Q3 2021 Golden Minerals Co Earnings Call
Greetings and welcome to the Golden Minerals Company third quarter 2021 earnings webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Karen Winkler Director of Investor Relations you may begin.
Thank you operator, good morning, everyone on behalf of the Golden minerals team I'd like to welcome you to today's earnings call during which we will be discussing operating and financial results for the third quarter 2021.
Before we get started please note that certain statements made my bad 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 results or performance to be materially different from those expressed or implied by such statements.
Please refer to our most recently filed Form 10-Q for detailed risks and other important factors that could cause actual results to differ materially from those in our forward looking statements.
On the call today are Golden Minerals', President and CEO, One lane, and our Chief Financial Officer, Bob Vogels.
Following their prepared remarks, they will be available to answer. Your question. This webcast will also be available for replay on the company's website tomorrow and remain posted for approximately 30 days.
Ill now turn the call over to Martin.
Thank you Karen.
I am pleased to report the Golden Minerals', just completed its first ever profitable quarter for our mine operating income.
This is a great milestone and it is validation of successfully executing our plan to become a profitable producer.
And this profitability despite increased exploration spending in the quarter, mostly focused on expanding the rodeo resource and extending the life of mine.
Which I'm sure we can all agree given the strong performance of Brookdale is a worthy goal.
Where do continues to perform well.
Production and revenue from our data were both strong in Q3 was a quarter over quarter gain of 38% in gold production.
And a 44% gain in revenue.
Our cost per ounce of gold produced has improved significantly since Q2.
And is now in the mid $800 another silver credits.
We are on track to meet our annual guidance for gold production of between 12000 and.
And 14000 ounces and.
And we have already exceeded guidance for silver production for the year.
Our guidance for net operating margin of 10 million to 11 and a half million is also right on track.
We're seeing increases in the metallurgical recovery of gold and our plants based on some adjustments we have made in improving the finance of the grind by grinding a bit less material per day grinding it longer.
We are injecting more air into the tanks to increase the oxygen levels in the agitated Leach train.
She is also increasing the gold recovery.
Given the recovery gains partly based on the finer grind.
We plan to maintain daily production levels at about 500 dry metric tonnes per day as we have been since late September.
We completed our resource expansion drilling near the rodeo pit and we'll be releasing the complete results from the program this quarter.
We have seen numerous mill grade gold intercepts that are outside of the current resource.
We expect to see an increase in the size of the Golden Silver resource, which should yield a modest extension of the mine life overdue.
We plan to have that information incorporated into our mine plan before the end of the year.
Our advancement of dollar Dania is continuing to progress through detailed selective mining studies.
An additional final testing to define the details of the proposed bio oxidation or by ox plant.
We have determined that it is not in the company's best interest to start the mine until we are approved the construction of the <unk> plant and they're closer to the possible completion date.
The economics of operating without receiving good payables for the gold are simply not attractive enough to justify the risks.
We will not get good payables for the gold until we have the buyouts planned operating and can extract the gold using our oxide plant.
This pushes a possible restart date out into 2022.
Once we have the results from our current test work now underway in South Africa, we will have a much more accurate estimate of the capital cost of the biopsies plants.
And we don't have a firm schedule for possible construction.
With this information.
We will be able to evaluate the restart proposal and assuming the economics are still favorable.
The start up plan.
This could happen in the first half of 2022.
You would potentially allow for a resumption of production at Butler Dania as soon as the second half of 2022 or early 2023.
We have finished the first phase of drilling Anniversaried, the Este project in Argentina.
And we are awaiting drill results.
This drill program and related expenditures were required to satisfy the terms of our earn in option.
The property is immediately adjacent to the giant talking talk about copper porphyry deposit in Western Salter Province.
It has excellent potential for copper deposits and also for high sulfonation after thermal gold silver deposits.
Once all the results are received we will release the results.
In mid October we started our second running drilling as our Yoki ROI project in Chihuahua, Mexico designed to follow up on some excellent Golden Silver intercepts that we released early this year.
The project has district scale.
We control about 5000 vectors and continued positive drill results would be significant for the company.
We should see assay results early next year.
Our plans for production growth and sustainable profitability are in place and advancing well.
With the other dania producing possibly as soon as next year.
We will be on track with our initial plan and potentially be producing and selling silver lead and separately zinc concentrates in 2022.
While we are constructing the bio oxidation facility.
Once the bio oxidation plant is complete.
Our projections show annual production of 2 million silver equivalent ounces per year from the operation at excellent margins, assuming continued strong gold and silver prices.
Our production from Belo Dania once in full swing will be about twice the equivalent gold production for mobile and we'll have a projected mine life of a decade and possibly more with additional exploration success.
I will now hand, the call to Bob Vogels, our Chief financial Officer to present, the financial results for the third quarter 2021.
Thank you ward.
Third quarter operating margin at the rodeo operation increased significantly over the second quarter as expected.
About $4 $2 million with throughput at the processing plant, averaging over 530 tonnes per day.
