Golden Growth
Golden Minerals Company (NYSEAMERICAN:AUMN) (TSX:AUMN) has now made the transition from developer to producer, and is currently ramping up production levels at its open-pit Rodeo Gold-Silver Mine, located in Durango State, Mexico.
At present Rodeo has a short mine life, of 2.5 years, but with a 2,000-metre drill programme currently underway, testing near-surface targets located immediately adjacent to the current open pit, Golden Minerals is confident that the mine life will be expanded.
Despite Rodeo's current short mine life, Golden Minerals expects the cash flow it generates to play an important role in its business' growth. Rodeo's 2021 after-tax cash flow is estimated by Golden Minerals to be between US$9.0mln to US$10.5mln, which should enable the company to fund the initial start-up of silver-lead-zinc operations at its Velardeña Project, and potentially cover the cost of a bio-oxidation circuit to process the gold-bearing pyrite/arsenopyrite concentrates at Velardeña.
Velardeña would be a significantly larger operation generating on average US$20mln after-tax net cash flow per annum for ten years, totalling US$197mln, based on metal prices of US$1,800/oz Au, US$25/oz Ag, US$0.90/lb Pb, and US$1.25/lb Zn.
Alongside its production assets, Golden Minerals has a strong pipeline of exploration projects that it will advance using the cash flow generated from its Rodeo and Velardeña operations.
At the Yoquivo Gold-Silver Project, Golden Minerals plans to build on the success of its initial drill programme, which returned intersections of high-grade gold-silver mineralisation. Golden Minerals plans to commence its Phase 2 drilling programme in Q2 '21.
At the district scale El Quevar Silver-Gold Project, Golden Minerals has partnered with mining major Barrick Gold Corp (NYSE:ABX) (TSE:ABX) to target large high sulfidation epithermal gold systems at the project.
Under the terms of the earn-in agreement, Barrick must invest US$10mln on exploration and produce a pre-feasibility study with a NI 43-101 compliant mineral resource estimate of over 2moz of Au eq, over an 8-year period to earn a 70%-interest in the project.
Q1 '21 production figures from the Rodeo Gold Mine totalled 1,559 gold equivalent (Au eq) ounces while the mine was ramping up operations. Golden Minerals sold 1,054 Au eq ounces during the quarter at an average realised price, before refining and selling costs, of US$1,721/oz Au and US$25.76/oz Ag in doré, resulting in a pre-refining and selling costs revenue of c. US$1.8mln.
With four projects at the PEA stage, demonstrating a collective NPV of US$164mln, using gold and silver prices below their current levels, Golden Minerals current market capitalisation of US$115mln looks undemanding.
Golden Minerals had around US$9.7m in cash and no debt on its balance sheet as of December 2020 and following the successful ramp-up of operations at the Rodeo Gold Mine, the company is well-positioned to deliver on its growth strategy.
Golden Minerals has a portfolio of precious metals projects that range in the development stage from production though to early-stage exploration. These projects are in Mexico, Argentina and Nevada (USA) (Figure 1).
Figure 1 - Golden Minerals' Portfolio
Source: Golden Minerals
Location: Mexico
Target: Gold-Silver
Stage: Ramp-up
Area: 18.7 km2
Interest: 100%
Programme: 2,000m of drilling Q221
Figure 2 - Rodeo Mine Location
Source: Golden Minerals Company
Figure 3 - Rodeo Pit Shell
Source: Golden Minerals Company
Figure 4 - Velardeña Oxide Plant
Source: Golden Minerals Company
Rodeo Gold-Silver Mine
The Rodeo Gold-Silver Mine is located in Durango State, Mexico (Figure 2). Golden Minerals commenced production in December 2020 and is currently ramping up production levels to 450 tonnes per day (tpd) or more by May 2021.
The project has a total NI 43-101 compliant mineral resource estimate of 48,800oz of gold (Au) equivalent (eq) at a grade of 3.3 grams per tonne (g/t) Au and 11 g/t silver (Ag).
