**Table of Contents**

** **

** **

** **

**UNITED STATES**

**SECURITIESAND 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 THE  QUARTERLY PERIOD ENDED MARCH 31, 2010.**                                                                                                                                                                               |
| ** **                                                                                                                                                                                                                             |
| **OR**                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                   |                                                                                                    |
| **o**                                                                                                                                                                                                                                  | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                             | ** **                                                                                              |
| **FOR THE TRANSITION PERIOD  FROM                TO                .** |

 

**COMMISSION FILE NUMBER 1-13627**

 

###### **GOLDEN MINERALS COMPANY**

(EXACT NAME OFREGISTRANT 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 TOBE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THEREGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TOSUCH FILING REQUIREMENTS 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 SECURITIESEXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLANCONFIRMED BY A COURT:   YES x   NO o

 

ATMAY 3, 2010, 9,274,786 SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE,WERE ISSUED AND OUTSTANDING.

 

 

 

----

Table of Contents

 

GOLDEN MINERALS COMPANY

FORM 10-Q

QUARTER ENDED MARCH 31,2010

 

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 | 18       |
|                                      |                                                                                        |     |
| ITEM 3.                                   | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 23       |
|                                      |                                                                                        |     |
| ITEM 4.                                   | CONTROLS AND  PROCEDURES                                                                    | 23       |
|                                      |                                                                                        |     |
| PART II — OTHER  INFORMATION    |                                                                                        |
|                                      |                                                                                        |     |
| ITEM 1.                                   | LEGAL PROCEEDINGS                                                                           | 24       |
|                                      |                                                                                        |     |
| ITEM 1A.                                  | RISK FACTORS                                                                                | 24       |
|                                      |                                                                                        |     |
| ITEM 2.                                   | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                | 24       |
|                                      |                                                                                        |     |
| ITEM 3.                                   | DEFAULTS  UPON SENIOR SECURITIES                                                            | 24       |
|                                      |                                                                                        |     |
| ITEM 4.                                   | REMOVED AND RESERVED                                                                        | 24       |
|                                      |                                                                                        |     |
| ITEM 5.                                   | OTHER INFORMATION                                                                           | 24       |
|                                      |                                                                                        |     |
| ITEM 6.                                   | EXHIBITS                                                                                    | 24       |
|                                      |                                                                                        |     |
| SIGNATURES                                | 25                                                                                          |

 

2

----

Table of Contents

 

**PART I. FINANCIAL INFORMATION**

 

**Item 1.    Financial Statements**

 