As Laurent mentioned, we anticipate the plant will continue to operate at a rate of approximately 500 tons per day through the remainder of the year.
Cash operating cost.
Net of silver byproduct credits improved significantly in Q3 declining to about $865 per payable ounce of gold produced due primarily to the higher mill throughput level and higher grades.
Cash operating costs net of silver byproduct credits should remain at or below $900 per ounce for the rest of the year, even as grades trend back to the deposit average in Q4.
And throughput levels Thats, approximately 500 tons per day for the remainder of the year and given a continuation of current prices for gold and silver operating margins at rodeo in Q4 should be similar to Q3.
As noted in our 10-Q filing we are estimating an operating margin of between $10 million at $11 5 million for the full year 2021, consistent with prior guidance.
With a significantly improved operating margins from rodeo, we reported positive after tax net income of about 400000 for Q3.
Even with increased exploration spending during Q3, as we advanced several projects, including drill programs at Rodale and in Argentina at the Street of Este property as Warren mentioned.
Other levels of expenditures for L. K bar, G&A, and beller, Dania cared maintenance, where similar to prior quarters and are expected to continue at approximately those levels going forward.
With the expected continued high operating margin from Rodale. The company is also anticipating positive net income in Q4.
We ended the third quarter with about $9 million of cash.
Net cash flow for Q3 was a positive $1 9 million.
Due primarily to the increased operating margin at rodeo.
Net cash flow during the third quarter also benefited from a significant refund of VAT receivables.
As noted in our 10-Q.
The VAT receivable overall declined about 500000 in Q3.
It is difficult to predict the timing of our VAT receivables collection quarter to quarter, but we expect our level of that receivables to remain more or less the same over the coming quarters with new that from current operations being offset by refunds of prior bad.
Now that we are in full operating ROE Dale and providing metals prices remain at current levels. We expect we will have positive net cash flow through the remainder of 2021 and 2022.
As reported in the third quarter 10-Q, we expect our cash balance to grow to around $11 million to $12 million over the next 12 months through September 32022, depending on metals prices and spending on exploration projects.
These projections include the $1 5 million, we expect to receive from fabled silver gold in December 2021. According.
According to the terms of our farm out agreement for the Santa Maria property.
The cash projection does not assume any other forms of debt or equity financing or cost that we may incur related to a potential restart of the Daimler Dania mine.
I will now turn the call back over to the operator, who will take your questions.
Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Press Star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question comes from the line of Jacob Bykowski with Alliance Global Partners. Please proceed with your question.
Hey, guys. Thanks for taking my questions.
Starting with the keyword.
Should we still expect bulk sample results.
Later this year followed by the feasibility early next year now closer to a potential production decision turned around my head around the timing of some of these items.
Yeah Jake.
Yeah. Good question. So we are we will be having a no information to report from the study, which won't technically be a full feasibility study, but it will be feasibility level work on the biopsy portion of the process, we should have that in the first quarter.
Next year, the exact dates are a little bit unclear depend.
It depends on.
The batch processing schedule that is being used by it was a tuck in South Africa.
So we should be able to you know certainly in the first half of the year next year, we would have that information to release along with some of the bulk sample results the head grades and whatnot that we obtained.
From the test mining.
Okay. That's helpful.
And then just on rodeo exploration results of the program.
Wound down in October.
Assuming they are positive, but let me see if those results come out do you think that'll trigger.
Formal mine plan update or will it be more of an internal milestone upbeat.
Results.
I'm I'm I'm, assuming we'll do it internally.
Because of the cost of doing an independent or external update. However, we will also be seeing likely an update based on the SPE 1300 rules.
Early next year, when we re file the technical reports summaries. So that information would be included in those updates as well.
Okay very good that's all on my end, Thanks again guys.
Thank you Jake.
Our next question comes from the line of HEICO.
Right Okay.
With your question.
Hey, there thanks for taking my questions.
Of course, I Com welcome.
Thank you. Thank you.
Just thinking out loud here, a little bit with the you know the longer term I mean, you're clearly investing in the firm quite heavily but thinking out a little bit longer how do you stand with investments versus shorter term cash flow performance for the farm.
And I'm talking about this because you know earnings versus the revenues that are being spend versus the capital that's being spent.
And in your future revenue inflow.
Yeah, no. It's a good question Heiko.
We're we're obviously reinvesting in exploration, we have a pipeline of projects that have the potential to have material change for the company to the better.
It's important to invest exploration dollars in those properties as we go along.
The company needs to grow obviously.
The most effective.
Growth program is internally from exploration spending.
And it's obviously much quicker if we were able to do some M&A, which we are continually looking at also.
In the meantime, investing reinvesting some of the revenues as exploration spending is really beneficial to the company and the shareholders in my opinion.
Very good.
Thank you Soma.
Thanks Heiko.
And again as a quick reminder, if you have any questions you May press star one on the telephone keypad to join in the Q&A queue.
And our next question comes from the line of Sanjay <unk> with fundamental research. Please proceed with your question.
