Q2 2021 Golden Minerals Co Earnings Call
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Greetings and welcome to the Golden Minerals Company second quarter 2021 earnings webcast. At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded and I'll now turn the conference over to your host Karen Welcome Mike Winkler and you may begin.
Thank you operator, good morning, everyone on behalf of the Golden mineral team I'd like to welcome you all to the company's inaugural earnings call during which we will be discussing operating and financial results for the second quarter 2021.
Before we get started please note that certain statements made by management today will be forward looking within the meaning of applicable securities laws.
Forward looking statements involve known and unknown risks uncertainties and other factors that may cause actual events or performance.
And materially different from those expressed or implied by such statements.
Please refer to our most recently filed form 10-Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward looking statements.
Today I'll go live minerals, President and CEO, 1 man and our Chief Financial Officer.
Following their prepared remarks, they will be available to answer your question.
The event will also be available for replay on the company's website tomorrow.
I will now turn the call over to Warren.
Thank you Karen.
As we predicted we essentially broke even as a company based on a rodeo goldmine income and the second quarter of 'twenty to 'twenty 1.
Our projections show strong positive earnings through the remainder of this year.
For a day, who has been operating very well since startup.
We commissioned a new ball mill and our oxide plant and the last days of April about a month later than we had planned however, our process plant throughput has exceeded expectations by nearly 100 tonnes per day since that time.
And we expect a higher throughput to continue.
We are now planning for an average throughput of at least 500 tonnes per day.
This means we should be able to easily meet our forecast for gold production of between 12014 thousand ounces this year.
And profitability for the year.
Our work at Valor Dania is progressing well towards a possible restart and near the end of 'twenty 'twenty 1.
We have completed our bulk sampling and precision mining test successfully and are now preparing the material to be sent to South Africa for the final and metallurgical studies to complete the design criteria for the bio oxidation plant and to optimize the flotation and separation maximizing gold reporting to the.
Pyrite concentrate that will be treated and the bio oxidation circuit.
We should have results of those tests were to report early in Q4 this year.
I anticipate a positive decision on the restart of the mine in Q4.
Yeah.
Exploration that rodeo and has continued to return positive results on 2 additional structure is not currently and the mine plan.
The structures are both east and west of the current pit.
And potentially within easy expansion access.
We have just added a second drill rig to speed up the drill program to delineate Golden realization on these 2 structures and to test additional targets.
The reverse circulation rig that just started the last day of July is expected to drill about 5 or more times faster than the core drill this.
And this means we should have the information we need to evaluate the potential extension of the mine life within the next few months.
We're also drilling a project in Argentina, and I'm quite enthusiastic about.
And the property is just the retail estate property, which is immediately adjacent to the giant Taco Taco and copper deposit and Western Salter Province.
We're drilling both a very interesting copper targets and a compelling high sulfur Dacian gold and silver target.
Initial results from the copper targets should be available and the next few weeks.
Our plans to drill at El Cubo District, and Chihuahua has been pushed back a few more months to accommodate our drilling at these other projects not necessarily because the other projects are better exploration targets all are quite good but because of operational needs that rodeo and based on our commitment to drill and sorry to Este.
No cable remains a very attractive gold silver district with excellent potential.
We expect to start drilling at El Cubo and Q4 this year.
Who knows the corvee got rodeo is freed up.
Our plans for production growth and sustainable profitability are in place and advancing well.
With the other dania producing hopefully later this year, we will have accelerated our production growth over our initial plan and potentially be producing about 1 million ounces of silver with lead and zinc byproducts in 2020.2 while we are constructing the bio oxidation facility.
Once the bio oxidation plant is complete our projections show and additional 1 million silver equivalent ounces produced per year from the gold and pyrite.
Our production from the other dania and once in full swing should be about twice the equivalent gold production from rodeo.
And where the project Didnt mine life of a decade, and possibly more with exploration success.
I will now hand, the call over to Bob Vogels, Our Chief financial Officer to present, the financial results for the second quarter 'twenty 'twenty 1.
Thank you Lauren.
And our second quarter, our operating margin and rodeo operation increased significantly over the first quarter as expected to about 2 and a 5 million per throughput at the processing plant and exceeding our internal projections. Following the startup of the new re grind mill circuit beginning in May.
And as Warren mentioned, we now expect the plant operating at a higher throughput level of at least 500 tonnes per day throughout the remainder of the year cash.