Geology
The Rodeo Deposit is a low sulfidation epithermal gold-silver deposit. It is hosted in Tertiary felsic volcanic rocks, and is associated with a major regional fault along the contact with the Cretaceous Mescalera Group that is composed of calcareous sedimentary rocks.
The gold-silver mineralisation occurs within with chalcedonic quartz veins and breccias that occur over a strike length of 300 m. The mineralisation outcrops at surface and as a result are extracted with a low-strip ratio open-pit method.
Preliminary Economic Assessment
Rodeo is expected to have an initial mine life of 2.5 years, with the preliminary economic assessment, completed in April 2020 defining a post-tax NPV8 US$22.5mln. The mine had a start-up capital cost of just US$1.5mln and is expected to have an all-in sustaining cost (AISC) per ounce of US$843/oz Au eq. This economic study used a gold price of US$1,622/oz and a silver price of US$14.38/oz. Using current metal prices, US$1,800/oz Au and US$25/oz Ag), the post-tax NPV8 rises to US$28mln.
Mining Operations
Rodeo is an open-pit mine (Figure 3) using conventional drilling and blasting. The ore is trucked 115 km to the southeast by road to Golden Minerals' oxide mill (Figure 4) at the Velardeña Silver-Gold Project for processing.
The oxide plant at Velardeña began processing Rodeo ore at a rate of around 200 tpd but Golden Minerals is expanding operations by constructing a second regrind mill that will increase production levels to around 450tpd by May 2021.
Q121 Production Update
The company announced a first pour of gold-silver doré bars on schedule at the end of January 2021. During Q1 '21, the company produced a total of 1,559 gold equivalent (Au eq) ounces while ramping up operations, with 1,054 Au eq ounces sold during the quarter. Average realised prices before refining and selling costs were US$1,721/oz Au and US$25.76/oz Ag in doré, resulting in a pre-refining and selling costs revenue of c. US$1.8m.
2021 Production Levels
Rodeo remains on track to achieve guidance productions levels for 2021 of between 12,000oz and 14,000oz Au and 25,000oz and 30,000oz Ag and the company expects the mine to generate after-tax cash flow of between US$9m and US$10.5m.
2021 Exploration Programme
Golden Minerals has commenced a 2,000 m drill programme at Rodeo to test selected near-surface targets located immediately adjacent to the current open pit. The objective of this programme is to extend the life of the Rodeo Mine beyond the current estimated life of 2.5 years. Results are expected within the next several months.
Location: Mexico
Target: Silver-Gold
Stage: Preliminary Economic Assessment
Area: 5.6 km2
Interest: 100%
Programme: BIOX Bulk Sample Tests H121
Figure 5 - Velardeña Project Location
Source: Golden Minerals Company
Figure 6 - Velardeña & Chicago Mines
Source: Golden Minerals Company
Figure 7 - Terneras Vein Group
Source: Golden Minerals Company
Velardeña Silver-Gold Project
The Velardeña Silver-Gold Project is located in Durango State, Mexico (Figure 5). The project contains both the Velardeña and Chicago past-producing underground silver-gold mines and two processing mills
Mining was suspended at Velardeña in November 2015 due to a combination of low metals prices, dilution and metallurgical challenges, which rendered operations unprofitable. Golden Minerals then leased one of Velardeña’s two mills to the Hecla Mining Company between 2015 and 2020, which generated cash flow to fund exploration.
The Mine has a total NI 43-101-compliant mineral resource estimate of 482,000oz Au and 33.4moz Ag (965,000oz of Au eq) at an average grade of 4.8 g/t Au and 335 g/t silver (Ag) with lesser zinc and lead.
Geology
The Velardeña and Chicago Deposits (Figure 6) are narrow vein epithermal to mesothermal deposit.
The Velardeña Deposit is hosted by the Cretaceous Aurora Formation, a limestone that has been intruded by diorite bodies forming related skarns. The silver-gold mineralisation occurs in two main vein systems. The first is the northwest striking, steeply north-dipping Santa Juana group of veins, which includes over 20 veins. The second is an east-west striking and steeply north-dipping and is represented by the Terneras (Figure 7) and San Mateo vein groups. Vein widths in the minable portions of the vein systems average between 0.3 metres to 0.5 metres.
