Golden Minerals Reports Third Quarter 2016 Results

GOLDEN, Colo., Nov. 3, 2016 /CNW/ -- Golden Minerals Company ("Golden Minerals" or the "Company") (NYSE MKT: AUMN and TSX: AUM) provides a business update and announces results for the third quarter ended September 30, 2016. 

Third Quarter Business Update

  • Hecla exercised its right to extend its lease of the Company's Velardena oxide plant for an additional six months, until June 30, 2017. Hecla has the right to extend the lease for an additional 18 months following June 30, 2017, or until December 31, 2018, under similar payment terms. The Company and Hecla previously reached agreement regarding an expansion of the tailings impoundment, at Hecla's cost, to accommodate processing at current levels until approximately December 31, 2018, plus an agreed capacity to remain unused. The agreed expansion plan preserves flexibility for future tailings expansion.
  • The Company completed a farm-out agreement on the Celaya exploration property in Mexico with Electrum Global Holdings, LP. Electrum can earn a 60 percent interest in exchange for a $0.2 million cash payment made at signing and the expenditure of $2.5 million on the property over three years. If the Company elects not to retain its 40 percent interest, Electrum can earn an additional 20 percent interest by spending an additional $2.5 million.
  • The Company sold excess mining equipment for approximately $0.7 million, with 90 percent of the sales price to be paid in February 2017, and sold its 50 percent interest in the San Diego exploration property to Golden Tag Resources, Ltd. for approximately $0.4 million in cash, 2,500,000 common shares of Golden Tag and a two percent net smelter return royalty.
  • The Company is evaluating underground drilling results at the Santa Maria property and expects to update its estimate of resources and complete a Preliminary Economic Assessment during the fourth quarter 2016.
  • The Company expects to complete in the fourth quarter 2016 the 2,000 meter core drilling program on the Rodeo property that it commenced in June 2016. Initial results show a gold and silver bearing epithermal vein and breccia system with encouraging gold and silver values over an approximate 50 to 70 meters true width.

Third Quarter Summary Results

  • Revenue of $1.7 million and positive net operating margin (oxide plant lease revenue less lease costs) of $1.2 million related to the lease of the Company's oxide plant in the third quarter 2016, compared to no revenue and a negative net operating margin (sale of metals less costs of metals sold) of $0.8 million in the third quarter 2015
  • Loss from operations of $0.2 million in the third quarter 2016 compared to a loss from operations of $17.6 million in the third quarter 2015
  • Net loss of $0.8 million in the third quarter 2016, including non-cash derivative losses of $0.5 million related to the Company's warrants, compared to a net loss of $16.8 million in the third quarter 2015, which included a non-cash gain of $0.2 million from the Company's warrants and $13.2 million in expense related to the impairment of long-lived assets
  • Cash and cash equivalents balance of $3.4 million as of September 30, 2016
  • Debt balance of zero as of September 30, 2016

Financial Results

The Company reported a net loss of $0.8 million in the third quarter 2016 compared to a net loss of $16.8 million in the third quarter 2015.  The 2016 net loss includes $0.5 million of non-cash derivative losses related to an increase in the fair value of the liability recorded for warrants to acquire the Company's common stock.  (See Note 18 in the Company's Form 10-Q for the period ending September 30, 2016 for complete details.)  By comparison, the 2015 net loss of $16.8 million included non-cash derivative income of $0.2 million related to the Company's warrants and an asset impairment expense of $13.2 million in connection with the shutdown of the Velardena Properties. 

The Company recorded revenue of $1.7 million related to the lease of the oxide plant in the third quarter 2016, compared to $1.8 million revenue from the sale of metals in the third quarter 2015.  Operating costs in the third quarter 2016 were $2.0 million compared to $19.4 million in the 2015 period.  The decrease in operating costs year over year is largely due to the absence in the 2016 period of the $13.2 million asset impairment expense previously mentioned and $2.6 million cost of metals sold recorded in the third quarter 2015, plus the addition in 2016 of $1.3 million in other operating income compared to minimal other operating income recorded in the third quarter 2015.  The $1.3 million in other operating income in the 2016 period is comprised of gains recorded related to the sale of excess mining equipment, the sale of the Company's remaining interest in the San Diego exploration property and the farm-out of the Celaya property.  See page 25, "2016 Highlights", of the Form 10-Q for the period ending September 30, 2016 for additional details.