Cash operating costs net of the silver byproduct credits also significantly declined in Q2 due to the higher mill throughput of about just over $900 per payable ounce of gold produced we should continue at this cost level or slightly better for the rest of the year as the higher throughput and continues going forward.
At the expected higher throughput levels for the remaining 2 quarters of 2021, and given a continuation of current gold and silver prices operating margins and road there should be higher for the remainder of 2021.
As noted in our 10-Q filing we are estimating and operating margin of between 10 and $11.5 million for full year 2021.
Despite the significantly improved operating margin from rodeo, we still reported a narrow net loss of about 800000 per Q2.
And part to noncash stock compensation awards granted in the second quarter.
Other levels of expenditures for exploration and that'll keep our G&A or dania care and maintenance were similar to prior quarters and are expected to continue at approximately at those levels going forward.
With a higher operating margin is expected for the remainder of the year. We are projecting positive net income and the second half of 2020.1.
We ended the quarter with about $7 million of cash net cash flow for Q2 was negative $1.1 million and was a negative $2.9 million on a year to date basis.
Primarily to costs incurred and startup rodeo operation and occurred primarily in the first quarter.
Those startup costs included approximately $1.2 million for the installation of the new regret no circuit and the buildup of working capital from the rodeo operations, primarily related to Dore inventories and a value added tax or VAT receivable.
We noted in our turnkey that are normal course refund claims with the VAT related to the ROE day of operation are occurring at a slower than anticipated pace due to delays and processing the refund claims and Mexico as Mexico deals with the economic fallout of Covid pandemic.
The VAT receivable increased by about 800000 per quarter too and we are currently incurring a little more than 250000 per month.
We are forecasting and the pace of refunds to pick up and the second half of the year and believe we will collect all the existing VAT receivables on our books within a year's time period.
Now that we and full operating mode at Rockdale and providing metals prices remain at current levels. We expect we will have positive net cash flow through the remainder of 2021 and into 2022.
As reported and the second quarter 10-Q, we expect our cash balance to grow to around 95 to $11.5 million over the next 12 months through June 32022.
And this does not include the 1.5 and we expect to receive payable silver gold and December 2021. According to the terms of our farmout agreement and Santa Maria property.
The cash projection and also does not assume any other forms of debt or equity finance.
I will now turn the call back over to the operator, who will take your questions.
And at this time, we will be conducting a question and answer session.
To ask a question. Please press star 1 on your telephone keypad.
Confirmation tone will indicate your line is and the question and keep you may price start to if you like to remove your question from the queue from participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
1 moment, please and while we pull for questions.
And our first question is from J C Koski with Alliance Global Partners. Please proceed with your question.
Hey, guys. Thanks for taking my questions.
So.
Just looking at the exploration program that you guys have on a per day. All we obviously saw some results and Q2 when do you think we'll see a broader update there and and I guess you expect from formerly upbeat. The P. A or do you think you can just go ahead and sort of tack on some of that new material.
To the mine plan out and discover it.
Yeah. Thanks for the question Jake.
Well, we'll have additional results out here and the next few weeks on the rodeo progress.
As noted and.
And my presentation and remarks, it's been slow going with a core rig, but it'll become a lot more accelerated now that we have the RC rig and theyre drilling as well.
I think it will probably take US a couple of months before we have enough data to update the resource I don't think we will update the PPA, but we will probably.
Internally update the resource and have some commentary around that we'll have to see just how big of a incremental or transformative increase the resources and.
And right now it's just not clear we do have those very interesting.
And now gold bearing structures on the other side of the existing pit, which certainly will.
Add to resource, it's a question of how much and at what grade.
Okay and do you think we'll see that resource by by Q4 this year.
I think it will be in Q4 checks a realistically just based on the lead time for assays.
And we're using the commercial labs, because our own internal lab.
And it's mostly.
Taken up with the mine assays that we need and very rapid turnaround on so.
So I would expect that.
In Q4.
And I can't tell you exactly when that will be but well get it out there as fast as we can.
Got it okay.
And then John and dealer Danielle from.
And my timing perspective, it sounds like you guys might be ready to make a restart decision by the end of this year.
And you just remind us what the ramp up time line is sort of from from that positive restart decision.
2 ish million silver equivalent ounces, a year that we might be from that.
Oh, Yeah, I can sort of go through this so this is all pending no official decision to progress, but we're getting close and my opinion.
And to having all the information we need.
But.
Assuming that we decided to go forward.
We will ramp up over the course of about 3 to 6 months and full production.
