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Message: Golden Minerals' Velardena PEA pegs NPV at $85M (U.S.)

 

Golden Minerals' Velardena PEA pegs NPV at $85M (U.S.)

 

2020-04-02 07:19 ET - News Release

 

Mr. Warren Rehn reports

GOLDEN MINERALS ANNOUNCES UPDATED PRELIMINARY ECONOMIC ASSESSMENT FOR VELARDENA PROJECT

Golden Minerals Company has released positive results from the updated mineral resource estimate and preliminary economic assessment (PEA) for its Velardena property, a 100-per-cent-owned silver and gold project located in Durango state, Mexico. All currency figures in this release are in U.S. dollars.

PEA financial and economic highlights

Tetra Tech, an independent engineering company, has prepared the PEA for the company in accordance with Canadian National Instrument 43-101 Standards of Disclosure of Mineral Projects. The PEA assumes prices of $1,324 per ounce gold, $16.23 per ounce silver, 90 cents per pound lead and $1.25 per pound zinc. Preliminary results of the economic analysis are shown in pretax U.S. dollars as highlighted below. The complete PEA will be published on SEDAR within 45 days of this press release:

 

  • Pretax net present value (NPV): $85.9-million at an 8-per-cent discount rate;
  • Pretax internal rate of return (IRR): 138.6 per cent;
  • Pretax payback period: one year;
  • Total preproduction capital cost: $10.27-million, including 10-per-cent contingency (1);
  • Postproduction and sustaining capital: $15.93-million, including 10-per-cent contingency;
  • Preproduction development time: one year;
  • Life of mine (LOM): 10 years;
  • LOM contained silver: 12.3 million ounces;
  • LOM contained gold: 188,000 ounces;
  • LOM average silver grade: 337 grams per tonne;
  • LOM average gold grade: 5.15 g/t;
  • LOM pretax free cash flow: $130.2-million;
  • LOM payable silver: 10.2 million ounces;
  • LOM payable gold production: 119,000 ounces;
  • LOM payable AgEq: 19.7 million ounces (Au and Ag only at a ratio of 80:1 Ag:Au).

 

(1) Capital estimate for bio-oxidation plant includes additional contingency

Golden Minerals president and chief executive officer Warren M. Rehn remarked: "The Velardena mines now present an attractive scenario for a potential restart. The most difficult challenge we previously faced at the Velardena mines was the low payable gold recovery, a challenge which we believe is solved with the addition of a relatively low-cost bio-oxidation circuit at our existing processing facility. Because we already have most of what is required for recommencing mining and processing, the capital needs for the project are modest. The one-year payback on preproduction capital signifies a very robust project. The projected cash costs for silver production at less than $1 per ounce net of byproducts points to the strong projected profitability of this operation."

 

        PRETAX TECHNICAL ECONOMIC MODEL RESULTS        
  
Item                                        Total            Per tonne
                                          ($000s)          of material

Gross payable                            $375,728              $330.19
TCs, RCs and penalties (cost)            ($33,130)             ($29.12)
Freight and insurance (cost) (1)         ($12,311)             ($10.82)
NSR                                      $330,288              $290.21
Operating (costs)
Mining (cost)                            ($94,303)             ($82.87)
Milling (cost)                           ($54,241)             ($47.67)
Site administration (cost)               ($15,656)             ($13.76)
G&A (cost)                                ($8,014)              ($7.04)
Federal mining royalty (cost)             ($1,651)              ($1.45)
                                        ($173,866)            ($152.79)
Operating margin                         $156,423              $137.46
Capital (costs)
Mine development (cost)                  ($10,791)              ($9.48)
Process plant (cost)                      ($9,460)              ($8.31)
Infrastructure (cost)                       ($782)              ($0.69)
Other non-operating (cost)*               ($5,158)              ($4.53)
Cash flow                                $130,232              $114.44
NPV8%                                     $85,914
IRR                                          139%
Payback (years)                                 1

* Includes contingency equal to 10 per cent of capital costs. 

