Case) |
$ 44.9 |
Net Present Value (8%) |
$ 29.6 |
Net Present Value (10%) |
$ 21.2 |
Internal Rate of Return (IRR) |
17.0% |
Payback |
3.4 years |
Total Capital Costs |
$ 96.8 |
Economic Model Inputs
Table 2 |
Economic Model Inputs |
Description |
Values |
Construction Period |
2 years |
Mine Life (after preproduction) |
6 years |
|
|
LOM Indicated Tonnage (Thousands) |
2,186 |
LOM Indicated Grade (g/t Ag) |
413 |
LOM Inferred Tonnage (Thousands) |
261 |
LOM Inferred Grade (g/t Ag) |
375 |
Avg. Annual Process Production Rate Silver (000 oz) |
4,837 |
|
|
Metal Pricing |
|
Silver Price (US$/oz) |
$16.66 |
Cost Criteria |
|
Estimate Basis |
2rd Q 2018 USD |
Inflation/Currency Fluctuation |
None |
Leverage |
100% Equity |
Income Tax |
|
Argentina Corporate |
25% Profit |
Salta Mining |
3% Mine Mouth2 |
Royalties / Payments |
|
Castor Royalty |
0.5% NSR royalty on Castor Concession |
Cannon Payment |
$100,000 per year |
Transportation, Smelting, and Refining Charges |
|
Shipping, Handling & Fees |
$255 wet tonne conc. |
Insurance |
0.2 % conc. value |
Concentrate Treatment Charge |
$110 dry tonne conc. |
Metal Refining Charge |
$1.10 / oz. payable silver |
Arsenic, Antimony & Bismuth Penalty |
$237 dry tonne conc. |
2 Applied to value of mineral produced net of processing costs,
administrative costs, and other costs of sales
Mining Operations
The PEA contemplates a six-year underground
mining operation using pre-existing and new underground development
at a mine production rate of 1,200 tonnes per day using a
post-pillar cut-and-fill mining method, and will deliver 2.45
million tonnes of diluted sulfide mineralized material at an
average grade of 409 g/t silver. The mined material will be
processed using a conventional single product flotation that
contains 11.5 kg of silver per tonne of dry concentrate. The mined
material will be processed using a conventional single product
flotation that produces a concentrate grading 11.5 kg/tonne of
silver.
Life of mine operating costs have been estimated
as follows:
Table 3 |
Summary of Operating Costs |
|
LOM Total |
LOM Ave |
Description |
$M |
$ / tonne MSM3 |
Mining |
$106.50 |
$43.52 |
Processing |
$33.20 |
$13.59 |
G&A |
$19.50 |
$7.96 |
|
|
|
Total |
$159.20 |
$65.07 |
|
|
|
|
|
$ / oz. recovered |
Total per recovered ounce |
|
$5.77 |
3 Mineralized silver material
Capital Costs Summary
The pre-production capital cost summary is shown
below:
Table 4 |
Capital Cost Summary |
Description |
$M |
Mining |
$ 26.7 |
Process |
$ 29.1 |
General & Infrastructure |
$ 15.0 |
EPCM4 |
$ 10.0 |
Contingency (25%) |
$ 16.0 |
TOTAL |
$ 96.8 |
4 Engineering and Procurement and Construction Management
Sustaining capital includes items such as mining
costs to add new equipment as the mine develops, new systems such
as mine dewatering as the development grows, costs associated with
future tailings development and closure costs. These costs are
shown below (note: numbers do not sum to the total due to
rounding):
Table 5 |
Summary of Sustaining Capital Costs
($M) |
Area |
LOM |
Yr 1 |
Yr 2 |
Yr 3 |
Yr 4 |
Yr 5 |
Yr 6 |
Yr 7 |
Mining Equipment |
2.6 |
- |
1.3 |
- |
1.3 |
- |
- |
- |
Ancillary Equipment |
5.0 |
0.5 |
2.3 |
- |
2.3 |
- |
- |
- |
Tailings Storage Facility |
1.8 |
- |
- |
1.8 |
- |
- |
- |
- |
Infrastructure |
0.1 |
0.1 |
- |
- |
- |
- |
- |
- |
Mine Reclamation & Closure |
3.7 |
- |
- |
- |
- |
- |
- |
3.7 |
Total |
13.3 |
0.6 |
3.6 |
1.8 |
3.6 |
- |
- |
3.7 |
Sensitivity Tables
The following table displays the sensitivities of various
project outcome metrics to changes in capital costs, the price of
silver, annual operating costs and silver recoveries.
