Golden Minerals' Quevar PEA pegs NPV at $45M (U.S.)

2018-09-05 07:06 ET - News Release

Mr. Warren Rehn reports

GOLDEN MINERALS REPORTS POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR EL QUEVAR SILVER PROJECT

Golden Minerals Company has released positive results from the preliminary economic assessment (PEA) for its 100-per-cent-controlled El Quevar silver project located in Salta province, Argentina. All currency figures are in U.S. dollars.

"We are very pleased with the results of this PEA, as the report confirms the potential for a profitable mining operation at El Quevar's Yaxtche deposit, with annual production of around five million ounces silver. We also see substantial opportunity to expand the size of the known resource and therefore improve the overall mine life economics. While the PEA considers only the Yaxtche deposit as outlined in the February, 2018, resource estimate, the Yaxtche deposit is still open for potential expansion on strike at both ends, and Golden Minerals has identified numerous prospective targets that lie outside the current resource area but within the larger 57,000-hectare property. We believe we have an excellent opportunity to further enhance the scale and economic significance of the El Quevar project through additional exploration," noted Warren M. Rehn, president and chief executive officer of Golden Minerals Company.

Amec Foster Wheeler E&C Services Inc., a Wood company, an independent engineering company, has prepared the technical report for Golden Minerals Company on the results of the PEA compiled in accordance with Canadian National Instrument 43-101 "Standards of Disclosure for Mineral Projects." The economic model was assembled by Samuel Engineering, based on capital and operating cost estimates from John E. Thompson LLC and Samuel Engineering. The full technical report will be filed on SEDAR within 45 days of this press release.

PEA highlights:

• After-tax net present value (NPV): $45-million (U.S.) at a 5-per-cent discount rate;
• After-tax internal rate of return (IRR): 17.0 per cent;
• After-tax payback period: 3.4 years;
• Total preproduction capital cost: $97-million, including $16-million contingency;
• Preproduction development time: two years;
• Life of mine (LOM): six years, based on the subset of the mineral resource estimate in the PEA mine plan;
• LOM free cash flow: $80-million;
• LOM payable silver production: 29 million ounces;
• LOM average silver grade: 409 grams per tonne (g/t);
• Post start-up cash cost: $9.10 per payable ounce of silver;
• Post start-up all-in sustaining costs (AISC): $9.45 per payable silver ounce.

The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Stand-alone economics have not been undertaken for the indicated resources and as such no reserves have been estimated for the project. There is no certainty that the economic results described in the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Financial summary

El Quevar's after-tax economic results have been summarized in the associated table.

               FINANCIAL RESULTS SUMMARY   
                   
Financial results                            Posttax ($M)

Cumulative cash flows (LOM)                         $79.8
Net present value (5%) (base case)                  $44.9
Net present value (8%)                              $29.6
Net present value (10%)                             $21.2
Internal rate of return (IRR)                       17.0%
Payback                                         3.4 years
Total capital costs                                 $96.8

                                       ECONOMIC MODEL INPUTS
Description                                                                              Values

Construction period                                                                     2 years
Mine life (after preproduction)                                                         6 years
LOM indicated tonnage (thousands)                                                         2,186
LOM indicated grade (g/t Ag)                                                                413
LOM inferred tonnage (thousands)                                                            261
LOM inferred grade (g/t Ag)                                                                 375
Avg. annual process production rate silver (000 oz)                                       4,837
Metal pricing
Silver price (US$/oz)                                                                    $16.66
Cost criteria
Estimate basis                                                                      Q2 2018 USD
Inflation/currency fluctuation                                                             none
Leverage                                                                            100% equity
Income tax
Argentina corporate                                                                  25% profit
Salta mining                                                                      3% mine mouth
Royalties/payments
Castor royalty                                            0.5% NSR royalty on Castor concession
Cannon payment                                                                $100,000 per year
Transportation, smelting and refining charges
Shipping, handling and fees                                                $255 wet tonne conc.
Insurance                                                                      0.2% conc. value
Concentrate treatment charge                                               $110 dry tonne conc.
Metal refining charge                                                   $1.10/oz payable silver
Arsenic, antimony and bismuth penalty                                      $237 dry tonne conc.