# **GOLDEN MINERALSCOMPANY**

# **CONSOLIDATEDBALANCE SHEETS**

**(Expressed in United States dollars)**

**(Unaudited)**

 
| ** **                                                                                                          | ** ** | **March 31,**                    | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                          | ** ** | **2010**                              | ** ** | **2009**              | ** ** |
| ** **                                                                                                          | ** ** | **(in thousands, except share data)** | ** ** |
| **Assets**                                                                                                          |       |                                  |       |                  |       |
| Current  assets                                                                                                     |       |                                  |       |                  |       |
| Cash  and cash equivalents                                                                                          |       | $                                     | 40,618     |                  | $          | 8,570 |   |
| Investments  (Note 4)                                                                                               |       | 5,270                                 |       | 444                   |       |
| Trade  receivables                                                                                                  |       | 90                                    |       | 1,460                 |       |
| Prepaid  expenses and other assets (Note 5)                                                                         |       | 1,448                                 |       | 2,087                 |       |
| Total  current assets                                                                                               |       | 47,426                                |       | 12,561                |       |
| Property,  plant and equipment, net (Note 6)                                                                        |       | 7,904                                 |       | 7,774                 |       |
| Assets  held for sale (Note 6)                                                                                      |       | 700                                   |       | 813                   |       |
| Prepaid  expenses and other assets (Note 5)                                                                         |       | 502                                   |       | 552                   |       |
| Total  assets                                                                                                       |       | $                                     | 56,532     |                  | $          | 21,700 |   |
| ** **                                                                                                          |       |                                  |       |                  |       |
| **Liabilities and Equity**                                                                                          |       |                                  |       |                  |       |
| Current  liabilities                                                                                                |       |                                  |       |                  |       |
| Accounts  payable and other accrued liabilities (Note 7)                                                            |       | $                                     | 3,469      |                  | $          | 2,428 |   |
| Other  current liabilities                                                                                          |       | 63                                    |       | 63                    |       |
| Total  current liabilities                                                                                          |       | 3,532                                 |       | 2,491                 |       |
| Other  long term liabilities                                                                                        |       | 640                                   |       | 651                   |       |
| Total  liabilities                                                                                                  |       | 4,172                                 |       | 3,142                 |       |
|                                                                                                                |       |                                  |       |                  |       |
| Commitments  and contingencies (Note 13)                                                                            |       |                                  |       |                  |       |
|                                                                                                                |       |                                  |       |                  |       |
| Equity  (Note 10)                                                                                                   |       |                                  |       |                  |       |
| Common  stock, $.01 par value, 50,000,000 shares authorized; 9,040,608 and 3,238,615  shares issued and outstanding |       | 90                                    |       | 32                    |       |
| Additional  paid in capital                                                                                         |       | 79,719                                |       | 37,854                |       |
| Accumulated  deficit                                                                                                |       | (27,315                               | )          | (20,276               | )          |
| Accumulated  other comprehensive income (loss)                                                                      |       | (134                                  | )          | 154                   |       |
| Parent  company’s shareholder’s equity                                                                    |       | 52,360                                |       | 17,764                |       |
| Noncontrolling  interest in subsidiaries (Note 11)                                                                  |       | —                                |       | 794                   |       |
| Total  equity                                                                                                       |       | 52,360                                |       | 18,558                |       |
| Total  liabilities and equity                                                                                       |       | $                                     | 56,532     |                  | $          | 21,700 |   |

 

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

 

3

----

Table of Contents

 

