Table ofContents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

**FORM 10-Q**

 

**(MARKONE)**

 
| **x** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------|

 

**FOR THEQUARTERLY PERIOD ENDED SEPTEMBER 30, 2010.**

 

**OR**

 
| **o** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**FOR THE TRANSITION PERIODFROM                TO                .**

 

**COMMISSION FILE NUMBER 1-13627**

 

**GOLDEN MINERALS COMPANY**

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

| **DELAWARE**                             | ** ** | **26-4413382**      |
|------------------------------------------|------------|---------------------|
| (STATE OR OTHER JURISDICTION OF          |       | (I.R.S. EMPLOYER    |
| INCORPORATION OR ORGANIZATION)           |       | IDENTIFICATION NO.) |
|                                     |       |                |
| **350 INDIANA STREET, SUITE 800**        | ** ** | ** **          |
| **GOLDEN, COLORADO**                     | ** ** | **80401**           |
| (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) |       | (ZIP CODE)          |

 

**(303) 839-5060**

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

INDICATEBY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BEFILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THEPRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WASREQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILINGREQUIREMENTS FOR THE PAST 90 DAYS:  YES x  NO o

 

INDICATEBY CHECK MARK WHETHER THE REGISTRANT HAS SUBMITTED ELECTRONICALLY AND POSTED ONITS CORPORATE WEB SITE, IF ANY, EVERY INTERACTIVE DATA FILE REQUIRED TO BESUBMITTED AND POSTED PURSUANT TO RULE 405 OF REGULATION S-T (§232.405 OF THISCHAPTER) DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THEREGISTRANT WAS REQUIRED TO SUBMIT AND POST SUCH FILES).  YES o  NO o

 

INDICATEBY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, ANACCELERATED FILER, A NON-ACCELERATED FILER, OR A SMALLER REPORTING COMPANY:

 

| LARGE ACCELERATED FILER o |   | ACCELERATED FILER o         |
|--------------------------------|--------|-----------------------------|
|                           |   |                        |
| NON-ACCELERATED FILER o        |   | SMALLER REPORTING COMPANY x |

 

INDICATEBY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE12B-2 OF THE EXCHANGE ACT):  YES o  NO x

 

INDICATEBY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND REPORTSREQUIRED TO BE FILED BY SECTIONS 12, 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BYA COURT:  YES x  NO o

 

ATNOVEMBER 1, 2010, 15,124,567 SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE,WERE ISSUED AND OUTSTANDING.

 

 

 

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GOLDEN MINERALS COMPANY

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2010

 

INDEX

 
| ** **                          | ** ** | ** **                                                                                  | ** ** | **PAGE** |
|-------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|----------|
|                                |       |                                                                                        |       |     |
| PART I — FINANCIAL INFORMATION |       |                                                                                        |
|                                |       |                                                                                        |       |     |
| ITEM  1.                            |       | FINANCIAL STATEMENTS (Unaudited)                                                            |       | 3        |
|                                |       |                                                                                        |       |     |
| ITEM 2.                             |       | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |       | 20       |
|                                |       |                                                                                        |       |     |
| ITEM 3.                             |       | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 |       | 27       |
|                                |       |                                                                                        |       |     |
| ITEM 4.                             |       | CONTROLS AND PROCEDURES                                                                     |       | 27       |
|                                |       |                                                                                        |       |     |
| PART  II — OTHER INFORMATION   |       |                                                                                        |
|                                |       |                                                                                        |       |     |
| ITEM 1.                             |       | LEGAL PROCEEDINGS                                                                           |       | 27       |
|                                |       |                                                                                        |       |     |
| ITEM 2.                             |       | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                |       | 28       |
|                                |       |                                                                                        |       |     |
| ITEM 3.                             |       | DEFAULTS  UPON SENIOR SECURITIES                                                            |       | 28       |
|                                |       |                                                                                        |       |     |
| ITEM 4.                             |       | REMOVED AND RESERVED                                                                        |       | 28       |
|                                |       |                                                                                        |       |     |
| ITEM 5.                             |       | OTHER INFORMATION                                                                           |       | 28       |
|                                |       |                                                                                        |       |     |
| ITEM  6.                            |       | EXHIBITS                                                                                    |       | 28       |
|                                |       |                                                                                        |       |     |
| SIGNATURES                          |       |                                                                                        |       | 29       |

 

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**PART I. FINANCIAL INFORMATION**

**Item 1.  Financial Statements**

 

**GOLDEN MINERALS COMPANY**

**CONSOLIDATED BALANCE SHEETS**

**(Expressed in United Statesdollars)**

**(Unaudited)**

 
| ** **                                                                                                                                  | ** ** | **Pro-Forma  September 30,  2010 (1)**          | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                  | ** ** | **(in thousands, except share data)** | ** ** |
| **Assets**                                                                                                                                  | ** ** | ** **                                                |       |                         |       |                        |       |
| Current assets                                                                                                                              |       |                                                      |       |                         |       |                        |       |
| Cash and cash equivalents                                                                                                                   |       | $                                                         | 133,270    |                         | $          | 30,268                      |       | $ | 8,570 |   |
| Investments (Note 4)                                                                                                                        |       | 335                                                       |       | 335                          |       | 444                         |       |
| Trade receivables                                                                                                                           |       | —                                                    |       | —                       |       | 1,460                       |       |
| Prepaid expenses and other assets (Note 5)                                                                                                  |       | 1,518                                                     |       | 1,568                        |       | 2,087                       |       |
| Total current assets                                                                                                                        |       | 135,123                                                   |       | 32,171                       |       | 12,561                      |       |
| Property, plant and equipment, net (Note 6)                                                                                                 |       | 9,084                                                     |       | 9,084                        |       | 7,774                       |       |
| Assets held for sale (Note 6)                                                                                                               |       | 1,316                                                     |       | 1,316                        |       | 813                         |       |
| Prepaid expenses and other assets (Note 5)                                                                                                  |       | 447                                                       |       | 447                          |       | 552                         |       |
| Total assets                                                                                                                                |       | $                                                         | 145,970    |                         | $          | 43,018                      |       | $ | 21,700 |   |
| **Liabilities and Equity**                                                                                                                  |       |                                                      |       |                         |       |                        |       |
| Current liabilities                                                                                                                         |       |                                                      |       |                         |       |                        |       |
| Accounts payable and other accrued liabilities  (Note 7)                                                                                    |       | $                                                         | 2,624      |                         | $          | 2,674                       |       | $ | 2,428 |   |
| Other current liabilities                                                                                                                   |       | 67                                                        |       | 67                           |       | 63                          |       |
| Total current liabilities                                                                                                                   |       | 2,691                                                     |       | 2,741                        |       | 2,491                       |       |
| Other long term liabilities                                                                                                                 |       | 584                                                       |       | 584                          |       | 651                         |       |
| Total liabilities                                                                                                                           |       | 3,275                                                     |       | 3,325                        |       | 3,142                       |       |
|                                                                                                                                        |       |                                                      |       |                         |       |                        |       |
| Commitments and contingencies (Note 13)                                                                                                     |       |                                                      |       |                         |       |                        |       |
| Equity (Note 10)                                                                                                                            |       |                                                      |       |                         |       |                        |       |
| Common stock, $.01 par value, 50,000,000 shares  authorized; (15,124,567 pro-forma), 9,271,286 and 3,238,615 shares issued and  outstanding |       | 151                                                       |       | 93                           |       | 32                          |       |
| Additional paid in capital                                                                                                                  |       | 183,728                                                   |       | 80,784                       |       | 37,854                      |       |
| Accumulated deficit                                                                                                                         |       | (41,197                                                   | )          | (41,197                      | )          | (20,276                     | )          |
| Accumulated other comprehensive income (loss)                                                                                               |       | 13                                                        |       | 13                           |       | 154                         |       |
| Parent company’s shareholder’s equity                                                                                             |       | 142,695                                                   |       | 39,693                       |       | 17,764                      |       |
| Noncontrolling interest in subsidiaries (Note 11)                                                                                           |       | —                                                    |       | —                       |       | 794                         |       |
| Total equity                                                                                                                                |       | 142,695                                                   |       | 39,693                       |       | 18,558                      |       |
| Total liabilities and equity                                                                                                                |       | $                                                         | 145,970    |                         | $          | 43,018                      |       | $ | 21,700 |   |

 

(1)         The pro-forma presentation reflects theresults of a public offering and private placement, which the Company closed onOctober 22, 2010 as discussed in Note 15, Subsequent Events.

 

The accompanying notesform an integral part of these consolidated financial statements.

 

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**GOLDEN MINERALS COMPANY**

**CONSOLIDATED STATEMENTS OFOPERATIONS AND COMPREHENSIVE INCOME (LOSS)**

**(Expressed in United States dollars)**

**(Unaudited)**

 
| ** **                                                                                        |   | **Three Months Ended  September 30,**      |       | **Nine Months  Ended** | ** ** | **For The Period  March 25, 2009  Through** | ** ** | **For The Period  January 1, 2009  Through** | ** ** |
|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|------------|-----------------------------|------------|-----------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                                                        |   | **2010**                                                  | ** ** | **2009**                    | ** ** | **September 30, 2010**                                | ** ** | **September 30, 2009**                                 | ** ** | **March 24, 2009** | ** ** |
| ** **                                                                                        |   | **(Successor)**                                           | ** ** | **(Predecessor)**           | ** ** |
| ** **                                                                                        |   | **(in thousands, except share data)** | ** ** |
| **Revenue:**                                                                                      |   |                                                      |       |                        |       |                                                            | ** ** | ** **                                                       | ** ** | ** ** | ** ** |
| Management  service fees (Note 12)                                                                |   | $                                                         | 98         |                        | $          | 2,652                                                           |       | $                                                                | 11,216     |   | $ | 6,010 |   | $ | 1,350 |   |
| **Costs and expenses:**                                                                           |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| Costs  of services (Note 12)                                                                      |   | (31                                                       | )          | (1,179                      | )          | (2,566                                                          | )          | (2,263                                                           | )          | — |   |
| Exploration  expense                                                                              |   | (3,755                                                    | )          | (3,598                      | )          | (9,893                                                          | )          | (7,067                                                           | )          | (3,482 | ) |
| El  Quevar feasibility                                                                            |   | (4,031                                                    | )          | —                      |       | (10,004                                                         | )          | —                                                           |       | — |   |
| Administrative  expense                                                                           |   | (1,868                                                    | )          | (2,521                      | )          | (6,295                                                          | )          | (5,857                                                           | )          | (4,779 | ) |
| Stock  based compensation                                                                         |   | (559                                                      | )          | (609                        | )          | (1,859                                                          | )          | (1,218                                                           | )          | (2,717 | ) |
| Other  operating income & (expenses), net                                                     |   | 76                                                        |       | 293                         |       | 186                                                             |       | 305                                                              |       | — |   |
| Depreciation,  depletion and amortization                                                         |   | (307                                                      | )          | (232                        | )          | (751                                                            | )          | (384                                                             | )          | (102 | ) |
| Total  costs and expenses                                                                         |   | (10,475                                                   | )          | (7,846                      | )          | (31,182                                                         | )          | (16,484                                                          | )          | (11,080 | ) |
| Loss  from operations                                                                             |   | (10,377                                                   | )          | (5,194                      | )          | (19,966                                                         | )          | (10,474                                                          | )          | (9,730 | ) |
| **Other income and expenses:**                                                                    |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| Interest  and other income                                                                        |   | 90                                                        |       | 106                         |       | 376                                                             |       | 204                                                              |       | 1,010 |   |
| Royalty  income                                                                                   |   | 80                                                        |       | 272                         |       | 239                                                             |       | 399                                                              |       | 88 |   |
| Interest  and other expense                                                                       |   | —                                                    |       | —                      |       | —                                                          |       | —                                                           |       | (345 | ) |
| Gain  (loss) on foreign currency                                                                  |   | (65                                                       | )          | 76                          |       | (53                                                             | )          | 170                                                              |       | (13 | ) |
| Gain  on extingushment of debt                                                                    |   | —                                                    |       | —                      |       | —                                                          |       | —                                                           |       | 248,165 |   |
| Loss  on auction rate securities                                                                  |   | —                                                    |       | (867                        | )          | —                                                          |       | (2,199                                                           | )          | (828 | ) |
| Reorganization  costs, net                                                                        |   | —                                                    |       | (249                        | )          | —                                                          |       | (917                                                             | )          | (3,683 | ) |
| Fresh  start accounting adjustments                                                               |   | —                                                    |       | —                      |       | —                                                          |       | —                                                           |       | 9,122 |   |
| Total  other income and expenses                                                                  |   | 105                                                       |       | (662                        | )          | 562                                                             |       | (2,343                                                           | )          | 253,516 |   |
| Income  (loss) from continuing operations before income (taxes) benefit                           |   | (10,272                                                   | )          | (5,856                      | )          | (19,404                                                         | )          | (12,817                                                          | )          | 243,786 |   |
| Income  taxes                                                                                     |   | 20                                                        |       | (284                        | )          | (1,517                                                          | )          | (497                                                             | )          | (165 | ) |
| Net  income (loss) from continuing operations                                                     |   | (10,252                                                   | )          | (6,140                      | )          | (20,921                                                         | )          | (13,314                                                          | )          | 243,621 |   |
| **Income (loss) from discontinued operations**                                                    |   | —                                                    |       | —                      |       | —                                                          |       | —                                                           |       | (4,153 | ) |
| Net  income (loss)                                                                                |   | $                                                         | (10,252    | )                           | $          | (6,140                                                          | )          | $                                                                | (20,921    | ) | $ | (13,314 | ) | $ | 239,468 |   |
| Net  (income) loss attributable to noncontrolling interest                                        |   | —                                                    |       | $                           | —     |                                                            | —     |                                                             | $          | — |   | $ | (7,869 | ) |
| Net  income (loss) attributable to the Successor/Predecessor shareholder’s                   |   | $                                                         | (10,252    | )                           | $          | (6,140                                                          | )          | $                                                                | (20,921    | ) | $ | (13,314 | ) | $ | 231,599 |   |
| **Other comprehensive loss:**                                                                     |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| Unrealized  gain (loss) on securities                                                             |   | (74                                                       | )          | (666                        | )          | (141                                                            | )          | $                                                                | 160        |   | $ | 940 |   |
|                                                                                              |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| Comprehensive  income (loss) attributable to Successor/Predecessor shareholder’s             |   | $                                                         | (10,326    | )                           | $          | (6,806                                                          | )          | $                                                                | (21,062    | ) | $ | (13,154 | ) | $ | 232,539 |   |
|                                                                                              |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| **Net income (loss) per Common/Ordinary Share — basic**                                      |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| ** **                                                                                        |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| Income  (loss) from continuing operations attributable to the Successor/Predecessor  shareholders |   | $                                                         | (1.15      | )                           | $          | (2.06                                                           | )          | $                                                                | (2.81      | ) | $ | (4.46 | ) | $ | 4.13 |   |
| Discontinued  operations attributable to the Successor/Predecessor shareholders                   |   | —                                                    |       | —                      |       | —                                                          |       | —                                                           |       | (0.20 | ) |
| Income  (loss) attributable to the Successor/Predecessor shareholders                             |   | $                                                         | (1.15      | )                           | $          | (2.06                                                           | )          | $                                                                | (2.81      | ) | $ | (4.46 | ) | $ | 3.93 |   |
|                                                                                              |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| **Net income (loss) per Common/Ordinary Share — diluted**                                    |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| ** **                                                                                        |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| Income  (loss) from continuing operations attributable to the Successor/Predecessor  shareholders |   | $                                                         | (1.15      | )                           | $          | (2.06                                                           | )          | $                                                                | (2.81      | ) | $ | (4.46 | ) | $ | (0.06 | ) |
| Discontinued  operations attributable to the Successor/Predecessor shareholders                   |   | —                                                    |       | —                      |       | —                                                          |       | —                                                           |       | (0.17 | ) |
| Income  (loss) attributable to the Successor/Predecessor shareholders                             |   | $                                                         | (1.15      | )                           | $          | (2.06                                                           | )          | $                                                                | (2.81      | ) | $ | (4.46 | ) | $ | (0.23 | ) |
|                                                                                              |   |                                                      |       |                        |       |                                                            |       |                                                             |       |   |   |
| **Weighted average Common Stock/Ordinary Shares outstanding -  basic**                            |   | 8,919,536                                                 |       | 2,987,735                   |       | 7,455,303                                                       |       | 2,987,735                                                        |       | 59,000,832 |   |
| **Weighted average Common Stock/Ordinary Shares outstanding -  diluted**                          |   | 8,919,536                                                 |       | 2,987,735                   |       | 7,455,303                                                       |       | 2,987,735                                                        |       | 69,171,400 |   |