I don't know sooner you're on the line.
Oh, sorry, yes.
This was on the strong production performance everyone.
Few questions.
One is a follow up on a previous question Oh deal. So is it better home that are formally update will come out early.
Early next year.
Okay.
Well, what we will do said is we're doing internal updates this year it will incorporate that into the mine plan.
And it will be.
Published was in the technical report summary update that we need to do for SK <unk> hundred early next year.
In summary form is mine is what I anticipate so while we won't produce an independent.
Uh huh.
43, 101 report this year, we will update based on this case 1300 next year.
Okay.
Have provided cash flow projection for the next 12 months.
But I'm a bit greedy here was trying to see if you are able to provide any guidance for production and maybe cash cost.
Bob do you want to take that but let's see I'm not sure what we have in the next 12 months forecast right now.
Well, we don't have anything published certainly with our 10-K filing for.
For the end of this year, we will provide.
Provide a forecast full year forecast for 2022, that's what I anticipate this year, we only provided forecast.
Or this current year 2021, and we've been reporting against that all year I would expect with the year end financials and 10-K, we will provide a full year of 2022 forecast, which presumably would include production as well.
Sure.
Fair to say that Cas costs might remain the same in Q4.
Excuse me.
Yes, so I think actually we.
And the update I gave I indicated that Q4, we expect cost to remain under $900, an ounce, which is in line with what we had in Q3 slightly higher as grades are expected to be a little bit lower in Q4 than they were in Q3.
The key will what's the plan there and we expect a maiden resource estimate next year or.
Yes. So we're just doing the second phase of drilling there. So we're a long ways from a possible resource estimate.
We're looking to.
Define the extent of some of these mineralized.
Drill holes that we reported early this year.
So it's unknown, whether this will become a resource or nuts.
And certainly based on the results of this drill program that we're currently undertaking so we'll have much better idea of the extent of mineralization and we can give an update after those results are out early next year.
Okay. Thanks, and just one more question on Barrick, What's your plan of the bank.
<unk> 1 million on the property so far.
Color on what they spend on what is the plan going forward.
So the the.
The company has put out for bid.
For exploration drilling starting late this year early next year Barrick Barrick has.
As kind of a public bid process. So they are planning to drill within the next year.
And don't have much more details to offer at this point, but they are continuing their process of earning and then.
Continuing with the option.
Thank you again, congratulations on the strong company.
Thank you Sir.
And our next question comes from the line of Heiko Ihle with H C. Wainwright. Please proceed with your question.
Hey, this is Ted.
One quick follow up there sorry for jumping back in.
Can you break down the $4 9 million in exploration costs and property holding costs between your assets. Please.
Yes, Bob you want to take that one.
The four point no and that was the full year numbers correct Heiko.
Yeah.
The majority of it.
Was that ROE Dale.
A little over $1 billion in total.
There was about 700000 800000 at Sydney to stay in Argentina.
We also had some costs in there associated with our studies for validating a restart.
We include in there.
And.
Our our normal.
Spend for a base level of exploration.
Which includes property holding costs in a number of exploration concessions that we have runs approximately $2 million a year, so about a million and $5.
Of costs associated with <unk>.
Just general exploration.
We have an exploration staff in Mexico, and in Argentina that we pay.
And we have.
Roughly about <unk> 5 million to date.
And concession payments to various holdings that we have.
That's more or less a breakdown of that expense.
Got it and it's going to be the same for the next 12 months more or less.
Depending on drill programs.
That's the most expensive aspect of that so we've got Yoki, though where we're drilling as I mentioned.
And there could be further programs announced as we head into next year.
Got it.
You seem to have you couldn't ultimate number down to $4 9 million.
Okay.
I am sorry, Heiko I didn't hear that exactly.
I I said.
You seem to have the total number down to the $4 9 million that are in your outlook.
Right yes.
Okay.
Confused by the question.
What I'm, what I'm, saying is like the past 12 months spend should be more or less the same as the next 12 months spent by asset.
Well, if we continue to be.
Fairly aggressive in drilling some of these these prospects in past years, where we haven't had cash flow available to us we have cut back a long ways and we've managed to keep exploration spending in the $2 million to $3 million annual range.
Just base level.
Concession payments holding costs salaries.
And just minimal exploration work and so.
Yes, that's why you've seen it uptick this year as we had the money to do some of these additional drill programs.
Got it.
Well, let me just.
Just let me jump in a minute more on that just to explain a bit further.
I think we spent probably more exploration drill dollars this past year than we would.
Planning on for next year, but we haven't made that final decision, but as we start.
Gearing up on dollar Dania once that decision is made.
I think we will.
By necessity cut back on exploration spending next year. So just the overall book.
Makes sense. Thank you all.
Thanks Heiko.
And we have reached the end of the question and answer session I will now turn the call back over to Karen Winkler for closing remarks.
Thanks, Operator. This concludes today's call. Thanks for joining us and we look forward to talking with you again next quarter have a good day.
Yeah.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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Yeah.
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