Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
AUMN > SEC Filings for AUMN > Form 10-Q on 8-Aug-2013All Recent SEC Filings

Show all filings for GOLDEN MINERALS CO | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for GOLDEN MINERALS CO


8-Aug-2013

Quarterly Report


Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Golden Minerals is a mining company with precious metals mining operations in the State of Durango, Mexico, the El Quevar advanced exploration property in the province of Salta, Argentina, and a diversified portfolio of precious metals and other mineral exploration properties located in or near historical precious metals producing regions of Mexico and South America.

This discussion should be read in conjunction with Management's Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on March 1, 2013.

2013 Highlights

During the first six months of 2013 we focused our efforts primarily on production and operational improvements at our Velardeña Operations, advancing our El Quevar project and continued rationalization of our exploration portfolio. On June 19, 2013 we suspended operations at the Velardeña Operations in order to conserve the asset until the Company is able to develop operating plans that at then current prices for silver and gold indicate a sustainable cash margin for operations. An overview of certain significant 2013 events is provided below:

Velardeña Operations

† On June 19, 2013 we suspended operations at the Velardeña Operations. Earlier in the year we projected that the Velardeña operations would achieve operating cash neutrality during the third quarter 2013, assuming gold and silver prices of $1,600 per ounce and $30 per ounce, respectively. During the second quarter, metals prices decreased significantly below those levels, which is the principal reason we suspended our operations. We have placed the mine and processing plants on a care and maintenance program to enable a re-start when operating plans and metals prices support a cash positive outlook for the operations. Approximately 420 positions at the Velardeña Operations were eliminated as a result of the suspension. We have retained a core group of approximately 50 to 60 employees to facilitate a re-start of operations and to maintain and safeguard the longer term value of the asset.

† Payable production during the first six months of 2013 totaled approximately 395,000 silver equivalent ounces (equivalents calculated at 60:1 silver to gold) and included 251,000 ounces of silver and 2,400 ounces of gold. Payable silver equivalent production includes only silver and gold. We also produced approximately 530,000 pounds of payable lead and 710,000 pounds of payable zinc during the first six months of 2013.

† During May 2013, we completed the San Mateo ramp at the Velardeña Operations, which provides access to the productive Santa Juana mining area. The completed ramp, which provides more efficient and less costly haulage capacity from the mine, should be helpful to the re-start economic analysis. During the suspension period, we plan to use the ramp to access mining areas to develop and evaluate re-start mining plans. We also plan to continue work on treatment options for gold-bearing pyrites produced at the mine, including autoclave, bioleach and roasting technologies.

† On March 8, 2013, Mexican regulatory authorities suspended the explosives permit for the principal producing areas of the Velardeña Operations due to the proximity of the blasting cap magazine to certain occupied mine facilities. Although we immediately relocated the employees to other mine buildings, which regulatory authorities agreed on March 9, 2013 was acceptable, the permit was not reinstated until April 10, 2013. During this period, we completed the installation of additional flow capacity in the oxide leach circuit and additional cleaner flotation capacity to the float circuit ahead of the oxide circuit. These projects were designed to improve silver and gold recoveries.

El Quevar

† In early 2013, we completed a 2,400 meter, 16-hole drilling program at the Quevar North and South areas at El Quevar. Results may represent a significant extension of the previously defined Yaxtché deposit and a mineralized zone at Quevar North similar in structural control to the Yaxtché zone. In order to advance El


Table of Contents

Quevar, the Company is actively soliciting a partner to move the project forward with additional drilling in these areas, drilling in other potential areas and evaluations.

Exploration Portfolio

† Recently we acquired the 233 hectare Los Azules property in Chihuahua, Mexico under a purchase agreement with Minera Socavato, a private Mexico mining company. The purchase agreement requires a series of option payments over a four year period totaling $2.0 million with $0.1 million required during the first year. A drilling program of approximately 2000 meters is planned to test the down dip continuation of the previously mined veins. We plan to begin rehabilitation of a portion of the underground workings this month in preparation for the drill program.

† We have made significant progress with our ongoing strategy to rationalize our portfolio of exploration properties, realizing in 2012 and the first quarter 2013 exploration property sales totaling approximately $9.0 million. We also have relinquished properties no longer of interest, and have reduced our portfolio of about 80 properties containing about 730,000 hectares to about 40 properties containing about 320,000 hectares. Since 2011, we have reduced ongoing annual expenditures for the exploration program by approximately 75 percent.