 

The accompanying notes forman integral part of these consolidated financial statements. 

 

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**GOLDEN MINERALS COMPANY**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(Expressed in United States dollars)**

**(Unaudited)**

 
| ** **                                                                                                    | ** ** | **Nine Months  Ended  September 30, 2010** | ** ** | **For The Period  March 25, 2009  Through  September 30, 2009** | ** ** | **For The Period  January 1, 2009  Through  March 24, 2009** | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                    | ** ** | **(Successor)**                                           | ** ** | **(Predecessor)**                                                                             | ** ** |
| ** **                                                                                                    | ** ** | **(in thousands)**                                   | ** ** |
| Cash flows from operating activities:                                                                         |       |                                                      |       |                                                                                          |       |                                                                                       |       |
| Net cash used in operating activities (Note 14)                                                               |       | $                                                         | (16,775    | )                                                                                             | $          | (15,760                                                                                    | )          | $ | (13,849 | ) |
| Cash flows from investing activities:                                                                         |       |                                                      |       |                                                                                          |       |                                                                                       |       |
| Purchase of available for sale investments                                                                    |       | (6,003                                                    | )          | —                                                                                        |       | (4,447                                                                                     | )          |
| Sale of available for sale investments                                                                        |       | 6,441                                                     |       | 2,498                                                                                         |       | 21,113                                                                                     |       |
| Released from restricted cash to collateralize  credit facility, letters of credit and interest payments, net |       | —                                                    |       | —                                                                                        |       | 5,732                                                                                      |       |
| Proceeds from sale of interest in subsidiary, net                                                             |       | —                                                    |       | —                                                                                        |       | 25,225                                                                                     |       |
| Proceeds from sale of assets                                                                                  |       | 85                                                        |       | 1,650                                                                                         |       | —                                                                                     |       |
| Capitalized costs and acquisitions of property, plant  and equipment                                          |       | (2,585                                                    | )          | (459                                                                                          | )          | (4,580                                                                                     | )          |
| Net cash provided by (used in) investing  activities                                                          |       | $                                                         | (2,062     | )                                                                                             | $          | 3,689                                                                                      |       | $ | 43,043 |   |
| Cash flows from financing activities:                                                                         |       |                                                      |       |                                                                                          |       |                                                                                       |       |
| Proceeds from issuance of common stock, net of  issue costs                                                   |       | 40,535                                                    |       | —                                                                                        |       | —                                                                                     |       |
| Payments of notes payable and long term debt                                                                  |       | —                                                    |       | —                                                                                        |       | (47,297                                                                                    | )          |
| Amounts drawn on DIP facility                                                                                 |       | —                                                    |       | —                                                                                        |       | 6,500                                                                                      |       |
| Non-controlling interest contributions                                                                        |       | —                                                    |       | —                                                                                        |       | 3,500                                                                                      |       |
| Net cash (used in) provided by financing  activities                                                          |       | $                                                         | 40,535     |                                                                                          | $          | —                                                                                     |       | $ | (37,297 | ) |
| Net increase (decrease) in cash and cash  equivalents                                                         |       | 21,698                                                    |       | (12,071                                                                                       | )          | (8,103                                                                                     | )          |
| Cash and cash equivalents - beginning of period                                                               |       | 8,570                                                     |       | 25,620                                                                                        |       | 33,723                                                                                     |       |
| Cash and cash equivalents - end of period                                                                     |       | $                                                         | 30,268     |                                                                                          | $          | 13,549                                                                                     |       | $ | 25,620 |   |

 

See Note 14 for supplemental cash flow information.

 

The accompanying notes forman integral part of these consolidated financial statements.

 

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**GOLDEN MINERALS COMPANY**

**CONSOLIDATED STATEMENTS OFCHANGES IN EQUITY (DEFICIT)**

**(Expressed in United Statesdollars)**

**(Unaudited)**

 
| ** **                                                           | ** ** | **Common Stock**                                    | ** ** | **Additional  Paid-in** | ** ** | **Accumulated** | ** ** | **Accumulated  Other  Comprehensive  income** | ** ** | **Noncontrolling** | ** **   | **Total  Equity** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------------------------------|------------|-------------------------|------------|-----------------|------------|-----------------------------------------------|------------|--------------------|--------------|-------------------|------------|
| ** **                                                           | ** ** | **Shares**                                               | ** ** | **Amount**              | ** ** | **Capital**     | ** ** | **Deficit**                                   | ** ** | **(loss)**         | ** **   | **Interest**      | ** ** | **(Deficit)** | ** ** |
| ** **                                                           | ** ** | **(in thousands except share data)** | ** ** |
| **(Predecessor)**                                                    | ** ** | ** **                                               | ** ** | ** **              | ** ** | ** **      | ** ** | ** **                                    | ** ** | ** **         | ** **   | ** **        | ** ** | ** ** | ** ** |
| **Balance, December 31, 2008**                                       | ** ** | **59,000,832**                                           | ** ** | **$**                   | **590**    | ** **      | **$**      | **680,901**                                   | ** ** | **$**              | **(880,020** | **)**             | **$**      | **(551** | **)** | **$** | **150,792** | ** ** | **$** | **(48,288** | **)** |
| Stock  compensation accrued.                                         |       | —                                                   |       | —                  |       | 2,920           |       | —                                        |       | —             |         | —            |       | 2,920 |   |
| Ordinary  Shares of Apex Silver Mines Limited to be canceled         |       | (59,000,832                                              | )          | (590                    | )          | (683,821        | )          | —                                        |       | —             |         | —            |       | (684,411 | ) |
| Unrealized  loss on marketable equity securities                     |       | —                                                   |       | —                  |       | —          |       | —                                        |       | 940                |         | —            |       | 940 |   |
| Net  income (loss)                                                   |       | —                                                   |       | —                  |       | —          |       | 231,599                                       |       | —             |         | 7,869             |       | 239,468 |   |
| Capital  contributions                                               |       | —                                                   |       | —                  |       | —          |       | —                                        |       | —             |         | 3,500             |       | 3,500 |   |
| Interest  payable to non controlling interest                        |       | —                                                   |       | —                  |       | —          |       | —                                        |       | —             |         | 7,899             |       | 7,899 |   |
| Elimination  of Predecessor accumulated deficit                      |       | —                                                   |       | —                  |       | —          |       | 648,421                                       |       | —             |         | —            |       | 648,421 |   |
| Elimination  of Predecessor accumulated OCI                          |       | —                                                   |       | —                  |       | —          |       | —                                        |       | (389               | )            | —            |       | (389 | ) |
| Elimination  of Predecessor Noncontrolling Interest                  |       | —                                                   |       | —                  |       | —          |       | —                                        |       | —             |         | (170,060          | )          | (170,060 | ) |
| **Balance, March 24, 2009**                                          | ** ** | **—**                                               | ** ** | **$**                   | **—** | ** **      | **$**      | **—**                                    | ** ** | **$**              | **—**   | ** **        | **$**      | **—** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** |
| **(Successor)**                                                      |       |                                                     |       |                    |       |            |       |                                          |       |               |         |              |       |   |   |
| Issuance  of new equity in connection with emergence from Chapter 11 |       | 3,000,000                                                |       | $                       | 30         |            | $          | 36,230                                        |       | $                  | —       |              | $          | — |   | $ | — |   | $ | 36,260 |   |
| Stock  compensation accrued, net of forfeitures                      |       | 242,500                                                  |       | 2                       |       | 1,664           |       | —                                        |       | —             |         | —            |       | 1,666 |   |
| Treasury  shares acquired and retired                                |       | (3,885                                                   | )          | —                  |       | (40             | )          | —                                        |       | —             |         | —            |       | (40 | ) |
| Unrealized  gain on marketable equity securities                     |       | —                                                   |       | —                  |       | —          |       | —                                        |       | 154                |         | —            |       | 154 |   |
| Noncontrolling  interest in mineral properties                       |       | —                                                   |       | —                  |       | —          |       | —                                        |       | —             |         | 794               |       | 794 |   |
| Net  loss                                                            |       | —                                                   |       | —                  |       | —          |       | (20,276                                       | )          | —             |         | —            |       | (20,276 | ) |
| **Balance, December 31, 2009**                                       | ** ** | **3,238,615**                                            | ** ** | **$**                   | **32**     | ** **      | **$**      | **37,854**                                    | ** ** | **$**              | **(20,276**  | **)**             | **$**      | **154** | ** ** | **$** | **794** | ** ** | **$** | **18,558** | ** ** |
| Purchase  of El Quevar noncontrolling interest                       |       | 400,000                                                  |       | 4                       |       | 790             |       | —                                        |       | —             |         | (794              | )          | — |   |
| Private  placements, net                                             |       | 1,749,759                                                |       | 18                      |       | 12,965          |       | —                                        |       | —             |         | —            |       | 12,983 |   |
| Public  offering, net.                                               |       | 3,652,234                                                |       | 36                      |       | 27,516          |       | —                                        |       | —             |         | —            |       | 27,552 |   |
| Stock  compensation accrued                                          |       | 255,750                                                  |       | 3                       |       | 1,856           |       | —                                        |       | —             |         | —            |       | 1,859 |   |
| Treasury  shares acquired and retired                                |       | (25,072                                                  | )          | —                  |       | (197            | )          | —                                        |       | —             |         | —            |       | (197 | ) |
| Unrealized  loss on marketable equity securities                     |       | —                                                   |       | —                  |       | —          |       | —                                        |       | (141               | )            | —            |       | (141 | ) |
| Net  loss                                                            |       | —                                                   |       | —                  |       | —          |       | (20,921                                       | )          | —             |         | —            |       | (20,921 | ) |
| **Balance, September 30, 2010**                                      | ** ** | **9,271,286**                                            | ** ** | **$**                   | **93**     | ** **      | **$**      | **80,784**                                    | ** ** | **$**              | **(41,197**  | **)**             | **$**      | **13** | ** ** | **$** | **—** | ** ** | **$** | **39,693** | ** ** |

 

The accompanying notes form an integral part of these consolidatedfinancial statements.

