Cash reserves drop further after Q313 losses
Golden Minerals Company, (AUMN) has continued to run down its cash reserves on the back of ailing precious metal prices and the shutdown of its flagship Velardeña silver-gold mine in Mexico late in Q213. A Q313 loss of US$6.2m included more than US$2.2m in shutdown and maintenance costs for Velardeña. The board will decide on its strategy at Velardeña by the end of Q413, which may result in optimisation and a potential restart. Meanwhile, US law firm Levi Korsinsky stated in Q313 it was investigating Golden Minerals “in connection with possible claims of breaches of fiduciary duty”.
Maintenance and closure costs weigh on Q3 numbers
Golden Minerals recorded US$0.5m in revenue in Q313 from sales of existing inventories, following the shutdown at Velardeña in Q213. Cost of sales was also US$0.5m, which, combined with residual shutdown costs, exploration and G&A expenses, led to a US$6.2m net loss. Golden Minerals had US$44.6m in cash and equivalents at the start of the year, but was down to US$23.8m at the end of the third quarter following continued losses and shutdown costs at Velardeña.
More ounces, lower costs targeted for Velardeña
Golden Minerals is revisiting all aspects of production at Velardeña with a view to increasing efficiencies and lowering operating costs. Long hole stoping and alternative high-grade narrow vein mining methods are currently being assessed. Metallurgical work to date on sulphide ore has not been encouraging, but the possibility of toll-treating additional oxide feed is also being explored. Silver and gold prices of US$30/oz and US$1,600/oz respectively had been targeted at the start of the year for operational break-even, but optimisation could result in a break-even point at metal prices up to 30% below that level.
Valuation: Critical decision to be made on 2014
Golden Minerals anticipates a cash balance of US$18m at the end of 2013, which is expected to cover optimisation studies, exploration and maintenance costs until Q414, including stope development if the company pursues a restart at Velardeña. We expect a potential sale of either Velardeña or Golden Minerals’s 62Moz El Quevar silver project in Argentina to also be presented as an option before the company commits to its 2014 programme. Given the company is backed by cash, optimisation success at Velardeña; securing a partner and expanding the resource at El Quevar; the monetisation of an asset; or an uplift in precious metal prices could lead to an improved valuation.