This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Greetings and welcome to Golden Minerals Company third quarter 2022 quarterly conference call and webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on the telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Karen Winkler, Director of Investor Relations. Thank you. You may begin.
spk01: Thank you, and welcome to Golden Minerals Company's third quarter 2022 earnings call and webcast. On the call today are Golden's President and CEO, Warren Rang, our Chief Operating Officer, John Galassini, and our Chief Financial Officer, Julie Weidman. 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 risks and uncertainties 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. I will now turn the call over to Warren.
spk02: Thank you, Karen. Good morning, everyone. I'll start the call by providing an overview of the company's third quarter performance, followed by full-year 2022 production guidance and several project updates. John will then take you through the quarter's operational highlights, followed by Julie, who will review our third quarter financial results and 12-month projections. After their remarks, we'll take questions from our analysts and from others who have submitted them. In the third quarter, 2022, we reported $5.3 million in revenue, $4.4 million in cost of sales, and a net operating margin of just under $1 million. Lower metals prices this quarter weighed heavily on their net operating margin as we saw both gold and silver prices drop significantly from the second quarter. Rodeo continues to operate close to plan. However, we have seen higher cash costs per ounce of gold produced than anticipated, although slightly lower than in Q2. These higher costs are due mainly to continued higher costs of explosives and to slightly higher than average waste to ore ratios as we reach the bottom of the Phase I rodeo pit. Compared to 2021, the main driver of higher per ounce costs is the lower average head grade of material mined, as has been in the mine plan since inception. For full year 2022 production guidance, we maintain our estimate for payable production of 12,000 to 14,000 ounces of gold, and we are projecting slightly higher production of silver between 47,000 and 50,000 ounces. Average head grades for the full year are projected at around 2.8 grams per ton gold, which is slightly lower than the prior 2.9 grams per ton estimate. and 10.8 grams per tonne silver, which is higher than the prior 9.4 grams per tonne estimate. Mill recoveries are expected to remain at between 75 and 80% for gold and 80 to 85% for silver. We announced last quarter that our plans to start mining at Velardeña would be delayed while we work through a modified mine plan and mining methods in order to counteract excess dilution we observed from one of the veins in the test mining we conducted earlier this year. We are continuing with this work, notably continuing to study ore sorting, which shows promise in initial tests. and may allow upgrading of mine material by rejecting waste using an automated system after mining and crushing. John will provide additional information about the work we are doing at Bellardania in advance of a production restart decision. On the exploration front, in July, we finished an additional round of exploration drilling at the Yoquivo Gold-Silver Project in Chihuahua State, Mexico. And we are now following up on some good results on the pertinent to San Francisco and dollar veins to tighten up drill spacing in advance of completing and publishing a maiden resource estimate for this property. We expect to have these results for release in the first quarter. At the Cerrito Este project in Salta Province, Argentina, we completed additional drilling that was designed to follow up on a discovery hole encountered in the initial 2021 drilling program. The discovery hole showed potentially economic-grade gold over an interesting thickness in an oxidized near-surface intercept. In August, we reported results from this program, which confirmed the discovery hole and continued to expand on the mineralized volume. We have since completed additional drilling that brings the total since inception to 4,925 meters in 51 core drill holes. Results to date point to a potentially economic shallow oxidized gold system, which is open to the south. In April 2020, we entered into an earn-in agreement with Barrick Gold at our El Kevar project located in Salta Province, Argentina. This past June, Barrick completed a five-hole, 1300-meter initial diamond drill program to test the highest priority targets at the property. Barrick reported buggy silica alteration, which is commonly associated with high sulfidation epithermal gold-silver deposits in all of the drill holes. Partial assays from the program point to high-grade gold over a narrow interval in an area that has seen very little drilling. Final assay results from the program are still pending. We expect Barrett to follow up on these results with additional drilling in 2023. I will now hand the call over to John to talk in more detail about our operations.