And I think that.
Full production.
For the silver lead and zinc con sales that will be and the order of 300 tons per day, which was the approximate capacity of the flotation plant.
Now we won't get to the full gold recovery portion until we have the buybacks.
<unk> built so.
Assuming that we start production.
Production from the <unk>.
The silver lead and zinc concentrate sales late this year early next.
Will take about a year to build the biopsy plant we would presumably.
Stockpile the pyrite concentrate during that period of time and then once that box plant is operational which would likely be 2023, assuming all goes well. We would then be able to be and the full production mode as contemplated in the PPA with approximately 2 million silver equivalent ounces being produced on an annual base.
This is the way we have it.
Scoped out and the PPA right now.
Got it Okay that was very very helpful. That's all from me. Thanks again guys.
Thank you Jack.
Okay.
And our next question is from Heiko.
And with H C. Wainwright. Please proceed with your question.
Hey, there thanks for taking my questions and thanks for doing this call.
But of course glad to have you.
Hey, you mentioned, you incurred 700 Grand and and capital expenditures during the quarter, mostly related to the regret and mill circuit.
Are there other any other meaningful items that were in there I mean, it seems like everything is 1 and good now and you're getting the better throughput rates and and.
And also is there anything else on the horizon that we shouldn't anticipate it and.
And the longer lasting item category.
Yeah, Great question.
Yeah.
The mill construction involved a couple of parts that we hadn't initially contemplated.
Our variable control system.
Was sized undersized initially we had to get the larger 1 that added a bit to the cost we ended up having to actually put in a a cooling system for the electric motor for the mill.
We had initially planned to go to the synchronous motor and we went with.
And asynchronous just electric motor on it at the end because the synchronous smarter wasn't.
Fixable the 1 that we had purchased used so there is a number of of.
Details and that mill installation and added to the cost beyond what we had initially suspected and it wasn't obvious until we actually started tried to start the mill and so that's what led to the months, let's say.
Delay getting that mill up and running and a bit to the cost now we've had some minor.
Additional costs and the vibrating screen.
Repair and things like that but that's normal sort of a care and maintenance costs for the mill. So we don't anticipate any further significant capital costs for the mill and it's up and running going great and everything else will be minor.
Fair and replacement items.
That's that's what I hope you would say.
Okay Fair enough and you get the outlook in there until the end of June 2022 of the $3.8 million and exploration activities.
And as much detail as you're willing to do and then see and writing from people like me can you break it down between your different assets.
Yeah.
No, we havent really disclosed a detailed breakdown heiko, but.
And I think I can say that.
We are planning to spend.
About 600000, sorry to S day.
We're planning to spend close to.
Half a million kilo the initial spend and plan.
Pat and rodeo was about a 300000, but we'll go over that.
Fairly significantly and based on positive results that we've had to date.
And so that's the level of detail I have right now for you and then there's there's of course, there is care and maintenance items for the claim costs and the general overhead from the exploration group and there as well Bob do you have any additional comments on that.
No I think Thats right Warren.
And spend is.
0.2, 2 million and a half just for sort of holding costs.
Laurent and said the holding cost for the exploration group property concession payments those sorts of things and.
So the majority of that spend as planned drilling and exploration and the field.
Makes sense I actually thought that it was a a plenty of detailed answers. So thank you very much and stay well.
Thank you Heiko.
Okay.
Our next question is from Chen Lin with Lin asset management. Please proceed with your question.
Hi, Thank you for taking my questions guys and thank you for hosting the conference call. Most of my question and answer and hadn't been touched and basically about the 2 mining.
Operations and.
1 thing I heard you said in the conference call is the Barrick and.
Exploration. So can you remind us what exactly Barrick is looking for.
And and you should expecting you you said you are.
And you're expecting results in a few weeks.
Hi, Chad.
Talking about the 3 to a state property.
And is not part of the Barrick deal.
The new property that we haven't talked much about and western Salta province, but now that you've asked about the El <unk> project that Barrick is earning into.
They're still doing their surface exploration work and they are preparing and preparing to get ready for a drill program and I expect them to propose a drill program sometime next year.
And all likelihood, but there's no confirmation of that yet, but barrick and just looking for a world class gold deposits and L. K bar their target is about a 5 million ounce gold deposits.
And they're doing their work very methodically to get to.
The point, where they drill their best targets and see whether they have indications of such a thing or not.
Okay, great. Thank you and then you said you're treating your own and property adjacent to it or is that also in Argentina.
