Golden Minerals Announces Intent to Sell El Quevar Silver Project and Provides Corporate Update

Rhea-AI Summary

Golden Minerals Company (NYSE-A: AUMN, TSX: AUMN) has announced plans to sell its El Quevar Silver Project in Argentina for US$3.5 million to address near-term liquidity needs. The company has signed a binding Letter Agreement with Butte Energy Inc., with the transaction expected to close by October 31, 2024. Additionally, Golden Minerals has sold its Mexican subsidiary, Minera Labri, for US$445,500 and regained control of the Desierto I mining concession in Argentina following a successful appeal.

The company is facing financial challenges, with only US$0.9 million in cash as of August 30, 2024, and is exploring various options to raise funds, including potential asset sales and external financing. If unable to secure additional resources, Golden Minerals may be forced to cease operations and liquidate.

Positive

• Sale of El Quevar Silver Project for US$3.5 million to address liquidity needs
• Sale of Mexican subsidiary Minera Labri for US$445,500
• Successful appeal resulting in restitution of Desierto I mining concession in Argentina

Negative

• Severe liquidity issues with only US$0.9 million in cash as of August 30, 2024
• Delayed payment of US$2.8 million from previous Velardeña Properties sale
• Ceased mining operations at Velardeña mines in Q1 2024
• Potential forced cessation of operations and liquidation if unable to secure additional funding

Insights

Financial Analyst

The planned sale of Silex Argentina and El Quevar project for $3.5 million is a critical move for Golden Minerals' survival. With only $0.9 million in cash and an overdue $2.8 million payment from the Velardeña sale, the company is in dire financial straits. The $500,000 non-refundable deposit by September 3, 2024, could provide temporary relief, but it's a race against time. The sale of Minera Labri for $445,500 offers minimal help. Golden's focus on selling assets and seeking external financing highlights its desperate liquidity situation. Investors should be extremely cautious, as the company's ability to continue as a going concern is in serious doubt.

Mining Industry Expert

Golden Minerals' decision to sell El Quevar, despite previous plans for additional drilling and an updated Technical Report, signals a significant shift in strategy. This move, along with the sale of Velardeña Properties, indicates a major downsizing of the company's portfolio. The recovery of the Desierto I mining concession in Argentina is a small positive, but its value is overshadowed by the company's financial woes. The focus on exploration projects like Sarita Este/Desierto and Sand Canyon is now contingent on future funding, which is uncertain given the current situation. This drastic reduction in assets could leave Golden Minerals with growth potential, even if it manages to survive its current crisis.

Legal Expert

The Letter Agreement with Butte Energy for the sale of Silex Argentina is a legally binding document, but it's important to note that the final transaction is subject to several conditions. These include regulatory approvals and due diligence, which could potentially delay or derail the deal. The successful appeal against the cancellation of the Desierto I mining concession demonstrates Golden's ability to navigate legal challenges. However, the company's dire financial situation raises potential legal risks, including the possibility of creditor actions or bankruptcy proceedings if it fails to secure adequate funding. Shareholders should be aware of the risk of total loss if the company is forced to liquidate, as mentioned in the liquidity update.

GOLDEN, Colo.--(BUSINESS WIRE)-- Golden Minerals Company (“Golden Minerals,” “Golden” or the “Company”) (NYSE-A: AUMN and TSX: AUMN) today announced it has signed a letter agreement to sell Silex Argentina S.A. (“Silex”), its wholly-owned subsidiary that owns the El Quevar Project, and also provided updates on additional corporate activities.

Silex Argentina Sale

The Company signed a Letter Agreement (the “Letter Agreement”) with Butte Energy Inc. (“Butte”) whereby Butte agreed to purchase 100% of the issued and outstanding shares of Silex, which is the sole owner of the El Quevar project located in Salta Province, Argentina (“El Quevar”). The Letter Agreement is intended to be binding on the parties, pending (i) negotiation of a definitive Acquisition Agreement (the “Acquisition Agreement”) on or prior to September 30, 2024, and (ii) closing of the sales transaction (the “Transaction”) on or prior to October 31, 2024. The purchase price for the acquisition of 100% of Silex is US$3,500,000, payable in cash, as follows:

1. US$500,000, as a non-refundable deposit, payable to Golden by the close of business on September 3, 2024;
2. US$500,000 payable to Golden upon execution of the Acquisition Agreement; and
3. US$2,500,000 payable to Golden upon closing of the Transaction (collectively, the “Transaction Payments”).

Given its immediate cash requirements, the Company has entered into the Letter Agreement to address near-term liquidity needs. As previously disclosed, the closing of the sale of the final portions of the Velardeña Properties (located in Durango State, Mexico) has not been completed and there is an outstanding payment with respect to that sale of approximately US$2.8 million currently owed to the Company. While the Company initially planned to conduct additional drilling and complete an updated Technical Report at El Quevar, the Company believes that the sale of Silex is the most effective strategy for alleviating the Company’s short-term financial pressures. Moving forward, the Company intends to concentrate its exploration efforts on its other projects, including Sarita Este/Desierto and Sand Canyon, subject to the availability of future funding.