spk10: Thanks, Warren. Our rodeo mine produced just under 3,000 payable ounces of gold and 11,900 payable ounces of silver in the third quarter of 2022, marginally lower than the figures we reported last quarter. Year-to-date, we've produced just under 9,600 payable gold ounces at cash costs per payable gold ounce net of silver credits of $1,316. We're processing at the rate of just over 520 tons per day and achieving around 75% recovery for gold and experiencing a slightly lower silver recovery of 78%. We are forecasting similar results for the remainder of 2022 with the exception of a slightly higher silver recovery. From inception in January 2021 through September 30, 2022, we have produced approximately 24,000 ounces of gold and 90,000 ounces of silver at cash costs averaging $1,089 per payable gold ounce net of silver credit. During the third quarter, cash costs for payable gold-ounce net of silver byproduct credits were lower at $1,391 as compared to $1,426 in the second quarter. Rodeo saw a significant cost increase in basic materials such as explosives, and our processing facilities have also seen a substantial increase in reagent costs. Despite this, we were able to keep other costs in check and lower our cash costs quarter on quarter as a result of lower oxide plant processing costs, less blasting materials required for the quarter, and lower administrative costs. Gold and silver head grades in the third quarter were nearly identical to the second quarter of 2022. Looking ahead, we continue to estimate full-year 2022 average realized prices of $1,800 and $25 per gold and silver rounds respectively, a 2022 net operating margin between $6 and $8 million, and recovery rates of around 75 to 80% for gold and 80 to 85% for silver. Given the lower head grade and the higher supply costs, we've raised our full year estimate of cash costs for payable gold amounts, net of silver credits to approximately $1,300 from $1,200. Last quarter, we announced we would be moving forward with a tailings expansion project at our oxide plant ahead of its original 2023 schedule. The tailing storage expansion at Bellar Dania plant that processes rodeo material has begun earlier than previously forecasted due to higher than planned plant throughput at the rodeo mine this year. We began construction activities in October, and as of November 1st, we have reached 50% completion on the project. We anticipate reaching 80% completion in the next two months with final completion in late January 2023. The work is estimated to cost around $2.2 million, $1.5 million of which we anticipate incurring in 2022 with the remaining $700,000 in the first two months of 2023. The expansion project is anticipated to provide an additional 350,000 tons of tailing storage that will service Rodeo for the remainder of its mine life. It will also service a portion of Belladonia material should we elect to restart the mine in the future. We're continuing to work in support of ultimately making a production restart decision at the Belladonia properties. You'll recall we announced last quarter that although the results of earlier 2022 test mining met expected productivity metrics, they did not meet anticipated dilution metrics on some of the veins mined. And we elected to continue evaluating modified mine plans and mining techniques and address a dilution issue before making a restart decision. Since then, we have continued to study alternative mining methods and began ore sorting technology evaluation. It has been determined that the RISU mining method is most optimal for Belladonia, and we will continue optimizing techniques to decrease dilution. In terms of ore sorting applications, we have completed the first round of ore characterization testing with positive results. The second phase of testing will require bulk samples from Velardeña, and we're currently determining the location and ore type that will properly represent our mine life. These samples will be utilized to determine the feasibility of the technology at Velardeña and evaluate the true value generation of this processing step. We expect to have our testing complete by February or March 2023. I will now hand the call over to Julie to present our financial results.