Yes, it's and it's about an hour and a half to the west it's almost on the Chilean and border.
And it's immediately adjacent to first Quantum's Tokotoko copper project, which is a huge a feasibility stage copper porphyry.
So we have a combination of 2 different targets archery. This day, 1 is a copper target.
And which could have some similarities to the Taco Taco project and then there's also.
The project that we were initially interested in there that appears to be a high sulfonation gold silver prospect with some very interesting gold values on surface, we just haven't talked to them.
Much about it yet churn churn, but we will be releasing some results here and the next.
A few weeks to perhaps a little bit longer because of the assay delay it might be up to a month.
Right. That's the interesting how many oh did you drilled so far.
Well, we've drilled about.
Thousand liters more or less.
3000 meter plan and program and.
And.
They're about 6 holes drilled to.
Jim and.
And that were great.
Okay.
And looking forward to that.
Okay, Great and Oh, so you seem to have a very nice and new discovery I rode deal and then yeah.
And you will have more resolved and then 90 and you have a new Resourcing and Q4 are what are you hoping for and.
With what you've seen so far you hope to extend it for another year or another 6 months.
Open pit operation or do you need to go underground.
Let me, let me be clear, we don't have and added resource yet we think we will be able to expand the resource, but we are still dependent on drill results and now we have the initial drill results that were positive and several holes and the June press release and.
We will have some additional results too.
Publish share within let's say the next few weeks on the rodeo. So it's showing progress we have no indication of how much it might affect the resource or how much it might extend the mine life and.
And my opinion, there is indication that we're getting the positive results.
Should lead to that sort of resource expansion, but there's no way I can tell you how much additional production and time will get out of the resource.
If in fact, it does increase and as I think it will.
Okay. Thank you congratulations for you first a breakeven quarter continue their good work.
Thank you very much Jen and I appreciate that.
And our next question is from Cedar and my job with fundamental Research group. Please proceed with your question.
Yes, congratulations for your strong quarter. So my question is on road deal recovery late.
And the war then the P estimate, but do you think next year and trying to get a feel about all of the production for next year do.
Do you think that calculates and the costs and work towards the estimate next year.
Yeah. Thanks. Thanks for the question Yeah, we're focused entirely on on bringing up those recoveries the gold recoveries from what we reported was about 78% I think and Q2.
Versus the <unk>.
<unk> scale and previous work that we've done that showed an estimated 85% recovery for gold that was used and the PPA.
And we're sure we can improve it now.
And we had a bit of a side effect from the faster.
Faster throughput.
Oftentimes recovery rate and and throughput are our balanced opposite each other and so because we are.
And put no had the higher throughput and and May June and sort of makeup for the slower than expected mill commissioning and April.
Think we are.
Probably has a slightly lower recovery then we will have if we dial back to somewhere closer to 500 tons per day.
I'm confident that we will improve the recovery I can't tell you exactly to what point, but I expect to come very close to the PPA published a recovery of about 85 per cent per gold.
Yeah, and pleased to hear and melodies and yeah I think from 1 of your best bonds earlier is.
Is it fair to say that to you and me.
Most of the Capex and cash.
And therefore this year.
And at Bella Dania and no we have not spent the capex there we have spent.
Fairly minor amount of money doing the bulk sampling.
And the.
Preparation for.
For the test mining so we've done some test mining studies.
We're anticipating doing a bit more and there's still a development.
Capital required or development cost required once we have made the go ahead decision, which we have not made and other dania yet.
I'm hopeful that we'll make that positive go ahead decision late this year.
And at that point, we will have to continue to spend some capex and quotes for development and also for the completing the biotics feasibility and construction. So we have not spent the capital from other dania.
And we won't until we have a go ahead.
On that project, so that's still pending.
And what's your estimate for the development Capex then.
And we haven't changed our estimates and once once we start the.
P a contemplated about.
$10 million.
Yeah.
For the project.
3 to 4 I think was in startup costs.
Working cap and development and about 6 for the <unk> facility and that would be spread over time and 2022.
If we make the decision to go ahead.
And based on anytime and cashless noise. It seems that can be self funded you don't have to go back and the market place capital.
Yeah, that's what we've been saying Bob do you want to comment on that please.
Yes.
And our internal projections for cash flow.
Yes.
And as I mentioned, a balance of $10 million to $11 million of cash by June 2022, and that does not include yet and he kind of spending estimates.