The Company's cash and cash equivalents balance of $3.4 million on September 30, 2016 was $0.7 million lower than the year-end 2015 balance of $4.1 million.  The reduction in cash during the first nine months of 2016 is due primarily to:

  • $1.6 million in shutdown and care and maintenance expenses at the Velardena Properties
  • $2.9 million in exploration expenditures, including costs related to drilling at the San Luis del Cordero, Santa Maria and Rodeo properties
  • $0.3 million in care and maintenance plus property holding costs at the El Quevar project
  • $3.1 million in general and administrative expenses
  • $0.6 million from an increase in working capital primarily related to a decrease in deferred revenue from the lease of the Company's oxide plant resulting from the application of a 2015 $500,000 advance payment to 2016 lease payments

These items were offset in part by:

  • $0.9 million of net proceeds from the sale of non-strategic exploration properties
  • $3.3 million of net operating margin received pursuant to the oxide plant lease
  • $3.6 million of net proceeds received in a registered direct offering of the Company's common stock in May 2016

Financial Outlook

In addition to the $3.4 million cash balance at September 30, 2016, the Company expects to receive approximately $1.4 million in the fourth quarter 2016:  $1.2 million in net operating margin from the lease of the oxide plant and $0.2 million from the second quarter farm out of a non-strategic exploration property.  In the third quarter, Hecla exercised its right to extend the lease for an additional six months until June 30, 2017, which the Company estimates should provide approximately $2.4 million in net operating margin during the first seven months of 2017.  As noted above, Hecla has an additional 18- month lease extension right.  In addition, the Company expects to receive $0.6 million in February 2017 relating to the final payment for the sale of non-strategic mining equipment that occurred in the third quarter 2016. 

The Company currently plans to spend approximately $1.8 million during the fourth quarter 2016, resulting in a projected cash balance at year-end 2016 of approximately $3.0 million:

  • $0.4 million at the Velardena Properties for care and maintenance;
  • $0.5 million on exploration activities and property holding costs related to exploration properties located primarily in Mexico, including project assessment and development costs related to the Santa Maria, Rodeo and other properties;
  • $0.2 million on El Quevar maintenance activities, property holding costs and continuing project evaluation costs; and
  • $0.7 million on general and administrative costs.

Additional information regarding third quarter 2016 financial results may be found in the Company's 10-Q Quarterly Report which is available on the Golden Minerals website at www.goldenminerals.com.

About Golden Minerals

Golden Minerals is a Delaware corporation based in Golden, Colorado.  The Company is primarily focused on acquiring and advancing mining properties near its Velardena processing plants and the exploration of properties in Mexico and Argentina.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and applicable Canadian securities legislation, including statements regarding including the Company's planned expenditures during the fourth quarter 2016 and anticipated cash balance at year-end 2016; net operating margin expected to be received in the fourth quarter 2016 and first half of 2017 from a third party lease of the Velardena oxide mill; amounts expected to be received in February 2017 as the final payment in respect of an equipment sale; the planned fourth quarter 2016 drilling at the Rodeo project and the planned fourth quarter 2016 update of Santa Maria resources and completion of a Preliminary Economic Assessment. These statements are subject to risks and uncertainties, including: lower than anticipated net operating margin from the oxide plant lease due to problems at the third party's mine or the oxide plant resulting in less than anticipated production or due to processing delays or termination of the lease due to inability to obtain required permits or for other reasons; results from exploration and project assessments at the Santa Maria, Rodeo or other exploration properties and whether we will advance these or other exploration properties; potential delays in our exploration activities or other activities to advance properties towards mining resulting from environmental events or permitting delays or problems, accidents, problems with contractors, disputes under agreements related to exploration properties, unanticipated costs and other unexpected events; increases in costs and declines in general economic conditions; inability to raise external financing on acceptable terms or at all; and changes in political conditions, in tax, royalty, environmental and other laws in Mexico, and financial market conditions. Golden Minerals assumes no obligation to update this information. Additional risks relating to Golden Minerals may be found in the periodic and current reports filed with the Securities and Exchange Commission by Golden Minerals, including the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

