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spk09: Greetings. Welcome to the Golden Minerals Company second quarter 2022 quarterly 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. Please note this conference is being recorded. I'll now turn the conference over to your host, Karen Winkler, Director of Investor Relations. You may begin.
spk02: Thanks, Operator. Welcome to Golden Minerals Company's second quarter 2022 earnings call. On today's call are our president and CEO, Warren Wren, our chief financial officer, Julie Weidman, and our chief operating officer, John Galassini. Following their prepared remarks, they will be available to answer questions. 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 10Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward-looking statements. I will now turn the call over to Warren.
spk07: Thank you, Karen. Good morning to all, and thanks for joining us. I'll begin today's call by providing a brief overview of the company's second quarter performance, followed by our 2022 guidance and several project updates. I'll then hand the call over to John, who will take you through the quarter's operating highlights, followed by Julie, who will discuss second quarter financial results. Afterward, we'll open up the call to questions from our analysts and anyone else who has sent in questions. As you all know, the US and Mexico are facing macroeconomic headwinds, including decades high inflation rates and continued supply chain challenges. And these headwinds have affected our operations to some degree, driving up the cost of production. Our rodeo mine produced approximately 3,000 payable ounces of gold and 12,800 payable ounces of silver in the second quarter 2022. generating approximately 1.3 million in net operating margin. Higher cash costs at Rodeo are due in part to the inflationary pressures on basic materials, but also and primarily due to the lower head grade from mine material that we encountered at Rodeo this past quarter as we near the bottom of the phase one pit. Grades in the remaining phase one pit and the current phase two pit are higher than what we encountered this last quarter, Expenditures for exploration at Yoquivo and our new discovery at Cerrito Este as well as costs of test mining at Velardeña have also increased our net loss for the quarter to just under two cents per share. Our full year 2022 production guidance for Rodeo remains unchanged. Available production for 2022 is estimated at 12,000 to 14,000 ounces of gold and 42,000 to 47,000 ounces of silver with estimated average grades of 2.9 grams per ton gold and 9.4 grams per ton silver. Our plans to start mining at Veledania have been once again delayed while we work through a modified mine plan and mining methods to counteract excess dilution we observed from some of the veins in our recent test mining. One vein in particular, the San Mateo vein, yielded results exceeding the range of dilution that we anticipated. We're looking at options to modify the mine plan by replacing the San Mateo vein in the plan with other veins that would not have the same characteristics that caused the extra dilution. We're also looking at the possibility of ore sorting to upgrade the diluted material. Investigating these alternatives will take several months. During this time, since silver prices have also dipped and have not yet returned to expected higher long-term values, we are better off not producing until we have reworked our mine plan and mining methods. John will provide additional information about the details of our rodeo production and our recent work at Bellardania later in the call. Moving to the exploration side of our business, Last month, we completed a third drill program of about 5,700 meters and 24 holes at our Yoquivo gold-silver project located in Chihuahua, Mexico. The drill program was designed to further delineate vein-hosted mineralized intervals that were identified during 2021 drilling. The first nine holes of the 2022 program, as reported last month, showed continued strong gold-silver grades and identified multiple new and previously unknown high-grade gold-silver structures. Complete assay results haven't yet been received. However, we expect this third round of drilling will give us sufficient information to estimate a maiden gold-silver resource later this year. At our Cerrito Este prospect in Salta Province, Argentina, we completed a second drill program in June that was designed to offset and delineate an oxide gold interval that we encountered in an initial 2021 drilling program. We're very pleased with recently received assay results that point to a potentially economic shallow oxide gold system. We are planning further drilling at Cerita Este to begin in the current quarter. In April of 2020, You'll recall we entered into an earning agreement with Barrick Gold at our LKVAR project located also in Salta Province, Argentina. This past June, Barrick completed a five-hole, 1,300-meter initial diamond drill program to test the highest priority targets on the property. Barrick reported buggy silica alteration, which is commonly associated with high sulfidation epithermal gold silver deposits in all of the drill holes. Final assay results from the program are pending. I will now hand the call over to John to talk in more detail about the operation.
