Golden Minerals Reports First Quarter 2024 Financial Results

Rhea-AI Summary

Golden Minerals Company (AUMN) has released its first quarter 2024 financial results. The company reported a net loss of $4.6 million ($0.32 per share) compared to a $3.3 million loss in Q1 2023. Revenues from discontinued operations were $1.2 million versus $4.2 million in Q1 2023.

Operational challenges led to the halting of mining and processing activities at Velardeña properties by the end of March 2024. Barrick Gold withdrew from the El Quevar project, and Golden Minerals plans to focus on exploration at El Quevar as funding allows.

Golden Minerals entered into agreements to sell certain Mexican assets for $5.5 million, with initial payments received. The company had $2.4 million in cash as of March 31, 2024, but faces liquidity challenges and will require $6-8 million to cover expenses through March 2025.

Positive

• Zero debt as of March 31, 2024.
• Entered into asset sale agreements worth $5.5 million.
• Received initial non-refundable payment of $1 million for asset sales.
• Cash inflow of $2 million from VAT receivables.

Negative

• Net loss of $4.6 million in Q1 2024 compared to $3.3 million in Q1 2023.
• Revenue from discontinued operations decreased to $1.2 million from $4.2 million in Q1 2023.
• Net operating margin from discontinued operations was negative $1.7 million.
• Stopped mining and processing activities at Velardeña properties due to operational issues.
• Barrick Gold withdrew from El Quevar project.
• Cash and equivalents decreased to $2.4 million from $3.8 million as of December 31, 2023.
• Requires $6-8 million in capital inflows to meet expenses through March 2025.
• Current liabilities of $6.5 million versus current assets of $5.3 million.

Insights

Financial Analyst

Golden Minerals' first quarter financial results reveal several key challenges. The company reported revenue of $1.2 million from discontinued operations, a significant decrease from $4.2 million in the same quarter last year. This drop is largely due to the cessation of operations at the Velardeña Properties. The negative net operating margin of $1.7 million is concerning, indicating that operational costs significantly outweighed revenue. Similarly, the net loss of $4.6 million compared to $3.3 million in the previous year highlights the financial strain the company is under.

One critical point is the company's liquidity position. With $2.4 million in cash and equivalents and no debt as of March 31, 2024, Golden Minerals is in a relatively stable short-term position. However, with accounts payable and other current liabilities amounting to $6.5 million, the immediate future looks challenging. The company acknowledges the need for additional capital inflows between $6.0 million to $8.0 million to meet its financial obligations through March 2025. This capital will likely come from asset sales, equity financings, or the collection of VAT receivables.

The sale of Velardeña assets for $5.5 million provides some relief, but it is not a guaranteed solution. Investors should be aware of the potential for dilution if equity financing is pursued and the risks associated with the collection of VAT receivables.

Mining Industry Expert

The operational update on the Velardeña Properties brings to light significant issues in Golden Minerals' mining processes. The decision to cease operations after less than three months due to insufficient production and equipment challenges is alarming. This suggests deeper operational inefficiencies that need addressing. The withdrawal of Barrick Gold from the Earn-In Agreement on the El Quevar project adds another layer of complexity. With Barrick’s expertise no longer in play, Golden Minerals will need to refocus its exploration strategy, which could prove costly and time-consuming.

The sale of mining assets in Mexico is a mixed bag. On one hand, it provides necessary liquidity to the company, but on the other, it signifies a retreat from potentially profitable operations. This move could be interpreted as a strategic shift towards focusing on fewer projects with better prospects or as a sign of distress.

For retail investors, it’s important to understand that mining projects have long development cycles and significant capital requirements. The setbacks at Velardeña and the termination of the El Quevar agreement are substantial blows to Golden Minerals' operational strategy. The company will likely need to invest heavily in both capital and time to turn these projects around or find new opportunities.

Market Research Analyst

From a market perspective, Golden Minerals is currently navigating a turbulent phase. The company’s revenue decline, operational setbacks and need for substantial capital inflows indicate that it is in a period of transition. The mining industry is highly cyclical and companies like Golden Minerals often face significant volatility tied to commodity prices and operational challenges.

Investors should note that the company’s liquidity is under pressure, with a cash balance of $2.4 million against liabilities of $6.5 million. This disparity indicates a potential liquidity crunch if the asset sales or capital inflows do not materialize as expected. The planned asset sale for $5.5 million is a positive step, but the uncertainty around its completion adds risk.

Moreover, the termination of the Barrick Earn-In Agreement could affect investor confidence. Partnerships with larger, established firms often provide smaller companies with not only financial support but also operational expertise. Golden Minerals will now have to navigate these waters alone, at least in the near term.

Looking ahead, investors should be mindful of the company’s strategic moves to secure additional funding and how these actions impact shareholder value. The potential for dilution through equity financing is significant and could adversely affect current share prices.

GOLDEN, Colo.--(BUSINESS WIRE)-- Golden Minerals Company (“Golden Minerals,” “Golden” or the “Company”) (NYSE-A: AUMN and TSX: AUMN) has today released financial results and a business summary for the quarter ending March 31, 2024. (All figures are in approximate U.S. dollars.)

First Quarter Business Summary and Subsequent Events

• The Company restarted silver-gold production at the Company’s Velardeña Properties (Durango State, Mexico) in December 2023, but stopped mining at the end of February 2024 and stopped processing mineralized material at the end of March 2024, after determining the initial performance of the mine and processing plant did not achieve the expected mine production ramp-up schedule or initial expected plant concentrate production results. Operational issues at the mine were caused by a combination of insufficient experienced miners, and issues with mine ventilation and mining equipment availability.
• On March 27, 2024, Golden announced that Barrick Gold Corporation had notified the Company that it was withdrawing from the 2020 Earn-In Agreement between the two parties related to the Company’s El Quevar silver project (Salta Province, Argentina). The agreement’s termination was effective on April 20, 2024 and the El Quevar project has now reverted back into the full control of Golden Minerals. Golden now intends to focus on exploration activities at El Quevar as funding allows.
• On April 29, 2024, two of Golden’s Mexico subsidiaries, Minera William S.A. de C.V. (“Minera William”) and Minera Labri S.A. de C.V. (“Minera Labri”) entered into certain asset purchase and sale agreements with a privately held Mexican company whereby Minera William and Minera Labri agreed to sell certain mining concessions, equipment, land parcels and other assets to the buyer in exchange for an aggregate purchase price of $5.5 million in cash, plus Value-Added Tax (“VAT”). The assets being sold include the Velardeña and Chicago mines, both of the Company’s oxide and sulfide processing plants and related equipment. Under the terms of the purchase and sales agreements:
  • On April 29, 2024, the buyer paid a non-refundable advance payment of $1.0 million in cash to the Company;
  • On May 20, 2024, the buyer shall pay $2.0 million in cash, plus VAT (including VAT on the advance payment), to the Company, and
  • On July 1, 2024, the buyer shall pay $2.5 million in cash, plus VAT, to the Company.

Although the Company believes the transaction will be completed, there can be no assurance that the transaction will be completed on the terms described or at all.

First Quarter Financial Summary

• Revenue from discontinued operations was $1.2 million in the first quarter 2024 and included sales of concentrate, slag material and doré from the Velardeña discontinued operations. Revenue was $4.2 million in the first quarter 2023, which was related to the sale of metals in doré from the Rodeo mine (Durango State, Mexico).
• Net operating margin from discontinued operations (defined as revenue from the sale of metals less cost of metals sold) was negative $1.7 million in the first quarter 2024, which was related to the Velardeña discontinued operations. Net operating margin was positive $0.2 million in the first quarter 2023, which was related to the sale of metals in doré from the Rodeo mine.
• Cash and equivalents balance as of March 31, 2024 was $2.4 million, compared to $3.8 million on December 31, 2023.
• Zero debt as of March 31, 2024, unchanged from December 31, 2023.
• Net loss was $4.6 million or $0.32 per share in the first quarter 2024, compared to a net loss of $3.3 million or $0.47 per share in the first quarter 2023.

Cash Inflows and Expenditures

Cash expenditures during the three months ended March 31, 2024 totaled $3.5 million and included:

• $1.0 million in general and administrative expenses;
• $0.5 million in exploration expenditures;
• $0.1 million in care and maintenance costs at the El Quevar project, net of zero reimbursements from Barrick;
• $1.7 million of net operating margin from the Velardeña discontinued operations (defined as revenue from the sale of metals less the cost of metals sold); and
• $0.2 million in changes in working capital (mainly due to an increase in accounts receivable associated with the sales made near the end of the first quarter).

The above expenditures were offset by cash inflows of $2.1 million from the following:

• $2.0 million from the collection of VAT receivables from the Mexican Government; and
• $0.1 million of proceeds received from the sale of non-core assets in working capital.

Capital Resources and 12-Month Financial Outlook

The Company does not currently have sufficient resources to meet its expected cash needs during the twelve months ended March 31, 2025. At March 31, 2024, the Company had current assets of approximately $5.3 million, including cash and cash equivalents of approximately $2.4 million. On the same date, it had accounts payable and other current liabilities of approximately $6.5 million. Because the Company has ceased mining at the Velardeña mine, its only near-term opportunity to generate cash flow is from the sale of assets and equity financings.

Golden Minerals will require further sources of capital. In order to satisfy the Company’s projected general, administrative, exploration and other expenses through March 31, 2025, the Company will need approximately $6.0 to $8.0 million in total capital inflows. These capital inflows may take the form of asset sales such as from the anticipated closing of the sale of Velardeña assets for $5.5 million, collection of the Company’s outstanding receivable, equity financing activities, or otherwise.

As of March 31, 2024, Golden Minerals had VAT receivable in Mexico of approximately $1.1 million. Although the Company believes it is likely it will receive some material portion of this receivable in the second and third quarters of 2024, there is no certainty as to the timing and amount of such payment.

Quarterly Report on Form 10-Q

The Company’s consolidated financial statements and management’s discussion and analysis, as well as other important disclosures, may be found in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024. This Form 10-Q is available on the Company’s website at Golden Minerals Company - SEC Filings. It has also been filed with the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov/edgar and with the Canadian securities regulatory authorities on SEDAR at www.sedar.com.

About Golden Minerals

Golden Minerals is a precious metals mining exploration company based in Golden, Colorado. The Company is primarily focused on advancing its Yoquivo property in Mexico and its El Quevar silver property in Argentina. The Company is also focused on acquiring and advancing selected mining properties in Mexico, Nevada and Argentina.

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 applicable Canadian securities legislation, such as statements regarding (i) buyer’s scheduled payments to the Company pursuant to the purchase and sale agreements, (ii) the Company’s anticipated near-term capital needs, and potential sources of capital; (iii) the Company’s plans to undertake further exploration activities El Quevar project, as funding allows; (iv) expectations pertaining to the recovery of VAT refunds from the Mexican government; (v) projected revenue and spending for the twelve months ending March 31, 2025; and (vi) statements concerning the Company’s financial condition, business strategies, business risks and financial outlook for 2024, including anticipated expenditures and cash inflows during the year. These statements are subject to risks and uncertainties, including the failure by the buyer of our assets in Mexico to make the required payments on the agreed schedule; the inability of the Company to obtain sufficient capital to meet its obligations; 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.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20240514238376/en/

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

Golden Minerals Company

Karen Winkler, Director of Investor Relations

(303) 839-5060

Source: Golden Minerals Company

FAQ

What were Golden Minerals' financial results for Q1 2024?

Golden Minerals reported a net loss of $4.6 million or $0.32 per share for Q1 2024.

How did Golden Minerals' revenue from discontinued operations change in Q1 2024?

Revenue from discontinued operations was $1.2 million in Q1 2024, down from $4.2 million in Q1 2023.

What operational issues did Golden Minerals face in Q1 2024?

Operational issues included insufficient experienced miners, mine ventilation problems, and mining equipment availability.

What is the status of the El Quevar project?

Barrick Gold withdrew from the El Quevar project, which has reverted back to Golden Minerals.

What asset sales did Golden Minerals announce?

Golden Minerals entered agreements to sell certain Mexican assets for $5.5 million, including an initial payment of $1 million.

How much cash does Golden Minerals have as of March 31, 2024?

Golden Minerals had $2.4 million in cash as of March 31, 2024.

What are Golden Minerals' capital requirements for the next 12 months?

Golden Minerals requires $6-8 million to meet expenses through March 2025.

What caused the negative net operating margin from discontinued operations?

The negative net operating margin of $1.7 million was due to the Velardeña discontinued operations.