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Golden Minerals is a junior silver producer with a strong growth profile, listed on both the NYSE Amex and TSX.
Message: is this of concern?
This was posted on SH earlier, my apologies for bringing content to this site but wondered if this has any significance.
Zak
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| Hi Coach, Not everybody agrees with you heres a contrairian view I recently received from Tom Szabo What to do when all boats rise? Tom Szabo is the man behind The Metal Augmentor, a Canadian website with a subscription service that follows the metals market. It also has a community of investors that swap information. You can check out the website at www.metalaugmentor.com Regarding your recent post on ECU Silver, I can't recall if you mentioned this or not but the CIL plant they "purchased" in March was actually a "repurchase" from Hecla. Hecla's financial statement disclosures indicate there was a mechanics lien on the plant that originated before ECU sold it to Hecla back a few years ago. Apparently, ECU did not pay the guys who got the plant up and running and instead sold it to Hecla without disclosing that basic piece of information. I have copied at the end of this email the relevant section from the 10-K**. Furthermore, since this is a CIL plant, they actually need to be feeding it oxide gold and silver. With a recovery rate of 78% gold and 58% silver as per the NI43-101 they have oxide M&I of 80,000 oz. recoverable gold and 3.2 million oz. recoverable silver (no wonder they use tonnage and not ounces to describe the production "potential" of this "new" plant). My guess is that "all" this gold and silver isn't sitting in one location either but is spread throughout the mines. As a result, it is unlikely they will make $8 million in cash flows to cover the cost of the mill. Indeed, as Hecla's disclosures indicate, the "creditor" who has the lien on the mill had just prevailed in court as of February 2009, so ECU buying the mill back could have been more of an attempt to sweep the mess under the rug as opposed to a good business decision. Perhaps more important than the above in the long run is that most of the Velardeña veins tend to be very narrow and thus any mining may suffer from high labor cost and significant dilution. Dilution appears to be a major reason why most of the M&I gold and silver may never get converted to reserves and much of the inferred gold and silver may never get converted to M&I (and as you have already stated, those lead and zinc credits are way overstated when converted to "silver equivalent"). Simply put, selective mining is required or dilution becomes excessive. Indeed, Micon uses a 1 meter diluted grade which is not possible with any standard stoping methods. **Here is the excerpt from the Hecla 10-K: In Mexico, our wholly owned subsidiary, Minera Hecla, S.A de C.V., currently is involved in two cases in the State of Durango, Mexico, concerning the Velardeña mill. The Velardeña mill processed ore from our now closed San Sebastian mine, and the mill was placed on care and maintenance upon closure of the mine. In the first case we are interveners in a commercial action initiated in April of 2006 by a creditor to the prior owner of the mill. In that litigation, the creditor to the prior mill owner seeks to demonstrate that he has an ownership interest in the mill arising out of an allegedly unpaid prior debt. We are contesting this action, and deny the assertion that the plaintiff has an ownership interest in the mill. We take this position for a number of reasons, including the fact that the mill was sold to us prior to plaintiff’s obtaining his alleged ownership interest. In the second matter, a civil action involving Minera Hecla that is in a different court within the State of Durango, the same creditor as in the first case claims that his ownership of the Velardeña mill relates back to the time he allegedly performed the work on which the debt was based, rather than the time that he filed his lien relating to the debt, which was after the mill was sold to us. We are contesting the position of the creditor. In February 2009 we received notice that the court in the first matter referenced above ruled in favor of the creditor, and also in February 2009, we filed a timely appeal. We are currently negotiating with the plaintiff who has offered to purchase the mill from Minera Hecla. If such negotiations are successful, the above referenced litigation will be dismissed with prejudice. The basis for our defense in the above matter is that we have a judicially determined valid bill of sale for the Velardeña mill. Thus, we believe that the claims of the creditor and his successors are without merit, and that Minera Hecla is the sole owner of the Velardeña mill. We intend to zealously defend our ownership interest. Although there can be no assurance as to the outcome of these proceedings, we believe that the proceedings will not have a material adverse effect on our results from operations or on our financial position. " Regards, Tom |
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