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Shares of Golden Minerals (TSX:AUM; NYSE-MKT: AUMN) shot up after the junior announced it would reopen its Mexico-based Velardena silver-gold mine in July as a leaner and lower cost operation.

The Colorado-headquartered firm suspended the underground operation in Durango state last June, mainly due to a decline in metal prices. Prior to that, it was processing the mine’s sulphide and oxide material in two separate plants for a combined throughput of 500 tonnes per day, with cash costs exceeding US$30 silver per oz.

However, last May it estimated if it continued running the mine for the reminder of 2013, it would have had a negative operating margin of US$5 million at metal prices US$1,500 oz. gold and US$25 per oz. silver. This caused the firm to place its sole producing asset on care and maintenance in the following month, and re-think its mine plan.

While the precious metals prices haven’t shown a significant recovery since then, the company has pared down costs by reducing throughput and its labour force, and by improving its underground infrastructure.

The firm intends to resume mining in the third quarter of 2014, focusing mostly on the San Mateo vein. It plans to stockpile the mined material until the fourth quarter, at which time it should start up the sulphide mill as well as begin mining the Terneras vein. (The San Mateo and Terneras veins were the focus of this year’s 8,000-metre drill program.)

Golden Minerals expects to process 150 tonnes per day of sulphide ores in the fourth quarter, before ramping up to 285 tonnes per day in mid-2015. This compares previously to 500 tonnes per day of sulphide and oxide ores.

Production in the fourth quarter should total around 150,000 silver-equivalent oz. (including silver and gold, but not lead and zinc) before reaching 275,000 silver-equivalent oz. per quarter in mid-2015, once the operation ramps up.

Cash costs per silver oz., net of byproduct credits, should total US$30 in the fourth quarter, before decreasing to between US$12 and US$15 in mid-2015.

“Our team has worked diligently since the suspension of operations at Velardena to streamline the operation for a restart,” Jeffrey Clevenger, the company’s chairman and CEO, said in a statement. “Once ramped up, out restart plans show incremental cash for the company of about US$5 million to US$8 million per year at today’s prices (about US$20 per oz. silver and US$1,250 per oz. gold) as compared to holding the property for the future.”

To help improve efficiencies, Golden Minerals has brought in a new team of employees, including a new general manager and managers for both the mine and mill. It has also scaled back its previous 470-person staff to 150 employees.  

On the infrastructure front, it has completed a 1.9 km long access ramp into the mine. “This ramp will provide more efficient and lower cost removal of mined material from the underground mine workings as compared to pre-suspension haulage primarily from a low capacity internal shaft,” the company explains.

All these changes, should contribute to the operation, once at full capacity, churning out 1 million to 1.2 million silver equivalent oz. a year, at cash costs of US$12 to US$15 per silver oz. net of by-product credits.

Golden Minerals soared 92% in the two days following the mine restart news to close June 19 at $1.48. Today in late afternoon, it shares were trading around $1.22.

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