                              CASH COSTS 
                                                           
Cash cost per payable Ag ounce, net of byproducts                 $0.92 
All-in sustainable cost per payable Ag ounce, net of byproducts   $3.48 

 

The updated PEA has been prepared to incorporate new and updated elements of the project database and mine plan, most notably the inclusion of bio-oxidation treatment of gold concentrates. In late 2019, Golden obtained successful results from testing Velardena gold concentrate material using Finnish firm Outotec's BIOX process. BIOX is a unique and sustainable technology that was developed to pretreat refractory ores and concentrates ahead of conventional cyanide leaching. The gold in these types of mineralized material, such as those found at Velardena, is encapsulated in pyrite and arsenopyrite which prevents the gold from being successfully cyanide leached. BIOX utilizes bacteria to oxidize these sulphide materials, thereby exposing the gold for subsequent cyanide leaching and increasing overall gold recoveries. Golden Minerals believes this technology is key to unlocking successful and sustainable value from production at Velardena. Indeed, 2019 BIOX testing of Velardena material achieved gold recoveries of 92 per cent, compared with sub-30-per-cent gold recoveries realized when Golden last operated Velardena in 2015.

In the coming months, the company plans to continue to optimize the mine plan and processing details in preparation for future test mining and processing in advance of establishing a definite schedule for restarting commercial production at the Velardena mines and the installation of the bio-oxidation circuit.

Mine planning

Given changes to the resource models and project parameters, a new preliminary mine plan was developed. Mine staff performed test mining to prove a selective mining minimum width of 0.7 metre. Based on the new resource models, new dilution calculations and the updated NSR, the mining areas have changed from the previous PEA. The 2015 PEA considered only a limited subset of areas and tonnes, whereas the update considers all principal veins for the mine plan. This updated mine plan includes 1.14 million tonnes of sulphide material, with a mine life of approximately 10 years at a rate of 310 tonnes per day.

The associated table shows the potentially minable material within the preliminary mine plan.

 

                  MINE PLAN     
Category                        Total/avg.

Tonnes                           1,137,949
NSR ($/t)                              290
Ag (gpt)                               337
Contained Ag oz                 12,325,300
Au (gpt)                              5.15
Contained Au (oz)                  188,250
Pb (%)                                1.32
Contained Pb (lb)               33,096,126
Zn (%)                                1.63
Contained Zn(lb)                40,886,729

 

Sensitivity tables

Project sensitivity to metals prices, capital and operating costs are shown in the associated table. The project is most sensitive to metals prices, and to silver slightly more than gold. Given the low remaining required capital expenditures, the project is least sensitive to capital.

Updated mineral resource estimate

The updated mineral resource estimate incorporates work completed on the project database since the previous technical report (Feb. 20, 2015: Tetra Tech, National Instrument 43-101 technical report and preliminary economic assessment, Velardena project, Durango state, Mexico). The database was evaluated and intervals were recoded by vein, which led to an update of the principal veins (CC, C1, A4, F1, G1, San Mateo, Roca Negra, Hiletas, Terneras, Chicago and Escondida), including wireframe models. The new wireframe models were created in Leapfrog software for the principal veins. Resource estimations for these veins were completed using a 3-D block model with a block factor.

Estimation of secondary veins was conducted in the same manner as the 2015 resource estimate, using point models based on vein surfaces, but with updated parameters including minimum 0.7-metre dilution, updated mined-out shapes, updated property boundaries and the new NSR cut-off value of $125 per tonne of ore.