 

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** **

**GOLDEN MINERALS COMPANY**

**NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS**

**(Expressed in United States dollars)**

 

**1.****             ****Basisof Preparation of Financial Statements and Nature of Operations**

 

Golden Minerals Company (the “Company”), a Delawarecorporation, has prepared these unaudited interim consolidated financialstatements in accordance with the rules and regulations of the Securities andExchange Commission (“SEC”). Such rules and regulations allow the omission ofcertain information and footnote disclosures normally included in financialstatements prepared in accordance with accounting principles generally acceptedin the United States (“GAAP”), so long as such omissions do not render thefinancial statements misleading.  Certainprior period amounts have been reclassified to conform to the current periodpresentation.

 

In the opinion of management, these financialstatements reflect all adjustments that are necessary for a fair presentationof the financial results for the periods presented. These interim financialstatements should be read in conjunction with the annual financial statementsincluded in the 2009 Annual Report on Form 10-K.

 

The Company is primarily engaged in the explorationand advancement of its portfolio of exploration properties in South America andMexico.  The Company ceased providingoperations management services to Sumitomo Corporation for the San Cristóbalmine effective June 30, 2010.  The financialstatements have been prepared on a going concern basis under which an entity isconsidered to be able to realize its assets and satisfy its liabilities in thenormal course of business.  However, thecontinuing operations of the Company are dependent upon its ability to raisesufficient capital and to generate future profitable operations.  The underlying value and recoverability ofthe amounts shown as mineral properties in the consolidated balance sheet are dependenton the ability of the Company to continue to finance exploration anddevelopment activities that would lead to profitable production or proceedsfrom the disposition of the mineral properties. There can be no assurance that the Company will be successful in raisingadditional financing in the future on terms acceptable to the Company or atall.

 

Our Predecessor, Apex Silver Mines Limited (“ASML”),was the 65% owner and operator of the San Cristóbal silver and zinc mine inBolivia.  Upon emergence from Chapter 11reorganization on March 24, 2009, the San Cristóbal mine was sold and theCompany became the successor to ASML for purposes of reporting under the U.S.federal securities laws.  References inthis Form 10-Q to “Successor” refer to the accounts of the Company and itssubsidiaries on or after March 25, 2009, the day following emergence fromChapter 11.  References to “Predecessor”refer to the accounts of ASML and its subsidiaries prior to March 25, 2009.

 

**2.****             ****DiscontinuedOperations**

 

Results of operations of the San Cristóbal mine andrelated subsidiaries are presented as discontinued operations for the periodson the Consolidated Statements of Operations and Comprehensive Income (Loss)through March 24, 2009, the date the San Cristóbal mine and relatedsubsidiaries were sold, including all direct financing related to the SanCristóbal mine.  Additionally, costsincurred for management service fees that were previously eliminated uponconsolidation have not been eliminated and are reflected as a cost of servicebetween the discontinued operations and the Company.

 

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The results of discontinued operations for theperiod January 1, 2009 through March 24, 2009 are as follows (amounts inthousands):

 
| ** **                                     | ** ** | **For The Period  January 1, 2009  Through  March 24, 2009** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| ** **                                     | ** ** | **(in thousands)**                                                                    | ** ** |
| **Revenue:**                                   |       |                                                                                       |       |
| Sale of concentrates, net                      |       | $                                                                                          | 99,049     |   |
|                                           |       |                                                                                       |       |
| **Costs and expenses:**                        |       |                                                                                       |       |
| Costs applicable to sales                      |       | (59,955                                                                                    | )          |
| Management fee                                 |       | (1,350                                                                                     | )          |
| Asset retirement accretion expense             |       | (232                                                                                       | )          |
| Foreign currency gain                          |       | 1,960                                                                                      |       |
| Depreciation, depletion and amortization       |       | (10,527                                                                                    | )          |
| Total costs and expenses                       |       | (70,104                                                                                    | )          |
| Income (loss) from operations                  |       | 28,945                                                                                     |       |
|                                           |       |                                                                                       |       |
| **Other income and expenses:**                 |       |                                                                                       |       |
| Interest and other income                      |       | 67                                                                                         |       |
| Interest expense and other borrowing costs     |       | (22,233                                                                                    | )          |
| Total other income and expenses                |       | (22,166                                                                                    | )          |
| Income before income taxes                     |       | 6,779                                                                                      |       |
| Income taxes                                   |       | (2,523                                                                                     | )          |
| Income before sale of interest in subsidiaries |       | 4,256                                                                                      |       |
|                                           |       |                                                                                       |       |
| Loss on sale of interest in subsidiaries       |       | (8,409                                                                                     | )          |
|                                           |       |                                                                                       |       |
| **Loss from discontinued operations**          |       | $                                                                                          | (4,153     | ) |

** **

**3.****             ****Significant Accounting Policies**

 

*Recently Adopted Standards*

 

On January 1, 2010 theCompany adopted the Accounting Standards Codification (“ASC”) guidance forconsolidation accounting which was updated to require an entity to perform aqualitative analysis to determine whether the enterprise’s variable interestgives it a controlling financial interest in a variable interest entity(“VIE”). This analysis identifies a primary beneficiary of a VIE as an entitythat has both of the following characteristics: (i) the power to direct theactivities of a VIE that most significantly impact the entity’s economicperformance and (ii) the obligation to absorb losses or receive benefits fromthe entity that could potentially be significant to the VIE. The updatedguidance also requires ongoing reassessments of the primary beneficiary of aVIE. The Company currently has no VIEs.

 

*Recently Issued Pronouncements*

 

In January 2010, ASC guidance for fair value measurements anddisclosure was updated to require additional disclosures related to: (i)transfers in and out of level 1 and 2 fair value measurements and (ii) enhanceddetail in the level 3 reconciliation. The guidance was amended to provideclarity regarding the level of disaggregation required for assets andliabilities and the disclosures required for inputs and valuation techniques usedto measure the fair value of assets and liabilities that fall in either level 2or level 3.  The updated guidance is effective for the Company’s fiscalyear beginning January 1, 2010, with the exception of the level 3disaggregation which will be effective for the Company’s fiscal year beginningJanuary 1, 2011. The adoption had no impact on the Company’s condensedconsolidated financial position, results of operations or cash flows. Refer toNote 8 for further details regarding the Company’s assets and liabilitiesmeasured at fair value.

 

**4.****             ****Investments**

 

The Company considers all highly liquid investments with a maturity ofthree months or less when purchased to be cash equivalents. Short-terminvestments include investments with maturities greater than three months, butnot exceeding 12 months, or highly liquid investments with maturities greaterthan 12 months that the Company intends to liquidate during the next 12 monthsfor working capital needs.

 

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The Company determines the appropriate classification of itsinvestments in debt and equity securities at the time of purchase andre-evaluates those classifications at each balance sheet date.  Debt securities are classified as held tomaturity when the Company has the intent and ability to hold the securities tomaturity. Held to maturity debt securities are stated at amortized cost.  Available for sale investments are marked tomarket at each reporting period with changes in value recorded as a componentof other comprehensive income (loss). If declines in value are deemed otherthan temporary, a charge is made to net income (loss) for the period.

 

Thefollowing tables summarize the Company’s investments at September 30, 2010 andDecember 31, 2009:

 
| **September 30, 2010** | ** ** | **Cost**                | ** ** | **Estimated  Fair Value** | ** ** | **Carrying  Value** | ** ** |
|----------------------------------|------------|-------------------------|------------|--------------------------------|------------|---------------------|------------|
| ** **                       | ** ** | **(in thousands)** | ** ** |
| Investments:                     |       |                    |       |                           |       |                |       |
| Short-term:                      |       |                    |       |                           |       |                |       |
| Available for sale               |       |                    |       |                           |       |                |       |
| Common stock                     |       | $                       | 181        |                           | $          | 251                 |       | $ | 251 |   |
| Warrant to purchase common stock |       | 124                     |       | 84                             |       | 84                  |       |
| Total available for sale         |       | 305                     |       | 335                            |       | 335                 |       |
| Total short term                 |       | $                       | 305        |                           | $          | 335                 |       | $ | 335 |   |

 
| **December 31, 2009** | ** ** | **Cost**                | ** ** | **Estimated  Fair Value** | ** ** | **Carrying  Value** | ** ** |
|---------------------------------|------------|-------------------------|------------|--------------------------------|------------|---------------------|------------|
| ** **                      | ** ** | **(in thousands)** | ** ** |
| Investments:                    |       |                    |       |                           |       |                |       |
| Short-term:                     |       |                    |       |                           |       |                |       |
| Available for sale              |       |                    |       |                           |       |                |       |
| Common stock                    |       | $                       | 191        |                           | $          | 444                 |       | $ | 444 |   |
| Total available for sale        |       | 191                     |       | 444                            |       | 444                 |       |
| Total short term                |       | $                       | 191        |                           | $          | 444                 |       | $ | 444 |   |

 

Quoted market prices at September 30, 2010 and December 31, 2009 wereused to determine the estimated fair values of the above investments except forthe warrant to purchase common stock. The fair value of the warrant to purchasecommon stock was determined using a Black-Scholes model with inputs based onquoted market price, historic volatilities, risk free interest rates and thelife of the warrant (see Note 8).

 

*CreditRisk*

 

Credit risk is the risk that a third party might fail to fulfill itsperformance obligations under the terms of a financial instrument. For cash andcash equivalents and investments, the Company’s maximum exposure to credit riskrepresents the carrying amount on the balance sheet. The Company attempts tomitigate credit risk for cash and cash equivalents and investments by placingits funds and investments with high credit-quality financial institutions,limiting the amount of exposure to each financial institution, monitoring thefinancial condition of the financial institutions and investing only ingovernment and corporate securities rated “investment grade” or better. TheCompany invests with financial institutions that maintain a net worth of notless than $1.0 billion and are members in good standing of the SecuritiesInvestor Protection Corporation.

 

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**5.****             ****Prepaidexpenses and other current assets**

 

Prepaid expenses and other current assets consist of the following:

 
| ** **                                  | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                  | ** ** | **(in thousands)**      | ** ** |
| Prepaid insurance                           |       | $                            | 333        |                        | $          | 306 |   |
| Prepaid contractor fees and vendor advances |       | 755                          |       | 191                         |       |
| Deferred leasehold costs                    |       | 182                          |       | 329                         |       |
| Prepaid offering costs                      |       | 50                           |       | 576                         |       |
| Recoupable deposits and other               |       | 248                          |       | 685                         |       |
|                                        |       | $                            | 1,568      |                        | $          | 2,087 |   |

 

*September 30, 2010*

 

Theprepaid contractor fees and vendor advances consist primarily of advancepayments made to contractors and suppliers primarily at the El Quevar projectin Argentina.  Deferred leasehold costsare related to the Company’s headquarters office lease in Golden,Colorado.  The prepaid offering costs arerelated to fees incurred on the public offering of the Company’s common stockcompleted in October of 2010 (see Note 15).

 

Inaddition, included in non-current assets is approximately $0.4 million ofprepaid insurance on which amortization will be recognized through 2015.

 

*December 31, 2009*

 

Thedeferred leasehold costs are related to the Company’s headquarters office leasein Golden, Colorado.  Prepaid contractorfees and vendor advances consist primarily of advance payments made tocontractors and suppliers for exploration related services.  Prepaid offering costs are related to directcosts and fees associated with the then anticipated public offering of commonstock that had not been completed at year-end 2009.  These costs were netted against the proceedsfrom the offering in the first quarter 2010. Included in recoupable deposits and other is a $0.2 million receivablerelated to the sale of certain investments which settled January 4, 2010 and a$0.2 million recoupable deposit made to a firm providing legal services relatedto the reorganization that was returned to the Company during the first quarter2010.