† During February 2013, the Company entered into an agreement to sell the majority of its exploration concessions in Peru to Compañía de Minas Buenaventura S.A.A. ("Buenaventura") for $4.3 million, with transactions for approximately $3.5 million of that amount completed. The sale of the remaining $0.8 million in exploration concessions to Buenaventura was conditioned on the receipt of third party consents by February 28, 2013. The Company continues to work to obtain the consent of an additional third party representing $0.6 million of concession sales. The Company has closed its exploration office in Peru.

Velardeña Operating Statistics

During the first six months of 2013 we produced products from our Velardeña Operations in Mexico containing 251,306 payable ounces of silver, 2,400 payable ounces of gold and 395,306 payable ounces of silver equivalent compared to products produced during the first six months of 2012 containing 204,627 payable ounces of silver, 3,277 payable ounces of gold and 398,247 payable ounces of silver equivalent. Silver equivalent ounces are calculated at a ratio of 60:1 silver to gold.

The table below sets forth the operating statistics of our Velardeña Operations for the first six months of 2013 and 2012:


Table of Contents

                                  Year to Date Ended June 30,
                                     2013             2012
Tonnes of ore milled
Oxide plant                             41,383           51,314
Sulfide plant                           30,679           35,472
                                        72,062           86,786
Combined grade
(Grams per tonne)
Gold                                      2.56             1.98
Silver                                     163              106
Combined recovery (1)
Gold                                      50.6 %           68.7 %
Silver                                    75.5 %           77.6 %
Produced metals (1)
Gold ounces                              2,997            3,792
Silver ounces                          285,282          228,730
Silver ounce equivalent (60:1)         465,102          456,250
Lead pounds                                593              447
Zinc pounds                                841              745
Payable metals production (1)
Gold ounces                              2,400            3,227
Silver ounces                          251,306          204,627
Silver ounce equivalent (60:1)         395,306          398,247
Lead pounds                                530              404
Zinc pounds                                710              618
Payable metals sold
Gold ounces                              2,501            3,415
Silver ounces                          261,907          207,579
Silver ounce equivalent (60:1)         411,967          412,479
Lead pounds                                665              610
Zinc pounds                                855              487



(1) Current production and recoveries include final metal settlements pertaining to sales of previously reported production.

Combined grades feeding both plants increased year over year by 29% for gold and 53% for silver. Silver and gold production for the six months ended June 30, 2013 was negatively impacted by an approximately 33 day suspension of the explosives permit between the first and second quarters and the shutdown of operations on June 19 which reduced mill throughput during the period. Gold production was also negatively impacted in 2013 by reduced gold recoveries from material mined from new areas, which appears to have different metallurgy, and a decrease in the percentage of oxide ores which achieve favorable recoveries in the leach circuit. The Company continues with the testing of both short and longer term methods to improve gold recoveries and has engaged an independent expert to assist in these efforts.

Results of Operations

For the results of continuing operations discussed below, we compare the results from operations for the three month and six month periods ended June 30, 2013 to the results from operations for the three month and six month periods ended June 30, 2012.

Three Months Ended June 30, 2013

Revenue from the sale of metals. We recorded $4.5 million and $4.9 million of revenue for the three months ended June 30, 2013 and 2012, respectively. The decrease in revenue from the sale of metals during the 2013 period as compared to the 2012 period was primarily related to lower realized silver and gold prices and lower payable gold and silver metals sold. All of the revenue is from the sale of products produced at our Velardeña Operations in Mexico.

Costs of metals sold. We recorded $8.1 million and $6.6 million of costs of metals sold for the three months ended June 30, 2013 and 2012, respectively. Included in costs of metals sold was a $1.6 million and $1.2 million write down of finished goods inventory to its estimated net realizable value for the respective periods. The increase in 2013 costs is primarily related to higher unit costs in inventory as a result of the approximately 30 day suspension of the explosives permit during the period.


Table of Contents

Exploration. Our exploration expenses, including property holding costs and costs incurred by our local exploration offices, were $1.2 million for the three months ended June 30, 2013, as compared to $1.8 million for the three months ended June 30, 2012. Exploration expenses were incurred primarily for concession payments in Mexico, drilling programs in Mexico and other exploration activities in Mexico and Argentina. The decrease in exploration expenses during the second quarter 2013 as compared to the second quarter 2012 is primarily the result of reduced property holding, administrative and direct exploration costs resulting from rationalization of our exploration portfolio in 2012 and 2013.

