Golden Minerals receives Rodeo environmental permits

2020-11-17 07:34 ET - News Release

Mr. Warren Rehn reports

GOLDEN MINERALS RECEIVES FINAL ENVIRONMENTAL PERMITS FOR RODEO GOLD PROJECT; COMPANY ON TRACK FOR JANUARY 2021 GOLD PRODUCTION

Golden Minerals Company has received final environmental permits for its Rodeo gold-silver project located in Durango state, Mexico. The Company is presently on track to begin gold production in January 2021, which will mark the transition of Golden Minerals to gold producer from precious metals exploration company.

President and Chief Executive Officer of Golden Minerals, Warren Rehn, notes, "The receipt of the environmental permits for our Rodeo mine puts us on schedule to begin mining in January 2021. We expect to begin delivering gold-bearing material to our Velardena mill early in January and begin processing immediately."

Mining Plans and April 2020 Preliminary Economic Assessment ("PEA")

Rodeo is located approximately 115 kilometers ("km") by road from the Company's Velardena Properties in Durango State, Mexico. The Company intends to truck mined material from Rodeo to Velardena using a commercial trucking contractor, upon which the material will be mined through Golden's existing and newly vacated oxide plant. The plant is a typical agitated leach plant rated to handle up to 450 tonnes per day ("tpd") of throughput from Rodeo. It is equipped with a Merrill Crowe circuit and a modern dore refinery, and the attached tailings facility was recently expanded and is expected to be sufficient for the tailings produced from Rodeo's operations.

The Company published a PEA in April 2020 (Mineral Resources Engineering - April 1, 2020, see https://www.goldenminerals.com/projects/technical-reports/ for the complete report) which called for an open pit mining operation at Rodeo. In August 2020, the Company completed a 35-hole 1,400-meter drilling program in order to further verify continuity of the high-grade core of the Rodeo deposit. Results from this drilling program were slightly better than assumptions used in the PEA. The results of this program enabled Golden to finalize the initial start-up mine plan. Further metallurgical testing on newly obtained material confirmed recovery assumptions and enabled the Company to plan appropriately to modify the oxide plant by adding a regrind mill for higher throughput. Results of the 2020 metallurgical testing revealed that the harder characteristics of Rodeo's mined material would necessitate an additional regrind circuit in the oxide plant in order to achieve a finer grind size at desired throughput rates to attain recoveries projected in the PEA. The need for an additional regrind circuit and its estimated $0.6 million cost were already included in the PEA's estimated $1.5 million of start-up costs and capital expenditures.

Golden has begun hiring key mine and plant supervisory personnel. The Company anticipates only minor hiring needs given it has a plant operating workforce in place at Velardena currently working under the terms of Golden's oxide plant lease with Hecla Mining Co. (this lease will terminate on November 30, 2020). In December 2020, employees will transition to Rodeo-related activities, preparing the plant to receive Rodeo's mined material. Golden has engaged a regional contractor to perform mine excavation work, while Golden will provide overall mine management and engineering work, including in-pit technicians who will determine whether material is suitable for processing. The Company will shortly engage a second contractor to haul mined material to the oxide plant. Golden's assay lab located in Velardena will be used for the project's assaying requirements.

The Company currently believes the oxide plant will be ready to begin milling and processing operations in January 2021. Following a two to three-month start-up period, the Company anticipates daily throughput in the oxide plant of roughly 450 tpd, slightly lower than the 480 tpd in the PEA due to the added regrind circuit. Mine life at 450 tpd is estimated to be approximately 2.5 years or 10 quarters, one quarter longer than outlined in the PEA.

The dore produced is, according to the PEA, expected to be comprised of approximately 25% gold and 65-70% silver, and to be of a readily marketable and saleable quality.

Mining Projections

The April 2020 PEA incorporated pricing assumptions of $1,622/oz gold and $14.38/oz silver. It estimated an after-tax net present value of US$22.5 million (using an 8% discount rate) and an All-In Sustaining Cost ("AISC") per gold ounce, net of by-product credits, of US$843. The Company has updated its internal preliminary projections to apply to the PEA assumptions of current metals prices of $1,887/oz gold and $23.73/oz silver (London Fix PM prices on September 30, 2020, as reported by Kitco) and the results of the recently completed drilling program, metallurgical testing and proposed contract mining and hauling contracts. These current projections were outlined in the Company's Form 10-Q for the period ending September 30, 2020 and may be summarized as follows. The Company notes these projections are preliminary in nature and actual results may vary significantly due to a number of factors, as detailed in the Cautionary Statements section of this press release.

Total Payable Production
 
 YearTonnes ProducedAg (oz)Au (oz)
2021    148,000    43,700 13,200 
2022    162,000    47,800 14,400 
2023    104,000    30,600  9,200 

After-Tax Cash Flow
 
 YearEstimated After-tax Cash Flow
2020        -$1.3 million        
2021        $12.6 million        
2022        $14.5 million        
2023        $9.5 million         

Sensitivity Analysis

The Rodeo project shows high sensitivity to movements in the underlying market price of gold. An increase in gold price from the PEA base case ($1,622/oz) to $2,000/oz changes after-tax net present value (8% discount rate) by an estimated 50%, to $33.4 million.

About Golden Minerals

Golden Minerals is a Delaware corporation based in Golden, Colorado. The Company is primarily focused on advancing its Rodeo and Velardena properties in Mexico and, through partner-funded exploration, its El Quevar silver property in Argentina, as well as acquiring and advancing mining properties in Mexico, Argentina and Nevada.

We seek Safe Harbor.

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