GOLDEN, Colo., June 21, 2013 /PRNewswire/ -- Golden Minerals Company (NYSE MKT: AUMN); (TSX: AUM) ("Golden Minerals" or "the Company") announced that it has suspended operations at its Velardena mine as of June 21, 2013, in order to conserve the asset until operating plans and prices for silver and gold indicate a sustainable cash margin for operations. The employees at the Velardena mine were informed of the Company's decision in the afternoon of June 21, 2013. In February 2013 the Company anticipated the Velardena operations would achieve operating cash neutrality during the third quarter 2013, assuming gold and silver prices of $1,600 per ounce and $30 per ounce, respectively. In May 2013 the Company projected a $5 million negative margin from the operations for the remaining three quarters of 2013 at prices of $1,500 gold and $25 silver. Metals prices have continued to decline and remain below these levels.
The Company is placing the mine and processing plants on a care and maintenance program to enable a re-start when operating plans and metals prices support a cash positive outlook for the property. Approximately 470 positions at the Velardena operations are being eliminated as a result of the suspension. The Company is presently negotiating the specific terms of a severance package with its labor unions. The Company plans to retain a core group of approximately 50 to 60 employees to facilitate a re-start of operations and to maintain and safeguard the longer term value of the asset.
The Company projects approximately $7 million of one-time costs in the second and third quarters 2013 for employee severance and other activities related to the suspension of operations and approximately $1 million in quarterly holding costs after the third quarter should operations remain suspended. The financial effect of unwinding Velardena's current working capital position is expected to be minimal, with cash proceeds from receivables and sales of existing inventory expected to offset payable accounts. With Velardena under a care and maintenance program, the Company anticipates a cash balance of approximately $14 million at year-end 2013. The Company plans to review whether an impairment of the Velardena asset is indicated for accounting purposes as it prepares financial statements for the quarter ending June 30, 2013.
During May 2013, the Company completed the San Mateo ramp providing access to the productive Santa Juana mining area. The completed ramp, which provides more efficient and less costly haulage capacity from the mine, should be helpful to the re-start economic analysis. During the suspension period, the Company plans to use the ramp to access mining areas to develop and evaluate re-start mining plans. The Company also plans to continue work on treatment options for gold-bearing pyrites produced at the mine, including autoclave, bioleach and roasting technologies.
The Company estimates payable production during the second quarter 2013 prior to the suspension of approximately 160,000 silver equivalent ounces, assuming a 50:1 ratio for gold to silver. This total is approximately 25 percent less than the record production achieved in the first quarter 2013 and reflects the effects of reduced production during the previously announced suspension of the property's explosives permit and 9 days without mining operations during the quarter resulting from the June 21 suspension of operations.
Separately, the Company is evaluating further general and administrative expense reductions, with the objective of reducing corporate general and administrative expense by about 25 percent from 2012 levels.
In property-related updates, the Company has received $250,000 for the farm out of a property in Zacatecas state, Mexico. In Argentina, the process of attracting a partner to move the El Quevar property forward is progressing with several interested parties reviewing data and conducting site visits. Additionally, the Company has signed an option agreement to acquire the Los Azules property in Chihuahua state, Mexico, which is located seven kilometers southwest of the San Francisco de Oro district.
Jeffrey G. Clevenger, Chairman, President and Chief Executive Officer, noted, "We achieved progress toward our 2013 objectives at Velardena with early completion of the San Mateo ramp and increasing rates of production of gold and silver. The Company believes its shareholders and other stakeholders will be best served when the Company conserves the Velardena asset during this period of falling silver and gold prices. We will take advantage of the suspension to address mine plans and operating inefficiencies for an eventual return to operations when metals prices and operational plans dictate. We sincerely regret the hardship this suspension brings to our employees and we are planning to provide severance payments to help cushion the immediate impact of the suspension."
About Golden Minerals
Golden Minerals Company is a Delaware corporation based in Golden, Colorado that owns the silver and gold Velardena Operations in Mexico and the evaluation stage El Quevar project in 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 Canadian securities legislation, including statements regarding second quarter 2013 production from the Velardena Operations; suspension of operations at Velardena, placing the operations on care and maintenance, and anticipated financial effects and costs; anticipated cash balance at year-end 2013; planned work on new operating plans for the Velardena Operations and treatment options for gold-bearing pyrites; planned retention of 50 to 60 employees to facilitate a re-start and maintain the value of the mines and related assets; potential impairment of the Velardena Operations assets; benefits of the completed San Mateo ramp and its positive impact on a potential re-start; continued efforts to obtain a partner for the El Quevar property; and efforts to reduce corporate general and administrative expenses. These statements are subject to risks and uncertainties, including unexpected events at the Velardena Operations, including difficulties in maintaining the properties on a care and maintenance basis, potential sabotage or damage to the assets related to the suspension of operations, and variations in ore grade and relative amounts, grades and metallurgical characteristics of oxide and sulfide ores; technical, permitting, water, mining, metallurgical or processing issues; changes in interpretation of geological or metallurgical information at the Velardena Operations or the El Quevar project; actual costs of the shutdown exceeding current estimates or including unanticipated costs; failure to achieve objectives in the reduction of corporate general and administrative expense, failure to obtain anticipated benefits of the San Mateo ramp; inability to develop operating plans or gold recovery improvements that can achieve sustainable cash positive results at current and future metals prices; loss of and inability to adequately replace skilled mining and management personnel; possible disputes with customers or joint venture partners; failure of undeveloped ore or veins to meet expectations; strikes or other labor problems; increased costs or decreased metals prices; availability and cost of materials, supplies and electrical power required for mining operations and exploration; fluctuations in silver, gold, zinc and lead prices, costs and general economic conditions; changes in political conditions, tax, environmental and other laws; diminution of physical safety of employees in Mexico; and other conditions in the countries in which the Company operates.
Golden Minerals Company assumes no obligation to update this information. Additional risks relating to Golden Minerals Company may be found in the periodic and current reports filed with the Securities Exchange Commission by Golden Minerals Company, including the Company's Annual Report on Form 10-K for the year ended December 31, 2012.
For additional information please visit http://www.goldenminerals.com/ or contact:
Golden Minerals Company
Director of Investor Relations
SOURCE Golden Minerals Company