Closing of the Transaction will be subject to additional conditions, including receipt of regulatory approvals, completion of due diligence review by Butte, and approvals from the board of directors of each of Butte and Golden. INFOR Financial Inc. is acting as financial advisor to Golden Minerals in relation to this Transaction.

CUCA Sales

On August 28, 2024, the Company sold its wholly-owned Mexican subsidiary, Minera Labri S.A. de C.V. (“Minera Labri”), to a private Mexican company for approximately US$445,500. Minera Labri previously owned the Velardeña Properties’ Plant 1, which together with the Velardeña mines, was sold to another privately-held Mexican group earlier in 2024. Upon consummation of that transaction, Minera Labri held no assets but held net operating losses and inflation-adjusted capital contributions. Under Mexican law, the balance of Minera Labri’s capital contribution accounts (“CUCAs”) may be bought and sold. All funds related to the sale of the CUCAs have now been received and are expected to be deployed to reduce existing liabilities of the Company and its subsidiaries.

Desierto Claim Returned to Golden

In the third quarter of 2022, the Mining Court of the Province of Salta, Argentina (“Salta”), declared the cancellation of the Company’s Desierto I mining concession. The Company disputed the cancellation, believing it to be without merit. On August 28, 2024, the judges of the Court of Appeals of Salta (i) accepted the Company’s appeal, (ii) revoked the Mining Court’s resolutions of cancellation and (iii) ordered the restitution to the Company of the Desierto I mining concession.

Liquidity Update

The Company previously disclosed in August 2024 that it did not have sufficient resources to meet its expected cash requirements over the twelve months ending June 30, 2025. The Company ceased mining at the Velardeña mines in the first quarter 2024, and subsequently sold the mines and certain related assets; the payment of US$2.8 million of the purchase price for the remaining Velardeña assets has been delayed and is overdue. The Company’s only near-term opportunity to generate cash flow to meet its expected cash requirements is from the sale of assets, equity or other external financing. As of August 30, 2024, the Company has cash and cash equivalents of approximately US$0.9 million.

The Company is taking actions to address its liquidity and financial stability concerns. As a part of these efforts, the Company is evaluating and pursuing alternatives to obtain sufficient funds to continue as a going concern, including the potential sale of the Company, finalizing the sale of its assets at the Velardeña Properties, closing of the Transaction to sell Silex, seeking buyers or partners for the Company’s other assets or obtaining equity or other external financing. The proceeds from these sales would be directed toward addressing the Company’s ongoing operating expenses and satisfying its liabilities, while seeking to maximize any remaining value for its shareholders. If the Company is unable to obtain additional resources, it may be forced to cease operations and liquidate.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and forward-looking information within the meaning of applicable Canadian securities legislation (collectively, “forward-looking statements”), including statements regarding the Company entering into the Acquisition Agreement and closing the Transaction; the Company receiving the Transaction Payments contemplated by the Letter Agreement, Acquisition Agreement and Transaction; the Company’s intention to concentrate its exploration efforts on its Sarita Este/Desierto and Sand Canyon projects, subject to the availability of future funding; the Company’s ability to continue as a going concern in the absence of cash flow from the sale of its assets, equity or other external financing and the Company’s ongoing evaluation and pursuit of alternatives to obtain sufficient financing to continue as a going concern.

These statements are subject to risks and uncertainties including the Company’s receipt of the Transaction Payments; the ability of the Company to sell or realize value from the sale of the Silex Shares or its other assets, or from equity or other external financings; the receipt by the Company of the outstanding amounts owed in respect of the sale of the Velardeña Properties; increases in costs and declines in general economic conditions; changes in political conditions, in tax, royalty, environmental and other laws in the United States, Mexico or Argentina and other market conditions; and fluctuations in silver and gold prices. Golden Minerals assumes no obligation to update this information. Additional risks relating to Golden Minerals may be found in the periodic and current reports filed with the Securities & Exchange Commission by Golden Minerals, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

For additional information, please visit http://www.goldenminerals.com/

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Golden Minerals Company

(303) 839-5060

Source: Golden Minerals Company

FAQ

What is the sale price of Golden Minerals' El Quevar Silver Project?

Golden Minerals (AUMN) has agreed to sell its El Quevar Silver Project for US$3.5 million to Butte Energy Inc.

When is the expected closing date for the El Quevar Project sale by Golden Minerals (AUMN)?

The sale of the El Quevar Project by Golden Minerals (AUMN) is expected to close on or prior to October 31, 2024.

How much cash does Golden Minerals (AUMN) have as of August 30, 2024?

As of August 30, 2024, Golden Minerals (AUMN) reported having approximately US$0.9 million in cash and cash equivalents.

What happened to Golden Minerals' (AUMN) Desierto I mining concession in Argentina?

Golden Minerals (AUMN) successfully appealed the cancellation of its Desierto I mining concession in Argentina, resulting in its restitution to the company on August 28, 2024.