Mining operations

The PEA contemplates a six-year underground mining operation using pre-existing and new underground development at a mine production rate of 1,200 tonnes per day using a postpillar cut-and-fill mining method, and will deliver 2.45 million tonnes of diluted sulphide mineralized material at an average grade of 409 g/t silver. The mined material will be processed using a conventional single product flotation that contains 11.5 kg of silver per tonne of dry concentrate. The mined material will be processed using a conventional single product flotation that produces a concentrate grading 11.5 kg/tonne of silver.

          ESTIMATED LIFE-OF-MINE OPERATING COSTS  

Summary of operating costs                          
                            LOM Total             LOM Avg

Description                        $M         $/tonne MSM
Mining                        $106.50              $43.52
Processing                     $33.20              $13.59
G&A                            $19.50               $7.96
Total                         $159.20              $65.07
                                           $/oz recovered
Total per recovered ounce                           $5.77

       CAPITAL COSTS SUMMARY

Capital cost summary
Description                      $M
Mining                        $26.7
Process                       $29.1
General and
infrastructure                $15.0
EPCM                          $10.0
Contingency (25%)             $16.0
Total                         $96.8

Sustaining capital includes items such as mining costs to add new equipment as the mine develops, new systems such as mine dewatering as the development grows, costs associated with future tailings development and closure costs. These costs are shown in the associated table (note: numbers do not sum to the total due to rounding).

                                                  
             SUMMARY OF SUSTAINING CAPITAL COSTS ($M)          
        
Area                        LOM Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7

Mining equipment            2.6    -  1.3    -  1.3    -    -    -
Ancillary equipment         5.0  0.5  2.3    -  2.3    -    -    -
Tailings storage facility   1.8    -    -  1.8    -    -    -    -
Infrastructure              0.1  0.1    -    -    -    -    -    -
Mine reclamation
and closure                 3.7    -    -    -    -    -    -  3.7
Total                      13.3  0.6  3.6  1.8  3.6    -    -  3.7

Sensitivity tables

The associated table displays the sensitivities of various project outcome metrics to changes in capital costs, the price of silver, annual operating costs and silver recoveries.

                            POSTTAX SENSITIVITY ANALYSIS                                             
Capital cost
                      -40%    -30%   -20%   -10%    Base    10%    20%    30%    40%
Capital cost ($M)      $58     $68    $77    $87     $97   $107   $116   $126   $136
IRR                  35.1%   29.1%  24.4%  20.4%   17.0%  14.0%  11.4%   9.1%   7.0%
NPV at 5% ($M)       $76.6   $69.0  $61.1  $53.1   $44.9  $36.5  $27.9  $19.1  $10.1
Silver price
($/oz)
                      -40%    -30%   -20%   -10%    Base   +10%   +20%   +30%   +40%
US$/troy oz.        $10.00  $11.66 $13.33 $14.99  $16.66 $18.33 $19.99 $21.66 $23.32
IRR                 -19.1%   -6.6%   3.0%  10.2%   17.0%  23.3%  29.1%  34.7%  40.1%
NPV at 5% ($M)      ($73.3) ($39.1) ($7.2) $19.0   $44.9  $70.6  $96.2 $121.7 $147.3
Total annual
operating
cost ($/t)
                      -40%    -30%   -20%   -10%    Base   +10%   +20%   +30%   +40%
US$/tonne           $39.04  $45.55 $52.05 $58.56  $65.07 $71.57 $78.08 $84.58 $91.09
IRR                  26.3%   24.1%  21.8%  19.4%   17.0%  14.6%  12.1%   9.6%   7.0%
NPV at 5% ($M)       $81.9   $72.7  $63.4  $54.2   $44.9  $35.6  $26.2  $16.9   $7.5
Ag recovery
                       -4%     -3%    -2%    -1%    Base    +1%    +2%    +3%    +4%
Recovery             86.2%   87.2%  88.2%  89.2%   90.2%  91.2%  92.2%  93.2%  94.2%
IRR                  14.2%   14.9%  15.6%  16.3%   17.0%  17.7%  18.4%  19.0%  19.7%
NPV at 5% ($M)       $34.2   $36.9  $39.5  $42.2   $44.9  $47.6  $50.2  $52.9  $55.6

* Mineral resource estimate dated Feb. 26, 2018.

