VELARDENA PROJECT
Location
Durango State, Mexico
Land Area
557 hectares
Property Description
Two underground Ag/Au mines & two mills (oxide & sulfide)
Metals
Silver and gold; lead and zinc byproducts
Ownership
100% owned
Project Stage
Accelerating plans to re-start production, potentially in late 2021-2022
Current Activities & Work
Continuing to optimize mine plan in preparation for future test-mining & processing
Permitting
Current and complete
Overview & History
The Velardeña Properties in Durango State, Mexico contain two past-producing underground silver and gold mines and two processing mills. Mining was suspended in November 2015 when a combination of low metals prices, dilution and metallurgical challenges rendered operations unprofitable. We subsequently leased one of Velardeña’s two mills to Hecla Mining Company - beginning late 2015 and ending in November 2020 -- and this lease arrangement provided cash flow that supported Golden's exploration activities.
In recent years we have evaluated and tested various mining methods and processing alternatives that could potentially enable sustainable profitable operations at Velardeña. In late 2019, Golden announced it had achieved successful results from testing Velardeña gold concentrate material using Finnish firm Outotec’s bio-oxidation or “BIOX” process. BIOX is a unique and sustainable technology that was developed to pre-treat refractory ores and concentrates ahead of conventional cyanide leaching. The gold in these types of mineralized material, such as those found at Velardeña, is encapsulated in pyrite and arsenopyrite which prevents the gold from being successfully cyanide leached. BIOX utilizes bacteria to oxidize these sulfide materials, thereby exposing the gold for subsequent cyanide leaching and increasing overall gold recoveries. Golden Minerals believes BIOX technology is key to unlocking successful and sustainable value from production at Velardeña. Indeed, 2019 BIOX testing of Velardeña material achieved gold recoveries of 92% from pyrite concentrates, compared to sub-30% gold recoveries realized when Golden last operated Velardeña in 2015.
An updated PEA was published in April 2020 that incorporates refinements to the resource model as well as bio-oxidation processing technology designed to enhance the recovery of gold from pyrite and arsenopyrite that is common in the veins at both the Velardeña and Chicago mines.
During 2021, 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; however, discussions are in progress regarding the potential to restart mining and flotation processing in late 2021 or early 2022 while awaiting design and possible construction of the bio-oxidation facility.
The oxide mill at Velardeña is currently being used to process gold-silver material from our Rodeo project. Installation of a regrind circuit at this mill is underway (with completion expected around the end of the first quarter 2021) that will also be used in the processing of Rodeo gold-silver material.
Highlights -2020 Velardeña PEA
Tetra Tech, an independent engineering company, prepared the PEA for the Company in accordance with Canadian National Instrument 43-101 “Standards of Disclosure of Mineral Projects” (“NI 43-101”). The PEA assumes prices of $1,324/oz gold, $16.23/oz silver, $0.90/lb lead and $1.25/lb zinc. Preliminary results of the economic analysis are shown in pre-tax U.S. Dollars as highlighted below. The complete PEA will be published on SEDAR within 45 days of our April 2, 2020 press release.
- Pre-tax net present value (“NPV”): (US)$85.9 million at an 8% discount rate
- Pre-tax Internal rate of return (“IRR”): 138.6%
- Pre-tax Payback period: 1 year
- Total pre-production capital cost: $10.27 million, including 10% contingency*
- Post-production and sustaining capital: $ 15.93 million, including 10% contingency
- Pre-production development time: 1 year
- Life of mine (“LOM”): 10 years
- LOM contained silver: 12.3 Moz; LOM contained gold: 188 Koz
- LOM average silver grade: 337 grams per tonne (“g/t”); LOM average gold grade: 5.15 g/t
- LOM pre-tax free cash flow: $130.2 million
- LOM payable silver: 10.2 Moz; LOM payable gold production: 119 Koz
- LOM payable Ageq: 19.7 Moz (Au and Ag only at a ratio of 80Ag:1Au)
*Capital estimate for bio-oxidation plant includes additional contingency
| Pre-Tax Technical Economic Model Results | Pre-Tax Technical Economic Model Results | Pre-Tax Technical Economic Model Results |
|---|---|---|
| Item | Total | per Tonne |
| ($000s) | of Material | of Material |
| Gross Payable | $375,728 | $330.19 |
| TCs, RCs and penalties | ($33,130) | ($29.12) |
| Freight & Insurance (1) | ($12,311) | ($10.82) |
| NSR | $330,288 | $290.21 |
| Operating Costs | ||
| Mining costs | ($94,303) | ($82.87) |
| Milling costs | ($54,241) | ($47.67) |
| Site Administration | ($15,656) | ($13.76) |
| G&A | ($8,014) | ($7.04) |
| Federal Mining Royalty | ($1,651) | ($1.45) |
| ($173,866) | ($152.79) | |
| Operating Margin | $156,423 | $137.46 |
| Capital Costs | ||
| Mine Development | ($10,791) | ($9.48) |
| Process Plant | ($9,460) | ($8.31) |
| Infrastructure | ($782) | ($0.69) |
| Other Non-Operating Costs* | ($5,158) | ($4.53) |
| Cash Flow | $130,232 | $114.44 |
| NPV8% | $85,914 | |
| IRR | 139% | |
| Payback (years) | 1 | |
| * includes contingency equal to 10% of capital costs above |
| Cash Costs | |
|---|---|
| Cash cost per payable Ag ounce, net of by products | $0.92 |
| All in Sustainable cost per payable Ag ounce, net of by products | $3.48 |
PEA Sensitivity Analysis
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](https://www.goldenminerals.com/_resources/images/Vel-Sensitivity-Pic.png)
Other Velardeña Information
Location, Access and Facilities
The Velardeña Properties are comprised of two underground silver and gold mines (Velardeña and Chicago) and two processing plants, located within the Velardeña mining district approximately 65 kilometers southwest of the city of Torreón and 140 kilometers northeast of the city of Durango. The properties are accessed by a seven-kilometer road from the village of Velardeña, which is reached by highway from Torreón and Durango.
