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TABLE OF CONTENTS Jul 7 - 13, 2014 Volume 100 Number 21 - 0 comments

Golden Minerals to restart Velardena mine

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Golden Minerals (TSX: AUM; NYSE-MKT: AUMN) is reopening its Velardena silver–gold mine in Mexico’s Durango state in July as a leaner and lower-cost operation.

The Golden, Colo.-head­quart­er­ed firm suspended the under­ground operation in Durango state in June 2013, mainly due to falling metal prices.

Before that, it was processing the mine’s sulphide and oxide material in two plants for a combined throughput of 500 tonnes per day, with cash costs exceeding US$30 per oz. silver.

Last May it said that if it ran the mine for the rest of 2013, it would have had a negative operating margin of US$5 million at metal prices of US$1,500  per oz. gold and US$25 per oz. silver. As a result the firm placed its sole producing asset on care and main­tenance the following month, and rethought its mine plan.

While precious metal prices haven’t recovered much since then, the company has pared down costs by reducing throughput and its labour force, and improving its underground infrastructure.

The firm intends to resume mining in the third quarter of 2014, focusing on the San Mateo vein. It plans to stockpile the mined material until the fourth quarter, at which time it would start up the sulphide mill and mine the Terneras vein. (The San Mateo and Terneras veins were the focus of this year’s 9,000-metre drill program.)

Golden Minerals expects to process 150 tonnes per day of sulphide ores in the fourth quarter, before ramping up to 285 tonnes per day in mid-2015. This compares to 500 tonnes per day of sulphide and oxide ores previously.

Fourth-quarter production would total 150,000 equivalent oz. silver (including silver and gold, but not lead and zinc) before reaching 275,000 equivalent oz. silver per quarter in mid-2015, once the operation ramps up.

Cash costs per silver ounce, net of by-product credits, would total US$30 in the fourth quarter, before decreasing to between US$12 and US$15 in mid-2015.

“Our team has worked diligently since the suspension of operations at Velardena to streamline the operation for a restart,” Jeffrey Clevenger, the company’s chairman and CEO, said in a statement. “Once ramped up, our restart plans show incremental cash for the company of US$5 million to US$8 million per year [at US$20 per oz. silver and US$1,250 per oz. gold], as compared to holding the property for the future.”

To improve efficiencies Golden Minerals has brought in a fresh team of employees, including a new general manager and managers for both the mine and mill. It plans to cut its previous 470-person staff to 150 employees by the end of 2014.

On the infrastructure front, it has completed a 1.9 km long access ramp into the mine. “This ramp will provide more efficient and lower-cost removal of mined material from the underground mine workings, as compared to pre-suspension haulage primarily from a low-capacity internal shaft,” the company explains.

With these improvements the operation could churn out 1 million to 1.2 million equivalent oz. silver a year at full capacity, at cash costs of US$12 to US$15 per oz. silver, net of by-product credits.

Golden Minerals shares soared 92% in the two days after the mine restart news to close June 19 at $1.48. At press time they fell back down to $1.13. 

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A portal at Golden Minerals' past-producing Velardena silver-gold mine in Mexico's Durango state. Credit: Golden Minerals
A portal at Golden Minerals' past-producing Velardena s...

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