The Chicago Deposit is hosted in a highly folded portion of the Cretaceous Aurora Formation. The Chicago veins strike northeast and dip steeply southeast. The main veins are the Chicago and Escondida veins, which tend to be higher in lead and zinc than the Santa Juana or Terneras veins. Vein widths at Chicago tend to be narrower than at the Santa Juana deposit.
Preliminary Economic Assessment
Velardeña is expected to have an initial mine life of 10 years, with the preliminary economic assessment, completed in April 2020 (adjusted for current gold and silver prices, US$1,800/oz Au and US$25/oz Ag) defined a post-tax NPV8 of US$138mln and a post-tax IRR of 226%. The mine has a capital cost of US$10.3mln (including the bio-oxidation circuit) and is expected to have an all-in sustaining cost (AISC) per ounce of US$669/oz Au eq.
Mining Operations
At Velardeña the veins will be mined by underground two-pass resue mining technique and will focus on the sulphide ore from the main veins. Golden Minerals plans to initially produce lead and zinc-silver containing concentrates using the existing 300tpd, conventional crush, grind, and flotation plant, commencing late-2021 or early-2022.
The Company is also continuing with feasibility studies to optimise and design the circuit for bio-oxidation (BIOX) leaching of the gold-bearing pyrites concentrates to increase the recovery rate of the silver-gold mineralisation at Velardeña.
2021 Exploration Programme
During 2021 Golden Minerals will be optimising the mine plan and processing details in preparation for future test-mining and processing at Velardeña. Bulk samples will be collected and sent for BIOX testing in H1 '21. Once completed the company plans to establish a definite schedule for restarting commercial lead-zinc production at the Velardeña mines potentially in late 2021 to early-2022 with the potential for the installation of the bio-oxidation circuit during 2023.
Location: Mexico
Target: Gold-Silver
Stage: Drilling
Area: 18.8 km2
Interest: Option to earn 100%
Programme: Drilling H1 '21
Figure 8 - Yoquivo Project Location
Source: Golden Minerals Company
Figure 9 - Yoquivo Veins
Source: Golden Minerals Company
Figure 10 - Yoquivo Drill Locations
Source: Golden Minerals Company
Yoquivo Gold-Silver Project
The Yoquivo Gold-Silver Project is located in Chihuahua State, Mexico (Figure 8). Previous mining at the project was focused on the near-surface extent of several veins, down to a depth of 130 metres. Golden Minerals is testing the near-surface potential of a number of un-mined and partially-mined epithermal veins.
Geology
The claims cover an under-explored epithermal precious metals district that shows similar mineralisation to the adjacent Ocampo Mining District. The veins are hosted in andesites and Oligocene-aged rhyolites.
Multiple gold-silver bearing epithermal veins have been defined at the project (Figure 9), with the San Francisco and Pertenencia veins, defined over a 2 km strike length. Numerous splays and parallel structures have also been identified and sampled.