Table 6 |
Post-tax Sensitivity Analysis |
Capital Cost |
|
-40% |
-30% |
-20% |
-10% |
Base |
10% |
20% |
30% |
40% |
Capital Cost ($M) |
$58 |
$68 |
$77 |
$87 |
$97 |
$107 |
$116 |
$126 |
$136 |
IRR |
35.1% |
29.1% |
24.4% |
20.4% |
17.0% |
14.0% |
11.4% |
9.1% |
7.0% |
NPV @ 5% ($M) |
$76.6 |
$69.0 |
$61.1 |
$53.1 |
$44.9 |
$36.5 |
$27.9 |
$19.1 |
$10.1 |
|
Silver Price ($/oz) |
|
-40% |
-30% |
-20% |
-10% |
Base |
+10% |
+20% |
+30% |
+40% |
US$/troy oz. |
$10.00 |
$11.66 |
$13.33 |
$14.99 |
$16.66 |
$18.33 |
$19.99 |
$21.66 |
$23.32 |
IRR |
-19.1% |
-6.6% |
3.0% |
10.2% |
17.0% |
23.3% |
29.1% |
34.7% |
40.1% |
NPV @ 5% ($M) |
($73.3) |
($39.1) |
($7.2) |
$19.0 |
$44.9 |
$70.6 |
$96.2 |
$121.7 |
$147.3 |
|
Total Annual Operating Cost
($/t) |
|
-40% |
-30% |
-20% |
-10% |
Base |
+10% |
+20% |
+30% |
+40% |
US$/tonne |
$39.04 |
$45.55 |
$52.05 |
$58.56 |
$65.07 |
$71.57 |
$78.08 |
$84.58 |
$91.09 |
IRR |
26.3% |
24.1% |
21.8% |
19.4% |
17.0% |
14.6% |
12.1% |
9.6% |
7.0% |
NPV @ 5% ($M) |
$81.9 |
$72.7 |
$63.4 |
$54.2 |
$44.9 |
$35.6 |
$26.2 |
$16.9 |
$7.5 |
|
Ag Recovery |
|
-4% |
-3% |
-2% |
-1% |
Base |
+1% |
+2% |
+3% |
+4% |
Recovery |
86.2% |
87.2% |
88.2% |
89.2% |
90.2% |
91.2% |
92.2% |
93.2% |
94.2% |
IRR |
14.2% |
14.9% |
15.6% |
16.3% |
17.0% |
17.7% |
18.4% |
19.0% |
19.7% |
NPV @ 5% ($M) |
$34.2 |
$36.9 |
$39.5 |
$42.2 |
$44.9 |
$47.6 |
$50.2 |
$52.9 |
$55.6 |
* Mineral Resource Estimate Dated
February 26, 2018
In conjunction with the PEA, the independent
firm of Amec Foster Wheeler E&C Services, Inc., a Wood plc
company (“Wood”) prepared a Mineral Resource estimate in compliance
with NI 43-101 at El Quevar. The estimate is based on the
same drilling data as the 2012 technical report prepared by
RPMGlobal (formerly Pincock Allen & Holt) but uses updated
geologic controls and a modeling approach designed to delineate the
higher-grade mineralization. The Indicated and Inferred Mineral
Resource estimates are shown as follows:
Table 7 |
Mineral Resource Table |
Category |
Cut-off Ag (g/t) |
Tonnes (M) |
Ag Grade (g/t) |
Ag (M oz) |
|
|
|
|
|
Indicated |
|
|
|
|
Sulfide |
250 |
2.63 |
487 |
41.1 |
Oxide |
250 |
0.3 |
434 |
4.2 |
Inferred |
|
|
|
|
Sulfide |
250 |
0.31 |
417 |
4.1 |
Notes to
accompany Mineral Resource table: |
|
1)
|
The
independent Qualified Person who prepared the Mineral Resource
estimate is Gordon Seibel, a Registered Member of the Society for
Mining, Metallurgy and Exploration (RM SME), who is a Principal
Geologist with Wood. |
|
|
2) |
The
effective date of the estimate is February 26, 2018. Mineral
Resources are estimated using the CIM Definition Standards for
Mineral Resources and Reserves (2014). Mineral Resources that
are not Mineral Reserves do not have demonstrated economic
viability. |
|
|
3) |
There are
reasonable prospects for eventual economic extraction under
assumptions of a silver price of $16.62/oz, employment of
underground, mechanized, room‐and‐pillar mining methods, and that
silver concentrates will be produced and sold to a smelter. Mining
costs are assumed to be $55/t at a nominal production of rate
365,000 t/a. Concentrator and general and administrative (G&A)
costs are assumed to be $30/t and $20/t respectively.