 

**6.****             ****Property,Plant and Equipment and Assets Held for Sale**

 

*Property, plant and equipment*

 

Thecomponents of property, plant and equipment are as follows:

 
| ** **                     | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                     | ** ** | **(in thousands)**      | ** ** |
| Exploration properties         |       | $                            | 3,986      |                        | $          | 4,228 |   |
| Royalty properties             |       | 1,207                        |       | 1,207                       |       |
| Buildings                      |       | 1,444                        |       | 383                         |       |
| Mining equipment and machinery |       | 2,609                        |       | 1,984                       |       |
| Other furniture and equipment  |       | 692                          |       | 601                         |       |
| ** **                     |       | 9,938                        |       | 8,403                       |       |
| Less: Accumulated depreciation |       | (854                         | )          | (629                        | )          |
| ** **                     |       | 9,084                        |       | 7,774                       |       |
|                                |            |                              |            |                             |            |  |  |

 

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*Assets Held for Sale*

 

The Company has obtained approval from its board of directors to sellits Paca Pulacayo property in Bolivia. The $0.9 and $0.8 million carrying valueof the property is reflected in assets held for sale in the accompanying consolidatedbalance sheets at September 30, 2010 and December 31, 2009, respectively.  Completion of the transaction is subject tonegotiation and execution of definitive agreements, approval of the Company’sboard of directors, consents and approvals of third parties includinggovernmental entities and the TSX Venture Exchange, and other customary closingconditions.  The carrying value of theasset held for sale is adjusted at the end of each period per the guidance ofASC 360, “Property, Plant and Equipment”. According to ASC 360, a gain may berecorded in the current period to the extent of prior losses recognized.  During the first nine months of 2010 theCompany wrote up by approximately $0.1 million the carrying value of theproperty to its estimated sales price less selling costs, reflected in otheroperating income, expense on the accompanying consolidated statements ofoperations.

 

The Company is currently negotiating the sale of an airplane it owns inBolivia and expects to complete the sale during the fourth quarter of2010.  At September 30, 2010 the $0.4million carrying value of the airplane was included in assets held for sale.During the quarter ended September 30, 2010 the Company wrote down the carryingvalue of the airplane by approximately $0.1 million to reflect the fair marketvalue of the airplane based on the anticipated selling price per the guidanceof ASC 360.

 

**7.     Accounts Payable and Other Accrued Liabilities**

 

The Company’s accounts payable and other accrued liabilities consist ofthe following:

 
| ** **                                 | ** ** | **September 30,**  | ** ** | **December 31,** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                 | ** ** | **2010**                | ** ** | **2009**              | ** ** |
| ** **                                 | ** ** | **(in thousands)** | ** ** |
|                                       |       |                    |       |                  |       |
| Accounts payable and accruals              |       | $                       | 1,366      |                  | $          | 1,863 |   |
| Taxes payable                              |       | 3                       |       | 22                    |       |
| Accrued employee compensation and benefits |       | 1,305                   |       | 543                   |       |
|                                       |       | $                       | 2,674      |                  | $          | 2,428 |   |

 

*September 30, 2010*

 

Accounts payable and accruals consist of $0.8 million related toexploration and corporate administrative activities and $0.6 million related toamounts due to contractors and suppliers at the El Quevar project.

 

Accrued employee compensation and benefits consist of $0.3 millionrelated to withholding taxes and benefits payable, $0.9 million related tobonuses payable and $0.1 million of accrued vacation payable.

 

*December 31, 2009*

 

Accounts payable and accruals consist of $1.0 million related toexploration and corporate administrative activities and $0.9 million related toamounts due to contractors and suppliers.

 

Accrued employee compensation and benefits consist of $0.3 millionrelated to withholding taxes and benefits payable and $0.2 million of accruedvacation payable.

 

**8.             Fair ValueMeasurements**

 

Effective January 1, 2008, the Company adopted ASC 820, “Fair ValueDisclosure and Measurements”, for the financial assets and liabilities andnonfinancial assets and liabilities which are measured at fair value on arecurring (annual) basis.  ASC 820establishes a framework for measuring fair value in the form of a fair valuehierarchy which prioritizes the inputs into valuation techniques used tomeasure fair value into three broad levels. This hierarchy gives the highest priority to quoted prices (unadjusted)in active markets and the lowest priority to unobservable inputs.  Further, financial assets and liabilitiesshould be classified by level in their entirety based upon the lowest level ofinput that was significant to the fair value measurement.  The three levels of the fair value hierarchyper ASC 820 are as follows:

 

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**Level 1: **Unadjustedquoted market prices in active markets for identical assets or liabilities thatare accessible at the measurement date.

 

**Level 2: **Quoted pricesin inactive markets for identical assets or liabilities, quoted prices forsimilar assets or liabilities in active markets, or other observable inputseither directly related to the asset or liability or derived principally fromcorroborated observable market data.

 

**Level 3: **Unobservableinputs due to the fact that there is little or no market activity. This entailsusing assumptions in models which estimate what market participants would usein pricing the asset or liability.

 

Thefollowing table summarizes the Company’s financial assets at fair value atSeptember 30, 2010, by respective level of the fair value hierarchy:

 
| ** **                               | ** ** | **Level 1**        | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|------------------------------------------|------------|-------------------------|------------|------------------|------------|------------------|------------|-----------|------------|
| ** **                               | ** ** | **(in thousands)** | ** ** |
| Assets:                                  |       |                    |       |             |       |             |       |      |       |
| Cash equivalents                         |       | $                       | 30,268     |             | $          | —           |       | $         | —     |   | $ | 30,268 |   |
| Short-term available for sale securities |       | 251                     |       | —           |       | —           |       | 251       |       |
| Warrant to purchase common stock         |       | —                  |       | 84               |       | —           |       | 84        |       |
|                                     |       | $                       | 30,519     |             | $          | 84               |       | $         | —     |   | $ | 30,603 |   |

 

The Company’s cash equivalents, comprised principally of U.S. treasurysecurities, are classified within Level 1 of the fair value hierarchy.

 

The Company’s short-term available for sale securities are classifiedwithin Level 1 of the fair value hierarchy. These securities are comprised of common stock, which have been valuedusing quoted prices in active markets.

 

The Company’s warrant to purchase common stock is classified withinLevel 2 of the fair value hierarchy. The fair value of the warrant to purchasecommon stock was determined using a Black-Scholes model with inputs based onquoted market price, historic volatilities, risk free interest rates and thelife of the warrant.

 

**9.             Income Taxes**

 

The Company, a Delaware corporation, and its subsidiaries file taxreturns in the United States and in various foreign jurisdictions.  The tax rules and regulations in thesecountries are highly complex and subject to interpretation. The Company’sincome tax returns are subject to examination by the relevant taxingauthorities and in connection with such examinations, disputes can arise withthe taxing authorities over the interpretation or application of certain taxrules within the country involved.  TheCompany’s total unrecognized tax benefits, representing uncertain tax positionstaken or expected to be taken on tax returns, were $1.4 million as of September30, 2010 and December 31, 2009, which resulted in a reduction to the Company’sdeferred tax assets as of September 30, 2010 and December 31, 2009.

 

For the nine months ended September 30, 2010, the Company incurredoperating losses and recognized income tax of $1.5 million resulting fromBolivian withholding tax on management services provided in Bolivia.  Based on the limited history of the Company,an estimated effective tax rate is not used to report the year-to-dateresults.  For the period March 25, 2009to September 30, 2009, the Company recognized tax expense of $0.5 millionconsisting of $0.7 million Bolivia withholding tax on management services, less$0.2 million tax benefits for losses which offset previously recognizeddeferred tax liabilities.  ThePredecessor recognized income tax of $0.2 million for the period Januarythrough March 24, 2009, also due to Bolivia withholding tax on managementservices, and income tax of $2.5 million is included in discontinued operationsfor the same period.

 

Deferred tax liabilities of $0.2 million exist as of September 30, 2010and December 31, 2009, related to mineral properties owned by certaindisregarded subsidiaries of the Company whose book basis exceed the respectiveUS tax basis.  The deferred taxliabilities are included in other long-term liabilities on the balance sheet.

 

The Company believes it has had a change of ownership for purposes ofI.R.C. section 382 (“Sec. 382”), effective March 19, 2010, due in part to itsinitial public offering during the year and issuance of new shares as a resultof such offering. Sec. 382 establishes limits on the usage of US net operatinglosses generated by a company prior to a 50% change of shareholder ownershipduring a cumulative 3 year period.  TheCompany has made a preliminary calculation of the loss

 

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limitationresulting from the change of ownership and has determined that such limitationdid not result in the recognition of taxable income for the nine months endedSeptember 30, 2010.

 

**10.  Equity**

 

*Issuance of common stock for mineral property interest*

 

During January 2010 the Company acquired Hochschild Mining Group’s (“Hochschild”)35% interest in Minera El Quevar S.A. in exchange for 400,000 shares of the Company’scommon stock and a warrant to acquire 300,000 shares of the Company’s commonstock exercisable for three years at an exercise price of $15.00 pershare.  In accordance with ASC 810, “Consolidations”,the Company has reflected this transaction in equity with charges to commonstock and additional paid in capital and the elimination of approximately $0.8million of noncontrolling interest. No gain or loss was recognized on thetransaction. With the completion of this transaction, the Company now owns orcontrols 100% of the concessions related to the El Quevar project.

 

*Public offering and private placements of the Company’s common stock*

 

During January 2010 the Company completed a private placement of844,694 shares of its common stock to two investment funds managed by TheSentient Group (“Sentient”), which includes 745,318 shares issued in theinitial private placement plus an additional 99,376 shares issued upon exerciseof Sentient’s contractual pre-emptive right in order to maintain its 19.9%equity interest in the Company following completion of the Hochschildtransaction. These shares were sold at a purchase price of Cdn$7.06 per share,resulting in net proceeds to the Company of approximately $5.5 million.

 

On March 24, 2010 the Company completed a public offering of 4,000,000shares of common stock at an offering price of $8.50 per share. The Companysold 3,652,234 shares and a selling stockholder sold 347,766 shares.  Concurrent with the public offering, Sentientexercised its existing pre-emptive right and purchased in a private placementpursuant to Regulation S under the U.S. Securities Act of 1933 an additional905,065 shares of common stock at the public offering price of $8.50 per share.The aggregate net proceeds to the Company from the sale of the shares in thepublic offering and the sale of the shares to Sentient was approximately $35.0million after deducting underwriting discounts, commissions and expenses.

 

During October 2010, the company completed an additional publicoffering and private placement of its common stock as discussed in Note 15.

 

*Equity Incentive Plans*

 

In April 2009, the Company adopted the 2009 Equity Incentive Plan (the “EquityPlan”) pursuant to which awards of the Company’s common stock may be made toofficers, directors, employees, consultants and agents of the Company and itssubsidiaries.  The Company recognizes stock-based compensation costs usinga graded vesting attribution method whereby costs are recognized over therequisite service period for each separately vesting portion of the award.

 

Thefollowing table summarizes the status of the Company’s restricted stock grantsissued under the Equity Plan at September 30, 2010 and changes during the ninemonths then ended:

 
| **Restricted Stock Grants** | ** ** | **Number of  Shares** | ** ** | **Weighted Average  Grant Date Fair  Value Per Share** | ** ** |
|---------------------------------------|------------|----------------------------|------------|---------------------------------------------------------------------------------|------------|
| Outstanding at December 31, 2009      |       | 230,000                    |       | $                                                                               | 10.75      |   |
| Granted during the period             |       | 259,750                    |       | 8.00                                                                            |       |
| Restrictions lifted during the period |       | (134,000                   | )          | 10.52                                                                           |       |
| Forfeited during the period           |       | (4,000                     | )          | 8.73                                                                            |       |
| Outstanding at September 30, 2010     |       | 351,750                    |       | $                                                                               | 8.83       |   |

 

Onethird of the restricted stock granted during the period will vest on each ofthe first, second and third anniversaries of the grant date, provided theofficer or employee continues to serve the Company at that time.  Included in the shares for which therestrictions lifted during the period were 24,000 shares for which the liftingof the restriction was accelerated related to severance benefits for fiveterminated employees.  For the periodJanuary 1, 2010 through September 30, 2010 the Company recognized approximately$1.5 million of compensation expense related to the restricted stock grants andthe

 

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Companyexpects to recognize additional compensation expense related to these awards ofapproximately $1.5 million over the next two and a half years.

 

Thefollowing table summarizes the status of the Company’s stock option grantsissued under the Equity Plan at September 30, 2010 and changes during the ninemonths then ended:

 
| **Equity Plan Options**  | ** ** | **Number of   Shares** | ** ** | **Weighted  Average  Exercise  Price Per  Share** | ** ** |
|------------------------------------|------------|----------------------------------|------------|--------------------------------------------------------|------------|
| Outstanding at December 31, 2009   |       | —                           |       | $                                                      | —     |   |
| Granted during period              |       | 136,810                          |       | 8.01                                                   |       |
| Forfeited or expired during period |       | —                           |       | —                                                 |       |
| Exercised during period            |       | —                           |       | —                                                 |       |
| Outstanding at September 30, 2010  |       | 136,810                          |       | 8.01                                                   |       |
|                               |       |                             |       |                                                   |       |
| Exercisable at end of period       |       | —                           |       | —                                                 |       |
| Granted and expected to vest       |       | 131,693                          |       | 8.01                                                   |       |
|                                    |            |                                  |            |                                                        |            |  |

 

Onethird of the options granted during the period will vest on each of the first,second and third anniversaries of the grant provided the officer, director oremployee is still employed by the Company at that time.  For the period January 1, 2010 throughSeptember 30, 2010 the Company recognized approximately $0.2 million ofcompensation expense related to the option grants and the Company expects torecognize additional compensation expense related to these awards ofapproximately $0.4 million over the next 32 months.

