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spk02: Greetings. Welcome to the Golden Minerals Company third quarter 2021 earnings webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero and the telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Karen Winkler, Director of Investor Relations. You may begin.
spk01: Thank you, operator. Good morning, everyone. On behalf of the Golden Minerals team, I'd like to welcome you to today's earnings call, during which we will be discussing operating and financial results for the third quarter 2021. Before we get started, please note that certain statements made by management today will be forward-looking within the meaning of applicable securities laws. Forward-looking statements involve known and unknown risk. uncertainties, and other factors that may cause actual results or performance to be materially different from those expressed or implied by such statements. Please refer to our most recently filed Form 10-Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward-looking statements. On the call today are Golden Minerals President and CEO Warren Rang and our Chief Financial Officer Bob Vogels. Following their prepared remarks, they will be available to answer questions. This webcast will also be available for replay on the company's website tomorrow and remain posted for approximately 30 days. I will now turn the call over to Warren. Thank you, Karen.
spk07: I'm pleased to report that Golden Minerals just completed its first ever profitable quarter from mine operating income. This is a great milestone. and it is validation of successfully executing our plan to become a profitable producer. And this profitability is despite increased exploration spending in the quarter, mostly focused on expanding the Rodeo resource and extending the life of mine, which I'm sure we can all agree, given the strong performance of Rodeo, is a worthy goal. Rodeo continues to perform well, Production and revenue for Mordea were both strong in Q3 with a quarter over quarter gain of 38% in gold production and a 44% gain in revenue. Our cost per ounce of gold produced has improved significantly since Q2 and is now in the mid $800 net of silver credits. We are on track to meet our annual guidance for gold production of between 12,000 and 14,000 ounces, and we have already exceeded guidance for silver production for the year. Our guidance for net operating margin of 10 million to 11.5 million is also right on track. We're seeing increases in the metallurgical recovery of gold in our plants based on some adjustments we have made in improving the fineness of the grind by grinding a bit less material per day and grinding it longer. We are injecting more air into the tanks to increase the oxygen levels in the agitated leach train, which is also increasing the gold recovery. Given the recovery gains, partly based on the finer grind, we plan to maintain daily production levels at about 500 dry metric tons per day, as we have been since late September. We completed our resource expansion drilling near the Rodeo pit, and we'll be releasing the complete results from the program this quarter. We have seen numerous mill grade gold intercepts that are outside of the current resource. We expect to see an increase in the size of the gold and silver resource, which should yield a modest extension of the mine life for Rodeo. We plan to have that information incorporated into our mine plan before the end of the year. Our advancement of Delardegna is continuing to progress through detailed selective mining studies and additional final testing to define the details of the proposed bio-oxidation or BIOX plant. We have determined that it is not in the company's best interest to start the mine until we have approved the construction of the BIOX plants and they're closer to the possible completion date. The economics of operating without receiving good payables for the gold are simply not attractive enough to justify the risks. We will not get good payables for the gold until we have the biox plant operating and can extract the gold using our oxide plant. This pushes a possible restart date out into 2022. Once we have the results from our current test work, now underway in South Africa, we will have a much more accurate estimate of the capital cost of the biox plant and we will have a firm schedule for possible construction. With this information, we will be able to evaluate the restart proposal and, assuming the economics are still favorable, approve the startup plan. This could happen in the first half of 2022, which would potentially allow for resumption of production at Velardeña as soon as the second half of 2022 or early 2023. We have finished the first phase of drilling at our Cerita Este project in Argentina, and we are awaiting drill results. This drill program and related expenditures were required to satisfy the terms of our earn-in option. The property is immediately adjacent to the giant Takataka copper porphyry deposit in western Salta Province and has excellent potential for copper deposits and also for high sulfidation epithermal gold-silver deposits. Once all results are received, we will release the results. In mid-October, we started our second round of drilling at our Yoquivo project in Chihuahua, Mexico, designed to follow up on some excellent gold and silver intercepts that we released early this year. The project has district scale, we control about 5,000 hectares, and continued positive drill results would be significant for the company. We should see assay results early next year. Our plans for production growth and sustainable profitability are in place and advancing well. With Velardeña producing possibly as soon as next year, we will be on track with our initial plan and potentially be producing and selling silver lead and separately zinc concentrates in 2022 while we are constructing the bio-oxidation facility. Once the bio-oxidation plant is complete, our projections show annual production of 2 million silver equivalent ounces per year from the operation at excellent margins, assuming continued strong gold and silver prices. Our production from Velardeña once in full swing will be about twice the equivalent gold production from Rodeo and will have a projected mine life of a decade and possibly more with additional exploration success. I will now hand the call to Bob Vogels, our Chief Financial Officer, to present the financial results for the third quarter 2021.