Velardeña project expense. During the three months ended June 30, 2013 we incurred $0.8 million of project expenses related to our Velardeña Operations in Mexico as compared to $2.1 million for the three months ended June 30, 2012. The costs for both periods were primarily related to development of the San Mateo drift, other mine development, and engineering work. In addition to amounts expensed during the three months ended June 30, 2013 and 2012, we incurred capital expenditures of approximately $0.8 million and $1.5 million, respectively for plant construction, mining and other equipment. In addition, we had outstanding approximately $0.1 million and $1.2 million of advance payments to suppliers and equipment manufacturers at June 30, 2013 and 2012, respectively.

Velardeña shutdown costs. During the quarter ended June 30, 2013 we recorded a $2.3 million expense related to the severance of 420 positions and other costs at our Velardeña Operations as the result of the suspension of operations at Velardeña effective June 19, 2013. We had no such charges during the quarter ended June 30, 2012.

El Quevar project expense. During the three months ended June 30, 2013 and 2012 we incurred $0.6 million and $1.2 million, respectively of expenses primarily related to furthering our evaluation of the Yaxtché deposit at our El Quevar project in Argentina. The reduction in costs for 2013 is primarily the result of placing the El Quevar project in a holding and maintenance state during 2013 while we actively solicit a partner to move the project forward.

Administrative. Administrative expenses were $1.6 million for the three months ended June 30, 2013 compared to $1.8 million for the three months ended June 30, 2012. Administrative expenses for both years are comparable and are primarily related to public company costs and corporate activities in support of our Velardeña Operations, El Quevar project work and our exploration programs.

Other Operating Income & Expense, Net. During the three months ended June 30, 2013, we recorded $0.4 million of net other operating income primarily related to the lease of certain exploration properties in Mexico. During the three months ended June 30, 2012 we recorded $0.1 million of other operating expense primarily arising from the payment of interest and penalties associated with a value added tax audit in Mexico related to prior years.

Stock based compensation. During the three months ended June 30, 2013 we recorded $0.6 million of stock based compensation expense compared to $0.3 million of stock based compensation expense recorded during the three months ended June 30, 2012. The increase in the second quarter 2013 costs as compared to the second quarter 2012 is primarily the result of restricted stock grants made during the second quarter 2013 to certain officers of the Company in conjunction with a salary reduction approved by the Board.

Reclamation Expense. During the three months ended June 30, 2013 we incurred less than $0.1 million of reclamation expense, all related to the accretion of an asset retirement obligation at the Velardeña Operations. As the result of a revised closure plan completed for our Velardeña mines during the second quarter 2012, we reduced the accretion of the asset retirement obligation by approximately $0.1 million resulting in only nominal reclamation expense for the three months ended June 30, 2012.

Impairment of long lived assets and goodwill. We assess the recoverability of our property, plant and equipment and goodwill, at least annually, or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The significant decrease in metals prices in the second quarter 2013 and the shutdown of operations at Velardeña at the end of the second quarter were events that required an assessment of the recoverability of the Velardeña Operations asset group and goodwill. We completed an impairment analysis at June 30, 2013 and determined that both the long lived assets and the goodwill associated with the Velardeña Operation and the San Diego property were impaired. As a result we recorded a $238.0 million impairment charge related to the long lived assets and an $11.2 million impairment charge related to goodwill. There were no such charges during the second quarter of 2012.

Interest and Other Income, net. We recorded approximately $0.2 million of interest and other income during the three months ended June, 2013 primarily related to the reduction of a loss contingency liability. During the three months ended


Table of Contents

June 30, 2012 we recorded approximately $2.0 million of interest and other income comprised of a $1.8 million gain on the sale of the Platosa net smelter royalty to Excellon and a $0.2 million reduction of a loss contingency liability.

Royalty Income. During the three months ended June 30, 2012 we recorded royalty income of approximately $0.2 million related to Excellon's Platosa mine in Mexico, on which we retained a net smelter return royalty. We sold our net smelter return royalty on the Platosa mine to Excellon during the second quarter 2012. During the three months ended June 30, 2013 we had no royalty income.

Gain/Loss on Foreign Currency. During the three months ended June 30, 2013 we recorded a $1.1 million foreign currency loss compared to a nominal foreign currency loss for the same period in 2012. Foreign currency gains and losses are primarily related to the effect of currency fluctuations of monetary assets net of liabilities held by our foreign subsidiaries, primarily in Mexico, that are denominated in currencies other than US dollars.

Income Taxes. We recorded an income tax benefit for the three months ended June 30, 2013 of $45.0 million related primarily to the impairment of long lived assets of the Velardeña Operations. In comparison, an income tax benefit of $1.2 million was recorded for the three months ended June 30, 2012 relating primarily to Mexico net operating losses.

Six Months Ended June 30, 2013

Revenue from the sale of metals. We recorded $10.3 million and $11.3 million of revenue for the six months ended June 30, 2013 and 2012, respectively. The decrease in revenue from the sale of metals during the 2013 period as compared to the 2012 period was primarily related to lower realized silver and gold prices. All of the revenue is from the sale of products produced at our Velardeña Operations in Mexico.

Costs of metals sold. We recorded $17.0 million and $14.5 million of costs of metals sold for the six months ended June 30, 2013 and 2012, respectively. Included in costs of metals sold was a $1.6 million and $2.1 million write down of finished goods inventory to its estimated net realizable value for the respective periods. Also included in the 2013 cost of metals sold is a $0.6 million charge related to workforce reduction severance costs incurred during the first quarter of 2013. The increase in 2013 costs is primarily related to higher unit costs in inventory as a result of the approximately 30 day suspension of the explosives permit during the period.

Exploration. Our exploration expenses, including property holding costs and costs incurred by our local exploration offices, were $2.8 million for the six months ended June 30, 2013, as compared to $4.2 million for the six months ended June 30, 2012. Exploration expenses were incurred primarily for concession payments in Mexico, drilling programs in Mexico and other exploration activities in Mexico and Argentina. The decrease in exploration expenses during the first six months of 2013 as compared to the first six months of 2012 is primarily the result of reduced property holding, administrative and direct exploration costs resulting from rationalization of our exploration portfolio in 2012 and 2013.

Velardeña project expense. During the six months ended June 30, 2013 we incurred $2.9 million of project expenses related to our Velardeña Operations in Mexico as compared to $5.5 million for the six months ended June 30, 2012. The costs for both periods were primarily related to development of the San Mateo ramp, other mine development, and engineering work. The San Mateo ramp was completed during May of 2013. In addition to amounts expensed during the six months ended June 30, 2013 and 2012, we incurred capital expenditures of approximately $1.6 million and $5.1 million, respectively for plant construction, mining and other equipment. In addition, we had outstanding approximately $0.1 million and $1.2 million of advance payments to suppliers and equipment manufacturers at June 30, 2013 and 2012, respectively.

Velardeña shutdown costs. During the six months ended June 30, 2013 we recorded a $2.3 million expense related to the severance of 420 positions and other costs at our Velardeña Operations as the result of the suspension of operations at Velardeña effective June 19, 2013. We had no such charges during the six months ended June 30, 2012.

El Quevar project expense. During the six months ended June 30, 2013 and 2012 we incurred $1.7 million and $2.6 million, respectively, of expenses primarily related to furthering our evaluation of the Yaxtché deposit at our El Quevar project in Argentina. The reduction in costs for 2013 is primarily the result of placing the El Quevar project in a holding and maintenance state during 2013 while we actively solicit a partner to move the project forward.

Administrative. Administrative expenses were $3.5 million for the six months ended June 30, 2013 compared to $3.9 million for the six months ended June 30, 2012. Administrative expenses for both years are comparable and are primarily


Table of Contents

related to public company costs and corporate activities in support of our Velardeña Operations, El Quevar project work and our exploration programs.

Other Operating Income & Expense, Net. During the six months ended June 30, 2013 we recorded $3.6 million of net other operating income primarily related to the gain on the sale of certain exploration properties in Peru for $3.5 million partly offset by the $0.6 million carrying value of the properties, the receipt of an $0.3 million option payment for another Peruvian exploration property, and the receipt of approximately $0.3 million for the lease of a mineral property in Mexico. During the six month period ended June 30, 2012 we recorded $0.2 million of net other operating income comprised of approximately $0.4 million of gains on the sale of certain exploration properties partially offset by approximately $0.2 million of other operating expense arising from the payment of interest and penalties resulting from a value added tax audit in Mexico related to prior years.