 

Also,pursuant to the Equity Plan, the Company’s board of directors adopted theNon-Employee Director’s Deferred Compensation and Equity Award Plan (the “DeferredCompensation Plan”).  Pursuant to theDeferred Compensation Plan the non-employee directors receive a portion oftheir compensation in the form of Restricted Stock Units (“RSUs”) issued underthe Equity Plan. The RSUs vest on the first anniversary of the grant and eachvested RSU entitles the director to receive one unrestricted share ofcommon stock upon the termination of the director’s board service.

 

Thefollowing table summarizes the status of the RSU grants issued under theDeferred Compensation Plan at September 30, 2010 and changes during the ninemonths then ended:

 
| **Restricted Stock Units**  | ** ** | **Number of  Underlying  Shares** | ** ** | **Weighted Average  Grant Date Fair  Value Per Share** | ** ** |
|---------------------------------------|------------|----------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| Outstanding at December 31, 2009      |       | 25,000                                 |       | $                                                                               | 10.92      |   |
| Granted during the period             |       | 21,555                                 |       | 8.12                                                                            |       |
| Restrictions lifted during the period |       | —                                 |       | —                                                                          |       |
| Forfeited during the period           |       | —                                 |       | —                                                                          |       |
| Outstanding at September 30, 2010     |       | 46,555                                 |       | $                                                                               | 9.62       |   |

 

For the period January 1, 2010 through September 30,2010 the Company recognized approximately $0.1 million of compensation expenserelated to the RSU grants and expects to recognize additional compensationexpense related to these RSUs of approximately $0.1 million over the next 8months.

 

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**11.   Noncontrolling Interest**

 

On January 1, 2009the Company adopted certain provisions of ASC 810 related to the presentationof noncontrolling interest, previously called a minority interest.  A noncontrolling interest is the portion ofequity in a subsidiary not attributable, directly or indirectly, to a parent.

 

At December 31, 2009the major concessions at the Company’s El Quevar project were within a jointlyowned subsidiary of which the Company held a 65% interest and Hochschild heldthe remaining 35%.  At December 31,2009 Hochschild’s 35% interest was reflected in the consolidated balance sheetsas a noncontrolling interest of $0.8 million and was included as a component oftotal equity.  In January 2010 theCompany purchased Hochschild’s 35% interest in Minera El Quevar S.A. for stockand warrants (see Note 10).  As of September 30,2010 the Company has no noncontrolling interests.

 

The following schedule setsforth the amounts of income from continuing operations and discontinuedoperations attributable to the Successor’s and Predecessor’s shareholders:

 
| ** **                                                                                                 | ** ** | ** **                       | ** ** | **For The Period**     | ** ** | **For The Period**  | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                 | ** ** | **Nine Months**             | ** ** | **March 25, 2009**     | ** ** | **January 1, 2009** | ** ** |
| ** **                                                                                                 | ** ** | **Ended**                        | ** ** | **Through**                      | ** ** | **Through**                   | ** ** |
| ** **                                                                                                 | ** ** | **September 30, 2010** | ** ** | **September 30, 2009** | ** ** | **March 24, 2009**  | ** ** |
| ** **                                                                                                 | ** ** | **(Successor)**                  | ** ** | **(Predecessor)**                | ** ** |
| ** **                                                                                                 | ** ** | **(in thousands)**          | ** ** |
|                                                                                                       |       |                             |       |                             |       |                          |       |
| Amounts attributable to  Golden Minerals common stockholders and Predecessor’s ordinary shareholders: |       |                             |       |                             |       |                          |       |
| Income (loss) from  continuing operations                                                                  |       | $                                | (20,821    | )                                | $          | (13,314                       | )          | $ | 243,621 |   |
| Loss from discontinued  operations                                                                         |       | —                           |       | —                           |       | (12,022                       | )          |
| Net income (loss)                                                                                          |       | $                                | (20,821    | )                                | $          | (13,314                       | )          | $ | 231,599 |   |

 

**12.  Revenue and Cost of Services**

 

The Company was party to a Management Agreement withSumitomo under which it provided certain management services with respect tothe San Cristóbal mine. The Management Agreement terminated effectiveJune 30, 2010 as discussed below. The Management Agreement provided for anannual fee of $11.4 million which included approximately $5.4 million thatconstituted reimbursement for direct administrative expenses the Company incurredon behalf of the San Cristóbal mine. Under the terms of the ManagementAgreement, the Company received the fee and any reimbursements net of anyBolivian withholding taxes. The fee and reimbursements for administrative costsand Bolivian withholding taxes are reported as Revenue from Services in thestatement of operations following the guidance of ASC 605, “Revenue Recognition”regarding “income statement characterization of reimbursements received forout-of-pocket expenses incurred” and “reporting revenue gross as a principalversus net as an agent”.  ASC 605supports recording as gross revenue fees received for the reimbursement ofexpenses in situations where the recipient is the primary obligor and hascertain discretion in the incurrence of the reimbursable expense. The actualcosts incurred for the reimbursed direct administrative expenses are reportedas costs of services in the statement of operations. Reimbursed Bolivianwithholding taxes are reported as income taxes in the statement of operations.Prior to entering into the Management Agreement, ASML received a management feeof $450,000 per month from San Cristóbal to cover certain costs incurreddirectly by ASML.

 

For the first six months of 2010, through theJune 30, 2010 termination of the agreement, the Company recorded $6.2million as revenue related to the Management Agreement, comprised of $5.4million of fees and $0.8 million for reimbursed withholding taxes. The Companyalso recorded corresponding charges of $2.5 million to cost of services and$0.8 million to income taxes for the actual administrative costs andwithholding taxes reimbursable under the Management Agreement.

 

The Company and Sumitomo agreed to terminate theManagement Agreement effective June 30, 2010, six months earlier thanprovided by the terms of the agreement. As a result of the termination the Company received a $4.3 milliontermination fee comprised of $2.8 million in lieu of the performance ofservices by the Company for the final two quarters of 2010 and waiver ofSumitomo’s 6-month notice requirement, $1.0 million for a termination payment(as provided in the Management Agreement) and approximately $0.5 million for aperformance bonus for the first two quarters of 2010.  The termination fee proceeds were partiallyoffset by the return of prepaid administration fees for services not performedthrough June 30, 2010 of approximately $1.1 million resulting in a netpayment from Sumitomo of $3.2 million received on

 

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June 30, 2010. As a result of the termination werecognized additional revenue of $4.9 million, comprised of the $4.3 million oftermination fees as discussed above and $0.6 million for reimbursed withholdingtaxes.

 

For the quarter ended September 30, 2010 theCompany recorded approximately $0.1 million of additional revenue and minimalamounts to cost of services and income taxes related to certain final servicescompleted under the agreement.

 

**13.  Commitments and Contingencies**

 

As previously disclosed, the Predecessor concluded,based on the results of an internal investigation conducted under the directionof its Audit Committee in late 2005 and early 2006, that certain former senioremployees of one of its South American subsidiaries were involved in makingimpermissible payments of approximately $125,000 to government officials in2003 and 2004. The Predecessor contacted the Department of Justice (“DOJ”) andSEC during 2006 and reported the results of the internal investigation and wasinformed that the SEC and DOJ would commence investigations with respect tothese matters, including possible violations of the Foreign Corrupt PracticesAct. Subsequently, the Predecessor and then the Company entered intodiscussions with the SEC staff concerning a settlement of the conduct subject tothe SEC’s investigation. As a result, the Company reached an agreement inprinciple with the SEC staff which, if approved by the Commission, wouldresolve this matter with the SEC. Under the terms of the proposed settlement,the Company, on neither an admit nor deny basis, would agree to the entry of anadministrative cease and desist order prohibiting the Company from futureviolations of Sections 13(b)(2)(A), 13(b)(2)(B) and 30A of theSecurities Exchange Act of 1934. Moreover, under the terms of the proposedsettlement, the SEC staff would not recommend that the Commission require thepayment of disgorgement, civil money penalties, prejudgment interest or theappointment of a corporate monitor. The proposed settlement is subject toCommission approval. The Company cannot guarantee that the Commission willultimately accept the terms of the proposed settlement.

 

In August 2009, the DOJ informed the Company thatit has closed its investigation based on, among other things, the Company’spending settlement with the Commission.

 

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**14.  Supplemental Cash Flow Information**

 

The following table reconciles net income (loss) forthe period to cash from operations:

 
| ** **                                                                                  | ** ** | ** **                       | ** ** | **For The Period**     | ** ** | **For The Period**  | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                                                                  | ** ** | **Nine Months**             | ** ** | **March 25, 2009**     | ** ** | **January 1, 2009** | ** ** |
| ** **                                                                                  | ** ** | **Ended**                        | ** ** | **Through**                      | ** ** | **Through**                   | ** ** |
| ** **                                                                                  | ** ** | **September 30, 2010** | ** ** | **September 30, 2009** | ** ** | **March 24, 2009**  | ** ** |
| ** **                                                                                  | ** ** | **(Successor)**                  | ** ** | **(Predecessor)**                | ** ** |
| ** **                                                                                  | ** ** | **(in thousands)**          | ** ** |
| Cash flows from  operating activities:                                                      |       |                             |       |                             |       |                          |       |
| Net (loss) income  before noncontrolling interests                                          |       | $                                | (20,921    | )                                | $          | (13,314                       | )          | $ | 239,468 |   |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities:       |       |                             |       |                             |       |                          |       |
| Amortization and depreciation                                                               |       | 751                              |       | 384                              |       | 10,977                        |       |
| Accretion of asset  retirement obligation                                                   |       | —                           |       | —                           |       | 232                           |       |
| Amortization of  premiums and discounts                                                     |       | —                           |       | —                           |       | 37                            |       |
| Mark-to-market loss on  derivative positions                                                |       | —                           |       | —                           |       | 36                            |       |
| Gain on sale of  marketable securities                                                      |       | (131                             | )          | —                           |       | —                        |       |
| Fair value of stock/warrants  received for mineral rights                                   |       | (423                             | )          | (168                             | )          | —                        |       |
| Loss (gain) on sale of  assets, net                                                         |       | (64                              | )          | 167                              |       | —                        |       |
| Loss on auction rate  security investments                                                  |       | —                           |       | 2,199                            |       | 828                           |       |
| Income tax provision                                                                        |       | 91                               |       | —                           |       | —                        |       |
| Gain on extingushment  of debt                                                              |       | —                           |       | —                           |       | (248,165                      | )          |
| Loss (gain) on sale of  interest in subsidiary                                              |       | —                           |       | —                           |       | 8,409                         |       |
| Fresh start accounting  adjustment                                                          |       | —                           |       | —                           |       | (9,122                        | )          |
| Treasury shares  acquired and retired                                                       |       | (197                             | )          | —                           |       | —                        |       |
| Stock compensation                                                                          |       | 1,859                            |       | 1,219                            |       | 2,920                         |       |
| Changes in operating  assets and liabilities:                                               |       |                             |       |                             |       |                          |       |
| (Increase) decrease in  trade accounts receivable                                           |       | 1,460                            |       | (26                              | )          | (11,893                       | )          |
| (Increase) decrease in  accrued interest receivable                                         |       | —                           |       | 152                              |       | 84                            |       |
| Port fees applied to  Port of Mejillones note receivable                                    |       | —                           |       | —                           |       | 709                           |       |
| (Increase) decrease in  prepaid expenses and other assets                                   |       | 552                              |       | (674                             | )          | 6,063                         |       |
| Increase in inventories                                                                     |       | —                           |       | —                           |       | (12,000                       | )          |
| Increase in value added  tax recoverable, net                                               |       | —                           |       | —                           |       | (11,696                       | )          |
| Increase in accrued  interest payable                                                       |       | —                           |       | —                           |       | 11,496                        |       |
| Increase (decrease) in  deferred revenue                                                    |       | —                           |       | —                           |       | (3,227                        | )          |
| Increase (decrease) in  accounts payable and accrued liabilities net of amounts capitalized |       | 250                              |       | (5,897                           | )          | 2,462                         |       |
| Increase (decrease) in  deferred leasehold payments                                         |       | (41                              | )          | 441                              |       | —                        |       |
| Decrease in deferred  taxes, net                                                            |       | (26                              | )          | (227                             | )          | (2,262                        | )          |
| Other increase  (decrease)                                                                  |       | 65                               |       | (16                              | )          | 795                           |       |
| Net cash used in  operating activities                                                      |       | $                                | (16,775    | )                                | $          | (15,760                       | )          | $ | (13,849 | ) |

