Golden Minerals (NYSEMKT:AUMN) just announced its intent to raise capital via stock and warrant issuance in order to explore its recently acquired Santa Maria Project in Chihuahua, Mexico. The company didn't specify how much money it intends to raise and management says that this will largely depend on market conditions.
As I argued in July the company's decision to restart mining at its flagship Velardena Project was questionable, although the stock continued to offer exceptional leverage for silver bulls given the company's valuation relative to the amount of silver resources at its two projects. Then about three weeks ago the company announced that it had acquired the Santa Maria exploration project in Mexico. I suggested that perhaps I was underestimating the company's potential to generate cash-flow from Velardena seeing that it felt that it had sufficient capital to go ahead with an expansion. With this most recent announcement I'm really not sure what to think of this, especially since we don't know the intended size of the secondary offering.
With this in mind I would be hesitant to add to my position here until we have more information regarding the company's plans. Clearly management wants to expand its value beyond Velardena but I am not clear whether management is doing so in an efficient manner. Once we get clarity on this issue beyond the vague announcement that management intends to issue stock we can reassess the situation. I'm not selling my position, but I'm not adding either.
Disclosure: The author is long AUMN.
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