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spk05: Greetings and welcome to the Golden Minerals Company first quarter 2022 earnings conference call and 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 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Karen Winkler, Director of Investor Relations. Thank you. You may begin.
spk01: Thank you, Operator, and good morning, everyone. Welcome to today's earnings call, during which we'll be discussing operating and financial results for the first quarter of 2022. 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 risks, 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 today's call are Golden Minerals President and CEO, Warren Rang, and our Chief Financial Officer, Julie Weidman. 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, where it will remain posted for approximately 30 days. I will now turn the call over to Warren.
spk04: Thank you, Karen. Our radio mine continues to operate as anticipated and continues to generate significant cash flow for the company. From inception in January 2021 through the end of March 2022, We have produced around 18,000 ounces of gold and 65,000 ounces of silver from Rodeo, with cash costs averaging $982 per payable gold ounce net of silver credits. In the first quarter of 2022, we produced about 3,600 ounces of gold and 14,000 ounces of silver. Our 2022 guidance for Rodeo remains unchanged. And we estimate processing 175,000 to 185,000 tons of material through our oxide plants at an average rate of about 500 tons per day. Payable production for 2022 is estimated at approximately 12,000 to 14,000 ounces of gold and 42,000 to 47,000 ounces of silver. We estimate average grades during 2022 will be 2.9 grams per ton gold and 9.4 grams per ton silver. These grades are lower than what we recorded in 2021 since we are now working into a lower grade area of the resource. However, they are as expected in the mine plan. Mill recoveries are projected to average about 80% for both gold and silver. We anticipate higher total plant throughput in 2022 compared to 2021 that will help offset the lower gold grades for 2022 with similar total payable gold production this year, although at a higher unit cost. Cash costs per payable gold ounce net of silver byproduct credits are expected to be between $1,100 and $1,200 during 2022. We continue to advance our Velardeña underground silver gold mines ahead of making a production restart decision. The bio-oxidation or BIOX testing of pyrite concentrates in South Africa has now been completed. We are assessing the results and incorporating them into the final plan for the proposed BIOX plant at Velardeña. We have nearly completed the flotation optimization test work, also in South Africa, and expect to have results soon to incorporate into the final production plans. We began underground test mining last month to determine that with our chosen subcontractor, we can control mining dilution, which is critical to the success of the project. Testing is anticipated to run into next month. We intend to make the formal decision on resumption of mining activities within the next few months. As previously communicated, if we make the decision to restart mining activities at Velardeña, we estimate construction of the biox plant would take roughly one year, running into mid-year 2023. It is possible, depending in part on metals price, that we could begin mining with a three to four month wrap-up period and begin selling silver lead and zinc concentrates while stockpiling the pyrite concentrates, in which most of the gold is contained, until the BIOX facility is complete. Moving on to our exploration properties, in April we began a third drill program at the Yoquivo Gold-Silver Project in Chihuahua, Mexico. This program was designed to further delineate the previously encountered vein-hosted mineralized intervals. Two earlier drill programs identified multiple potentially economic-grade areas of mineralization at Yoquivo. The newly recognized southern high-grade zone is open to the south on the Pertinencia vein. Most other high-grade zones have also not been closed off. We expect this third round of drilling will give us sufficient information to estimate an initial gold-silver resource. In January, we reported results from the first drill program ever conducted at our Cerita Este project in Salta, Argentina. That drilling identified shallow oxide gold with widths and grades that are potentially economic. We have submitted new permits for trenching and additional drilling that we plan to complete during a 2022 field campaign. Last week, we announced that John Galassini has joined Gold Minerals as Chief Operating Officer, effective May 9th. John has more than 30 years of mining operations experience and has successfully managed numerous underground operations as well as some of the world's largest open pit mines. He will be responsible for leading our mining operations as Gold Minerals continues to grow. Additionally, I'm pleased to introduce Julie Weidman, who joined the company earlier this year and stepped into the Chief Financial Officer role upon Bob Vogel's retirement at the end of March. Julie joins us with over 30 years of accounting and finance experience, including 10 years of mining industry work at Phelps Dodge, a number of years at smaller domestic and international mining companies, and time at Deloitte and Touche. I will now hand the call over to Julie to present the financial results for the first quarter.