spk06: Thank you, Warren. For the third quarter, our operating margin at the Rodeo operation increased significantly over the second quarter, as expected, to about $4.2 million, with throughput at the processing plant averaging over 530 tons per day. As Warren mentioned, we anticipate the plant will continue to operate at a rate of approximately 500 tons per day through the remainder of the year. Cash operating cost, net of silver byproduct credits, improved significantly in Q3, declining to about $865 per payable ounce of gold produced, due primarily to the higher mill throughput level and higher grades. Cash operating costs net of silver byproduct credits should remain at or below $900 per ounce for the rest of the year, even as grades trend back to the deposit average in Q4. At throughput levels of approximately 500 tons per day for the remainder of the year, and given a continuation of current prices for gold and silver, operating margins at Rodeo in Q4 should be similar to Q3. As noted in our 10-Q filing, we are estimating an operating margin of between $10 million and $11.5 million for the full year 2021, consistent with prior guidance. With a significantly improved operating margin from Rodeo, we reported positive after-tax net income of about $400,000 for Q3, even with increased exploration spending during Q3 as we advanced several projects. including drill programs at Rodeo and in Argentina at the Cerita Este property, as Warren mentioned. Other levels of expenditures for Elkivar, G&A, and Velardeña Cairn maintenance were similar to prior quarters and are expected to continue at approximately those levels going forward. With the expected continued high operating margin from Rodeo, the company is also anticipating positive net income in Q4. We ended the third quarter with about $9 million of cash. Net cash flow for Q3 was a positive $1.9 million, due primarily to the increased operating margin at Rodeo. Net cash flow during the third quarter also benefited from a significant refund of prior VAT receivables, as noted in our 10-Q. The VAT receivable overall declined about $500,000 in Q3. It is difficult to predict the timing of our VAT receivables collection quarter to quarter, but we expect our level of VAT receivables to remain more or less the same over the coming quarters with new VAT from current operations being offset by refunds of prior VAT. Now that we are in full operating mode at Rodeo and providing metals prices remain at current levels, we expect we will have positive net cash flow through the remainder of 2021 and 2022. As reported in the third quarter 10Q, we expect our cash balance to grow to around 11 to 12 million over the next 12 months through September 30, 2022, depending on metals prices and spending on exploration projects. These projections include the one and a half million we expect to receive from fabled silver gold in December 2021, according to the terms of our farm out agreement for the Santa Maria property. The cash projection does not assume any other forms of debt or equity financing or costs that we may incur related to a potential restart of the Bellardania mine. I will now turn the call back over to the operator, who will take your questions.
spk02: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. with participants using speaker equipment, and may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And our first question comes from the line of Jake Zichelski with Alliance Global Partners. Please proceed with your question.
spk08: Hey, guys. Thanks for taking my questions. Just starting with Celar Genia, should we still expect bulk sample results later this year? followed by the feasibility early next year, you know, closer to a potential production decision. I'm just trying to wrap my head around the timing of some of these items.
spk07: Yeah, Jake. Yeah, good question. So, we will be having, you know, information to report from the study, which won't technically be a full feasibility study, but it will be feasibility level work on the BIOCS portion of the process. We should have that in the first quarter of next year. The exact date is a little bit unclear. It depends on the batch processing schedule that is being used by Uzitech in South Africa. So we should be able to, certainly in the first half of the year, next year, we would have that information to release, along with some of the bulk sample results, the head grades and whatnot that we obtained from the test mining.
spk08: Okay, that's helpful. And then just on Rodeo Exploration Results Program wound down in October, you know, assuming they're positive, let me see those results come out, do you think that'll trigger a formal mine plan update or will it be more of an internal mine plan update incorporating results?
spk07: I'm assuming we'll do it internally because of the cost of doing an independent or external update. However, we will also be seeing likely an update based on the SKE 1300 rules early next year when we refile the technical report summaries. So that information would be included in those updates as well.
spk08: Okay. Very good. That's all on my end. Thanks again, guys.
spk04: Thank you, Jake.
spk02: Our next question comes from the line of Heiko Ayer with AC Wainwright. Please proceed with your question.
spk05: Hey there. Thanks for taking my questions. Of course, Heiko. Welcome. Thank you. Thank you. Just thinking out loud here a little bit with, you know, the longer term. I mean, you're clearly investing in the firm quite heavily, but thinking out a little bit longer, how do you stand with investments versus shorter term cash flow performance for the firms? And I'm talking about this because, you know, earnings versus the revenues that are being spent versus the capital that's being spent in your future revenue inflow.
spk07: Yeah, no, that's a good question, Heiko. So we're obviously reinvesting in exploration. We have a pipeline of projects that have the potential to have material change for the company to the better. And it's important to invest exploration dollars in those properties as we go along. The company needs to grow, obviously, and the most effective growth program is internally from exploration spending. And it's obviously much quicker if we were able to do some M&A, which we are continually looking at also. But in the meantime, investing, reinvesting, some of the revenues as exploration spending is really beneficial to the company and the shareholders in my opinion.
spk04: Very good. Thank you so much. Thanks, Heiko.
spk02: And again, as a quick reminder, if you have any questions, you may press star 1 on the telephone keypad to join the Q&A queue. And our next question comes from the line of Sid Rajpev with Fundamental Research. Please proceed with your question.