Stock based compensation. During the six months ended June 30, 2013 we recorded $1.0 million of stock based compensation expense compared to $0.5 million of stock based compensation expense recorded during the six months ended June 30, 2012. The increase in the first quarter 2013 costs as compared to the first quarter 2012 is primarily the result of a greater number of outstanding stock grants at June 30, 2013 as compared to June 30, 2012 and restricted stock grants made during the second quarter 2013 to certain officers of the Company in conjunction with a salary reduction approved by the Board.

Reclamation Expense. During the six months ended June 30, 2013 we incurred approximately $0.1 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Operations. During the six months ended June 30, 2012 we incurred $0.2 million of reclamation expense, which included $0.1 million of reclamation costs related to the accretion of an asset retirement obligation at the Velardeña Operations and actual reclamation expenses of $0.1 million incurred at the El Quevar project. The 2012 reclamation expense was partially offset by an adjustment reducing accretion expense by approximately $0.1 million as the result of a revised closure plan completed for our Velardeña Operations during the second quarter of 2012.

Impairment of long lived assets and goodwill. We assess the recoverability of our property, plant and equipment and goodwill at least annually, or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The significant decrease in metals prices in the second quarter 2013 and the shutdown of operations at Velardeña at the end of the second quarter were events that required an assessment of the recoverability of the Velardeña Operations asset group and goodwill. We completed an impairment analysis at June 30, 2013 and determined that both the long lived assets and the goodwill associated with the Velardeña Operation and the San Diego property were impaired. As a result we recorded a $238.0 million impairment charge related to the long lived assets and a $11.2 million impairment charge related to goodwill. There were no such charges during the second quarter of 2012.

Interest and Other Income, net. We recorded approximately $0.5 million of interest and other income during the first six months of 2013 primarily related to the reduction of a loss contingency liability. During the first six months of 2012 we recorded approximately $2.2 million of interest and other income comprised of a $1.8 million gain on the sale of the Platosa net smelter royalty to Excellon and a $0.4 million reduction of a loss contingency liability.

Royalty Income. During the first six months of 2012 we recorded royalty income of approximately $0.4 million related to Excellon's Platosa mine in Mexico, on which we retained a net smelter return royalty. We sold our net smelter return royalty on the Platosa mine to Excellon during the second quarter 2012. For the six months ended June 30, 2013 we had no royalty income.

Gain/Loss on Foreign Currency. During the six months ended June 30, 2013 we recorded a $0.4 million foreign currency loss compared to $0.4 million foreign currency gain for the same period in 2012, primarily related to the effect of currency fluctuations of monetary assets net of liabilities held by our foreign subsidiaries, primarily in Mexico, that are denominated in currencies other than US dollars.

Income Taxes. We recorded an income tax benefit for the six months ended June 30, 2013 of $47.5 million related primarily to the impairment of long lived assets of the Velardeña Operations and Mexico net operating losses. In comparison, an income tax benefit of $3.0 million was recorded for the three months ended June 30, 2012 relating primarily to Mexico net operating losses.

Liquidity, Capital Resources and Going Concern

At June 30, 2013 our aggregate cash and short-term investments totaled $30.0 million and, based on the assumptions described below, we expect to have a cash balance of approximately $16.0 million at December 31, 2013. During the first


Table of Contents

quarter of 2013 we completed the sale of certain Peruvian exploration properties to a third party for net proceeds of $3.5 million. We received $0.5 million in joint venture option payments on other Mexican and Peruvian exploration properties. With the cash and investment balance at June 30, 2013 we expect to have sufficient funding to continue our long-term business strategy through 2013.

Our cash and short-term investment balance at June 30, 2013 of $30.0 million is $14.6 million lower than the $44.6 million in similar assets held at December 31, 2012 due primarily to $6.7 million in operating losses at the Velardeña Operations; $4.5 million in Velardeña Operations capital and development expenditures; $2.3 million in shutdown and severance costs at the Velardeña Operations; $2.8 million in exploration expenditures; $3.5 million on general and administrative activities; and $1.7 million on the El Quevar project; offset by net proceeds of $4.0 million from the sale of non strategic . . .

  Add AUMN to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for AUMN - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.