spk06: Thank you, Warren. At our rodeo operations, we produced approximately 3,000 ounces payable gold and 12,800 ounces payable silver during the second quarter ending June 30, 2022. Year-to-date, we've produced over 6,600 payable gold ounces at cash costs per payable gold ounce net of silver credits of $1,283. And since Rodeo's inception in January 2021, we have produced in excess of 21,000 ounces of gold and 77,000 ounces of silver at cash costs averaging $1,046 per payable gold ounce net of silver credits. We're producing just over 500 metric tons per day and achieving around 75% recovery for gold and 82% for silver, levels which we see as sustainable through 2022. Cash costs per payable gold ounce net of silver byproduct credits were higher at $1,426 during the second quarter as a result of several items. First, lower grade material was mined during the quarter as modeled and as we expected as we transitioned from our initial higher grade phase one material to a mix of high and medium grade in phase two of the PIP. We anticipate about the same grade material for the remainder of the year as we have seen in the second quarter. In addition, we saw increased drilling and blasting costs incurred during the second quarter for the benefit of third quarter production. And we saw a spike in the cost of explosives related to the onset of the conflict in Ukraine and related supply chain issues. While we continue to estimate full year average realized prices of $1,825 per ounce gold and silver respectively, we have lowered Rodeo's 2022 operating margin estimate to between $6 and $8 million from between $7 and $9 million. During the third quarter 2022, we intend to begin expanding the tailing capacity of the oxide plants that currently processes Rodeo material. The expansion was originally expected to take place in 2023, but is being moved forward due to higher than initially planned plant throughput at Rodeo in 2022. This work is estimated to cost around $2.1 million. most of which is anticipated to be spent in 2022. We began limited-scale mining activities at our Velardeña underground silver-gold mines in June 2021 to obtain bulk samples for use in our final optimization of a bio-oxidation or biox plant design and for future use in additional flotation studies that would indicate how we can effectively separate the gold-bearing minerals into a pyrite concentrate that is proposed for processing at the BIOX circuit. Test results using the BIOX pretreatment oxidation process continue to fully support the use of the technology in future processing at Velardeña. This past May, we began additional test mining activities using a new contractor to evaluate productivity and dilution of RISU mining on the principal veins that are accessible from the San Mateo decline. Although results of the test mining met expected productivity metrics, they did not meet anticipated dilution metrics on some of the veins mined. We are therefore electing to continue evaluating modified mine plans and mining techniques and address dilution issues. During the current downturn in precious metal prices, our plans to restart production at Velardeña are temporarily delayed. Before we proceed further with development work, we want to see test mining activity produce results that are consistent with the initial PEA. We'd like to demonstrate the ability to fully achieve our mining dilution targets, given minimal dilution is critical to the ultimate financial success of the project. In the coming three months, we intend to evaluate the results of the test mining and explore other methods that will maximize the value of Velardeña. In addition to test mining techniques, we have also begun evaluation of ore sorting and an additional step in processing to further minimize dilution. Rock and ore samples have been sent to the ore sorter manufacturer for preliminary testing, with detailed testing scheduled for later this quarter. I will now hand the call over to Julie to present the financial results.
spk01: Thank you, John. For the second quarter 2022, our operating margin at the Rodeo operation was approximately $1.3 million from revenue of $5.9 million received from the sale of approximately 3,060 ounces of gold in dore. The plant operated at a rate of just under 525 tons per day, and the average gold grade of material processed was 2.6 grams per ton. While the operating margin from Rodeo in the second quarter 2022 was positive, we reported negative after-tax income of about 2.8 million. Exploration expenses were approximately 2.8 million, which included $0.8 million on test mining for the potential restart of Valardana, $0.6 million on drilling at Yoquibo, $0.5 million on drilling at Cerrito Este, $0.1 million on drilling at Rodeo, and $0.6 million on general exploration. This is higher than the first quarter's $1.7 million. G&A costs of $1.3 million for the second quarter remain the same as the first quarter of 2022. Expenditures in Q2 2022 for Elkavar were $0.2 million similar to the first quarter of 2022 and are expected to continue at approximately that level going forward. Care and maintenance expense at Valardania was approximately $0.1 million which was lower than the first quarter of 2022. We expect continued positive operating margin from Rodeo throughout 2022 and are now estimating an operating margin of between 6 and 8 million for the full year, which is below the 7 to 9 million we previously estimated due mainly to costs anticipated to be incurred in 2022 to increase the tailing capacity. These costs are occurring sooner than anticipated due to the higher than anticipated processing rate at the plant. This assumes full-year 2022 plant throughput levels of around 510 tons per day with lower grades compared to 2021 of approximately 2.9 grams per ton for gold and 9.4 grams per ton for silver. This operating margin estimate assumes a future gold price of $1,800 per ounce and a silver price of $25 per ounce. We ended the quarter with about $9.5 million of cash. Net cash flow for the quarter was a negative $2.7 million due primarily to cash used in operating activities, partially offset by $1 million received from the exercise of warrants. Spending on capital items has significantly dropped off compared to last year with only $27,000 spent during the first half of 2022 compared to $1.4 million spent in the first half of 2021. The higher 2021 figure included construction of the second ball mill added to our oxide plant. Assuming metals prices average $1,800 per ounce for gold and $25 per ounce for silver, we expect our cash balance to remain around $5 to $6 million over the next 12 months through June 30th 2023, depending on spending on exploration projects and costs associated with the potential restart of the Velardeña Mine. These projections include the $1.5 million of payments scheduled to be received from FABEL through June 30, 2023. The cash projection does not assume any other forms of debt or equity financing. I will now turn the call back over to the operator who will take your questions.