spk04: Hello, Sid. Are you on the line?
spk03: Sorry. Yeah, congratulations on the strong production performance, everyone. A few questions. Thanks, Sid. One is a follow-up on a previous question, Rodeo. So is it better assumed that a formal resource update will come out year-end, early next year?
spk07: What we'll do, Sid, is we'll do an internal update this year. We'll incorporate that into the mine plan, and it will be published within the technical report summary update that we need to do for SK-1300 early next year, as in the summary form is what I anticipate. So while we won't produce an independent 43-101 report this year, we will update based on SK-1300 next year.
spk03: Okay, now you have provided cash flow projections for the next 12 months, but I'm a bit greedy here. I was trying to see if you are able to provide any guidance for production and maybe cash costs.
spk07: Bob, do you want to take that? Let's see. I'm not sure what we have in the next 12 months forecast right now.
spk06: Well, we don't have anything published, certainly with our 10-K filing for the end of this year. we will provide a forecast full year forecast for 2022 that's what I anticipate this year we only provided a forecast for this current year 2021 and we've been reporting against that all year I would expect with the year-end financials and 10k we will provide a full year 2022 forecast which presumably would include production as well yeah so it
spk03: Fair to say that the cash cost might remain the same in Q4 as Q3?
spk06: Yes, I think actually we, in the update I gave, I indicated that Q4 we expect cost to remain under $900 an ounce, which is in line with what we had in Q3, slightly higher as grades are expected to be a little bit lower in Q4 than they were in Q3. All right.
spk03: What's the plan there? Can we expect a maiden resource estimate next year?
spk07: Yes, we're just doing the second phase of drilling there, so we're a long ways from a possible resource estimate. We're looking to define the extent of some of these mineralized drill holes that we reported early this year. So it's unknown whether this will become a resource or not, and certainly based on the results of this drill program that we're currently undertaking, we'll have a much better idea of the extent of mineralization, and we can give an update after those results are out early next year.
spk03: Thanks, Warren. Just one more question on Barrick. What's their plan? They spent $1 million on the property so far. Any color on what they spent on? What is the plan going forward?
spk07: So the company has put out for bid for exploration drilling starting late this year, early next year, Barrick has, as kind of a public bid process. So they are planning to drill within the next year and don't have much more details to offer at this point. But they're continuing their process of earning in and continuing with the option.
spk03: Thank you. Again, congratulations on the strong Q3.
spk02: Thank you, Sid. And our next question comes from the line of Heiko Aili with HC Wayne White. Please proceed with your question.
spk05: Okay, I just had one quick follow-up there. Sorry for jumping back in. Can you break down the $4.9 million in exploration costs and property holding costs between your assets, please? Yeah, Bob, you want to take that one?
spk06: The 4.9, that was the full year number, correct, Heiko? Yeah. The majority of it was at Rodeo, a little over a million dollars in total. There was about 700,000, 800,000 at Subida Este in Argentina. We also had some costs in there associated with our studies for Belladamia Restart we include in there. Our normal spend for base level exploration, which includes property holding costs and a number of exploration concessions that we have, runs approximately $2 million a year, so about $1.5 million of of costs associated with just general exploration. We have an exploration staff in Mexico and in Argentina that we pay, and we have roughly about half a million dollars to date in concession payments to various holdings that we have. That's more or less a breakdown at that expense.
spk05: Got it. And it's going to be the same for the next 12 months, more or less.
spk06: Yeah, depending on drill programs, that's the most expensive aspect of that. So we've got YoKivo we're drilling, as Warren mentioned, and there could be further programs announced as we head into next year.
spk04: Got it.
spk05: You seem to have the penultimate number, Dylan, the 4.9 million.
spk06: I'm sorry, Heiko, I didn't hear that exactly.
spk05: I said you seem to have the total number down, the 4.9 million that are in your outlook. Right?
spk04: Yes.
spk06: I'm confused by the question.
spk05: What I'm saying is the past 12 months spent should be more or less the same as the next 12 months spent by assets.
spk06: It will if we continue to be fairly aggressive in drilling some of these prospects. In past years, where we haven't had cash flow available to us, we have cut back a long ways and we've managed to keep exploration spending in the two to three million annual range, which is base level concession payments, holding costs, salaries, and just minimal exploration work. That's why you've seen an uptake this year is we had the money to do some of these additional drill programs.
spk07: Got it. Cool. Let me jump in a minute more on that just to explain a bit further. I think we spent probably more exploration drill dollars this past year than we would plan on for next year, but we haven't made that final decision. But as we start gearing up on Velardeña once that decision is made, I think we will, by necessity, cut back on exploration spending next year. So just as an overall look.
spk04: Makes sense. Thank you all. Thanks, Heiko.
spk02: And we have reached the end of the question and answer session. I'll now turn the call back over to Karen Winkler for her closing remarks.
spk01: Thanks, Operator. This concludes today's call. Thanks for joining us, and we look forward to talking with you again next quarter. Have a good day.
spk02: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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