Golden Minerals Company owns the silver and gold Velardeña Properties located in Durango State, Mexico. The Properties are comprised of two underground mines and two processing plants within the Velardeña mining district, approximately 65 kilometers southwest of the city of Torreón and 140 kilometers northeast of the city of Durango.
In July 2015, a wholly-owned subsidiary of Hecla Mining Company leased our Velardeña oxide plant for an initial term of 18 months beginning July 1, 2015. The lease has been extended several times, most recently on August 2, 2017 when Golden granted Hecla an option to secure the use of the oxide mill for an additional two years, through December 31, 2020. Hecla must provide Golden notice of its intention to extend no later than October 3, 2018. Hecla is responsible for ongoing operation and maintenance of the oxide plant. During 2016, Hecla processed approximately 136,000 tonnes of material through the oxide plant, resulting in a net margin to Golden Minerals of $4.4 million in 2016. Hecla reached its intended processing throughput of approximately 400 tonnes per day in 2016 and, at this rate, net cash payments to us, net of reimbursable costs, should total approximately $0.4 million per month, or approximately $4.8 million annually. In the first half of 2017, Hecla completed an expansion of the tailings impoundment at Velardeña, as part of an agreement related to its continued use of the facility. Hecla will fund any required future tailings expansions, leaving unused at the end of the lease term an agreed amount of capacity.
Of the two underground mines comprising the Velardeña Properties, the Velardeña mine includes five different major vein systems including the Terneras, Roca Negra, San Mateo, Santa Juana and San Juanes systems. During 2015 we mined from the San Mateo, Terneras and Roca Negra vein systems as well as the Santa Juana vein system to augment grades as mining and processing rates ramped up.
Due to continuing net operating losses, the company suspended mining and sulfide processing activities in November 2015 in order to conserve the asset until we are able to develop mining and processing plans that at then-current prices for silver and gold indicate a sustainable positive operating margin (defined as revenues less costs of sales) or we are able to locate, acquire and develop alternative mineral sources that could be economically mined and transported to the Velardeña Properties for processing.