Golden Minerals Company
 
 
 
  
Exploration Properties
   

Golden Minerals controls a diversified portfolio of approximately 10 precious metals and other mineral exploration properties located primarily in or near historic precious metals producing regions of Mexico.


Santa Maria

Overview

In August 2014, we entered into an option agreement giving us the right to acquire for $1.2 million the Santa Maria mine, a privately held property comprised of a single mining claim of 18 hectares west of Hildalgo de Parral, Chihuahua State, Mexico. In August 2017, we acquired three additional claims that cover the eastward extension of the Santa Maria vein. The new claims provide a 600-meter potential extension to the strike length of the vein system and add substantial downdip expansion potential. We have the right to acquire the Santa Maria property under two separate option agreements representing the total concessions that comprise the property for additional payments of $1.4 million, payable through April 2022.

Since 2015, we have completed test mining and processing of 7,500 tons from the Santa Maria mine, with average grades 338 gpt silver and 0.7 gpt gold. In March 2017 a Preliminary Economic Assessment ("PEA") was completed on our behalf by Tetra Tech, prepared pursuant to Canadian National Instrument 43-101, based on an updated estimate of mineralized material. The PEA presented a base case assessment of developing Santa Maria's mineral deposit. The PEA contemplates a 38-month underground mining operation at a mining rate of 200 tonnes per day using a combination of cut and fill and other mining techniques, and custom milling at a local third-party flotation mill. Based on the assumptions in the PEA, we believe there may be potential to develop a small mining operation at Santa Maria.

In August 2017, we also commenced a new drill program targeting extensions of the vein deposit described in the PEA and recent estimate of mineralized material with the goal of expanding the existing estimate of mineralized material to improve the overall economics reported in the PEA. We released final results from this 22-hole, 4,800-meter drill program in April 2018.

2015 – Test Mining

During the third quarter 2015 we mined approximately 3,000 tonnes of material from the vein as bulk samples at a total cost of about $0.25 million and entered into a contract to process the material for metallurgical and process testing purposes at a local third-party toll milling facility at a cost of about $0.1 million. The extracted material, mined from a high grade portion of the vein, had grades of approximately 500 gpt silver and 0.9 gpt gold. We did not have sufficient drilling data to predict the ultimate size of this higher grade zone. The 3,000 tonnes of mined material processed through the toll milling facility generated approximately 113 tonnes of concentrates containing approximately 47,000 ounces of silver and 80 ounces of gold. Under an October 2015 sales agreement, we received proceeds for approximately 32,000 ounces of silver and 45 ounces of gold with a net payable value of about $0.4 million. As required by the option agreement, we used a portion of the proceeds from the sale of the concentrates to pay the claim owner an advance royalty payment of $0.2 million, credited toward the $1.2 million purchase price of the property, with the remaining proceeds used to reimburse our costs for exploration and mining activities at Santa Maria since April 2015.

2016 –Additional Test Mining

During the first two quarters of 2016 we mined approximately 4,500 tonnes of material as a bulk sample with grades of approximately 235 gpt silver and 0.7 gpt gold. This material was substantially lower in grade than material mined in 2015 from the same vein. We processed the bulk sample through a toll milling facility, generating approximately 100 tonnes of concentrates containing approximately 22,000 ounces of silver and 44 ounces of gold. The concentrates were sold to a third party for approximately $0.3 million during the first two quarters of 2016 consisting of approximately 21,000 payable ounces of silver and 40 payable ounces of gold, which offset exploration costs. The average grade of 7,500 tons mined and processed in bulk samples since 2015 is 338 gpt silver and 0.7 gpt gold.

Q1 2017 – Preliminary Economic Assessment and NI 43-101

In March 2017 a PEA was completed on our behalf by the engineering firm of Tetra Tech, based on an updated estimate of mineralized material. The PEA presents a base case assessment of developing Santa Maria's mineral deposit. The PEA contemplates a 34-month underground mining operation at a mining rate of 200 tonnes per day using a combination of cut and fill and other mining techniques, and custom milling at a local third-party flotation mill. Based on the assumptions in the PEA, we believe there is potential to develop a small mining operation at Santa Maria.