spk03: Thanks, John. For the third quarter 2022, our net operating margin at the Rodeo Mine was approximately 0.9 million from revenue of 5.3 million received from the sale of approximately 3,100 ounces of Golden Dore. While the operating margin from Rodeo in the third quarter 2022 was positive, we reported negative after-tax income of about 2.7 million. Exploration expenses were approximately $2.4 million, which included $0.6 million on costs to increase the capacity of the tailings facility at Bellardania, $0.4 million on drilling at Cerrito Este, $0.3 million on drilling at Yoquibo, $0.1 million on drilling at Rodeo, and $1.0 million on other drilling and exploration. This is lower than the second quarter's $2.8 million. G&A costs of 0.9 million for the third quarter were lower than the 1.3 million in the second quarter of 2022. Expenditures in Q3 2022 for El Cavar were 0.2 million, similar to the second quarter of 2022, and are expected to continue at approximately that level going forward. Care and maintenance expense at Velardeña was approximately 0.4 million, which was higher than the second quarter of 2022. We expect to continue positive operating margin from Rodeo throughout 2022 and continue to forecast an operating margin of between 6 and 8 million for the full year 2022. This assumes full year 2022 plant throughput levels of approximately 520 tons per day with lower grades compared to 2021 of approximately 2.8 grams per ton for gold and 10.8 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 $6.5 million of cash Net cash flow for the quarter was a negative $3.0 million due primarily to cash used in operating activities. Spending on capital items has significantly dropped off compared to last year with only $46,000 spent during the first nine months of 2022 compared to $1.5 million spent in the first nine months of 2021. The higher 2021 figure included construction of the second ball mill added to our oxide plant. Assuming metal prices average $1,800 per ounce for gold and $25 per ounce for silver, we expect our cash balance to remain between around $4 to $6 million over the next 12 months through September 30, 2023, depending on spending on exploration projects. These projections include the $1.75 million of payments scheduled to be received from fabled through September 30th of 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.
spk06: Thank you.
spk04: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on a telephone keypad. 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. One moment please while we poll for questions. Our first question is from the line of Jake Sakelski with Alliance Global Partners. Please state your question.
spk06: Hi, Warren and team. Thanks for taking my questions. Hi, Jake. Glad to have you here.
spk08: Just looking at cost... which actually decreased quarter over quarter, which isn't something we've seen from many of your peers, given the inflationary environment. So well done there. Was this a function of consumable prices coming down quarter over quarter, or were there other factors at play that contributed to this?
spk02: Yeah, Jay, great question. Let me just start with that, and then maybe I'll pass it over to John for further comment. Part of the decrease was that we had done some extra blasting and material moving in Q2, which did aid a bit in Q3 cost structure. But the other part, I think, is that basically the operation was running a little bit more smoothly in Q3 than Q2, and that helped as well. I know, John, do you want to add any color to that? Sure.
spk10: We actually did see an increase in our commodities, such as blasting materials, substantial increase in explosives, increase in some of our reagents at the oxide plants. But what we were able to do, as Warren mentions, we had already blasted a significant amount of our ore and material handling prior. In addition, we have really clamped down on our costs in terms of being able to run the plant in the most efficient way possible. We're bringing our reagent consumptions down to just the bare minimum and being able to maintain our recovery. In terms of the operating costs, we've been able to overcome some of the increase in commodity prices simply by being able to decrease the amount that we use.
spk05: Okay, that's helpful.
spk08: And then just switching over to Vilardina, I mean, metals prices have obviously been volatile lately. They're rebounding a bit today. But I'm just curious, has the volatility in prices caused you to slow down with any of the test work at Villadena at all, or are you still full steam ahead there?
spk02: Well, Jake, certainly the volatility has caused us some pause. The risk is fairly high at the low prices we were seeing earlier this year. I had certainly expected prices, precious metal prices to recover more quickly, but macroeconomic factors have really made that not happen. We're still pushing ahead on the testing, and we just need to see some good way to control the mining dilution that we observed for us to have a good chance of making a plan on production. It did slow us down a bit, perhaps, but we're still moving forward with all the speed we can.
spk06: Makes sense.
spk05: That's all for me.
spk06: Thanks again. Thank you, Jake. Thank you.
spk04: Our next question is from the line of Heiko Ayla with HC Wainwright. Please proceed with your question.