spk08: Thank you, Warren. For the first quarter of 2022, Our operating margin at the Rodeo operation was approximately 3.2 million, from revenue of 7.5 million received from the sale of approximately 3,850 ounces of gold in dore. The plant operated at a rate just over 525 tons per day, and the average grade of gold processed was 3.1 grams per ton for the first quarter. Cash operating costs, net of silver byproduct credits, were about $1,164 per ounce for the first quarter of 2022. As anticipated, this cost per ounce is higher than the average cost for the full year 2021 due to the decrease in the average grade. While the operating margin from Rodeo in the first quarter of 2022 was positive, we reported negative after-tax income of about $300,000. Exploration expenses were approximately $1.7 million compared to approximately $0.8 million in the first quarter of 2021. G&A costs for the first quarter of 2022 were $1.3 million compared to $1.5 million in the first quarter of 2021. Expenditures in Q1 of 2022 for Alkavar were $0.1 million similar to the same quarter in 2021, and are expected to continue at approximately that level going forward. Care and maintenance expenses at Ballardania was approximately 0.5 million, which was slightly higher than the first quarter of 2021 due to additional consulting costs incurred this year to prepare the TRS in order to comply with the new SK-1300 regulations required in our 10-K filing. Income tax expense of just under 0.1 million was accrued for the first quarter of 2022 due to the profitability of several of our Mexican entities. We expect continued positive operating margin from Rodeo throughout 2022. As noted in both our 10Q filing and our recent 10K filing, we are estimating an operating margin of between 7 and 9 million for the full year of 2022. This assumes plant throughput levels of approximately 500 tons per day with slightly lower grades compared to 2021 of approximately 2.9 grams per ton for gold and 9 grams per ton for silver. This operating margin estimate assumes future gold prices of $1,800 per ounce, which is below current levels, and a silver price of $25 per ounce, which is slightly higher than current levels. We ended the quarter with about 11.7 million of cash. Net cash flow for the quarter was negative 0.5 million due primarily to an increase in inventory and VAT receivables. Spending on capital items has significantly dropped off compared to last year with only 24,000 spent during Q1 of 2022 compared to 0.5 million spent in the first quarter of 2021. Assuming metal prices average $1,800 per ounce for gold and $25 per ounce for silver, we expect our cash balance to remain around $10 to $11 million over the next 12 months through March 31, 2023, depending on spending on exploration projects and costs associated with the potential restart of the Valardania mine. These projections include the $2 million payment scheduled to be received from Fable in December of 2022. The cash projection does not assume any other form of debt or equity financing. I will now turn the call back over to the operator who will take your questions.
spk05: Thank you. We will now 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
spk06: One moment, please, while we poll for your questions. Our first questions come from the line of Jake Sapkowski with Alliance Global Partners. Please proceed with your questions.
spk07: Hey, guys. Thanks for taking my questions. So, just Starting with the test mining activity at Vilardinia, should we expect results there before the end of Q2? And then just building off that a bit, I think, Warren, you mentioned what metals prices would we need to see for you to begin mining activity at Vilardinia while the BIOX plant is being constructed?
spk04: Yeah, Jake, thanks for the question and appreciate you being here. We should have our test mining results completed in June, and I expect to be able to talk about those results toward the end of June. It might be earliest Q3 when we actually get them out there into the public space. But that timing is holding fast. We're in the midst of the testing now. I think we've been at it for about 20-odd days or so. And it's about a 45-day test. So we should have everything firmly in hand and plugged back into our models to know quite well if we're doing what we need to do in terms of controlling dilution. So definitely expect to have that around that timeframe, but can't promise it'll be right before the end of Q2. It might be early as Q3. For the second part of the question, Jake, the pricing that has been key for know silver lead it's really based on the silver we do get some gold in the lead concentrate and so gold prices so but really we need a sustained silver price over 25 an ounce to make it really interesting enough to proceed you know before we get the the biox up and running so Assuming we can get that, you know, we'd be okay to start, I think, but it will require board approval to get there. Okay, that's helpful.
spk07: And then just on exploration, what's the plan look like for the rest of this year, both at Rodeo and Yokivo? And do you think there's any opportunity for further mine life extension at Rodeo? I know you guys have extended it by a couple quarters, but I'm just curious on your thoughts there.
spk04: Yeah, we did some additional drilling in the Q1. We haven't really reported results. We're still going to put those into the model. We'll probably have a model update. I don't think it'll be a huge, significant change. It'll be incremental. We expect to do a little bit more drilling at Rodeo sometime during the year. We don't need to do it right away. It's on the southern end of the deposit. We don't get there until really in 2023. So we may put that off a bit. But there is still the possibility of extending mine life at Rodeo for another quarter or two, let's say, depending on results. That's still open. The southern end of the deposit is open still. Plus, there's some other exploration targets nearby that we'll get to as we have the exploration budget to do so. Yokivo, we're definitely looking to continue drilling there to try to get enough information to put out a resource update, a first resource at Yokivo, let's say. It's going well. We're drilling now. We'll see how that goes. We'll drill until we have enough information to be firm about what we think the resource looks like there. But we've planned about, I think, 4,000 meters to start with.
spk06: Got it. Okay. That's all for me. Congrats again on a good quarter, guys. Thanks, Jake. Appreciate it. Thank you.
spk05: Our next questions come from the line of Aiko Ile with HC Wainwright. Please proceed with your questions.
spk03: Hey there. Thanks for taking my questions. Of course. Good morning, Aiko. Good morning. Opening any newspaper, all one reads about is inflation. I mean, today the number was the CPI inflation report, where once again, well over 8% per April. What are you guys seeing with the various forms of inflation? And I'm not just talking about the obvious ones, you know, like wage inflation, but I'm also just, you know, cost and duration of assays, that kind of stuff. And then when you're done with that, maybe just also go through some of the steps that you're going through to mitigate inflationary pressures, please.
spk04: Yeah, that's a great question. It's evolving, as you might expect. We are seeing the wage inflationary pressure in Mexico. Mexico had an internal CPI of about 7% last year. We did have to increase wages both for union and non-union employees, so we do have that showing up in our cost structure. We're starting to see some inflation increase Certainly at the gas pump, for any kind of diesel or gas used in the operation, that's gone up substantially since the worldwide oil shortage, if you will. And we are starting to see some increased costs in direct supplies. The service costs are only just now starting to show up. So what you can do about it basically is you push back to the extent you can, and eventually you have to compromise. Prices will go up. Costs will go up. I think they're still manageable. There's nothing outrageous about it. But I think we can anticipate that cost of the operation will reflect the overall inflationary pressure.
spk03: Fair answer. Building on my last question a little bit, and I truly have absolutely no idea, is there any inflationary impact on care and maintenance expenses? I am in particular talking about the Lardinian, obviously. I mean, I assume that besides slightly higher wages for security staff or staff in general, the impact on that should be essentially nothing, right?
spk04: You know, the bulk of that cost is the security cost of maintaining, you know, the integrity of the plants that are not in use to make sure no one comes in and rips them off, basically. And so we do get increased costs on an annual basis from our security provider. We don't see it immediately. We haven't gotten a new contract with that security provider, but that's the bulk of that care maintenance cost, Heiko. The other parts of it, Related to, for example, filing the updated technical report for the SK-1300, yeah, we'll see some increased costs on that. It's on a consulting basis, so that's more direct. But they're not major increases. I think they'll show up maybe at about the inflation rates over time, but lagging, especially for the security contract.
spk03: Okay, so it's fair to say that the 2024 numbers may not be the same given that it's lagging by, I guess we'll fully see it lagging a year, right?
spk04: Yeah, about a year after is when we'll start seeing the increased prices on the security contracts, for example, which is an annual contract that we renew with only the opportunity to change prices once a year.
spk06: Awesome. Thank you all so much. Take care. Thank you, Aiko.
spk05: Thank you. Our next question has come from the line of Sid Rajee with Fundamental Research. Please proceed with your question.
spk02: Hey, Warren. Pleased to see the Q1 results. If I may, Warren, I have a macro question and a couple of company-specific questions. In terms of macro, is the current supply disruptions and all the crisis going on, is that affecting Golden at all in any way?
spk04: In terms of supply of materials?
spk02: Into the sourcing materials for processing or mining or anything related, are you expecting an operation?
spk04: Well, we're seeing some longer timelines, but we haven't had any shortages that have caused any change in our operation. We are seeing some longer timelines for things like mill liners. I expect to see longer timelines for some steel products, especially stainless steel products. And we're anticipating that in advance, for example, for the construction of the biox plant, assuming we go ahead. We're looking at getting those orders placed as early as possible so as not to have significant delays in the construction schedule.
spk02: Got it. With your Q1 results, I was specifically surprised by the significant increase in recovery rates despite lower grades. I know you mentioned in our last call that in Q4, recovery rates had declined. How were you able to increase rates so much in Q1?
spk04: It's an interesting aspect of this ore deposit, Sid, that the recovery is higher with lower grades. It's usually not the case in precious metals deposits, but in this particular case at Rodeo, where we see the highest grade of gold, is where we see the strongest solicitation, very strong solicitation related to the deposit, the deposition of the mineral. And where we have that very strong solicitation, we have more encapsulation of the gold in silica, which is basically the cause of the lower than ideal recovery in the gold circuit. So when the gold grade actually tails off a little bit, there's not as strong solicitation. There's less encapsulation, so we get better recovery. So it's an interesting inverse relationship, which is what is explaining the behavior of recovery versus the gold grade, in my opinion. And it's why we expect to have, on average, no more than 80% recovery going forward this year, because the grades will be a little bit lower.
spk02: Got it. Thank you. And then just... On the financing for Velodynia, it seems like you might have to do a small financing. Will that be coming from debt?
spk04: We're looking at all possibilities for financing, and I think the preferred option, although we haven't made any decisions, will be a combination of a small amount of debt and also some forward sale of product. So those would be the two favorite choices. And we haven't made a decision on either one yet. But, yeah, obviously we'll need to have a little bit of additional cash to be able to complete the construction for the biox plant once we have the decision to go forward.
spk02: Got it. Just one more thing. Any updates from Barrick on LQR?
spk04: Nothing new. Going forward, they've put together a plan to drill this year. They have their permits in hand. I expect them to start drilling this year. I haven't gotten a firm date for beginning it. We're going into the winter up there at Okevar, which... Depending on what elevation exactly they're drilling at can make drilling a little bit difficult. But I do still expect them to drill some holes this year and have some results available from that. So they're still going forward with their earning, but nothing firm in terms of a timetable for the drilling.
spk02: Appreciate your insights. Thanks, Warren.
spk04: Thank you, Sid.
spk05: Thank you. There are no further questions at this time. I'd like to turn the call back over to Karen Winkler for any closing comments.
spk01: Thanks, Daryl. This concludes today's call. Thanks to everyone for joining us, and we look forward to talking with you again next quarter. Have a great day.
spk05: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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