Metallurgical recovery for silver is assumed to be 88.5%. |
|
|
4) |
Reported
Mineral Resources contain no allowances for hanging wall or
footwall contact boundary loss and dilution. No mining
recovery has been applied. |
|
|
5) |
Rounding as
required by reporting guidelines may result in apparent differences
between tonnes, grade and contained metal content. |
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. The
following Qualified Persons, from Wood, Samuels Engineering Inc.,
and Mr. John E. Thompson will co-author the technical report that
will be filed on SEDAR within 45 days of this news release:
Mr. Gordon Seibel, RM SME; Mr. John E. Thompson, QP MMSA, Mr. Al
Kuestermeyer, RM SME., and Mr. Steven Pozder, P.E. 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
Mr. Gordon Seibel, RM SME visited the El Quevar
project site, including the Yaxtche deposit, from 20 to 23
March 2018. The site visits included presentations by Golden
Minerals’ staff, inspection of core and surface outcrops, viewing
historic drill platforms, sample cutting and logging facilities,
and discussions of geology and mineralization interpretations with
Golden Minerals’ staff. During his visit, Mr. Seibel checked drill
hole collar locations, inspected drill core, and collected witness
samples from the Yaxtché deposit. Mr. Seibel participated in or
supervised the data verification that was undertaken, which
included a review of drilling, logging, sampling, and
laboratory analysis procedures, and inspection of selected core and
core photos. Database collar survey, down-hole survey,
assays, density, lithology and redox tables were reviewed, as were
the quality assurance and quality control results obtained for
standard reference materials, duplicates and blanks. These
checks were accompanied by independent umpire checks on density,
and witness sample checks to confirm the presence of mineralization
at the Yaxtché deposit. As a result of these
verification steps, the data are considered acceptable to support
Mineral Resource estimates.
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
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 El Quaver. 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 El Quevar PEA results (including cost
estimates, assumption of silver prices, development timing,
expected cash flows and life of mine and production expectations);
future activities at El Quevar, the likelihood of future expansion
of the deposit, and the possibility of future development; and
estimates of mineral resources for the El Quevar project. These
statements are subject to risks and uncertainties, including:
the reasonability of the economic assumptions at the basis of
the results of the El Quevar 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
and continued excessive inflation in Argentina; fluctuations in
exchange rates and changes in political conditions, in tax,
royalty, environmental and other laws in Argentina; new information
from drilling programs or other exploration or analysis; unexpected
variations in mineral grades, types and metallurgy; fluctuations in
silver prices; 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
SOURCE: Golden Minerals Company
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