 

The following table sets forth supplemental cash flowinformation and non-cash transactions:

 
| ** **                                              | ** ** | **Nine Months**    | ** ** | **For The Period**     | ** ** | **For The Period**  | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|----------------------------------|------------|-------------------------------|------------|
| ** **                                              | ** ** | **Ended**               | ** ** | **March 25, 2009**     | ** ** | **January 1, 2009** | ** ** |
| ** **                                              | ** ** | **September 30,**  | ** ** | **Through**                      | ** ** | **Through**                   | ** ** |
| ** **                                              | ** ** | **2010**                | ** ** | **September 30, 2009** | ** ** | **March 24, 2009**  | ** ** |
| ** **                                              | ** ** | **(Successor)**         | ** ** | **(Predecessor)**                | ** ** |
| ** **                                              | ** ** | **(in thousands)** | ** ** |
| Supplemental disclosure  of non-cash transactions:      |       |                    |       |                             |       |                          |       |
| Initial measurement of  asset retirement obligation     |       | $                       | —     |                             | $          | —                        |       | $ | 288 |   |
| Mineral rights acquired  with common stock and warrants |       | $                       | 794        |                             | $          | —                        |       | $ | — |   |

 

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**15.  Subsequent Events**

 

*Public offering and privateplacements of the Company’s common stock*

 

On October 22, 2010, the Company closed a publicoffering of 4,663,250 shares of its common stock, which includes 608,250 sharesissued to the underwriters upon exercise in full of their over-allotment option.All of the shares were sold at a price per share of $18.50.  Concurrent with the public offering, Sentientpurchased in a private placement pursuant to Regulation S under the SecuritiesAct of 1933 an additional 1,190,031 shares of the Company’s common stock at thepublic offering price of $18.50, increasing its ownership percentage to 19.9% (excludingrestricted common stock held by employees). The aggregate net proceeds to theCompany from the public offering and the Sentient private placement wasapproximately $103.0 million, net of offering costs of approximately $0.8million, the underwriting discount of approximately $4.3 million, and theplacement agent commission of approximately $0.2 million.

 

Following is an unaudited, condensed consolidatedpro-forma balance sheet that was prepared as if the public offering and privateplacement had been completed on September 30, 2010.  Actual amounts recorded may vary from thesepro-forma amounts pending a final determination of costs associated with theoffering.  These unaudited condensed consolidated pro forma financialstatements should be read in conjunction with our historical financialstatements as of September 30, 2010 included in this Form 10-Q.

 

**GoldenMinerals Company**

**CondensedConsolidated Pro-Forma Balance Sheet**

**September 30,2010**

**(Expressedin United States dollars)**

**(Unaudited)**

 
| ** **                                                                                            | ** ** | ** **                                                | ** ** | **Pro-Forma**                | ** ** | ** ** | ** ** | ** **    | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------------------------|------------|------------|------------|---------------|------------|
| ** **                                                                                            | ** ** | ** **                                                | ** ** | **Adjustments**              | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                                                                                            | ** ** | ** **                                                | ** ** | **to Reflect the** | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                                                                                            | ** ** | ** **                                                | ** ** | **Public Offering**     | ** ** | ** ** | ** ** | ** **    | ** ** |
| ** **                                                                                            | ** ** | **Historical**                                            | ** ** | **And**                      | ** ** | ** ** | ** ** | **Pro-Forma** | ** ** |
| ** **                                                                                            | ** ** | **Amounts**                                               | ** ** | **Private Placement**   | ** ** | **Note**   | ** ** | **Amounts**   | ** ** |
| ** **                                                                                            | ** ** | **(in thousands, except share data)** | ** ** |
| **Assets**                                                                                            |       |                                                      |       |                         |       |       |       |          |       |
| Current assets                                                                                        |       |                                                      |       |                         |       |       |       |          |       |
| Cash and cash  equivalents                                                                            |       | $                                                         | 30,268     |                         | $          | 103,002    |       | (a)           |       | $ | 133,270 |   |
| Investments                                                                                           |       | 335                                                       |       | —                       |       |       |       | 335           |       |
| Prepaid expenses and  other assets                                                                    |       | 1,568                                                     |       | (50                          | )          | (b)        |       | 1,518         |       |
| Total current assets                                                                                  |       | 32,171                                                    |       | 102,952                      |       |       |       | 135,123       |       |
|                                                                                                  |       |                                                      |       |                         |       |       |       |          |       |
| Property, plant and  equipment, net                                                                   |       | 9,084                                                     |       | —                       |       |       |       | 9,084         |       |
| Assets held for sale                                                                                  |       | 1,316                                                     |       | —                       |       |       |       | 1,316         |       |
|                                                                                                  |       |                                                      |       |                         |       |       |       |          |       |
| Prepaid expenses and  other assets                                                                    |       | 447                                                       |       | —                       |       |       |       | 447           |       |
| Total assets                                                                                          |       | $                                                         | 43,018     |                         | $          | 102,952    |       |          |       | $ | 145,970 |   |
| ** **                                                                                            |       |                                                      |       |                         |       |       |       |          |       |
| **Liabilities  and Equity**                                                                           |       |                                                      |       |                         |       |       |       |          |       |
| ** **                                                                                            |       |                                                      |       |                         |       |       |       |          |       |
| Current liabilities                                                                                   |       |                                                      |       |                         |       |       |       |          |       |
| Accounts payable and  other accrued liabilities                                                       |       | $                                                         | 2,674      |                         | $          | (50        | )          | (b)           |       | $ | 2,624 |   |
| Other current  liabilities                                                                            |       | 67                                                        |       | —                       |       |       |       | 67            |       |
| Total current  liabilities                                                                            |       | 2,741                                                     |       | (50                          | )          |       |       | 2,691         |       |
| Long term liabilities                                                                                 |       | 584                                                       |       | —                       |       |       |       | 584           |       |
| Total liabilities                                                                                     |       | 3,325                                                     |       | (50                          | )          |       |       | 3,275         |       |
|                                                                                                  |       |                                                      |       |                         |       |       |       |          |       |
| Equity (Note 10)                                                                                      |       |                                                      |       |                         |       |       |       |          |       |
| Common stock, $.01 par value,  50,000,000 shares authorized; 15,124,567 shares issued and outstanding |       | 93                                                        |       | 58                           |       | (a)        |       | 151           |       |
| Additional paid in  capital                                                                           |       | 80,784                                                    |       | 102,944                      |       | (a)        |       | 183,728       |       |
| Accumulated deficit                                                                                   |       | (41,197                                                   | )          | —                       |       |       |       | (41,197       | )          |
| Accumulated other  comprehensive income (loss)                                                        |       | 13                                                        |       | —                       |       |       |       | 13            |       |
| Total equity                                                                                          |       | 39,693                                                    |       | 103,002                      |       |       |       | 142,695       |       |
| Total liabilities and  equity                                                                         |       | $                                                         | 43,018     |                         | $          | 102,952    |       |          |       | $ | 145,970 |   |

 

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**(a)****         **Thispro-forma adjustment reflects the issuance of 4,663,250 shares in the publicoffering at $18.50 per share for gross proceeds of $86.3 million and netproceeds of $82.0 million after deducting $4.3 million for underwriters’commissions plus the issuance of 1,190,031 shares in the private placement at$18.50 per share resulting in gross proceeds of $22.0 million and net proceedsof $21.8 after deducting placement agent fees of $0.2 million.  The resulting total gross proceeds of $103.8million have been reduced by $0.8 million of estimated legal and accountingcosts related to the public offering and private placement, resulting inaggregate net proceeds of approximately $103.0 million.

 

**(b)****         **Thispro-forma adjustment reverses $50.0 thousand of legal and accounting costsrelated to the public offering and private placement that the Company hadaccrued at September 30, 2010.  Thetotal of $0.8 million of estimated legal and accounting costs related to thepublic offering and private placement are included in adjustment a) above.

 

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**Item 2:Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

 

**General**

 

Golden Minerals Company (“Golden Minerals” or “we”)was incorporated in Delaware in March 2009, and is the successor to ApexSilver Mines Limited (“ASML”) for purposes of reporting under U.S. federalsecurities laws.  References in thisdiscussion and analysis to “Successor” refer to Golden Minerals and itssubsidiaries on or after March 25, 2009, and references to “Predecessor”refer to ASML and its subsidiaries prior to March 25, 2009.

 

We are a mineral exploration company with adiversified portfolio of precious metals and other mineral explorationproperties located in or near the traditional precious metals producing regionsof Mexico and South America. We are currently focused on the advancement of ourEl Quevar silver project in northwestern Argentina.

 

During the nine months ended September 30, 2010,our only sources of income have been fees under our management servicesagreement with Sumitomo, royalty and interest income, and sales of non-coreproperties. The management services agreement with Sumitomo was terminatedeffective June 30, 2010 as discussed in Note 12 to the UnauditedConsolidated Financial Statements.  Weincurred a net operating loss during the first nine months of 2010 and expectto incur a net operating loss for the remainder of 2010 and future periodsunless and until El Quevar or one of our other exploration properties isdeveloped and begins to generate operating income. We cannot predict when or ifthat will occur.

 

This discussion should be read in conjunction withManagement’s Discussion and Analysis included in our Annual Report onForm 10-K for the fiscal year ended December 31, 2009.

 

**Overview**

 

During the third quarter and first nine months of 2010we focused our efforts primarily on advancing our El Quevar project, onraising additional capital, and during the first six months of 2010, on managingthe San Cristóbal mine for Sumitomo under the terms of theSan Cristóbal Management Services Agreement (the “Management Agreement”).We have also continued to make progress in advancing the exploration of ourportfolio of exploration properties. An overview of certain significant recentevents is provided below:

 

·                  In October 2010, we closed a public offering of4,663,250 shares of our common stock, which includes 608,250 shares issued tothe underwriters upon exercise in full of their over-allotment option. All ofthe shares were sold at a price per share of $18.50.  Concurrent with the public offering SentientGlobal Resources Fund III, LP and SGRF III Parallel I, LP, collectivelyreferred to as “Sentient”, purchased in a private placement pursuant toRegulation S under the Securities Act of 1933 an additional 1,190,031 shares ofour common stock at the public offering price of $18.50, increasing their ownershippercentage to 19.9% (excluding restricted common stock held by employees). Theaggregate net proceeds to us from the public offering and the Sentient privateplacement was approximately $103.0 million, net of offering costs ofapproximately $0.8 million, the underwriting discount of approximately $4.3million, and the placement agent commission of approximately $0.2 million.

 

·                  During the third quarter we continued to focus ondefining the extent of the Yaxtché deposit and conducting feasibility work atour 100% controlled El Quevar silver project, located in the Salta province ofArgentina. The Yaxtché deposit is one of 11 targets currently identified at theEl Quevar project. As of mid October 2010, we have completed approximately52,500 meters of diamond drilling in 254 drill holes. Of these holes, 189 weredrilled to test the main Yaxtché zone for potential mineralization, with about65% of the holes intersecting significant silver mineralization.  In addition, as of midOctober construction of the underground decline at the Yaxtché deposit hasadvanced approximately 175 meters of the 225 meters expected to be required toaccess ore. The production-sized decline will be used to confirm the resourcemodel and mining methods, and take bulk samples for additional metallurgicaltesting. Other ongoing work includes metallurgical testing and process design.

 

·                  Utilizing data from 168 drill holes, MiconInternational Limited (“Micon”) completed updated technical reports for the ElQuevar project in August 2010, in accordance with the requirements of theSEC’s Guide 7 and Canadian National Instrument 43-101. The reports indicatethat there are an estimated 902,000 tonnes of mineralized material at anaverage silver grade of approximately 310 grams per tonne.  During the third quarter 2010 we determinedthat additional drilling is warranted at El Quevar to further define the extentof the resource, and we have decided to delay completion of the feasibilitystudy originally scheduled to be

 

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completed in the fourthquarter of 2010. A larger resource base may support a higher production ratethan initially contemplated.