Previous work
In Q4 '20 Golden Minerals completed a 3,400-metre (15 holes) drill programme designed to target the Pertenencia, San Francisco and Esperanza vein systems to better understand the nature and distribution of the gold-silver mineralisation (Figure 10). This programme also resulted in the discovery of a new previously un-mined vein to the east of the Pertenencia vein. Significant results from these programmes include:
Pertenencia Vein
- 4.2 m at a grade of 2.34 g/t Au and 190 g/t Ag (365 g/t Ag eq), including 1.3 m at a grade of 5.69 g/t Au and 223 g/t Ag (650g/t Ag eq) (YQ_20_001)
- 1.9 m at a grade of 0.45 g/t Au and 150 g/t Ag (184 g/t Ag eq), including 0.6 m at a grade of 1.14 g/t Au and 423 g/t Ag (509 g/t Ag eq) (YQ_20_002)
Esperanza Vein
- 3.6 m at a grade of 1.77 g/t Au and 49 g/t Ag (190 g/t Ag eq), including 1 m at a grade of 5.0 g/t Au and 118 g/t Ag (524 g/t Ag eq) (YQ_20_006)
- 2.8 m at a grade of 1.2 g/t Au, 65 g/t Ag (155 g/t Ag eq), including 0.4 m at a grade of 8.76 g/t Au and 60 g/t Ag (717 Ag eq) (YQ_20_007)
New Vein
- 5.4 m at a grade of 1.9 g/t Au and 135 g/t Ag (278 g/t Ag eq), including 0.2 m at a grade of 15.4 g/t Au and 1150 g/t Ag (2305 g/t Ag eq) (YQ_20_010)
- 12.3 m at a grade of 1.3 g/t Au and 225 g/t Ag (323 g/t Ag eq), including 3.0 m at a grade of 4.2 g/t Au and 734 g/t Ag (1049 g/t Ag eq) (YQ_20_011)
- 1.2 m at a grade of 34 g/t Au and 1,895 g/t Ag (4,445 g/t Ag eq), including 0.3 m at a grade of 135.5 g/t Au and 7,480 g/t Ag (17,643 g/t Ag eq) (YQ_20_012)
2021 Exploration Programme
Golden Minerals is planning a phase 2 drill programme at Yoquivo, this is expected to commence in H1 '21.
Location: Argentina
Target: Silver-Gold
Stage: Preliminary Economic Assessment
Area: 567.2 km2
Interest: Barrick Gold Earning 70%
Programme: TBC
Figure 11 - El Quevar Location
Source: Golden Minerals Company
Figure 12 - El Quevar
Source: Golden Minerals Company
Figure 13 - Yaxtché Resource
Source: Golden Minerals Company
El Quevar Silver-Gold Project
The El Quevar Silver-Gold Project is a district scale (57,000 hectares) project, located in the Salta Province of Argentina (Figure 11). Between 1930 and 1950, lead and silver were mined from small underground workings in the El Quevar area.
Between 2004 and 2012 Golden Minerals completed 100,000-metre (400 holes) of drilling which culminated in the definition of a total NI 43-101-compliant mineral resource estimate published in February 2018 of 49.4mln ounces (moz) of silver at a grade of 477 g/t Ag and the production of a PEA in September 2018.
Despite this significant amount of drilling the Yaxtché deposit remains open along strike and several zones adjacent to the resource estimate area have returned significant silver intercepts, including the Yaxtché West extension, Carmen, Carolina and Yaxtché East.
In April 2020, Golden Minerals signed an earn-in agreement with Barrick Gold Corp (NYSE:ABX) (TSE:ABX) that will see Barrick invest US$1mln in Golden Minerals, spend US$10m on exploration and produce a pre-feasibility study with a NI 43-101 compliant mineral resource estimate of over 2moz of Au eq, over an 8-year period to earn a 70%-interest in the project. Barrick are targeting large high sulfidation epithermal gold systems at the project.
Geology
The silver-bearing veins at El Quevar are hosted in Tertiary volcanic rocks (Figure 12) believed to be part of an eroded stratovolcano. At the Yaxtché Target high-sulfidation epithermal silver mineralisation is hosted within a broad, generally east-west-trending structural zone (Figure 13) and occurs as a series of north-dipping parallel sheeted replacement zones, breccias and mineralised faults within an envelope of silicified and brecciated volcanic rocks. There are at least three sub-parallel structures that have a total strike length of 6.5km.
Preliminary Economic Assessment
A preliminary economic assessment, completed in September 2018 for El Quevar defined an initial mine life of 6 years based on the current resource estimate. The PEA, adjusted for the current silver price (US$23.32/oz), returned a post-tax NPV5 US$147mln and a post-tax IRR of 40%. The Mine has a capital cost of US$97mln and is expected to have all-in sustaining cost (AISC) per ounce of US$9.45/oz Ag.
2021 Exploration Programme
No details have been announced regarding the exploration programme for the El Quevar Project.