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Transcript: Golden Minerals (AUMN) - Gold Producer Expansion Plan on Target

February 22 2021, 12:22 GMT

Golden Minerals Company

  • TSX: AUMN
  • Shares Outstanding: 162.4M
  • Share price C$1.04 (22.02.2021)
  • Market Cap: C$168.9M

Interview with Warren Rehn, President & CEO of Golden Minerals Co. (TSX/NYSE: AUMN). Golden Minerals Company is a Colorado-based precious metals producer with a pipeline of exploration projects in Mexico, Argentina and Nevada.

With the commencement of gold and silver production at our Rodeo project (Durango State, Mexico) in January 2021, the company has successfully transitioned from exploration firm to gold-silver producer. Additionally, we intend to restart production at our silver-gold Velardeña Properties, potentially in 2021-2022, where the use of bio-oxidation processing of sulfide concentrates is expected to result in a dramatic increase in overall gold recovery that will give rise to longer term profitable operations.

We Discuss: 

  • 1:07 - Progress Overview: Production Right On Schedule
  • 3:09 - Run Down of the Rodeo Project
  • 5:52 - Allocating $10M & Cash Flow from Rodeo
  • 8:03 - Next Goal: Velardena. What Have They Got There?
  • 9:29 - BIOX Process: Testing & Schedule for Results
  • 12:00 - El Quevar, Sand Canyon, & Others: Plans & Cost Mitigation
  • 14:49 - The Future for Golden Minerals: What's Next?

Matthew Gordon: We last spoke the beginning of November, your share price has literally doubled since then I think you've got the producer re-rates there, because you've got Rodeo, as you mentioned, into production for a support. It's good news.

Warren Rehn: Yes, it's great news. We anticipated that the market would re-rate us as a producer, because we made that transition from exploration company to producer. Great to be back in production, obviously, love to see those full bars. I think the fact that we said what we're going to do, we did what we said we were going to, and I know we're spot on in terms of schedule.

Matthew Gordon: Rodeo was the nearest term or the nearest producing asset that you could go for. It's a short life of minus 2-3-years, isn't it?

Warren Rehn: Yes, the initial plan was for about 2.5-years, I think we've extended some. There is an opportunity to continue producing some lower grade material depending on Gold price, and there's exploration opportunity to expand. But you're right, it was the first piece in the puzzle, it was low capital cost, which is why we're able to do it. We had already, we have the production facility, the mill, we're using contract miners, so the initial capital cost was less than 1.5M all in. So, we were able to fund that from cash on hand and go right into production very rapidly. The beauty of that is it gives us a capital to advance the other projects. We have some longer life projects at Velardeña, the underground mine the high-grade Gold, Silver, Lead, Zinc underground veins. We have a plan to move that forward using the new technology, the bio-oxidation to recover more of the Gold content, actually get 90% Gold recovery out of the ground using that. Then we have our additional portfolio of exploration projects in Mexico, Nevada and Argentina. We see that, we can set ourselves up for sustainable profitable production starting with Rodeo, going to Velardeña and in the same time now move forward on these other exploration players that have the potential to be additional production assets down the road. So, it's organic, it means we don't have to have debt. So, we don't have to raise more money, we can just move very logically through the sequence, using the assets that we already own.

Matthew Gordon: Rodeo is the cash producing machine for the next 2.5- 3-years. Your 10K came out, suggests you've got just under $10M. And Rodeo will continue to produce cash, maybe talk about some of the numbers thrown off from that. And then if you don't mind, tell us where are you going to be applying that cash?

Warren Rehn: Yes, fair enough. So, Rodeo is scheduled to produce, we're projecting 12,000 to 14,000 Gold oz in 2021 and so we're spot on scheduled for that. That gives us cash flow, a net operating margin of between, let's see what it is 11 to 12.5M net operating margin, a couple million less after tax. So plenty of cash coming in. No more than enough to handle our G&A and other exploration projects. In addition to the most important part is advancing the Velardeña feasibility on the bio-oxidation and the potential restart and I'm looking frankly at restarting the Velardeña operation late this year potentially. I need the green light from the Directors, we need to make sure that the plan is in place but it looks quite good to me to make money on selling a Lead Silver concentrate and Zinc concentrate. Stockpile the Pyrite as soon the Pyrite that has all the Gold in and hold that until we have the BIOX facility built probably in late 2022. So there's a sequence there that gets us cash from Rodeo more cash from Velardeña sulphide and then for production, sustainable production with a BIOX facility now toward the end of 2022 kind of thing for that piece.

Matthew Gordon: You've always managed money quite carefully, you have revenues coming in from the mill previously, you got a lot of G&A, you're using Rodeo as a ATM. Can you just remind me again, what is it that you've got at Velardeña, what do you see happening there?

Warren Rehn: Yeah, so Velardeña based on the PEA that we put out last spring, has a potential to produce about 2 million Silver equivalent oz per year for at least 10-years, and it's wide open. And it produces that Silver at a very low cost based on the Gold, Lead, Zinc credit to it, basically producing it for, well under $10 an oz and it's really more like 6 to 8. So at today's Silver price is quite the margin there so have to do a bit more fine tuning on that. But you know, the PEA showed that with the Gold recovery using the BIOX that this is just a lovely project. It produces on the order of 20 million net operating margin annually from that operation at a fairly low throughput 300t/d. So, it's got it's got great potential and has long life, we know these lands continue to depth. We've got the resource to run it for 10-years now and we think we can find much more going to depth below that. So it's sustainable story and long term story that's why it's big.

Matthew Gordon: Do you think you've removed all doubt in the market with regards to the BIOX process? 