 

*The term “mineralized material”, although permissible under SECIndustry Guide 7, does not indicate “reserves” by SEC standards.  We cannot be certain that any part of theYaxtche deposit will ever be confirmed or converted into SEC Industry Guide 7compliant “reserves”.  Investors arecautioned not to assume that all or any part of the mineralized material willever be confirmed or converted into reserves or that mineralized material canbe economically or legally extracted.*

 

·                  During the quarter we initiated drilling on theRabioso and La Pinta targets in northern Zacatecas state.  Sample results received from the first sevencore holes out of a ten hole initial drill program include narrow goldintercepts in three holes.  RAB-10-03intercepted 2.2 meters averaging 2.3 grams per tonne (g/t) from 43 meters depthand 3.7 meters averaging 1.4 g/t from 47 meters.  RAB-10-06 intercepted 1.3 meters averaging2.0 g/t from 52 meters and 1.7 meters averaging 4.2 g/t from 60 meters.  RAB-10-07 intercepted 1.7 meters averaging3.0 g/t from 125 meters depth.  Theremaining assayed intervals were consistently of low values in gold and othermetals.  Assay results from additionalholes at Rabioso are pending.  Assayresults have been received from the first seven holes out of a planned ten holerotary drill program at the La Pinta target, directly south of Goldcorp’sPenasquito land position.  At La Pinta weare selectively drilling rotary holes in an effort to identify the source ofintrusive float found at the surface with anomalous base and precious metalvalues.  Results from the first sevenholes were uniformly low in gold and base metal values as the source of theintrusive float has yet to be determined.

 

**Results of Operations**

 

For the results ofcontinuing operations discussed below, we compare the results from continuingoperations of the Successor for the three

 

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month period ended September 30, 2010 to theresults from continuing operations for the three month period endedSeptember 30, 2009.  We also comparethe results from continuing operations for the nine month period ended September 30,2010 of the Successor to (i) results of the continuing operations of theSuccessor for the period from March 25, 2009 through September 30,2009 and (ii) the results of continuing operations of the Predecessor forthe 83-day period ended March 24, 2009. The results of operations of theSan Cristóbal mine and related subsidiaries that were sold during the firstquarter 2009 are aggregated and presented as discontinued operations of thePredecessor for the 83-day period ended March 24, 2009.  The Successor has no discontinued operationsto report.

 

**Three Months Ended September 30,2010**

 

*Continuing Operations*

 

*Managementservice fees.*Werecorded $0.1 million of management service fees for the third quarter 2010related to the final services performed under the Management Agreement whichwas terminated effective June 30, 2010 as discussed above.  Management service fees for the third quarter2009 were $2.7 million, all related to the Management Agreement and arecomprised of $2.3 million of fees and $0.4 million for reimbursed withholdingtaxes.

 

*Cost ofservices.*Werecorded minimal costs of services for the third quarter 2010. The cost ofservices is comprised of reimbursed direct administrative expenses incurred byus related to the final services performed under the Management Agreement whichwas terminated effective June 30, 2010 as discussed above.  Cost of services for the third quarter 2009was $1.2 million comprised of reimbursed direct administrative expensesincurred by us related to the Management Agreement.

 

*Exploration*. Our exploration expenses, includingproperty holding costs and allocated administrative expenses, were $3.8 millionfor the third quarter 2010, as compared to $3.6 million for the third quarter2009.  Exploration expenses for 2010 wereincurred primarily on drilling programs in Argentina, (excluding amounts spenton the El Quevar project feasibility work) and in Mexico and Peru. Explorationexpenses also include property holding costs and costs incurred by the localexploration offices. Exploration expenses for 2009 were incurred primarily atthe El Quevar project in Argentina and in Mexico and Peru and include propertyholding costs and costs incurred by the local exploration offices.

 

*ElQuevar feasibility*.In the first quarter we began recording separately expenses related to the feasibilitywork on the Yaxtché deposit of our El Quevar project. During the third quarter2010, we incurred $4.0 million of expenses related to feasibility work on theYaxtché deposit primarily related to development of the exploration drift,drilling and engineering work.  Costsincurred for work performed outside of our El Quevar project are included inexploration expense discussed above. In addition to amounts expensed during thethird quarter 2010, we purchased approximately $0.8 million of mining equipmentand had outstanding approximately $0.8 million of advance payments to equipmentmanufacturers at September 30, 2010. We did not incur any costs related to the El Quevar project feasibilitywork during the third quarter 2009.

 

*Administrative*. Administrative expenses were $1.9 million for the third quarter 2010compared to $2.5 million for the third quarter 2009.  Administrative expenses were primarilyrelated to public company costs, corporate activities in support of our ElQuevar feasibility work, exploration programs and our management services forthe San Cristóbal mine.  The reduction inthe third quarter 2010 administrative expenses as compared to administrativeexpenses for the same period of 2009 is primarily related to the reduction ofstaff and office lease costs in 2009 following our emergence fromreorganization and additional staff reductions during the second quarter 2010.

 

*Other Operating Income Expense, Net.* During the third quarter 2010 we recorded other net operating income ofapproximately $0.1 million compared to other net operating income of $0.3million for the third quarter 2009.  The2010 amount is primarily related to gains on the sale of certain operatingassets and mineral rights partially offset by impairments recorded on certainassets abandoned or held for sale. The 2009 amount includes approximately $0.6million gains on the sale of certain operating assets and mineral rightspartially offset by a $0.3 million write off of certain exploration propertiesthat no longer hold an interest to the Company.

 

*Loss on Auction Rate Securities.* During the third quarter 2009 we recorded a loss of $0.9 million relatedto auction rate securities (“ARS”) investments. The auctions for certain of our ARS began to fail during the thirdquarter of 2007 and continued to fail through third quarter 2009, at whichpoint we sold all of our remaining ARS investments in a secondary market.  We did not hold any ARS investments duringthe third quarter 2010.

 

*Interest and Other Income*. We recorded $0.1 million of interest and other income for the thirdquarter of 2010 and the third quarter 2009. The amounts are primarily related to interest earned on available cashand cash equivalent balances.

 

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*Royalty Income*. During the third quarter 2010 we recorded $0.1 million of royalty incomecompared to $0.3 million for the third quarter 2009.  The royalty income is related to Excellon’sPlatosa mine in Mexico, on which we retained a net smelter return royalty whichvaries from period to period depending on production from the mine.

 

*Income Taxes*. We are subject to U.S. income taxes on income derived from servicesprovided to the San Cristóbal mine. Otherwise, we do not currently conduct business in the U.S. that wouldgenerate significant U.S. taxable income. Our income tax provisions were $0.0 million and $0.3 million for thethird quarter 2010 and the third quarter 2009, respectively, and consistprimarily of withholding taxes either accrued or paid to Bolivia in connectionwith management services provided to the San Cristóbal mine.

 

**Nine Months Ended September 30,2010**

 

*Continuing Operations*

 

*Managementservice fees.*Werecorded $11.2 million of management service fees for the first nine months of2010.  The management service fees arecomprised of $5.5 million of fees, a $4.3 million early termination payment, asdiscussed above, and $1.4 million for reimbursed withholding taxes.  Management service fees for the first ninemonths of 2009 were $7.4 million ($6.0 million and $1.4 million for theSuccessor and Predecessor, respectively). The Successor’s $6.0 million of feesis comprised of $5.3 million of fees and $0.7 million of reimbursed withholdingtaxes. The $1.4 million 2009 Predecessor amount was related to fees received bythe Predecessor from a subsidiary included in discontinued operations.

 

*Cost ofservices.*Werecorded $2.6 million of costs of services for the first nine months of 2010.The cost of services is comprised of reimbursed direct administrative expensesincurred by us related to the Management Agreement.  Cost of services for the first nine months of2009 was $2.3 million (all related to the Successor).

 

*Exploration*. Our exploration expenses, includingproperty holding costs and allocated administrative expenses, were $9.9 millionfor the first nine months of 2010, as compared to $10.6 million for the firstnine months of 2009 ($7.1 million and $3.5 million for the Successor andPredecessor, respectively).  Explorationexpenses for 2010 were incurred primarily in Argentina, (excluding amountsspent on the El Quevar project feasibility work) and in Mexico and Peru andinclude property holding costs and costs incurred by the local explorationoffices. Exploration expenses for 2009 were incurred primarily at the El Quevarproject in Argentina and in Mexico and Peru. Exploration expenses also includeproperty holding costs and costs incurred by the local exploration offices.

 

*ElQuevar feasibility*.In the first quarter we began seperately recording expenses related to thefeasibility work on the Yaxtché deposit. During the first nine months of 2010,we incurred $10.0 million of expenses related to feasibility work on theYaxtché deposit, primarily related to development of the exploration drift,drilling and engineering work.  Costsincurred for work performed outside of our El Quevar project are included inexploration discussed above. In addition to amounts expensed during the firstnine months of 2010, we purchased approximately $2.6 million of miningequipment and had outstanding approximately $0.8 million of advance payments toequipment manufacturers at September 30, 2010.  We did not incur any costs related to the ElQuevar project feasibility work during the first nine months of 2009.

 

*Administrative*. Administrative expenses were $6.3 million for the first nine months of2010 compared to $10.7 million for the first nine months of 2009 ($5.9 millionand $4.8 million for the Successor and Predecessor, respectively).  Administrative expenses for 2010 wereprimarily related to public company costs, corporate activities in support ofour El Quevar feasibility work, exploration programs, our management servicesfor the San Cristóbal mine and financing efforts.  Administrative expenses for 2009 included publiccompany costs and were primarily related to corporate activities in support ofour operation of the San Cristóbal mine and exploration programs.  Reorganization expenses for the first ninemonths of 2009 were $4.6 million ($0.9 million and $3.7 million for theSuccessor and Predecessor, respectively). The reorganization expenses related to expenses for professionalservices incurred as a result of our bankruptcy filing and the sale of ourinterest in the San Cristóbal mine to Sumitomo during the first quarter2009.  We incurred no reorganizationexpenses during the first nine months of 2010.

 

*Other Operating Income Expense, Net.* During the first nine months of 2010 we recorded other net operatingincome of approximately $0.2 million compared to other net operating income of$0.3 million for the first nine months of 2009. The 2010 amount consists of $0.5 million of gains on the sale of certainoperating assets and mineral rights partially offset by $0.3 million ofimpairments recorded on certain assets abandoned or held for sale. The 2009amount includes approximately $0.6 million gains on the sale of certainoperating assets and mineral rights partially offset by a $0.3 million writeoff of certain exploration properties that no longer hold an interest to theCompany.

 

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*Loss on Auction Rate Securities.* During the first nine months of 2009 the Predecessor recorded a loss of$3.0 million ($2.2 million and $0.8 million for the Successor and Predecessor,respectively) related to ARS investments. The auctions for certain of our ARS began to fail during the thirdquarter of 2007 and continued to fail through third quarter 2009, at whichpoint we sold all of our remaining ARS investments in a secondary market.  We did not hold any ARS investments duringthe first nine months of 2010.

 

*Interest and Other Income*. We recorded interest and other income of $0.4 million for the first ninemonths of 2010 compared to $1.2 million for the first nine months of 2009 ($0.2million and $1.0 million for the Successor and Predecessor, respectively).  Interest and other income for the first ninemonths of 2010 consisted primarily of $0.3 million of income from the sale ofcertain mineral rights and $0.1 million of interest income. The first ninemonths of 2009 amounts were primarily related to interest earned on the higheraverage cash and investment balances held by the Predecessor during the firstquarter 2009.

 

*Royalty Income*. During the first nine months of 2010, we recorded $0.2 million ofroyalty income compared to $0.5 million for the first nine months of 2009 ($0.4million and $0.1 million for the Successor and Predecessor, respectively).  The royalty income is related to Excellon’sPlatosa mine in Mexico on which we retained a net smelter return royalty, whichvaries from period to period depending on production from the mine.

 

*Income Taxes*.  We are subject to U.S. income taxes on incomederived from services provided to the San Cristóbal mine.  Otherwise, we do not currently conductbusiness in the U.S. that would generate significant U.S. taxable income.  Our income tax provisions were $1.5 and $0.7for the first nine months of 2010 and the first nine months of 2009 ($0.5million and $0.2 million for the Successor and Predecessor, respectively), andconsist primarily of withholding taxes either accrued or paid to Bolivia inconnection with management services provided to the San Cristóbal mine.

 

*Discontinued Operations — SanCristóbal.*

 

The $4.2 million loss from discontinued operations forthe 83-day period ended March 24, 2009 was related to the San Cristóbalasset group that was sold on March 24, 2009 and includes an $8.4 millionloss on the sale of the San Cristóbal asset group.  See Note 2 to the consolidated financialstatements for details of the $4.2 million loss from discontinued operations.

 

**Liquidity, Capital Resources andGoing Concern**

 

At September 30, 2010 our aggregate cash andshort-term investments totaled $30.6 million, which included $30.3 million ofcash and cash equivalents and $0.3 million of short term investments. Our cashand short-term investment balance is significantly higher than the $9.0 millionin similar assets held at December 31, 2009 due to the receipt ofapproximately $40.5 million in net proceeds during the first quarter from theissuance of our common stock in a public offering and two separate privateplacements to Sentient,  proceeds of $7.2million, net of expenses and taxes, related to the Management Agreement with Sumitomo which was terminatedeffective June 30, 2010, partially offset by $26.1 million spent duringthe nine months ended September 30, 2010 on the initial feasibility workat our El Quevar project, exploration and general and administrative activities,including changes in working capital.

