Greetings, and welcome to the Golden Minerals Company First Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to Karen Winkler, Director of Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Welcome to today's earnings call during which we'll be discussing operating and financial results for the first quarter of 2022.

Before we get started, please note that certain statements made by management today will be forward-looking within the meaning of applicable securities laws. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to be materially different from those expressed or implied by such statements. Please refer to our most recently filed Form 10-Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward-looking statements.

On today's call are Golden Minerals' President and CEO, Warren Rehn; and our Chief Financial Officer, Julie Weedman. Following their prepared remarks, they will be available to answer questions.

This webcast will also be available for replay on the company's website tomorrow where it will remain posted for approximately 30 days.

I will now turn the call over to Warren.

Thank you, Karen. Our Rodeo mine continues to operate as anticipated and continues to generate significant cash flow for the company. From inception in January 2021 through the end of March 2022, we've produced around 18,000 ounces of gold and 65,000 ounces of silver from Rodeo, with cash costs averaging $982 per payable gold ounce net of silver credits. In the first quarter of 2022, we produced about 3,600 ounces of gold and 14,000 ounces of silver.

Our 2022 guidance for Rodeo remains unchanged, and we estimate processing 175,000 to 185,000 tonnes of material through our oxide plant at an average rate of about 500 tonnes per day. Payable production for 2022 is estimated at approximately 12,000 to 14,000 ounces of gold and 42,000 to 47,000 ounces of silver. We estimate average grades during 2022 will be 2.9 grams per tonne gold and 9.4 grams per tonne silver. These grades are lower than what we recorded in 2021 since we are now working into a lower grade area of the resource. However, they are as expected in the mine plan.

No recoveries are projected to average about 80% for both gold and silver. We anticipate higher total plant throughput in 2022 compared to 2021 that will help offset the lower gold grades for 2022 with similar total payable gold production this year, although at a higher unit cost. Cash costs per payable gold ounce net of silver by-product credits are expected to be between $1,100 and $1,200 during 2022.

We continue to advance our Velardeña underground silver gold mines ahead of making a production restart decision. The biooxidation or BIOX testing of pirate concentrates in South Africa has now been completed. We are assessing the results and incorporating them into the final plan for the proposed BIOX plant at Velardeña. We have nearly completed the flotation optimization test work also in South Africa and expect to have results soon to incorporate into the final production plans.

We began underground test mining last month to determine that with our chosen subcontractor, we can control mining dilution, which is critical to the success of the project. Testing is anticipated to run into next month. We intend to make the formal decision on the resumption of mining activities within the next few months. As previously communicated, if we make the decision to restart mining activities at Velardeña, we estimate construction of the BIOX plant would take roughly 1 year running into midyear 2023. It is possible, depending in part on metals price, that we could begin mining with a 3- to 4-month ramp-up period and begin selling silver, lead and zinc concentrates while stockpiling the pirate concentrates in which most of the gold is contained until the BIOX facility is complete.

Moving on to our exploration properties. In April, we began a third drill program at the Yoquivo gold-silver project in Chihuahua, Mexico. This program is designed to further delineate the previously encountered vein-hosted mineralized intervals. Two earlier drill programs identified multiple potentially economic-grade areas of mineralization at Yoquivo. The newly recognized Southern high-grade zone is open to the south on the Pertenencia vein. Most other high-grade zones have also not been closed off. We expect this third round of drilling will give us sufficient information to estimate an initial gold-silver resource.

In January, we reported results from the first drill program ever conducted at our Sarita Este project in Salta, Argentina. That drilling identified shallow oxide gold with widths and grades that are potentially economic. We have submitted new permits for trenching and additional drilling that we plan to complete during a 2022 field campaign.

Last week, we announced that John Galassini has joined Golden Minerals as Chief Operating Officer effective May 9. John has more than 30 years of mining operations experience and has successfully managed numerous underground operations as well as some of the world's largest open pit mines. He will be responsible for leading our mining operations as Golden Minerals continues to grow.

Additionally, I am pleased to introduce Julie Weedman, who joined the company earlier this year and stepped into the Chief Financial Officer role upon Bob Vogels' retirement at the end of March. Julie joins us for over 30 years of accounting and finance experience, including 10 years of buying industry work at Phelps Dodge, a number of years at smaller domestic and international mining companies and time at Deloitte & Touche.

I will now hand the call over to Julie to present the financial results for the first quarter.

Thank you, Warren. For the first quarter 2022, our operating margin at the Rodeo operation was approximately $3.2 million from revenue of $7.5 million received from the sale of approximately 3,850 ounces of gold in Doré. The plant operated at a rate just over 525 tonnes per day and the average grade of gold processed was 3.1 grams per tonne for the first quarter.

Cash operating costs, net of silver by-product credits were about $1,164 per ounce for the first quarter of 2022. As anticipated, this cost per ounce is higher than the average cost for the full year 2021 due to the decrease in the average grade.

While the operating margin from Rodeo in the first quarter 2022 was positive, we reported negative after-tax income of about $300,000. Exploration expenses were approximately $1.7 million compared to approximately $0.8 million in the first quarter of 2021. G&A costs for the first quarter of 2022 were $1.3 million compared to $1.5 million in the first quarter of 2021.

Expenditures in Q1 of 2022 for El Quevar were $0.1 million, similar to the same quarter in 2021 and are expected to continue at approximately that level going forward. Care and maintenance expenses at Velardeña was approximately $0.5 million, which was slightly higher than the first quarter of 2021 due to additional consulting costs incurred this year to prepare the TRS in order to comply with the new S-K 1300 regulations required in our 10-K filings. Income tax expense of just under $0.1 million was accrued for the first quarter of 2022 due to the profitability of several of our Mexican entities.

We expect continued positive operating margin from Rodeo throughout 2022. As noted in both our 10-Q filing and our recent 10-K filing, we are estimating an operating margin of between $7 million and $9 million for the full year of 2022. This assumes plant throughput levels of approximately 500 tonnes per day with slightly lower grades compared to 2021 of approximately 2.9 grams per tonne for gold and 9 grams per tonne for silver. This operating margin estimate assumes future gold prices of $1,800 per ounce, which is below current levels, and a silver price of $25 per ounce, which is slightly higher than current levels.

We ended the quarter with about $11.7 million of cash. Net cash flow for the quarter was negative $0.5 million due primarily to an increase in inventory and VAT receivables. Spending on capital items has significantly dropped off compared to last year with only $24,000 spent during Q1 of 2022 compared to $0.5 million spent in the first quarter of 2021.

Assuming metal prices average $1,800 per ounce for gold and $25 per ounce for silver, we expect our cash balance to remain around $10 million to $11 million over the next 12 months through March 31, 2023, depending on spending on exploration projects and costs associated with the potential restart of the Velardeña mine. These projections include the $2 million payment scheduled to be received from Fabled in December of 2022. The cash projection does not assume any other form of debt or equity financing.

I will now turn the call back over to the operator who will take your questions.

Thank you. We will now be conducting our question-and-answer session. [Operator Instructions] Our first questions come from the line of Jacob Sekelsky with Alliance Global Partners.

So just starting with the test mining activity at Velardeña, should we expect results there before the end of Q2? And then just building off that a bit. I think, Warren, you mentioned, what metal prices will we need to see for you to begin mining activity at Velardeña while the BIOX plant is being constructed?

Yes, Jake, thanks for the question, and appreciate you being here. We should have our test mining results completed in June. And I expect to be able to talk about those results toward the end of June. It might be earliest Q3 when we actually get them out there into the public space. But that timing is holding fast. We're in the midst of the testing now. I think we've been at it for about 20-odd days or so, and it's about a 45-day test. So we should have everything firmly in hand and plugged back into our models to know quite well if we're doing what we need to do in terms of controlling dilution. So I definitely expect to have that around that time frame, but can't promise it will be right before end of Q2, it might be earliest Q3.

For the second part of the question, Jake, the pricing that has been key for silver, lead, it's really based on the silver. We do get some gold in the lead concentrate and so gold price so, but really, we need a sustained silver price over $25 an ounce to make it really interesting enough to proceed before we get the BIOX up and run. So assuming we can get that, we'd be okay to start, I think, but it will require Board approval to get there.

Okay. That's helpful. And then just on exploration, what's the plan looks like for the rest of this year, both at Rodeo and Yoquivo? And do you think there's any opportunity for further mine life extension at Rodeo? I know you guys have extended it by a couple of quarters, but I'm just curious on your thoughts there.

Yes, we did some additional drilling in the Q1. We haven't really reported results. We're still going to put those into the model, probably have a model update. I don't think it will be a huge significant change. It'll be incremental. We expect to do a little bit more drilling at Rodeo sometime during the year. We don't need to do it right away. It's on the southern end of the deposit. We don't get there until really in 2023. So we may put that off a bit. But there is still the possibility of extending mine life at Rodeo for another quarter or 2, let's say, depending on results that's still open. The southern end of the deposit is open still. Plus there's some other exploration targets nearby that we'll get to as we have the exploration budget to do so.

Now Yoquivo, we're definitely looking to continue drilling there to try to get enough information to put out a resource update, a first resource at Yoquivo, let's say. And that is doing well. We're drilling now, and we'll see how that goes. We'll drill until we have enough information to be firm about what we think the resource looks like there. But we've planned about, I think, 4,000 meters to start with.

Congrats, again, on a good quarter, guys.

Our next questions come from the line of Heiko Ihle with H.C. Wainwright.

Opening any newspaper, all one reads about is inflation. I mean, today, the number was the CPI inflation report were once again well over 8% for April. What are you guys seeing with the various forms of inflation? And I'm not just talking about the obvious ones like wage inflation, but I mean also just cost and duration of assays, that kind of stuff. Can you maybe -- and then when you're done with that, maybe just also go through some of the steps that you're going through to mitigate inflationary pressures, please?

Yes. Well, that's a -- it's a great question. It's evolving, as you might expect. We are seeing the wage inflationary pressure in Mexico. Mexico had an internal CPI of about 7% last year. We did have to increase wages both for union and nonunion employees. So we do have that showing up in our cost structure. But we're starting to see some inflation and certainly at the gas pump for any kind of diesel or gas used in the operation. That's gone up substantially since the worldwide oil shortage, if you will. And we are starting to see some increased cost in direct supplies. The service costs are only just now starting to show up. So what you can do about it basically is you push back to the extent you can and eventually, you have to compromise. Prices will go up, costs will go up. But I think they're still manageable. There's nothing outrageous about it, but I think we can anticipate that cost of the operation will reflect the overall inflationary pressure.

Fair answer. Building on my last question a little bit, and I truly have absolutely no idea. Is there any inflationary impact on care and maintenance expenses? I am, in particular, talking about Velardeña obviously. I mean, I assume that besides slightly higher wages for security staff or staff in general, the impact on that should be essentially nothing, right?

Yes, the bulk of that cost is the security cost of maintaining the integrity of the plants that are not used to make sure no one comes in and rip them off basically. And so we do get increased costs on an annual basis from our security provider. We don't see it immediately. We haven't gotten our new contract with a security provider, but that's the bulk of that care and maintenance cost, Heiko.

The other parts of it are related to, for example, the filing, the updated type of report for the S-K 1300, yes, we'll see some increased cost on that. It's on a consulting basis. So that's more direct. But they're not major increases. I think those show up, maybe add about the inflation rates over time, but lag, especially for the security contract.

Okay. So it's fair to say that 2024 numbers may not be the same given that it's lagging by, I guess, we'll fully see it lagging a year, right?

Yes. Yes. About a year after is when we will start seeing the increased prices on the security contract, for example, which is an annual contract that we renew with only the opportunity to change prices once a year.

Our next questions come from the line of Sid Rajeev with Fundamental Research.

Warren, I'm pleased to see the Q1 results. If I may, Warren, I have a macro question and a couple of company-specific questions. In terms of macro, is the current supply disruptions and all the prices going on, is that affecting Golden at all in any way?

In terms of supply of materials, Sid?

In terms of sourcing materials for processing or mining or anything related, are you affected at all in your operations?

Well, we're seeing some longer time lines, but we haven't had any shortages that have caused any change in our operation. We are seeing some longer time lines for things like mill liners. I expect to see longer time lines for some steel products, especially stainless steel products, and we're anticipating that in advance, for example, for the construction of the BIOX plant assuming we go ahead. We're looking at getting those orders placed as early as possible so as not to have significant delays in the construction schedule.

Got it. With your Q1 results, I was specifically surprised by the significant increase in recovery rates despite lower grades. I know you mentioned in our last call that in Q4, recoveries have declined. How were you able to increase rates so much in Q1?

It's an interesting aspect of this ore deposit, Sid, that the recovery is higher with lower grades. It's usually not the case in precious metals deposits. But in this particular case at Rodeo where we see the highest grade of gold is where we see the strongest silicification, a very strong silicification related to the deposit -- the deposition of the mineral. And where we have that very strong silicification, we have more encapsulation of the gold and silica, which is basically the cause of the lower than ideal recovery in the gold circuit. So when the gold grade actually tails off a little bit, there's not as strong silicification. There's less encapsulation, so we get better recovery.

So it's an interesting inverse relationship, which is what is explaining the behavior of recovery versus the gold grade in my opinion. And that's why we expect to have, on average, no more than 80% recovery going forward this year because the grades will be a little bit lower.

Got it. And then just on the financing for Velardeña, it seems like you might have to do a small financing. Will that be coming from debt?

We're looking at all possibilities for financing. And I think the preferred option, although we haven't made any decisions, will be a combination of a small amount of debt and also some forward sale of product. So those would be the 2 favorite choices. And we haven't made a decision on either one yet. But yes, obviously, we'll need to have a little bit of additional income -- additional cash to be able to complete the construction for the BIOX plant once we have the decision to go forward.

Got it. Just one more thing. Any update from Barrick on El Quevar?

Nothing. Going forward, they put together a plan to drill this year. They have their permits in hand. I expect them to start drilling this year. I haven't gotten a firm date for beginning it. We're going into the winter up there at El Quevar, which, depending on what elevation exactly they're drilling at, can make drilling a little bit difficult. But I do still expect them to drill some holes this year and have some results available from that. So they're still going forward with their earning but nothing firm in terms of the timetable for the drilling.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Karen Winkler for any closing comments.

Thanks, Darryl. This concludes today's call. Thanks to everyone for joining us, and we look forward to talking with you again next quarter. Have a great day.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.