Sure Bill or Daniel project should decide to go forward with it so that would have to come out of that but as Warren mentioned, we'd be spending that capital through 2022. So we would have the full year.
And additional months and quarters in 2020 to raise more cash internally. So yes. It is possible.
Net funded internally and.
We're certainly going to if you're looking at some other options to maybe.
To help help that funding that could be could take on a number of different.
Alternatives in terms of raising more money, but right now all the options on the table and nothing else.
And it's quite yet.
Got it. Thank you so much and I appreciate you doing this call.
Thank you I appreciate your questions.
Yeah.
And just as a reminder, if anyone has any questions you May press star 1 on your telephone keypad and joined the queue.
Our next question is from John and clinically and and consulting group. Please proceed with your question.
Hey, Warren and thanks for taking my call had 3 questions. If you don't mind and the first could be answered by either you or Bob.
Just regarding the cash flow that you've mentioned it seems like Bob just mentioned $10 million to $11 million, but thats, not factoring and Santa Maria with fabled and and talking to Peter Who's the CEO of cable and it seems like things are going well there. So I anticipate that youre going to be getting some type of additional compensation in Q4 is that correct.
Sure.
Go ahead, Bob do you want to take that yeah.
There's their next scheduled payment is in December for $1.5 million and yes, I agree John Yeah. Their financials look pretty strong at this point.
We've been a.
A little bit conservative not throwing that NR or sort of official liquidity forecast at this point probably by the end of Q3, we will feel comfortable enough to drop that in.
Okay. Thank you and then.
Showing up another question regarding dilution.
You know Taylor door to who has the seeking alpha article.
Or just real yesterday on August 9 and quote there are more established producers out there that arent diluting shareholders regularly and so regularly to me seems to be and inaccurate statement given your news flow that and I look at your website. It looks like what's financing was done.
18 months ago, So can you state with some reasonable.
Maturity that the company is pretty cashed up or at least the remainder of this year. Please.
Yes, John.
And we've said that and I know Bob Bob has said again that we're going to grow our cash balance into next year of between 9 and a half and $11 million within a 12 month period and that's part of our disclosure Bob do you want to comment further on that yeah.
Yeah, I think what we've essentially put out there is that and we've turned the corner cash flow wise and we should be adding to cash going forward at this point as long as we've got that rodeo cash flow source.
So there's no need for us to go out.
And to the equity markets at this time, we've got the dania on the horizon.
And we are going to look at what we do there, but a lot of options around the table for that.
And that doesn't seem like to me with.
And you kind of major external financing for that and we.
You may choose not to have any external financing.
Okay. That's very positive. Thank you and then the.
The other 2 questions.
Third from a few analysts on this call and and would you be able to share with the listeners just you know what that analyst range looks like currently please.
Yeah.
Yeah, Let me just talk and general Forum on that John.
Analysts we have now 3 analyst published price targets.
On the stock and the range is between I think 91 and $1.10 per share so that clearly puts.
Puts their valuation of the company no.
Far higher than the current market valuation.
Okay.
And then lastly.
I mentioned earlier to our Dart and there's another gentleman named Christopher Air and from my Gold newsletter, who have meet the misstatements in my opinion about Golden minerals and writing over the past few weeks and.
And for example, just to use an example from yesterday to your darts dating yesterday that the net asset value and looking at the company share structure is around <unk> 4.4 per share.
And clearly from what I'm hearing that seems low so how can I am getting this question a lot warrant from my investors you know how can such a large discrepancy exists.
It was a company called or e-mailed either of these individuals to kind of explain the company strategy and it's either responded please.
Yeah, No that's a great question John no neither.
Taylor Dart and or Chris has had any direct contact with and.
Any of the officers of the company.
So and now there are more than welcome to call and get more clarity. We obviously think that their estimates are quite low when.
And when you compare their estimates and value compared to the other analysts a very respected analysts covering the company.
You can see that.
No the the very low vol and.
<unk> per share valuations that both Mr Dart and and Christopher we're putting forward are well below.
Half of what the respected analysts for the company are putting out and their research reports, so I think that's pretty clear.
Very helpful. Thanks to you and Bob I appreciate it.
Thank you John.
Okay.
And we have reached the end of the question and answer session and I'll now turn the call back over to Karen Winkler for closing remarks.
Thanks, operator, and thanks, everybody for taking the time out of your day to day to attend our conference call. We look forward to talking with you again next quarter have a great day.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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Yeah.
Okay.
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