spk09: Hi, everyone. This is Marcus Giannini calling . Thanks for taking our questions. In regards to the at Velardeña, can you provide us with a bit of color in terms of the system you plan on using, you know, how successful the tests have been so far, and if there's any mines where the system you're considering are currently actively being used, you know, sort of as an analog comparison?
spk02: I'll just hand that question over to John, if you don't mind, John. I think you have more detail on that.
spk10: Yeah, sure. Thanks for the question, Marcus. We're working with Metso Autotech right now with our initial testing. And there's other manufacturers as well, but the technology has grown leaps and bounds within the last few years. The system is based on sensors, a number of sensors, including near infrared, x-ray, transmission, electromagnetic, other things. And the processing speed of the computers and infrastructure to run it has grown tremendously as well, making this a much more viable technology than it was even five, ten years ago. We're working with them. We've sent our first samples off to Germany just for ore characterization more than anything else. We have not performed any sorting tests yet, as I mentioned on the call. We're just now collecting those samples. They're rather large bulk samples that will be utilized for this testing. Basically, what this does is reduces the dilution. You increase the head grade that you see going to the mill, which in turn reduces your overall cost. You use a lot less energy. If you're milling less ore, less water, it goes on and on. In terms of other mines that are utilizing this, we're putting a list together now to potentially visit some of those places. A couple of mines, one that comes to mind is San Sebastian there in Mexico. They utilized this technology back when it was still an order of magnitude less in terms of the optimal way to operate it. It didn't have the newer technology, the newer sensors, and certainly not the driving power of the computers behind it. So we're doing a lot of... studies and looking into the feasibility of it here. We have a lot of hope for it, but we'll see how all this turns out after we go through the actual sorting test itself.
spk09: Okay, awesome. Still sounds like pretty early days, but looking forward to those results. And then just for clarity, the $4.3 million on total exploration and property holding costs, Do you have any idea as to how much inflation is gnawing away at the number of meters you're drilling? I guess in asking a bit differently, what are you currently seeing with drilling costs by asset in Q4? And what do you anticipate seeing next year? I'm not sure how much negotiation is already happening in that regard.
spk02: Yeah, thanks. Thanks, Marcus. The exploration costs in Mexico for diamond drilling have stayed fairly steady for us. We're seeing, obviously, an increase in fuel costs and some upward pressure on labor costs in Mexico, but our actual drill contracted amounts have remained constant in Mexico, mostly because the operator is so good at maintaining control of costs. I do expect we'll see some increased costs next year as this works its way through the system, but I don't expect them to be at the level that we're seeing of general inflation. I think they'll be somewhat subdued, and that's to the credit of the contractor we're using more than anything else. So we are looking around and negotiating, but we have a good relationship with the contract driller, and he's able to maintain costs to the levels that Robert Forrant, Really don't affect the number of meters that we drill in Argentina it's a bit of a different story Argentina inflation has been. Robert Forrant, Extreme as i'm sure you're aware, and so we have had some upward pressure on costs there, but still quite reasonable I don't think the. Robert Forrant, change in cost to us of drilling has increased more than about 10 to 20% in Argentina and that's in an environment where. inflation is running at 70%, 80% on an annual basis. In part, that's because of the strength of the U.S. dollar. So we're looking at this in U.S. dollar terms, not in Argentinian peso terms. So up to date, we've been able to maintain our meterage in the drilling at costs very close to what we had seen prior to the kick-in of inflation. But we will see some effects going forward.
spk05: Okay, awesome.
spk09: Yeah, thanks for the color there.
spk06: I'll hop back in here. Thanks, Marcus.
spk04: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from the line of Pid Rajeev from Fundamental Research Corp. Please proceed with your question.
spk07: hey good morning everyone uh jake mentioned we're also pleased to see cash cost declining especially since your grades were similar and everyone else is reporting higher costs so it was very nice to see that i think based on your 1300 dollars per ounce for the full year estimate it seems like q4 costs might be even lower uh but yeah no that's that was good to see that but um in terms of belladonia Is it fair to assume that a production decision might be by mid-next year, or are you looking at second half?