spk09: 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.
spk08: One moment, please, while we poll for questions. Our first question comes from the line of Jake Zichelski with Alliance Global Partners. Please proceed with your question. Hey, guys.
spk05: Thanks for taking my questions. Can you maybe just touch a bit on the remaining mine life at Rodeo? I mean, I know you've extended it already, but do you think there's any low-hanging fruit there to extend it by a few more quarters?
spk07: Yeah, good morning, Jake. Yeah, this is Warren. Let me... Let me just take that one. No, we, we see the, uh, the, the higher grade material lasting, um, into October of 2023. Um, so that is more or less where we were, um, as of our last updates, I think in March, we do have quite a bit of lower grade material that depending on the gold price, um, could continue the operation profitably. Um, it's, uh, fairly distinctly lower than the current average grade. I think it would probably average about one and a half grams, which does make money, but just not the same profit margin. And that material could last another two years after the 2023 end of the higher grade material. So there is extended life. We're not seeing the higher grade material expanding much more in the current center of the mineralization. But we do have an opportunity elsewhere in the property to continue exploration, which we're looking at.
spk05: Okay, that's helpful. And then just looking at Velardinia, were the dilution issues specific to the San Mateo vein? Can you just remind us how important that vein is to the mine plan? Is it early in the mine plan or is the plan to sort of re-sequence to bring in other areas?
spk07: Yeah, let me carry on with that. The San Mateo is fairly important to the overall resource, or it was initially. It's less important now that we have gotten through some of the wider parts of the San Mateo at the higher levels, but it still makes up about a third or so of the overall resources. And much of the vein is fine. In this particular area where we're doing the test mining, there was jointing in the diorite parallel to the vein structure that tended to spall off as we were mining, so it over-diluted based on that geologic feature. It's not present in that same manner, that characteristic isn't present in that same manner in the San Mateo vein everywhere, but in those particular stopes on the San Mateo East, I believe it was, It was, and maybe John, you want to comment any further on that?
spk06: I think you characterized it really well. And it's, as you mentioned, just a difference in the rock type and it didn't break as other parts of the mine that we tested did. And so we had higher dilution.
spk05: Got it. Okay. And then just lastly, on CapEx for the restart at Virilardinia, obviously, as you mentioned, Warren, we're seeing cost inflation across the board. Are you still comfortable with those figures for the BIAC circuit and restart capital? Or is that something that you think you go back and take a look at over the next quarter as test work continues?
spk07: Well, we're in the process, Jake, of completing our detailed bids, so specific bids from specific providers. We haven't quite completed that. So far, it's in line with the overall $16 million cost of the Biox plant that we had anticipated. And so I think that's still going to be okay. There is a chance that some materials will surprise us, as we've all been aware of the costs are going up, not down. But I don't think it's going to be substantial. So that's where I am so far. I really won't have an answer to that until we finish the detailed estimates on the cost. But it's not looking like it's way out of range of what we had planned. Okay.
spk05: Very good. That's all for me. Thanks again.
spk09: Thanks, Jake. And again, as a reminder, if anyone has any questions, you may press star one on the telephone keypad to join the question and answer queue. Our next question comes from the line of Sid Rajeev with Fundamental Research Corp. Please proceed with your question.
spk04: Hi, good morning, everyone. Thanks for your time. So, so pleased to hear that grades are going to improve in the second half. Any guidance for cash costs? It definitely seems that cash costs might trend lower in the second half, but any guidance on what the range might be?