PEA highlights include:

  • Post-tax net present value ("NPV") of $6.3 million and pre-tax internal rate of return of 84 percent at an 8 percent discount rate
  • Total capital requirements of $1.2 million (initial capital $1.0 million, sustaining capital $0.2 million)
  • Pre-production development time 10 to 11 months
  • Life of mine ("LOM") 2.8 years
  • Payback in month 16
  • LOM free cash flow $8.2 million
  • LOM silver production 2.0 Moz; LOM gold production 6.8 koz
  • LOM average silver grade 332 grams per tonne ("gpt"); average gold grade 1.28 gpt

Note: PEA parameters assume prices of $1,222/oz gold, $17.30/oz silver and a discount rate of eight percent. Values above are approximate. All $ values in $US.

In conjunction with the PEA, Tetra Tech completed an updated National Instrument 43-101 compliant mineral resource estimate at Santa Maria dated March 30, 2017. Details are as follows:

Classification Cutoff Grade Tonnes Ag g/t Au g/t Ag toz (M) Au toz (k) AgEq toz (M) Dilution %
Recovered AgEq g/t
Indicated 175 180,000 304 1.4 1.73 8.1 2.31 10%
Inferred 175 120,000 343 1.0 1.37 3.9 1.64 19%

Notes:
1  Mineral resources are reported as diluted Tonnes and grade;
2  Cutoff grade and Ag equivalent calculated using metal prices of $17.30 and $1,222 per troy ounce
    of Ag and Au with a ratio of 70.6:1, the three year trailing average as of the end of December 2016;
3  Cutoff applied to diluted Ag equivalent blocks grades using recoveries of 90% and 80% Ag and Au;
4  Reported indicated mineral resources are equivalent to mineralized material under SEC Industry Guide 7,
    inferred mineral resource is not a recognized category under SEC Industry Guide 7; and
5  Columns may not total due to rounding.

Q3 2017 – Additional Claims Purchased and New Drill Program Begun

In August 2017, Golden acquired three additional claims totaling approximately 77 hectares on strike and downdip along the Santa Maria vein system. The new claims provide a 600-meter potential extension to the strike length of the vein system and add substantial downdip expansion potential. Surface exposures of the vein on the new claims have yielded values of silver and gold over potentially minable widths of a magnitude similar to the existing resource grade.

The 2017 drill program was initiated by the Company with the goal of expanding the existing resource to improve the overall economics reported in the Preliminary Economic Assessment ("PEA") published in March 2017.

In April 2018, we released final results from the 22-hole, 4,800-meter drill program. The recent drilling encountered oxidized vein material to much greater depths in the eastern part of the Santa Maria vein system than in the western part. The oxidized portion of the eastern vein system is preserved due to normal faulting and post-mineral basalt cover. In addition to the previously known Santa Maria vein and the hanging wall vein, Santa Maria 2, a breccia vein labelled NE breccia was encountered in some of the drill holes (see table of results). Metallurgical test-work on the oxide material is yet to be completed. The Company plans to update the resource model and the PEA based on the new drill results and the new metallurgical studies once those are available.

Santa Maria: 2014 – 2018 Drilling Program Results

     
Santa Maria
Complete Drill
Hole Results,
May 2018
     

Santa Maria: 2016 Drilling Program

El Quevare Conceptual Plan    
Santa Maria
Drilling Plan View
Santa Maria Long Section August 2016    

Santa Maria Q3 2017 Drilling Program

 
Overview Current Drill Program Potential Vein Expansion  

 


Rodeo

Rodeo is a 1,900-hectare gold project located in Durango State, Mexico approximately 80 kilometers west of the Company's Velardeña properties and processing mills. Golden acquired the Rodeo property subject to a royalty interest due to La Cuesta International in the second quarter 2015, prior to which exploration by other companies identified a gold-bearing system exposed at surface.