 

On October 22, 2010 we closed a public offeringof 4,663,250 shares of our common stock, at a public offering price of $18.50per share.  Concurrent with the closingof the public offering, we closed a private placement with our largeststockholder, The Sentient Group, of an additional 1,190,031 shares of ourcommon stock at the public offering price of $18.50 per share. The publicoffering and private placement totaled 5,853,281 shares at a price of $18.50per share, resulting in estimated net proceeds to us of approximately $103.0million after deducting underwriting discounts, placement agent fees andestimated offering expenses.

 

With our cash and investment balance atSeptember 30, 2010 of $30.6 million and the $103.0 million of net proceedsreceived from the October public offering and private placement, we planto spend the following amounts during the remainder of 2010 and through the endof 2011 pursuant to our long-term business strategy:

 

·                  Up to $16.5 million through thefirst quarter of 2011 to fund the completion of the $30.0 million of initial feasibilitywork at our El Quevar project, as outlined in our March 2010 publicoffering, for continuation of exploration drilling, underground drifting, andrelated technical engineering and project assessment;

 

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·                  An additional approximately$54.0 million to be incurred at our El Quevar project beginning in 2011 tofund the continuation of exploration drilling, underground drifting, andrelated technical engineering and project assessment to further define theextent of the resource before completing a feasibility study;

 

·                  Approximately $6.5 million to fundexploration of identified targets on our portfolio of exploration propertiesthrough mid 2011, with the possibility of additional amounts during the secondhalf of 2011 for early and advanced stage drilling programs, depending on thesuccess of our targeted exploration program and generative explorationactivities;

 

·                  Approximately $6.0 million throughthe end of 2011 on other generative exploration activities and property holdingcosts related to our remaining portfolio of exploration properties conductedthrough our principal exploration offices located in South America;

 

·                  Approximately $9.0 million throughthe end of 2011on general and administrative costs, working capital and othercorporate purposes.

 

We plan to fund the expenditures described above fromour cash and investment balances at September 30, 2010 of $30.6 million,from the estimated net proceeds of the October public offering and privateplacement of $103.0 million and from approximately $1.0 million from royaltiesand other income through the end of 2011. Based on these projections we would end the years 2010 and 2011 withcash and investment balances of approximately $117.0 million and $43.0 millionfor the respective years.

 

The actual amount that we spend through the end of2011 may vary significantly from the amounts specified above, and will dependon a number of factors, including the results of our continued explorationactivities and project assessment work at El Quevar and our other explorationproperties.  There can be no assurancethat the expenditures planned for El Quevar will demonstrate the economicviability of the project. Depending on the opportunities, economic conditionsand the results of the activities described above at El Quevar and our otherexploration properties, we may use a portion of the proceeds to invest inacquisitions of other exploration, development or producing properties.

 

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If the El Quevar feasibility study is positive, significantadditional capital would be required to complete development and constructionof an underground mine and processing facility at El Quevar. To fundcompletely the El Quevar project and other exploration drilling programs beyond2011 we will have to raise additional capital or enter into other financingarrangements. There can be no assurance that we will be successful in raisingadditional capital or obtaining financing in the future on terms acceptable tous or at all. If we are unable to obtain additional capital or financing during2011 or beyond, the potential development of the El Quevar project couldbe delayed following the completion of the feasibility work outlined above for2011 and we may have to significantly reduce spending on other explorationprojects to preserve cash.

 

**Significant Accounting Policies**

 

See Note 3 to theUnaudited Consolidated Financial Statements for recently adopted standards andnew accounting standards.

 

**Forward-Looking Statements**

 

Some information contained in or incorporated byreference into this report may contain forward-looking statements. Thesestatements include comments regarding:

 

·                     Our expectation that cash on hand and anticipated incomewill be sufficient to fund proposed spending through 2010 and 2011;

 

·                     Our planned spending on general and administrative andexploration costs and our expected cash receipts from interest and royaltyincome;

 

·                     The anticipated timing and cost of the advancement ofour El Quevar project, including projected costs to complete the developmentand construction if the results of the feasibility study are positive; and

 

·                     The timing and cost of the evaluation and expansion ofour exploration portfolio, including activities to be conducted during 2010 oncertain of our exploration properties.

 

The use of any of the words “anticipate,” “continues,”“estimate,” “expect,” “may,” “will,” “project,” “should,” “believe” and similarexpressions are intended to identify uncertainties. We believe the expectationsreflected in those forward-looking statements are reasonable. However, wecannot assure that these expectations will prove to be correct. Actual resultscould differ materially from those anticipated in these forward-lookingstatements as a result of the factors set forth below and other factors setforth in, or incorporated by reference into this report:

 

·                        Results of future exploration at the ElQuevar project;

 

·                        Results of future exploration at ourexploration portfolio properties;

 

·                        The economic viability of and the resultsof the proposed feasibility study for the El Quevar project;

 

·                        Our ability to raise necessary capital tofinance advancement of the El Quevar project and other projects in ourexploration portfolio;

 

·                        Delay and increased costs associated withthe El Quevar feasibility study;

 

·                        Economic and political events affectingthe market prices for silver, zinc, lead and other minerals which may be foundon our exploration properties;

 

·                        Political and economic instability inArgentina, Chile, Mexico, Peru and other countries in which we conduct ourbusiness and future actions of any of these governments with respect tonationalization of natural resources or other changes in mining or taxationpolicies; and

 

·                        The factors discussed under “RiskFactors” in our Form 10-K for the year ended December 31, 2009.

 

Many of these factors are beyond our ability tocontrol or predict. You should not unduly rely on these forward-lookingstatements. These statements speak only as of the date of this report onForm 10-Q. Except as required by law, we

 

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are not obligated to publicly release any revisions tothese forward-looking statements to reflect future events or developments.

 

**Item 3.****          ****Quantitative and Qualitative Disclosures About MarketRisk**

 

**Interest Rate Risk**

 

We invest substantially all of our excess cash in U.S.government and debt securities rated “investment grade” or better.  The rates received on such investments mayfluctuate with changes in economic conditions. Based on the average cash,restricted cash, investments and restricted investment balances outstandingduring the third quarter 2010, a 1% decrease in interest rates would haveresulted in a reduction in interest income for the period of approximately $0.1million.

 

**Foreign Currency Exchange Risk**

 

Although most of our expenditures are in U.S. dollars,certain purchases of labor, operating supplies and capital assets aredenominated in other currencies.  As aresult, currency exchange fluctuations may impact the costs of ouroperations.  To reduce this risk, wemaintain minimum cash balances in foreign currencies and complete most of ourpurchases in U.S. dollars.

 

**Commodity Price Risk**

 

One of our primary business activities is theexploration of properties containing silver, zinc, lead and otherminerals,  As a result, decreases in theprice of any of these metals have the potential to negatively impact ourability to establish reserves and develop our exploration properties.  None of our properties is in production andwe currently hold no commodity derivative positions.

 

**Item 4. Controls and Procedures**

 

(a)          Evaluation of Disclosure Controls andProcedures

 

Our Chief Executive Officer (principal executiveofficer) and Chief Financial Officer (principal financial officer) haveevaluated the effectiveness of our disclosure controls and procedures (as suchterm is defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act) as of September 30, 2010 (the “Evaluation Date”). Based onsuch evaluation, such officers have concluded that, as of the Evaluation Date,our disclosure controls and procedures are effective to ensure that informationrequired to be disclosed by us in the reports that we file or submit under theExchange Act are recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms and to ensure thatinformation required to be disclosed by us in the reports that we file orsubmit under the Exchange Act is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officerto allow timely decisions regarding required disclosure.

 

(b)         Changes in Internal Control overFinancial Reporting

 

There have been no changes in our internal controlover financial reporting that occurred during the period covered by this reportthat have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

 

PART II: OTHERINFORMATION

 

**Item 1.****          ****Legal Proceedings**

 

Our Predecessor, ASML,concluded, based on the results of an internal investigation conducted underthe direction of its Audit Committee in late 2005 and early 2006, that certainformer senior employees of one of its South American subsidiaries were involvedin making impermissible payments of approximately $125,000 to governmentofficials in 2003 and 2004. ASML contacted the Department of Justice (“DOJ”)and Securities and Exchange Commission (“SEC”) during 2006 and reported theresults of the internal investigation and was informed that the SEC and DOJwould commence investigations with respect to these matters, including possibleviolations of the Foreign Corrupt Practices Act. Subsequently, ASML enteredinto discussions with the SEC staff concerning a settlement of the conductsubject to the SEC’s investigation. As a result, we have reached an agreementin principle with the SEC staff which, if approved by the Commission, wouldresolve this matter with the SEC. Under the terms of the proposed settlement,we, on neither an admit nor deny basis, would agree to the entry of anadministrative cease and desist order prohibiting us from future violations of

 

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Sections 13(b)(2)(A), 13(b)(2)(B) and 30A of theSecurities Exchange Act of 1934. Moreover, under the terms of the proposedsettlement, the SEC staff would not recommend that the Commission require thepayment of disgorgement, civil money penalties, prejudgment interest or theappointment of a corporate monitor. The proposed settlement is subject toCommission approval.  We cannot guaranteethat the Commission will ultimately accept the terms of the proposedsettlement. In August 2009, the DOJ informed us that it has closed itsinvestigation based on, among other things, Golden Mineral’s pending settlementwith the SEC.

 

On May 3, 2010, wefiled a financial industry customer arbitration claim against Credit SuisseSecurities (USA) LLC with the Arbitration Board of the Financial IndustryRegulatory Authority (FINRA), seeking to recover approximately $32 million andother damages resulting from losses realized on the sale of auction ratesecurities in the third quarter 2009.  The proceeding is styled GoldenMinerals Company v. Credit Suisse Securities USA (LLC), FINRA DisputeResolution Arbitration No. 10-02061. We alleged in our Statement of Claim that Credit Suisse misrepresentedor failed to disclose material facts to us regarding the risk of thesecurities.   Credit SuisseSecurities (USA) LLC filed its response on approximately July 16, 2010,generally denying the Company’s allegations. We cannot predict the outcome of this proceeding.

 

**Item 2.****          ****Unregistered Sales of Equity Securities and Use ofProceeds**

 

*March 2010Public Offering and Private Placement*

 

InMarch 2010, we closed a public offering of 4,000,000 shares of our commonstock pursuant to our Registration Statement on Form S-1 (333-162486), ofwhich 3,652,234 shares were sold by us and 347,766 shares were sold by aselling stockholder.  Concurrent with thepublic offering, two of our shareholders, Sentient Global Resources Fund III,LP and SGRF III Parallel I, LP (“Sentient”) exercised their pre-emptive rightand purchased in a private placement pursuant to Regulation S under theSecurities Act an additional 905,065 shares of our common stock at the publicoffering price.  Of the approximately $35.0 million in net proceedsreceived from the March 2010 public offering and private placement, as ofSeptember 30, 2010, we have spent an estimated $13.5 million in connectionwith the construction of an underground drift and related infrastructure,technical engineering and project assessment for the Yaxtché deposit at our ElQuevar project, and an estimated $5.8 million to fund exploration activities onour portfolio of other exploration properties. Remaining amounts are being heldas cash or short term investments. None of the expenditures described abovereflect direct or indirect payments to directors, officers or persons owning10% or more of our equity securities.

 

*October 2010Public Offering and Private Placement*

 

OnOctober 22, 2010, we closed a public offering of 4,663,250 shares of ourcommon stock pursuant to our shelf registration statement on Form S-3(333-168304). All of the shares were sold at a price per share of $18.50.Concurrent with the public offering, Sentient purchased in a private placementpursuant to Regulation S under the Securities Act an additional 1,190,031shares of our common stock at the public offering price of $18.50, increasingits ownership percentage of our outstanding common stock to 19.9% (excludingoutstanding restricted stock held by our employees). Total proceeds from thepublic offering and Sentient private placement were approximately $103.0million net of $4.5 million of underwriting and placement agent discounts andcommissions and $0.8 million in other offering related costs.

 

**Item 3.****          ****Defaults Upon Senior Securities**

 

None.

 

**Item 4.****          ****Removed and Reserved**

 

**Item5.****          ****Other Information**

 

None.

 

**Item 6.****          ****Exhibits**

 
| 31.1 | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act.                                               |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act.                                               |
| 32   | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the  Sarbanes-Oxley Act). |

 

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SIGNATURES

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon behalf of the undersigned thereunto duly authorized.

 

 
|   |                  | GOLDEN MINERALS COMPANY                           |
|--------|-----------------------|---------------------------------------------------|
|   |                  |                                              |   |
|   |                  |                                              |   |
| Date:  | November 3, 2010 | By:                                               | /s/ Jeffrey G. Clevenger |
|   |                  | Jeffrey G. Clevenger                              |
|   |                  | President and Chief Executive Officer             |
|   |                  |
|   |                  |
| Date:  | November 3, 2010 | By:                                               | /s/ Robert P. Vogels |
|   |                  | Robert P. Vogels                                  |
|   |                  | Senior Vice President and Chief Financial Officer |

 

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