Durango State, Mexico
Two underground Ag/Au mines & two mills (oxide & sulfide)
Silver and gold; lead and zinc byproducts
Accelerating plans to re-start production, potentially in late 2021-2022
Current Activities & Work
Building regrind mill; preparing to receive Rodeo material in 2021; optimizing mine plan in preparation for future test-mining & processing
Current and complete
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.
In the coming months, we plan to mine and process a bulk sample for further test work to optimize the flotation separation of the sulfide material and complete more detailed studies of the bio-oxidation processing of the gold-rich pyrite concentrates that are produced. We are accelerating plans for a resumption of mining at Velardeña, potentially in late 2021-2022 based on sales of silver-lead and zinc concentrates while stockpiling the gold-rich pyrite concentrate until the bio-oxidation facility can be constructed.
Golden Minerals is accelerating production plans at Velardeña and intends to commence production, potentially in the late 2021-2022 timeframe. We believe we will be able to self-fund the roughly $10 million of startup capital costs by using Rodeo’s cash stream and we are currently revising and analyzing mining plans. Specifically, we are studying the feasibility of commencing production in 2021-2022, producing lead and zinc concentrates (to realize value from Velardeña’s silver, lead and zinc streams), and stockpiling the pyrite concentrates until the BIOX circuit is ready to go online, which would likely be in 2022. We estimate the BIOX circuit will take around 1.5 years to complete, including engineering studies and development, construction and testing.
Near term at Velardeña, we plan to use Velardeña’s oxide mill for processing material from the Rodeo gold project, which is anticipated to begin in early 2021.
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.
*Capital estimate for bio-oxidation plant includes additional contingency
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.
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.
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.
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 plan to release results of an updated PEA that will incorporate refinements to the resource model and a bio-oxidation processing methodology designed to greatly improve the recovery of gold from pyrites and arsenopyrites.
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 will be used to process Rodeo's gold-containing material beginning in 2021.
The precious metal deposits in the Velardeña and Chicago mines are narrow epithermal to mesothermal quartz-calcite to quartz-sulfide veins that follow three distinct trends. In the Velardeña mine east-west striking steeply north-dipping veins include the Terneras and San Mateo vein groups and the north-west striking, steeply northeast dipping Santa Juana veins. In the Chicago mine, the veins strike north-east and dip steeply to the southeast. Most veins carry recoverable lead and zinc values in galena and sphalerite as well as silver either in galena or in freibergite and gold hosted in pyrite and arsenopyrite.
The Velardeña district is located at the boundary between the Sierra Madre Oriental to the east and the Mesa Central sub-province to the west. The regional geology is characterized by a thick sequence of limestone and calcareous clastic sediments of Cretaceous age, intruded by Tertiary plutons. During the Laramide Orogeny, the sediments were folded into symmetrical anticlines and synclines that were modified into a series of asymmetrical overturned folds by a later stage of compression.
A series of Tertiary stocks have intruded the Cretaceous limestone over a distance of approximately 15 kilometers along a northeast to southwest trend. The various mineral deposits of the Velardeña mining district occur along the northeast southwest axis and are spatially associated with the intrusions and their related alteration.
Several types of Tertiary intrusive rocks are present in the Velardeña district. The largest of these intrusions outcrops on the western flank of the Sierra San Lorenzo and underlies a portion of the Velardeña Properties. It forms a northeast oriented, elongated body of diorite composition that outcrops over a distance of about 2.5 kilometers. The intruded limestone has been altered by contact metamorphism (exoskarn), and locally the intrusive has been metamorphosed (endoskarn).
The Santa Juana, Terneras, and San Mateo vein groups on the Velardeña property are hosted by Cretaceous Aurora Formation limestone, a diorite intrusion and related skarn.
Two main vein systems are present in the Velardeña mine. The first is the northwest striking, steeply north-dipping Santa Juana group of veins which include over 20 individually named veins, the most important of which are the A1, A4, CC, C1, and Santa Juana veins. The second vein system is east-west trending and steeply north-dipping and is represented by the Terneras and San Mateo vein groups. The Terneras group of veins includes the Roca Negra, Terneras Norte, Terneras Sur, Hiletas, and San Juanes veins. The San Mateo group includes San Mateo Oeste and San Mateo Este.
The most extensive of these is the Terneras vein, which was mined in the past over a strike length of 1,100 meters. All of these veins are observed to have extensive strike lengths and vertical continuity for hundreds of meters. The mineralogy of the east west system is somewhat different in that it contains less arsenic than the Santa Juana veins.
Vein widths in minable portions of the vein systems vary from 0.2 meters to 4 meters but average widths for most veins is 0.3 to 0.5 meters. Vein widths generally decrease where veins cut skarn.
On the Chicago property, the oldest rocks outcropping are Cretaceous limestone of the Aurora Formation which are highly folded. This limestone is locally metamorphosed by the intrusion of the Tertiary dioritic stocks and dykes. The general geology of the Chicago property is very similar to the geology of the Velardeña property. The Chicago veins strike northeast and dip steeply southeast. The main veins of interest at Chicago are the Chicago and Escondida veins. Chicago veins tend to be higher in lead and zinc than the Santa Juana or Terneras veins. Vein widths at Chicago are variable and tend to be narrower than at the Santa Juana deposit, especially in the skarn host.
Velardeña 2014 Drilling Results
Tetra Tech, Preliminary Economic Assessment & NI 43-101 Technical Report, May 8, 2020
Tetra Tech, NI 43-101 Technical Report - Preliminary Economic Assessment, Feb. 20, 2015