spk02: Yeah, Sid, thanks for the question. No, it really depends on how quickly these ore sorting tests come together for us. I think mid-year is probably the most likely obvious timing for the decision. And assuming that we don't have any setbacks in trying to control the dilution problem, I think that the oil sorting looks very promising, as John pointed out. I think we should be well-placed to be able to make a decision halfway through the year. So call it by the end of Q2.
spk07: And if the decision is positive, are you able to move to production within six months?
spk02: We can start production right away. The question will be the construction of the biox plants, which is required to have the full economic benefits of the production. However, once we have that decision made and have started, we can start production and stockpile the pyrite concentrates. according to the plan we have in place anyway until the BIOX plant would be completed. So the main obstacle there is just financing for the BIOX plant, and we're still looking at the total capital costs that that will entail. We had some decent estimates, but of course they have been affected by inflation and I expect the cost to go up. But at any rate, we would be able to start production early, be able to sell lead concentrates with silver into the market after startup, but we wouldn't have the full operation at optimal production and income until after the biox plant was completed, which process will take about a year from the decision point.
spk07: Now for the new plant, how much capex, I know it's kind of moving, how much capex you're looking at? We are modeling $4 to $5 million new money plus your OPEX cash flow operations.
spk02: Is that a fair assumption? The last solid cash or capital estimate I had for the BIOX plant was about $10 million. And so I think you're in the ballpark with that, Sid. But we do expect upward pressure on that capital spend for the plant itself and just haven't determined exactly to what point that's going to take us. So before we make the decision, obviously, we would have a much more detailed capital quote in place that would encompass all the increases due to inflation up to that point.
spk07: Okay. Two more questions on the other projects. Yukibo. Mayden resource coming out next quarter. Anything you can talk about that? What are you expecting? And will you move to a PEA after that?
spk02: Yeah, I think it should be a pretty easy move to a PEA. We're expecting an interesting project with robust grades. We've only drilled drilled out and are focusing on one of the vein systems of, you know, four to five total vein systems on the property. So we know we can expand, we will be able to expand in the future on the initial maiden resource. I just want to put a, you know, get a starting point and show the sorts of grades that might be possible for the entire project, you know, in the maiden resource. And we'll be able to move fairly quickly, I think, to PEA level estimates based on the initial resource and go from there. It'll look attractive. It's just a matter of getting that independent review of the resource out there before we actually talk about hard numbers.
spk07: Okay, so can we assume that you would move to PEA right away or are you going to update after that before the PEA?
spk02: My hope is to move to PEA right away next year. So I don't think it'll take us much time to get the costs estimated for the PEA level study.
spk07: For Sarita Este, are you close now that with these lease and build programs are ready to update the existing resource?
spk02: So we haven't announced a resource at Sarita Este yet. And we're probably a ways away from that. I'm still waiting for drill results from this latest round that we just finished up in October, latest round of drilling. So, you know, once we have that in hand, we'll take a look at it internally and see if we should go ahead with a resource estimate then or whether it would be worthwhile waiting for one more round of drilling, you know, before, you know, We see the obvious limits of some of that mineralized volume, at least where we can get to it on Cerita Este. So I think we're a little ways away from actually bringing that into a resource report, main resource report. But next year is looking likely to me.
spk07: All right. Thank you so much. I appreciate it, Warren.
spk06: No, thank you. Thank you, Sid. thank you a reminder please press star 1 on a telephone keypad to ask a question you would like to ask a question please press star 1 on the telephone keypad
spk04: There are no further questions at this time. I would like to turn the floor back over to Karen Rinkler, Director of Investor Relations, for closing comments.
spk01: Thanks to everyone for joining, and this concludes our call today. We look forward to talking with you again next quarter. Have a good day.
spk04: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer