GOLDEN MINERALS COMPANY Our Company
We were incorporated inDelaware inMarch 2009 under the Delaware General Corporation Law. During the three months endedMarch 31, 2021 , our principal source of revenue was from the sale of gold and silver from our Rodeo Property inDurango, Mexico . We incurred net operating losses for the three months endedMarch 31, 2021 and 2020. We remain focused on mining operations at the Rodeo Property as well as further studies of a restart plan for Velardeña including use of bio-oxidation to improve the payable gold recovery. We also continue to evaluate and search for mining opportunities inNorth America (includingMexico ) with near-term prospects of mining, and particularly for properties within reasonable haulage distances of our Velardeña Properties. We are also focused on advancing our El Quevar exploration property inArgentina through the Earn-In Agreement with Barrick and on advancing selected properties in our portfolio of approximately 12 properties, located inMexico ,Nevada andArgentina . We are reviewing strategic opportunities, focusing primarily on development or operating properties inNorth America , includingMexico . 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 endedDecember 31, 2020 , filed with theSEC onFebruary 18, 2021 . 2021 Highlights COVID-19 uncertainties We undertook several initiatives and installed multiple safety practices in response to the COVID-19 pandemic and have continued to carry out these initiatives and practices in 2021. We will continue to followWorld Health Organization protocols and local government rules and recommendations at all of our projects and corporate offices. Office employees continue to work remotely wherever possible. Activities at the Rodeo Property and the Velardeña Properties, including mining and processing, were not interrupted as a result of the pandemic during the first three months of 2021. Rodeo Property 23
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We began mining activities at the Rodeo Property, using a contract miner, inDecember 2020 . InNovember 2020 we received the final necessary permits for us to commence mining at the Rodeo Property from SEMARNAT, the environmental protection agency inMexico . We began hauling the mined material, also using a contractor, for processing at our Velardeña oxide plant beginning inJanuary 2021 . We provide the overall mine management and engineering, which includes in-pit technicianswho determine whether material is suitable for process or placement on the waste dump. We also employ and supervise the workforce responsible for processing activities at our oxide plant. Our assay lab, located in Velardeña,Durango, Mexico is used for the project's assaying requirements. We poured our first doré bar at the end ofJanuary 2021 and completed our first shipment of doré to a refinery located inthe United States inMarch 2021 . We installed a new regrind mill circuit at the plant specifically designed to process the harder mined material coming from the Rodeo Property, which was completed in April at a total cost of approximately$1.0 million . The new circuit, which was fully operational at the end of April, will allow for improved recovery of gold while increasing daily throughput of Rodeo material in the oxide plant to at least 450 tonnes per day. At that throughput level, the current life of the Rodeo mine is estimated to run through the middle of 2023 (approximately 2.5 years). Assays from early processing at the oxide plant indicate the doré produced are comprised of approximately 15 to 20 percent gold and 65 to 75 percent silver and are of a quality that is readily marketable and saleable to refineries located either inMexico or internationally, consistent with standard commercial terms. We entered into a refining agreement with a third party inFebruary 2021 and have completed four shipments of doré as ofMay 5, 2021 . 24
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The table below sets forth the key processing and sales statistics for the Rodeo
operation for the first quarter ended
Three Months
Ended
March 31 ,
Payable gold produced in doré (ounces) 1,390
Payable silver produced in doré (ounces)
11,289
Payable gold equivalent produced in doré (ounces) (1)
1,559
Gold sold in doré (ounces)
909
Silver sold in doré (ounces)
9,698
Gold equivalent sold in doré (ounces) (1)
1,054
Total tonnes mined (2)
171,905
Total tonnes in stockpiles awaiting processing (3)
6,746
Total tonnes in low grade stockpiles (4) 26,410 Tonnes processed 18,791 Tonnes per day processed 209 Gold grade processed (grams per tonne)
3.0
Silver grade processed (grams per tonne) 14.3 Plant recovery - gold (%) 84.3 Plant recovery - silver (%) 86.6 Realized price, before refining and selling costs Gold sold in doré (dollar per ounce)
Silver sold in doré (dollar per ounce)
(1) Gold equivalent based on realized gold and silver price (2) Includes all mined material transported to the plant, stockpiled or designated as waste (3) Includes mined material stockpiled at the mine or transported to the plant awaiting processing in the plant (4) Material grading between 2 g/t (current cut off grade) and 1 g/t Au held for possible future processing
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The following table highlights additional non GAAP cost and revenue statistics related to the Rodeo operations:
Three Months Ended
March 31, 2021
(inthousands except per unit amounts)
Total cash operating costs $ 2,826 Treatment and refining costs 30 Silver by-product credits (250) Total cash costs, net of by-product credits $ 2,606 Total cash cost per unit Payable gold ounces produced in doré 1,390 Total cash operating costs $ 2,034 Treatment and refining charges 22 Silver by-product credits (180)
Total cash costs, net of by-product credits, per payable gold ounce (1)
$ 1,876
Tonnes Processed in plant 18,791
Total cash operating costs per tonne processed $ 150
(1) Total cash costs, net of by-product credits, per payable gold ounce is a non-GAAP financial measure
and includes the total costs of production from mining, milling and administrative activities related to
the Rodeo operation. For a further explanation and a reconciliation to GAAP measures, see "Non-GAAP
Financial Measures" below.
Total cash operating costs for the first quarter ended March 31, 2021 , as
depicted in the table above, include all production costs during the period,
including mining, milling and general and administrative costs related to the
initial start-up of operations and associated build-up of mined material
stockpiles as well as in-solution inventories at the plant. As production
continues to ramp up, we expect unit costs to decrease significantly.
We anticipate total tonnes processed for the full year 2021 will be
approximately 125,000 to 135,000, resulting in payable production of
approximately 12,000 to 14,000 ounces of gold and 25,000 to 30,000 ounces of
silver, consistent with prior guidance reported in our Form 10-K for the period
ended December 31, 2020 . Using an assumed gold price of $1,800 /oz and an
assumed silver price of $25.00 /oz (the approximate average London Fix PM prices
during the first quarter 2021, as reported by Kitco, were $1,798 and $26.29 for
gold and silver, respectively), estimated operating margin for the full year
2021 from the Rodeo Property (defined as revenue from the sale of metals less
the cost of metals sold) is estimated at approximately $10.5 million to $12.0
million with after-tax cash flow for the full year, net of capital expenditures
and working capital, estimated at approximately $9.0 million to $10.5 million ,
consistent with prior guidance reported in our Form 10-K for the period ended
December 31, 2020 .
The estimates shown above are preliminary in nature and are based partly on the
actual results of operations for the first quarter 2021 and partly on
assumptions described in the PEA. Actual results from production at Rodeo may
vary significantly based upon, among other things, unanticipated variations in
grade, unexpected challenges associated with our proposed mining plan,
volatility in commodity prices, variations in expected recoveries, increases in
projected operating costs, working capital or capital costs or delays in
commencement of or interruptions in production. See "Risk Factors - Risk
Factors related to our Mining and Processing Activities" as described in our
Form 10-K for the period ended December 31, 2020 .
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Table of Contents Non-GAAP Financial Measures Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles. These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP. "Total cash costs, net of by-product credits, per payable gold ounce", and "All-in sustainable costs, net of by-product credits, per payable gold ounce", are non-GAAP financial measures calculated by the Company as set forth below and may not be comparable to similar measures reported by other companies. "Total cash costs, net of by-product credits, per payable gold ounce," includes all direct and indirect operating cash costs associated with the physical activities that would generate doré products for sale to customers, including mining to gain access to mineralized materials, mining of mineralized materials and waste, milling, third-party related treatment, refining and transportation costs, on-site administrative costs and royalties. Total cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Rodeo project. By-product credits include revenues from silver contained in the products sold to customers during the period. "Total cash costs, net of by-product credits", are divided by the number of payable gold ounces generated by the plant for the period to arrive at "Total cash costs, net of by-product credits, per payable gold ounce."
"All-in sustainable costs per payable gold ounce, net of by-product credits" begins with "Total cash costs, net of by-product credits, per payable gold ounce", and includes capital and sustaining capital.
"Cost of metals sold", reported as a separate line item in our Condensed Consolidated Statements of Operations for the period endedMarch 31, 2021 , is the most comparable financial measure, calculated in accordance with GAAP, to "Total cash costs, net of by-product credits". "Cost of metals sold" includes adjustments for changes in inventory and excludes third-party related treatment and refining costs, which are reported as part of revenue in accordance with GAAP. The following table presents a reconciliation for the three months endedMarch 31, 2021 between the non-GAAP measure of "Total cash cost, net of by-product credits" to the most directly comparable GAAP measure, "Cost of metals sold".
Reconciliation of Cash Costs to Cost of Metals Sold
Reconciliation of Costs of
Metals Sold (GAAP) to Total
Cash Costs, net of
By-product Credits
(Non-GAAP)
(in thousands)
Three Months Ended March 31, 2021
Total cash costs, net of by-product credits $ 2,606
Reconciliation to GAAP measure: Treatment and refining costs
(30)
Silver by-product credits
250
Write down of inventories to net realizable value
17
Change in inventory (excluding depreciation, depletion
and amortization) (1,307)
Cost of metals sold $ 1,536
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Table of Contents Rodeo Exploration InMarch 2021 , we began an exploration drilling program at Rodeo aimed at expanding the resource. The program will encompass approximately 2,000 meters of exploration drilling at selected near-surface targets located immediately adjacent to the current pit. The program has the potential to extend the life of the Rodeo mine beyond the currently estimated life of around 2.5 years. Results will begin to be available within the next several months and any newly-added resources will be incorporated into the Company's production plans. Velardeña PEA The Velardeña Properties contain two underground mines that were last operated in late 2015, at which point mining activities were suspended when a combination of low metals prices, mining dilution and metallurgical challenges rendered operations unprofitable. We elected to preserve the asset for future use, and since that time we have evaluated and tested various mining methods and processing alternatives that could enable sustainable profitable operations. The recent rise in precious metals prices, the advancement of alternative processing technologies in the industry, and the results of our testing activities prompted us to pursue the preparation of an updated preliminary economic assessment (PEA) based partly on projected increased gold recoveries from a proposed bio-oxidation circuit to treat gold- bearing pyrite concentrates. InApril 2020 , we announced positive results from the updated PEA. In the coming months, we plan to continue to optimize the mine plan and processing details in preparation for future test-mining and processing in advance of establishing a definite schedule for restarting commercial production at the Velardeña mines and the installation of the bio-oxidation circuit. No development decision has been made regarding a potential restart of the Velardeña mines.Yoquivo InSeptember 2020 , we began a 3,400-meter, 15-hole drill program to test the most promising portions of certain veins in theYoquivo property inChihuahua, Mexico . We completed the drill program inDecember 2020 and identified four separate vein systems in which surface sampling has returned grades up to 4,050 g/t silver and 27.7 g/t gold from surface. Complete results from the drill program were announced in our press release datedJanuary 27, 2021 . Of substantial interest is the discovery of a new vein parallel to and east of the Pertenencia vein. While the other principal veins have been partially mined from surface to the water table (up to 130 meters) in the case ofSan Francisco and Pertenencia, and over a much less extensive vertical interval in the case ofEl Dolar andEsperanza , the new vein is unmined from surface. We are planning a second phase drill program, which could start in the second quarter 2021. El Quevar OnApril 2020 , we entered into the Earn-in Agreement with Barrick, pursuant to which Barrick has acquired an option to earn a 70% interest in the Company's El Quevar project located in theSalta Province ofArgentina (the "Option"). For a description of the Earn-In Agreement, see our Annual Report Form 10-K for the year endedDecember 31, 2020 . During the earn-in period, in addition to the exploration spending, Barrick will fund the holding costs of the property, which will qualify as work expenditures. Barrick will reimburse us for expenses related to maintaining the exploration camp, which will initially be run by us under a service agreement and which will also qualify as work expenditures.
Through
Santa Maria InDecember 2020 , we entered into an Option Agreement with Fabled, pursuant to which Fabled will have the right to acquire our interest in theSanta Maria mining claims inChihuahua, Mexico . Fabled is engaged in an 8,000 meter drill program on the property to expand the resource and test additional exploration targets. To acquire the property Fabled will need to complete cash payments to Golden of$3.5 million byDecember 2022 .Sand Canyon
We have an earn-in agreement with Golden Gryphon Explorations for the
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approximately 1,800 meters inMarch 2020 . No potentially economic concentrations of precious metals were encountered in any of the four drill holes. Plans for further testing of the mineralized system are being considered. In the first year of exploration atSand Canyon and throughDecember 31, 2020 , we spent$1.8 million toward the$2.5 million earn-in requirement, fulfilling the first and second year minimum expenditures and the minimum drill commitment.
Financial Results of Operations
For the results of continuing operations discussed below, we compare the results from operations for the three months endedMarch 31, 2021 to the results from operations for the three months endedMarch 31, 2020 .
Three Months Ended
Revenue from the sale of metals. We recorded$1.8 million in revenue for the three months endedMarch 31, 2021 , all from the sale of gold and silver bearing doré from the Rodeo Operation inMexico . We did not record any revenue from doré sales for the three months endedMarch 31, 2020 . Costs of metals sold. For the three months endedMarch 31, 2021 we recorded$1.5 million of costs of metals sold, including a$17,000 write down of the doré inventory to net realizable value. We did not record any cost of metals sold during the three months endedMarch 31, 2020 . Revenue from oxide plant lease. We recorded revenue of$1.2 million during three-month period endedMarch 31, 2020 , related to the lease of our Velardeña oxide plant to a third party. The Velardeña oxide plant lease was terminated inNovember 2020 . We did not record any revenue during the three-month period endedMarch 31, 2021 . Oxide plant lease costs. We recorded$0.6 million of costs related to the oxide plant lease during the three-month period endedMarch 31, 2020 . The costs consist primarily of reimbursable labor and utility costs which for accounting purposes are also included in revenue from the oxide plant lease. The Velardeña oxide plant lease was terminated inNovember 2020 . We did not record any costs related to the oxide plant lease during the three-month period endedMarch 31, 2021 . Exploration expense. Our exploration expense, including property holding costs and allocated administrative expenses, totaled$0.8 million and$1.6 million for the three months endedMarch 31, 2021 andMarch 31, 2020 , respectively. The higher exploration expense for 2020 is primarily related to increased exploration at our Rodeo project inMexico during the period. Velardeña care and maintenance costs. We recorded$0.2 million and$0.5 million for the three-month periods endedMarch 31, 2021 andMarch 31, 2020 , respectively, for expenses related to care and maintenance at our Velardeña Properties as the result of the suspension of mining and processing activities inNovember 2015 . The reduced costs for 2021 are primarily the result of costs associated with activities at the Velardeña Properties being allocated to the Rodeo operation. El Quevar project expense. We incurred$0.1 million and$0.2 million for the three-month periods endedMarch 31, 2021 andMarch 31, 2020 , respectively related to holding and evaluation costs for the Yaxtché deposit at our El Quevar project inArgentina . During the three months endedMarch 31, 2021 , approximately$0.1 million of costs actually incurred are anticipated to be reimbursed by Barrick, as discussed above. Administrative expense. Administrative expenses totaled$1.5 million for the three months endedMarch 31, 2021 . Administrative expenses, including costs associated with being a public company, are incurred primarily by our corporate activities in support of the Rodeo Property, Velardeña Properties, El Quevar project and our exploration portfolio. The$1.5 million of administrative expenses we incurred during the first three months of 2021 is comprised of$0.8 million of employee compensation and directors' fees,$0.4 million of professional fees and$0.3 million of insurance, rents, travel expenses, utilities and other office costs. Administrative expenses totaled$1.2 million for the three months endedMarch 31, 2020 . The$1.2 million of administrative expenses we incurred during the three months of 2020 is comprised of$0.3 million of employee compensation and directors' fees,$0.5 million of professional fees and$0.4 million of insurance, rents, travel expenses, utilities and other office costs. Administrative expenses for employee compensation and director's fees were higher in the 2021 period due primarily to cash bonuses paid to executives and staff. 29
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Stock based compensation. During the three months endedMarch 31, 2021 we incurred approximately$0.4 million of expense related to stock-based compensation. Stock based compensation varies from period to period depending on the number and timing of shares granted, the type of grant, the market value of the shares on the date of grant and other variables. During the three months endedMarch 31, 2020 we incurred approximately$0.1 million of expense related to stock-based compensation. Stock based compensation was higher in the 2021 period due primarily to stock awards granted to executives. Reclamation and accretion expense. During each of the three months endedMarch 31, 2021 andMarch 31, 2020 we incurred approximately$0.1 million of reclamation expense related to the accretion of an asset retirement obligation at the Velardeña Properties and environmental liabilities associated with the Rodeo operation. Other operating (expense) income, net. We recorded$0.2 million of other operating income for the three months endedMarch 31, 2021 , primarily related to the amortization of deferred income related to the option agreement for the sale of theSanta Maria property, as discussed above. We recorded a nominal amount of other operating income for the three months endedMarch 31, 2020 , related to the sale of an asset inMexico . Depreciation, depletion and amortization. During the three-month periods endedMarch 31, 2021 andMarch 31, 2020 we incurred depreciation, depletion and amortization expense of approximately$0.2 million and$0.3 million , respectively. For the period endedMarch 31, 2021 , approximately$0.1 million of depreciation was allocated to finished goods and work in process inventories associated with the Rodeo operation. Interest and other expense, net. We recorded approximately$0.3 million of interest and other expense, net for the three-month period endedMarch 31, 2021 , primarily related to write off of deferred costs related to theLincoln Park Capital program. We recorded a nominal amount of interest and other expense, net for the three months endedMarch 31, 2020 , primarily related to a refundable deposit due to Autlán. Gain (Loss) on foreign currency losses. We recorded a nominal foreign currency loss for both the three months endedMarch 31, 2021 andMarch 31, 2020 . Foreign currency gains and losses are primarily related to the effect of currency fluctuations on monetary assets net of liabilities held by our foreign subsidiaries that are denominated in currencies other than US dollars. Other income. We recorded approximately$0.1 million of other income for the three months endedMarch 31, 2021 related to the mark-to-market of short-term investments. We did not record any other income for the three months endedMarch 31, 2020 . Income taxes. We recorded a$0.1 million tax benefit for the three months endedMarch 31, 2021 and no income tax expense or benefit for the three months endedMarch 31, 2020 .
Liquidity, Capital Resources and Going Concern
AtMarch 31, 2021 , our aggregate cash and cash equivalents totaled$8.0 million , compared to the$9.7 million in similar assets held atDecember 31, 2020 . TheMarch 31, 2021 balance is due in part from the following expenditures and cash inflows for the three months endedMarch 31, 2021 . Expenditures totaled$4.7 million from the following:
?
properties;
?
new regrind mill circuit related to the Rodeo operation;
?
? property holding costs at the El Quevar project, net of reimbursements from
Barrick;
?
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? increase in inventories and value added tax receivables associated with the
Rodeo operation, partially offset by an increase in accounts payable and other
accrued liabilities, also related to the Rodeo operation.
The foregoing expenditures were offset by cash inflows of
?
Note 15);
?
further described above in Note 15); and
?
revenue from the sale of metals less the cost of metals sold). In addition to the$8.0 million cash balance atMarch 31, 2021 , we expect to receive approximately$13.0 million to$15.0 million in net operating margin from the Rodeo Property (defined as revenue from the sale of metals less the cost of metals sold) during the twelve months endingMarch 31, 2022 , assuming an average gold and silver price during that period of$1,800 and$25.00 oz respectively (the approximate average London Fix PM prices during the first quarter 2021, as reported by Kitco, were$1,798 and$26.29 for gold and silver, respectively). Our forecasted cash inflows during the twelve months endingMarch 31, 2022 do not include the anticipated second installment of$1.5 million from the sale of theSanta Maria property to Fabled, scheduled to be paid inDecember 2021 , as discussed above. At this time, given the uncertainties associated with the eventual outcome of exploration activities atSanta Maria initiated by Fabled, and the associated timing of the start-up of operations atSanta Maria , we are not currently including the additional installment in our liquidity analysis.
Our forecasted expenditures during the twelve months ending
Approximately
? related to our portfolio of exploration properties located in
and
additional exploration at Rodeo,
? Approximately
operation;
? Approximately
maintenance;
? Approximately
maintenance and property holding costs, net of reimbursement from Barrick;
? Approximately
Approximately
? related to increased inventories and value added tax receivables at the Rodeo
operation. Our forecasted cash resources of approximately$21.0 to$23.0 million , which includes cash on hand atMarch 31, 2021 and the forecasted net operating margin from the Rodeo Property, are greater than our forecasted expenditures of approximately$8.5 million . The actual net operating margin received from the Rodeo Property could be negatively impacted if further interruptions due to COVID-19 occur inMexico . The actual amount of cash receipts that we receive during the period from the Rodeo operation may also vary significantly from the amounts specified above due to, among other things: (i) unanticipated variations in grade, (ii) unexpected challenges associated with our proposed mining plan, (iii) decreases in commodity prices below those used in calculating the estimates shown above, (iv) variations in expected recoveries, (v) increases in operating costs above those used in calculating the estimates shown above, or (vi) interruptions in production at Rodeo. The actual amount of cash expenditures that we incur during the twelve-month period endingMarch 31, 2022 may vary significantly from the amounts specified above and will depend on a number of factors, including variations in the anticipated care and maintenance costs at the Velardeña Properties or at El Quevar, and costs for continued exploration, project assessment, and development at our other exploration properties. Likewise, if cash expenditures are greater than anticipated or if cash receipts are less than anticipated, we may need to take certain actions to maintain 31
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sufficient cash balances over the next twelve months, including additional asset dispositions or raising additional equity capital through sales under the ATM Program or otherwise. The condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business. However, our continuing long-term operations are dependent upon our ability to secure sufficient funding and to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in our condensed consolidated financial statements are dependent on our ability to generate positive cash flows from operations and to continue to fund exploration and development activities that would lead to profitable mining and processing activities or to generate proceeds from the disposition of property, plant and equipment. There can be no assurance that we will be successful in generating future profitable mining and processing activities or securing additional funding in the future on terms acceptable to us or at all. We believe the cash on hand, anticipated positive net operating margins from the Rodeo operation, the potential use of the ATM Program, and the potential for additional asset dispositions make it probable that we will have sufficient cash to meet our financial obligations and continue our business strategy beyond one year from the filing of our condensed consolidated financial statements for the period endedMarch 31, 2021 .
Recent Accounting Pronouncements
InDecember 2019 , the FASB issued No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). The guidance removes certain exceptions to the general principles of ASC 740 and simplifies several other areas. ASU 2019-12 is effective for public business entities for annual reporting periods beginning afterDecember 15, 2020 , and interim periods within those reporting periods. The Company has adopted ASU 2019-12 beginning in 2021. One of the amendments within ASU 2019-12 eliminates a limitation on the amount of income tax benefit that can be recognized in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The Company has applied this guidance in the calculation of the tax benefit included in "Income taxes" in the Condensed Consolidated Statements of Operations. The adoption of this guidance did not result in a material impact on our consolidated financial position or results of operations. During the first quarter 2020, we adopted ASU No. 2016-13. ASU 2016-13 modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the timelier recognition of losses. As our principle credit risk is related to its lease receivables, the adoption of this update did not result in a material impact on our consolidated financial position or results of operations. OnApril 12, 2021 , theSEC published a statement relating to accounting and reporting considerations for warrants issued by Special Purpose Acquisition Companies (SPACs). TheSEC statement raised accounting and reporting considerations for all reporting entities that restricts the use of the exception noted above under ASC 815-40-25-7 thru 8 that allows for equity treatment, under certain conditions, for warrants that allow cash settlement in certain change of control transactions. The restriction put forth by theSEC would prevent equity treatment in cases where cash is received disproportionately between shareholders and warrant holders in such transactions. All of the outstanding warrants granted by us are recorded in equity atMarch 31, 2021 andDecember 31, 2020 following the guidance established by ASC Topic 815-40. Our warrants allow for the potential settlement in cash if certain extraordinary events are effected by us, including a 50% or greater change of control in our common stock. Since those events have been deemed to be within our control, we continue to apply equity treatment for these warrants.
Forward-Looking Statements
Some information contained in or incorporated by reference into this Quarterly Report on Form 10-Q may contain forward-looking statements. These statements include comments relating to: (i) the Rodeo project, including anticipated timing and impact of future mining activities, anticipated capital requirements, the expected composition of doré produced at the site, the projected future payable production and the projected future cash flow from production; (ii) our plans, expectations and assumptions concerning the Velardeña oxide plant lease, including the expected term and anticipated revenues; (iii) our plans regarding further advancement of the El Quevar project; (iv) our plans for further evaluation of the Velardeña Properties and potential use of the BIOX processing method; (v) the proposed transaction involving theSanta Maria property; (vi) potential future work atSand Canyon andYoquivo ; (vii) budgeted expenditures during the twelve months endingMarch 31, 2022 and anticipated cash inflows, including the amount of cash received as a result of 32
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production at Rodeo, the potential for future asset dispositions or sales of equity securities; and (viii) statements concerning our financial condition, business strategies and business and legal risks. The use of any of the words "anticipate," "continues," "likely," "estimate," "expect," "may," "will," "project," "should," "could," "believe" and similar expressions are intended to identify uncertainties. We believe the expectations reflected in those forward-looking statements are reasonable. However, we cannot assure that these expectations will prove to be correct. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors set forth below and other factors set forth in, or incorporated by reference into this report:
Timing duration and overall impact of the COVID-19 pandemic, including
? potential future suspension of activities at Rodeo or the Velardeña Properties
(including operations at the oxide plant lease) in the event of future orders
of the Mexican Federal Government; Deviations from the projected timing, amount of estimated production and
project costs at Rodeo due to unanticipated variations in grade, unexpected
? challenges associated with our proposed mining plan, volatility in commodity
prices, variations in expected recoveries, increases in projected operating or
capital costs or delays in commencement of or interruptions in production;
? Higher than anticipated care and maintenance costs at the Velardeña Properties
in
Risks related to the El Quevar project in
? results from our evaluation activities and whether the option with respect to
the El Quevar project is exercised pursuant to the terms of the Earn-in
Agreement;
? Decreases or insufficient increases in silver and gold prices;
Unfavorable results from exploration at the
? or other exploration properties and whether we will be able to advance these or
other exploration properties;
The Rodeo project, including assumptions and projections contained in the Rodeo
? PEA (including life of mine and production expectations), and our plans for
further exploration drilling;
Variations in the nature, quality and quantity of any mineral deposits that are
or may be located at the Velardeña Properties or our exploration properties,
? changes in interpretations of geological information, unfavorable results of
metallurgical and other tests, and the timing and scope of our further evaluation activities at the Velardeña Properties;
Potential delays in our exploration activities or other activities to advance
properties towards mining resulting from environmental consents or permitting
? delays or problems, accidents, problems with contractors, disputes under
agreements related to exploration properties, unanticipated costs and other
unexpected events;
? Our ability to retain key management and mining personnel necessary to
successfully operate and grow our business;
? Economic and political events affecting the market prices for gold, silver,
zinc, lead and other minerals that may be found on our exploration properties;
Political and economic instability in
? which we conduct our business and future actions of any of these governments
with respect to nationalization of natural resources or other changes in mining
or taxation policies;
? Volatility in the market price of our common stock; and
? The factors discussed under "Risk Factors" in our Annual Report on Form 10-K
for the year ended
Many of these factors are beyond our ability to control or predict. You should
not unduly rely on these forward-looking statements. These statements speak only
as of the date of this Quarterly Report on Form 10-Q. Except as required by
law, we are not obligated to publicly release any revisions to these
forward-looking statements to reflect future events or developments.
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Cautionary Statement Regarding Mineralized Material
"Mineralized material" as used in this Quarterly Report on Form 10-Q, although permissible under the SEC Industry Guide 7, does not indicate "reserves" bySEC standards. We cannot be certain that any deposits at the El Quevar, the Velardeña Properties, theSanta Maria properties or the Rodeo property or any deposits at our other exploration properties, will ever be confirmed or converted into SEC Industry Guide 7 compliant "reserves". Investors are cautioned not to assume that all or any part of the disclosed mineralized material estimates will ever be confirmed or converted into reserves or that mineralized material can be economically or legally extracted. In addition, in this quarterly report on Form 10-Q we also modify our estimates made in compliance with National Instrument 43-101 to conform to SEC Industry Guide 7 for reporting inthe United States . Mineralized material is substantially equivalent to measured and indicated mineral resources (exclusive of reserves) as disclosed for reporting purposes inCanada , except that theSEC only permits issuers to report "mineralized material" in tonnage and average grade without reference to contained ounces.
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