Warren Rehn: Well probably not yet. So, we're going to do another round of testing. That's on the schedule this year, we are producing another bulk sample. We'll do the flotation concentrations, send the appropriate representative concentrate to South Africa for additional testing. And mostly what we're looking at here is to finalise the size of the reactor vessels we need for the bio-oxidation. Just get the details of that plan so we can engineer it and have blueprints and start building. So that's the part that needs to be no further defined. I think there's no question that it works and it works well. We have a very good estimate and capital, we'll fine tune that we think it's going to be about a $6 million construction project for the BIOX plant. So not huge, and you know, well within our means to self-fund. We do need more detail on that, though. So that's really the next step in that process.

Matthew Gordon: Let us know how it's performing, you know, recovery rates, its ability to actually do the job that you're going to need it to do, to get these Gold and Lead and Zinc credits.

Warren Rehn: Yeah, so the schedule is a little bit tentative still, we're getting it firmed up. I need my bulk sample first, and then the flotation separation, which I'd optimise that, but my plan is to have that flotation concentrate in South Africa by late spring, will have results probably in the summer from their last tests and have an engineering design by the end of the year with hopefully blueprints to start building the following year. So that's about it's about a year long process, a little bit less. And we've been, we've started on preparing the stopes to get the second sample, or third sample actually, for the BIOX testing. And so it will take most of the year to get those, we'll have coming in partway through.

Matthew Gordon: You can focus on Rodeo, building up that cash in anticipation of it being ready, I noticed that you're also drilling, and it’s very early days at Yoquivo, if I pronounced that properly, what are you hoping to do there at Yoquivo?

Warren Rehn: It's a great district, it's a district scale project that we control, Yoquivo is how it's pronounced in Spanish, but close enough. We had some great initial results. And we had some very high Gold, Silver grades in some of these veins, we found an entirely new vein that we hadn't realised was there before has never been mined. There has been some historic production is minimal here at the district in the 20th century, and before, just under the water table. So we're looking at extensions down new veins and other veins that were only just barely touched in the district. So there's 5 veins that we're looking at significantly so far. The next stage of drilling will show what the sort of size potential would be will get additional hits on these high-grade zones. See what the widths are, see what the strike length looks like on these on these bands that we're looking at and be able to know more reasonably project, how long it'll take us to get to a possible resource type position here but it's a very exciting project.  

Matthew Gordon: I mentioned at Yoquivo there, again, in Argentina, because we discussed it previously. I should also mention Sand Canyon, United States. There's a lot of projects, which require some level of love and attention. Is it costing you much to keep those projects on the books?

Warren Rehn: No, they're very low cost really to keep on the books. And now we're able to fund the next stage of exploration without spending much more than we did last year, basically. So it's plenty of cash and income to do it. We'll do it at a reasonable pace and really, I'm going to spend some time looking at doing some exploration going right at Rodeo this year, because based on what I saw here week before last when I was down there, I see exactly where we need to go for extensions of that near pit resource. So I'm very interested in that. So we'll do that at Yoquivo we do have a project in Argentina other than El Quevar that we'll be looking at starting this year. 

Matthew Gordon: You've doubled your share price since we spoke at the beginning of November. They've given you that re-rate I thought interesting thing was it was also at a time when the market was falling away for precious metals, both Silver and Gold. So you must be quite pleased. 

Warren Rehn: Yes, very pleased with the market reaction. I think we've done because we did what we said we were going to do, we got that extra vote of confidence, I think. And to me, it bodes well for our progress getting back into Velardeña that we did what we said we're going do with Rodeo we'll do it again with Velardeña and prove that we can have that sustainable income that we're looking at right now potentially.

Matthew Gordon: So Q1 coming up, what can we expect to see from you? What sort of information are you going to be putting out there?

Warren Rehn: The the first 3-months of production, which are not full-scale production from Rodeo, we'll be showing the results of that. And you'll see that we will have ramped up 2 full production by the end of Q3. So we'll see that ramp up curve, and will be no cash positive on a project basis for Rodeo that will show that we've paid back what we have put into it, we'll show that we're on track to make this sort of income over the full year that we've projected. And that no hiccups so that's really those are the takeaways from what the Q1 should be showing us.

Matthew Gordon: What do you think that the market should be thinking about you now, because you've had years of inactivity? You were never a promoter per se, you didn't want to promise things before you knew you're able to deliver. What should they be thinking about you as a company now? 

Warren Rehn: You know, I think, pay close attention to our progress on Velardeña. That is the next big bonus for the company is getting that, you know, on schedule, starting the sulphide production, having the results from the BIOX test work, and moving into the full-scale benefit of those assets that we hope. So to me that is certainly the next main piece of the puzzle. And also, the exploration results from Yoquivo, from our other work, it will show that the pipeline, how strongly we're going to support that pipeline of projects for the future. So, in my mind, we've built a company that is going to be viable this year, with expansion possibilities and a very strong future based on the organic growth through projects we already have. 

Matthew Gordon: Do you think you've just done the easy bit? Rodeo was the easiest quickest when it gets you the cash that wasn't too complicated technically, it's open pit. Do you think what lies ahead of you is going to be harder?  

Warren Rehn: You know, because we have the experience mining at Velardeña and we know what the issues were in the last production cycle, though the one was the lack of the Gold recovery, we've got that one solved. The other was dilution in mining, we know how to solve that. I think that the focus we have now and the team that we've built is going to allow us to take advantage of these assets that we have much more easily than previously. So I'm much more confident this time around, frankly, than we were before. I really like the prospects of Velardeña coming on line and having that sustainable cash flow for the company going forward.

Matthew Gordon: I wanted to get you really when the Q1 came out, but it was worth I think, speaking to you before then, because you have report you've done what you said, which is great. Let's catch up after your Q1s come and see what they look like.

Warren Rehn: Fantastic, great talking to you.

 To find out more, go to Golden Minerals' Website. 


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