Golden conducted a 2,080-meter core drilling program at Rodeo in 2016. Partial results from the first round of drilling, released in September 2016, show a gold and silver bearing epithermal vein and breccia system with encouraging gold and silver values over an approximate 50 to 70 meter true width. The system is exposed at the top of a northwesterly striking ridge and dips steeply to the northeast. This could provide the possibility of open pit mining if we discover a deposit with sufficient tonnage of an appropriate grade and other characteristics to justify mining. The drill holes reported previously are spaced about 25 meters apart along 100 meters of the crest of the mineralized ridge. The drill holes are angle holes oriented at 55° to the southwest and cut the vein and breccia system at an angle of approximately 50°. Previous work has shown the mineralized system to be exposed at surface over about one kilometer of strike length.

We completed the drill program in Q4 2016 and announced a Canadian National Instrument 43-101 compliant mineral resource estimate in January 2017. Below are two resource estimates based on two processing scenarios and their respective cutoff grades and open-pit optimization models. Table 1 presents a mill grade resource that may be processed in the Company's existing oxide mill at Velardeña. This case provides a potentially shorter time to production and lower capital costs, since the Company owns the production mill located within trucking distance of the Rodeo property. Table 2 presents a heap leach case that could be a standalone operation, depending on leachability and costs of the standalone heap leach operation.

Rodeo: Base Case (Mill Processing)      
  Tonnes
M
Silver
M oz
Gold
'000 oz
Gold Eq.
'000 oz
  Silver
g/t
Gold
g/t
Indicated 0.4 0.2 46 47.8   11 3.3
Inferred - - - -   - -

Notes:
1  Cutoff grade and Au equivalent calculated using metal prices of $1,220 and $17 per troy ounce of Au and Ag,
    recoveries of 77% and 90% Au and Ag;
2  Mineral resources have been pit shell constrained using the Lerch Grossman algorithm with cost inputs
    per tonne of $7.50 mining, $10 trucking, and $20 processing. A breakeven cutoff including trucking and
    processing costs per block was applied to a block model within the optimized shell;
3  Metal prices do not exceed three-year trailing average as of the end of December 2016, per SEC guidance;
4  Reported indicated mineral resources are equivalent to mineralized material under SEC Industry Guide 7, and
5  Au equivalent calculated at the ratio 72 Ag : 1 Au.

Rodeo: Alternative Case (Heap Leach Processing)      
  Tonnes
M
Silver
M oz
Gold
'000 oz
Gold Eq.
'000 oz
  Silver
g/t
Gold
g/t
Indicated 3.6 1.4 94 113.1   12 0.8
Inferred 3.6 1.3 47 64   11 0.4

Notes:
1  Cutoff grade and Au equivalent calculated using metal prices of $1,220 and $17 per troy ounce of Au and Ag,
    recoveries of 60% and 70% Au and Ag;
2  Mineral resources have been pit shell constrained using the Lerch Grossman algorithm with input costs
    per tonne of $3.40 mining and $3.10 processing. A cutoff including mining and processing costs per block
    was applied to a block model within the optimized shell;
3  Metal prices do not exceed three-year trailing average as of the end of December 2016, per SEC guidance;
4  Reported indicated mineral resources are equivalent to mineralized material under SEC Industry Guide 7, and
5  Au equivalent calculated at the ratio 72 Ag : 1 Au.
-   Rodeo resources per Tetra Tech NI 43-101 Technical Report dated January 2017.

Exploration and metallurgical work is anticipated to continue at Rodeo. If our exploration efforts are successful, material from this property could be trucked to the Velardeña oxide plant for processing after the third party lease has terminated. La Cuesta holds a 2% net smelter return royalty on production from the claims up to a total payable amount of $5.0 million. Our agreement requires a minimum program of 1,000 meters of drilling before May 2017.

 


Celaya

The Celaya project totals 6,200 hectares encompassing a strongly developed alteration system on the main Mexico Silver Belt trend located approximately 10 kilometers east of the Plata Latina Naranjillo discovery and 45 kilometers southeast of and on trend with the historic Guanajuato District. Golden has conducted mapping and sampling activities at Celaya since 2012. We completed a 2,000 meter, three-hole drilling program in 2015 that identified epithermal gold and silver mineralization beneath a portion of the widespread clay-silica alteration on the claims comprising the Celaya project.