spk07: Hi, Sid. We're not really predicting that level of detail. I do expect them to come back down from what we saw in Q2. We did some additional work in Q2 that's going to benefit production in Q3, some additional blasting and drilling. And so the costs accrued to Q2, but they benefit Q3, which will drive that down. that cost per ounce down a bit. And April, I think, was our lowest grade production month. That's still within the average grades that we're seeing at 2.6 grams per ton. But the month of April was quite a bit lower, almost as low as around 2 grams per ton. I think we won't see quite that low a grade in the next quarter, this quarter, so we should, based on that, also be seeing the cost per ounce move down a bit.
spk04: Okay, thank you, Warren. In Q2, are you able to give some color on what percent of the increase in cash cost came from project-specific versus macro, supply chain inflation, those stuff? Are you able to give me a
spk01: of segmented you know percentage increase so we did look at the difference in the cash cost and it is pretty difficult to split out the exact portion related to inflation especially we A lot of our costs come through contractors. So, no, I don't have a specific percentage on what portion of it was related to inflation. And as we mentioned, the bigger contributor to the increase in cash costs of the quarter was the lower grade.
spk04: Lower grade, yes. Okay, thank you. And your key role, enough drilling has been done for a resource estimate coming out later this year. Any preliminary guidance, estimates on what the size could be, any range we could work with?
spk08: Sounds like we may have lost Warren.
spk09: Yes, unfortunately, we have lost Warren's line.
spk04: Yeah, maybe the final question that your Q, or Valadina, already, you know, mentioned that things got pushed out a bit. Any guidance on timelines? Previously, we were expecting some kind of production later in 2023. Is it fair to say that everything got pushed out by six months-ish, or will that be too aggressive?
spk06: So the test work that we did, there were a lot of bright spots in the test work, actually. With the RISU mining technique that we tested, many of the veins met up to the productivity standards to get us to the throughputs that we wanted. But the dilution factor was still higher, which is, you know, we have mentioned previously, that is critical for the Villadania mine to have low dilution. What we're doing right now, Sid, is taking a look at not only the re-sue method, but also a couple of other methodologies, like a modified long hole and even cut and fill, where you can take more tons and have a higher dilution, but you'll make up for it with your volume. That's going to take another month or so to evaluate. And in addition, we'll be looking at RISU mining in combination with an ore sorter. So with those tests in line, we're probably looking at a three- to six-month delay in the restart to Velardeña is an estimate.
spk04: That's good. Thank you so much. I appreciate your time.
spk08: You bet.
spk09: Thank you. And our next question comes from the line of John Fennec with Fennec Consulting. Please proceed with your question.
spk03: Thanks for taking my call. Is Warren back on the line or is he still dropped?
spk07: No, I'm back on, John. I don't know how I got dropped off. Hey, Warren.
spk03: Hey. Hey, I had a two-part question, please. First is, you know, congratulations on, you know, having some activity from BEREC at LKVAR and just wanted to find out from you and the team if you could update us on when assays may be expected.
spk07: Yes, I expect that Barrick will have their assays in sometime this month. They're not required to report to us until a month after the end of this next quarter. However, we may get that information sooner than that. But at latest, it would be in October when we get those assays and when we'd have a more clear idea of what their plans are going forward. But my feeling is that they had enough success, geologic success, and potentially assay success to carry on with at least another phase of drilling to see what this looks like.
spk03: Okay, great. Thanks. And secondly, when you look at your most recent presentation deck online, there's slide number four, which is a pie chart discussing different metrics. And one is the value of the different projects, specifically Rodeo of Our Dania and KVAR in terms of NPV and that present value. So looking at that, it shows 187 million NPV, yet the most recent Seeking Alpha article out there written by Taylor Dart is showing a much considerably lower NPV when looking at those three projects. Could you inform investors a little bit about what you think the value is? Is that value accurate in your deck? Is he pulling information from an old source, etc.?
spk07: Yeah, John, let me try to address that. From what I understand of Dart's models, he's not giving any value at all, for example, to the LKVAR resource, which is in our NPV value. He hasn't updated any of the NPV values and net present values of the projects for current metals prices. And most of our analyses were done at much lower than current metal prices. So those are the two main areas where he's losing value in his analysis compared to what's real. So I agree with you. Our company value based on the projects that we have and the published reports that we have is far, far greater than what DART is considering. and that leads to the error in his analysis.
spk08: Okay, thank you. Yeah, thank you, John. And we have reached the end of the question and answer session.
spk09: I'll now turn the call back over to Karen Winkler for closing remarks.
spk02: Thanks, Operator, and thanks to everyone for joining the call today. We look forward to seeing you again next quarter. You all have a good day.
spk09: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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