Power is provided through substations connected to the national grid. Water is provided by wells located in the valley adjacent to the Velardeña Properties. We hold title to three wells located near our sulfide plant and certificates of registration to three wells located near our oxide plant. We are licensed to pump water from all six wells up to a permitted amount.
Title and Ownership
The Velardeña Properties are subject to the Mexican ejido system requiring us to contract with the local communities, or ejidos, surrounding our properties to obtain surface access rights needed in connection with our mining and exploration activities. We currently have contracts with two ejidos to secure surface rights for the Velardeña Properties: one that provides surface rights to certain roads and infrastructure through 2021, and a second that provides exploration access and access rights for roads and utilities until 2038.
We hold 29 mineral concessions covering 557 hectares in the Velardeña Properties. We also own the land surface rights to 144 hectares that contain the oxide plant, tailings area and access to the Chicago mine, along with surface lands that may be required for potential plant expansions.
Property History
Exploration and mining in the Velardeña district extends back to at least the late 1500s or early 1600s, with large scale mining beginning in 1888 with the Velardeña Mining and Smelter Company. In 1902, the mining properties were acquired by ASARCO, who mined the property until 1926 when the mines were closed. For the next 35 years, the mines were operated from time to time by small companies and local miners. The property was nationalized in 1961, and in 1968 the sulfide processing plant was built by the Mexican government. In 1994, William Resources acquired the concessions comprising the Velardeña Properties. In 1997, ECU Gold (the predecessor to ECU Silver Mining Inc.) purchased from William Resources the subsidiaries that owned the concessions and the oxide processing plant. The sulfide processing plant was acquired in 2004.
Exploration and Mining Activity
Golden Minerals Company mined oxide and mixed oxide/sulfide material from the Velardeña and Chicago mines during the years 2011 to 2013. Between November 2014 and November 2015, we mined from the Velardeña mine’s San Mateo, Terneras, and Santa Juana vein systems, as well as from the Chicago mine. We suspended mining activities in November 2015 when a combination of low metals prices, dilution and metallurgical challenges resulted in continued operating losses. We placed the mine and sulfide mill on care and maintenance to enable a re-start when mining and processing plans and metals prices indicate mining activities may be conducted profitably, or until we are able to locate and develop alternative mineral sources that may be economically mined and transported to the Velardeña Properties for processing.
We continued to search for and evaluate other oxide and sulfide feed sources, focusing on sources within haulage distance of our sulfide and oxide mills at Velardeña. Additionally, as noted above we have evaluated and tested various mining methods and processing alternatives that could result in sustained profitable operations. In 2020 we released results of an updated PEA that incorporated refinements to the resource model and a bio-oxidation processing methodology designed to greatly improve the recovery of gold from pyrites and arsenopyrites.
Mills
We own a 300 tonne per day flotation mill situated near the town of Velardeña, which accounted for 100% of our revenue from saleable metals during 2014 and 2015. The mill includes three flotation circuits in which we can process the sulfide material to make lead, zinc and pyrite concentrates. Most of the silver and gold sold in 2014 and 2015 was contained in the lead concentrate. During 2015 we processed all our mined material through the sulfide plant.
We also own a conventional 550 tonne per day cyanide leach mill with a Merrill-Crowe precipitation circuit which is located adjacent to our Chicago mine. We previously used this mill to process oxide and mixed sulfide/oxide material from the Velardeña Properties. Subsequently, the mill was leased to Hecla Mining Co between late 2015 and November 2020. The mill is presently being used to process Rodeo's gold-silver material (as of January 2021).