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Golden Minerals (TSE:AUM)(AMEX:AUMN) said Wednesday that operating improvements at its Velardena project in Mexico have resulted in production that has exceeded its previous guidance for the September-to-December period.

The improvement prompted the company to announce a strategic direction that will see it rationalize its exploration portfolio, which spans Mexico, Peru and Argentina, to focus on establishing itself as an emerging producer, it said.

President and CEO, Jeffrey Clevenger said: “Management’s primary focus is on growing production and establishing the company as an emerging producer.

“This business strategy should allow Golden Minerals to more quickly become self-sufficient and less dependent on raising capital.”

Reduced dilution at the Velardena operations, located in the state of Durango, Mexico, resulted in higher head grades, which, in turn, have resulted in a 30 percent hike in gold production, and silver production that was more than doubled what it had previously expected.

In September, the company had estimated that it would produce about 1,000 ounces of gold and about 42,000 ounces of silver during the September-to-December period. It actually produced 1,300 ounces of gold and 90,000 ounces of silver.

The average head grades in December rose about 70 percent to 2.5 grams per tonne (g/t) gold and 150 g/t silver, from the August average head grades of 1.5 g/t gold and 90 g/t silver.

For the first quarter of fiscal 2012, Golden Minerals expects to produce about 1,300 ounces of gold and about 90,000 ounces of silver. In the second quarter, production is expected to rise to 2,000 ounces of gold and 150,000 ounces of silver.

Third quarter production is estimated at 2,600 ounces of gold and 230,000 ounces of silver, while fourth quarter production is expected at 3,100 ounces for gold and 270,000 ounces for silver.

Therefore, Golden Minerals expects total full year fiscal 2012 production of about 9,000 ounces of gold and about 740,000 ounces of silver from its Velardena operations.

Golden Minerals is also starting a series of plant optimizations and other work intended to improve recoveries and product quality, it said.

It will add a flotation circuit ahead of the current oxide plant to recover and divert the sulphide material, which is currently mixed in with the oxides, to its respective plant. This move is expected to make the Velardena operations cash flow positive by mid-year 2012.

The company has also begun engineering studies for a phase expansion of the sulphide plant. It will add an additional ball mill, flotation cells and concentrate handling equipment.

The expansion will more than double the plant’s capacity to 650 tonnes per day (tpd). Paired with other operational improvements, the expansion could result in annual production of up to two million ounces of silver and 29,000 ounces of gold by 2013.

As previously announced, the company expects to update its NI 43-101 compliant resource estimate for the Velardena project by the end of the first quarter of 2012. It also expects to complete a preliminary economic assessment (PEA) by the end of the third quarter. The PEA will be based on the updated resource estimate.

The Golden, Colorado-based company is a junior silver and gold producer, focused in Latin America. In addition to its Velardena project in Mexico, it’s working on developing its Atlas project and its El Quevar project, each in Argentina, its Cochabamba project in Peru, and its Zacatecas project in Mexico.

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