In August 2016, Golden Minerals entered into an earn-in and joint venture agreement with a 100% owned Mexican subsidiary of Electrum Global Holdings, L.P., a privately owned company, related to Celaya. Electrum has conducted extensive geologic mapping and sampling on the Celaya property. New targets have been identified and exploration drilling to test these targets began in December 2016.

Electrum has reported completing 12,400 meters of drilling on the property in 15 holes, with drilling ongoing. Results to date show intercepts of epithermal quartz vein mineralization with grades for gold, silver, lead and zinc that warrant further drill testing. In eight of the 14 holes assayed to date, intercepts of quartz vein material carry gold and silver grades that are within the range of economic interest, if sufficient volumes can be found in a configuration amenable to exploitation.

Details of the earn-in agreement are as follows:

Golden Minerals received an upfront payment of $200,000 and Electrum has agreed to incur exploration expenditures totaling at least $0.5 million within the first year of the agreement, reduced by certain costs Electrum previously incurred on the property since December 2015 in its ongoing surface exploration program. Electrum, at its option, can elect to acquire an undivided 60% interest in a joint venture company to be formed to hold the Celaya project after incurring exploration expenditures totaling $2.5 million during the first three years of the agreement. Following the initial three year earn-in period the joint venture company would be formed to hold all project assets and a management committee would be formed with one representative of Golden Minerals and two representatives of Electrum. Electrum would serve as manager of the project. Golden would have the right to maintain its 40% interest in the Celaya project by funding its share of additional exploration or development expenditures. If Golden were to elect not to contribute to additional exploration or development expenditures after the initial earn-in period, Electrum, at its option, would have the right to earn an additional 20% interest in the joint venture company, for a total interest of 80%, by incurring an additional $2.5 million of exploration or development expenditures over a second three year period. Following the second earn-in period Golden Minerals would have the right to maintain its 20% interest in the Celaya project by funding its share of additional exploration or development expenditures or its interest can ultimately be converted into a 10% net profits interest.

In February 2018, Golden amended the agreement with Electrum Global Holdings L.P. ("Electrum") to permit Electrum to earn, at its option, an additional 20 percent interest in the project in exchange for a $1.0 million payment. Electrum can now increase its total interest in the project to 80 percent by contributing 100 percent of the $2.5 million of additional expenditures required in the second three-year earn-in period. Following this second earn-in period (after $5.0 million total is spent from inception), Golden will have the right to maintain its 20 percent interest in the project or may elect to convert to a carried 10 percent net profits interest.


Zacatecas

Our 100% controlled Zacatecas silver and base metals project in Mexico is an exploration stage property that we have drilled in the past. Although we believe that the Zacatecas project may contain significant silver and other mineralization, we have not completed a mineralized material estimate or NI 43-101 resource study on the property.

The Zacatecas Mining District is located in the central part of Mexico, in the main Mexico Silver Belt. Our Zacatecas project surrounds the municipalities of Zacatecas, Veta Grande, Guadalupe, Pánuco, and Morelos in the state of Zacatecas, Mexico. We own approximately 149 concessions totaling approximately 7,900 hectares in the Zacatecas project.

On April 28, 2016, Golden Minerals entered into an option agreement under which Santacruz Silver Mining Ltd. may acquire its interest in certain nonstrategic mineral claims located in the Zacatecas Mining District, Zacatecas, Mexico for a series of payments totaling $1.5 million. Through February 2018, Santacruz has paid us approximately $0.9 million. We amended the option agreement with Santacruz in February 2018 to extend the due dates for the remaining series of payments through September 2018. To complete the acquisition of the Zacatecas Properties, Santacruz must now make three additional payments of $225,000 each in March, June and September 2018. Santacruz has the right to terminate the option agreement at any time, and the agreement could be terminated, at our option, if Santacruz fails to make subsequent payments when due.

 

 
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