Golden Minerals Company
Karen Winkler
Director of Investor Relations
(303) 839-5060
Investor.relations@goldenminerals.com

                                                                        

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars)
(Unaudited)








Unaudited




September 30, 


December 31, 


2016


2015


(in thousands, except share data)

Assets






Current assets






Cash and cash equivalents 

$

3,415


$

4,077

Short-term investments 


456



72

Trade receivables


506



546

Inventories 


264



330

Value added tax receivable, net 


4



400

Related party receivable 


642



Prepaid expenses and other assets 


277



451

  Total current assets


5,564



5,876

Property, plant and equipment, net 


9,453



11,125

  Total assets

$

15,017


$

17,001







Liabilities and Equity






Current liabilities






Accounts payable and other accrued liabilities 

$

1,406


$

1,144

Convertible note payable - related party, net 




3,702

Derivative liability - related party 




488

Deferred revenue 




500

Other current liabilities 


9



556

  Total current liabilities


1,415



6,390

Asset retirement and reclamation liabilities 


2,388



2,546

Warrant liability 


3,031



210

Other long term liabilities 


71



84

  Total liabilities


6,905



9,230







Commitments and contingencies 












Equity 






Common stock, $.01 par value, 200,000,000 and 100,000,000 shares authorized; 88,920,041 and  53,335,333 shares issued and outstanding, respectively


889



534

Additional paid in capital


495,424



484,742

Accumulated deficit


(488,352)



(477,378)

Accumulated other comprehensive income (loss)


151



(127)

  Shareholders' equity


8,112



7,771

  Total liabilities and equity

$

15,017


$

17,001

 

GOLDEN MINERALS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in United States dollars) (Unaudited)














Three Months Ended 


Nine Months Ended 


September 30, 


September 30, 


2016


2015


2016


2015


(in thousands except per share data)


(in thousands, except per share data)

Revenue:












Oxide plant lease 

$

1,729


$


$

4,768


$

Sale of metals 




1,788





6,086

  Total revenue


1,729



1,788



4,768



6,086

Costs and expenses:












Oxide plant lease costs 


(549)





(1,478)



Cost of metals sold (exclusive of depreciation shown below) 




(2,598)





(8,385)

Exploration expense


(927)



(615)



(2,865)



(2,851)

El Quevar project (expense) income


65



(177)



(308)



(988)

Velardeña project expense








(119)

Velardeña shutdown and care and maintenance costs


(456)



(393)



(1,589)



(393)

Administrative expense


(897)



(1,047)



(3,141)



(3,375)

Stock based compensation


(95)



(99)



(666)



(372)

Reclamation expense


(47)



(48)



(144)



(206)

Impairment of long lived assets




(13,181)





(13,181)

Other operating income, net 


1,281



7



1,558



477

Depreciation, depletion and amortization


(346)



(1,209)



(1,317)



(3,743)

  Total costs and expenses


(1,971)



(19,360)



(9,950)



(33,136)

Loss from operations


(242)



(17,572)



(5,182)



(27,050)

Other income and (expense):












Interest expense 






(515)



Interest and other income 


10



623



12



2,006

Warrant derivative (loss) gain 


(545)



200



(2,821)



1,068

Derivative loss 






(778)



Loss on debt extinguishment 







(1,653)



Loss on foreign currency


(21)



(71)



(63)



(125)

  Total other (expense) income


(556)



752



(5,818)



2,949

Loss from operations before income taxes


(798)



(16,820)



(11,000)



(24,101)

Income tax benefit






26



Net loss

$

(798)


$

(16,820)


$

(10,974)


$

(24,101)

Comprehensive loss, net of tax:












Unrealized gain (loss) on securities


107



(88)



278



(125)

Comprehensive loss

$

(691)


$

(16,908)


$

(10,696)


$

(24,226)

Net loss per common share — basic












Loss

$

(0.01)


$

(0.32)


$

(0.14)


$

(0.46)

Weighted average Common Stock outstanding - basic (1)


88,878,371



52,960,212



78,080,858



52,921,542



(1)

Potentially dilutive shares have not been included because to do so would be anti-dilutive.

 

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SOURCE Golden Minerals Company


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