 

                                             UPDATED RESOURCE ESTIMATE

Class         Mineral      NSR     Tonnes    Ag      Au     Pb     Zn          Ag        Au           Pb          Zn
                 type  cut-off            (g/t)   (g/t)    (%)    (%)    (000 oz)  (000 oz)     (pounds)    (pounds)

Measured        oxide      125    135,000   260    5.55   1.72   1.54   1,130,000    24,000    5,120,000   4,570,000
Indicated       oxide      125    301,000   250    4.89    1.7   1.47   2,420,000    47,000   11,300,000   9,750,000
Measured +
indicated       oxide      125    436,000   253     5.1   1.71   1.49   3,550,000    71,000   16,430,000  14,310,000
Inferred        oxide      125    372,000   399    4.82   2.52   1.46   4,770,000    58,000   20,680,000  11,950,000
Measured     sulphide      125    269,000   346    5.38   1.53   1.88   3,000,000    47,000    9,100,000  11,140,000
Indicated    sulphide      125    645,000   327    4.62   1.43   1.94   6,790,000    96,000   20,300,000  27,530,000
Measured +
indicated    sulphide      125    915,000   333    4.84   1.46   1.92   9,790,000   142,000   29,410,000  38,670,000
Inferred     sulphide      125  1,393,000   342     4.7   1.51   1.97  15,320,000   211,000   46,380,000  60,400,000
Measured          all      125    404,000   317    5.43    1.6   1.76   4,120,000    71,000   14,220,000  15,710,000
Indicated         all      125    946,000   303    4.71   1.52   1.79   9,220,000   143,000   31,610,000  37,280,000
Measured +
indicated         all      125  1,351,000   307    4.92   1.54   1.78  13,340,000   214,000   45,830,000  52,990,000
Inferred          all      125  1,765,000   354    4.73   1.72   1.86  20,080,000   268,000   67,060,000  72,350,000

Notes to accompany mineral resource table (effective date Dec. 31, 2019):
(1) Resources are reported as diluted tonnes and grade to 0.7-metre fixed width.
(2) Metal prices for NSR cutoff are three-year trailing average as of December, 2019: $16.30/troy ounce Ag, 
$1,305/troy ounce Au, 99 cents/pound Pb and $1.27/pound Zn.
(3) The cut-off value was calculated based on mining and milling costs from the 2015 operation and estimated 
payable recoveries including smelting and refining fees.
(4) Columns may not total due to rounding.
(5) Mineral resources that are not mineral reserves do not have demonstrated economic viability.

 

PEA information and cautionary note regarding inferred resources

The discounted cash flows in the PEA are provided pretax and are prepared in compliance with National Instrument 43-101 of the Canadian Securities Administrators. The following qualified persons from Tetra Tech will co-author the technical report that will be filed on SEDAR within 45 days of this news release: Dr. Guillermo Dante Ramirez Rodriguez, Leonel Lopez, Randolph P. Schneider and Kira Lyn Johnson. 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 mine plan evaluated in the PEA is preliminary in nature and additional technical studies will need to be completed in order to fully assess its viability. There is no certainty that a production decision will be made to reactivate the Velardena mine or that the economic results described in the PEA will be realized. In addition, the company may determine to proceed with a production decision without completion of customary feasibility studies demonstrating the economic viability of reactivation of Velardena. A mine production decision that is made without a feasibility study carries additional potential risks, which include, but are not limited to, (i) increased uncertainty as to projected initial and sustaining capital costs and operating costs, rates of production and average grades, and (ii) the inclusion of inferred mineral resources, as defined by NI 43-101, that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be converted to a mineral reserve, as defined by NI 43-101. Mine design and mining schedules, metallurgical flow sheets, and process plant designs may require additional detailed work and economic analysis and internal studies to ensure satisfactory operational conditions and decisions regarding future targeted production. In addition, the results of test mining may impact projected capital and operating costs, with the result that the projected NPV, IRR and cash flows may be adversely impacted.

No mineral reserves have been estimated for the project. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Review by qualified person and quality control

On behalf of Tetra Tech, the technical contents of this press release have been reviewed by the qualified persons for the purposes of NI 43-101. Tetra Tech's QPs have extensive experience in mineral exploration, mining engineering and metallurgical processes, and are QP members of the Mining and Metallurgical Society of America and the SME RM.

About Golden Minerals Company

 

Golden Minerals is a Delaware corporation based in Golden, Colo. The company is primarily focused on advancing its Velardena properties in Mexico and its El Quevar silver property in Argentina, as well as acquiring and advancing mining properties in Mexico and Nevada

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