 

In conjunction with the PEA, the independent firm of Amec Foster Wheeler E&C Services Inc., a Wood PLC company, prepared a mineral resource estimate in compliance with NI 43-101 at El Quevar. The estimate is based on the same drilling data as the 2012 technical report prepared by RPMGlobal (formerly Pincock Allen & Holt) but uses updated geologic controls and a modelling approach designed to delineate the higher-grade mineralization. The indicated and inferred mineral resource estimates are shown in the associated table.

                 MINERAL RESOURCE TABLE       
                               
Category       Cut-off Ag         Tonnes       Ag grade             Ag
                    (g/t)            (M)          (g/t)         (M oz)
Indicated
Sulphide              250           2.63            487           41.1
Oxide                 250            0.3            434            4.2
Inferred
Sulphide              250           0.31            417            4.1
   

Notes to accompany mineral resource table:

1. The independent qualified person who prepared the mineral resource estimate is Gordon Seibel, a registered member of the Society for Mining, Metallurgy and Exploration (RM SME), who is a principal geologist with Wood.
2. The effective date of the estimate is Feb. 26, 2018. Mineral resources are estimated using the CIM Definition Standards for Mineral Resources and Reserves (2014). Mineral resources that are not mineral reserves do not have demonstrated economic viability.
3. There are reasonable prospects for eventual economic extraction under assumptions of a silver price of $16.62/ounce, employment of underground, mechanized, room-and-pillar mining methods, and that silver concentrates will be produced and sold to a smelter. Mining costs are assumed to be $55/t at a nominal production of rate 365,000 tonnes per annum. Concentrator and general and administrative (G&A) costs are assumed to be $30/t and $20/t, respectively. Metallurgical recovery for silver is assumed to be 88.5 per cent.
4. Reported mineral resources contain no allowances for hangingwall or footwall contact boundary loss and dilution. No mining recovery has been applied.
5. Rounding as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal content.

PEA information

The discounted cash flows in the PEA are provided posttax and are prepared in compliance with National Instrument 43-101 of the Canadian Securities Administrators. The following qualified persons, from Wood, Samuels Engineering Inc., and John E. Thompson will co-author the technical report that will be filed on SEDAR within 45 days of this news release: Gordon Seibel, RM SME; John E. Thompson, QP MMSA, Al Kuestermeyer, RM SME, and Steven Pozder, PE. Each of these qualified persons has reviewed and approved the information presented in this news release that was derived from the sections of the PEA study for which they were responsible. Each of the named qualified persons is independent of Golden Minerals.

The contents of this press release have been reviewed and approved by Warren M. Rehn, MSc, QP, MMSA (No. 01449QP), a qualified person for the purposes of NI 43-101. Mr. Rehn has over 33 years of mineral exploration experience and is president, chief executive officer and a director of Golden Minerals.

Data verification

Mr. Seibel visited the El Quevar project site, including the Yaxtche deposit, from March 20 to March 23, 2018. The site visits included presentations by Golden Minerals' staff, inspection of core and surface outcrops, viewing historic drill platforms, sample cutting and logging facilities, and discussions of geology and mineralization interpretations with Golden Minerals' staff. During his visit, Mr. Seibel checked drill hole collar locations, inspected drill core, and collected witness samples from the Yaxtche deposit. Mr. Seibel participated in or supervised the data verification that was undertaken, which included a review of drilling, logging, sampling and laboratory analysis procedures, and inspection of selected core and core photos. Database collar survey, downhole survey, assays, density, lithology and redox tables were reviewed, as were the quality assurance and quality control results obtained for standard reference materials, duplicates and blanks. These checks were accompanied by independent umpire checks on density, and witness sample checks to confirm the presence of mineralization at the Yaxtche deposit. As a result of these verification steps, the data are considered acceptable to support mineral resource estimates.

About Golden Minerals Company

Golden Minerals is a Delaware corporation based in Golden, Colo. The company is primarily focused on advancing its El Quevar property in Argentina and in acquiring and advancing mining properties in Mexico with emphasis on areas near its Velardena processing plants.

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