**GOLDEN MINERALS COMPANY**

# **CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)**

**(Expressedin United States dollars)**

**(Unaudited)**

** **
| ** **                                                                                        | ** ** | ** **                            | ** ** | **For The Period**      | ** **        | ** ** | **For The Period**       | ** ** |
|---------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------|-------------------|------------|--------------------------|------------|
| ** **                                                                                        | ** ** | **Three Months**                      | ** ** | **March 25, 2009** | ** **        | ** ** | **January 1, 2009** | ** ** |
| ** **                                                                                        | ** ** | **Ended**                             | ** ** | **Through**             | ** **        | ** ** | **Through**              | ** ** |
| ** **                                                                                        | ** ** | **March 31, 2010**               | ** ** | **March 31, 2009** | ** **        | ** ** | **March 24, 2009**  | ** ** |
| ** **                                                                                        | ** ** | **(Successor)**                       | ** ** | ** **              | **(Predecessor)** | ** ** |
| ** **                                                                                        | ** ** | **(in thousands, except share data)** | ** ** |
| **Revenue:**                                                                                      |       |                                  | ** ** | ** **              | ** **        | ** ** | ** **               | ** ** |
| Management  service fees (Note 12)                                                                |       | $                                     | 3,173      |                    | $                 | 211        |                     |       | $ | 1,350 |   |
| **Costs and expenses:**                                                                           |       |                                  |       |                    |              |       |                     |       |
| Costs  of services (Note 12)                                                                      |       | (1,617                                | )          | (80                     | )                 |       | —                   |       |
| Exploration  expense                                                                              |       | (3,226                                | )          | (448                    | )                 |       | (3,482                   | )          |
| El  Quevar feasibility                                                                            |       | (2,469                                | )          | —                  |              |       | —                   |       |
| Administrative  expense                                                                           |       | (2,296                                | )          | (352                    | )                 |       | (4,779                   | )          |
| Stock  based compensation                                                                         |       | (522                                  | )          | —                  |              |       | (2,717                   | )          |
| Depreciation,  depletion and amortization                                                         |       | (109                                  | )          | (9                      | )                 |       | (102                     | )          |
| Total  costs and expenses                                                                         |       | (10,239                               | )          | (889                    | )                 |       | (11,080                  | )          |
| Loss  from operations                                                                             |       | (7,066                                | )          | (678                    | )                 |       | (9,730                   | )          |
| **Other income and expenses:**                                                                    |       |                                  |       |                    |              |       |                     |       |
| Interest  and other income                                                                        |       | 683                                   |       | 124                     |              |       | 1,010                    |       |
| Royalty  income                                                                                   |       | —                                |       | —                  |              |       | 88                       |       |
| Interest  and other expense                                                                       |       | (126                                  | )          | —                  |              |       | (345                     | )          |
| Gain  (loss) on foreign currency                                                                  |       | 13                                    |       | —                  |              |       | (13                      | )          |
| Gain  on extingushment of debt                                                                    |       | —                                |       | —                  |              |       | 248,165                  |       |
| Loss  on auction rate securities                                                                  |       | —                                |       | —                  |              |       | (828                     | )          |
| Reorganization  costs, net                                                                        |       | —                                |       | (103                    | )                 |       | (3,683                   | )          |
| Fresh  start accounting adjustments                                                               |       | —                                |       | —                  |              |       | 9,122                    |       |
| Total  other income and expenses                                                                  |       | 570                                   |       | 21                      |              |       | 253,516                  |       |
| Income  (loss) from continuing operationsbefore income taxes                                      |       | (6,496                                | )          | (657                    | )                 |       | 243,786                  |       |
| Income  taxes                                                                                     |       | (543                                  | )          | (26                     | )                 |       | (165                     | )          |
| Net  income (loss) from continuing operations                                                     |       | (7,039                                | )          | (683                    | )                 |       | 243,621                  |       |
| **Loss from discontinued operations**                                                             |       | —                                |       | —                  |              |       | (4,153                   | )          |
| Net  income (loss)                                                                                |       | $                                     | (7,039     | )                       | $                 | (683       | )                        |       | $ | 239,468 |   |
| Income  attributable to noncontrolling interest                                                   |       | —                                |       | $                       | —            |       |                     | $          | (7,869 | ) |
| Net  income (loss) attributable to the Successor/Predecessor shareholders                         |       | $                                     | (7,039     | )                       | $                 | (683       | )                        |       | $ | 231,599 |   |
| **Other comprehensive income (loss):**                                                            |       |                                  |       |                    |              |       |                     |       |
| Unrealized  gain (loss) on securities                                                             |       | (288                                  | )          | $                       | —            |       |                     | $          | 940 |   |
| Comprehensive  income (loss) attributable to Successor/Predecessor shareholders                   |       | $                                     | (7,327     | )                       | $                 | (683       | )                        |       | $ | 232,539 |   |
| ** **                                                                                        |       |                                  |       |                    |              |       |                     |       |
| **Net income (loss) per Common/Ordinary Share — basic**                                      |       |                                  |       |                    |              |       |                     |       |
|                                                                                              |       |                                  |       |                    |              |       |                     |       |
| Income  (loss) from continuing operations attributable to the Successor/Predecessor  shareholders |       | $                                     | (1.57      | )                       | $                 | (0.23      | )                        |       | $ | 4.13 |   |
| Loss  from discontinued operations attributable to the Successor/Predecessor  shareholders        |       | —                                |       | —                  |              |       | (0.20                    | )          |
| Income  (loss) attributable to the Successor/Predecessor shareholders                             |       | $                                     | (1.57      | )                       | $                 | (0.23      | )                        |       | $ | 3.93 |   |
| ** **                                                                                        |       |                                  |       |                    |              |       |                     |       |
| **Net income (loss) per Common/Ordinary Share — diluted**                                    |       |                                  |       |                    |              |       |                     |       |
| Loss  from continuing operations attributable to the Successor/Predecessor  shareholders          |       | $                                     | (1.57      | )                       | $                 | (0.23      | )                        |       | $ | (0.06 | ) |
| Loss  from discontinued operations attributable to the Successor/Predecessor  shareholders        |       | —                                |       | —                  |              |       | (0.17                    | )          |
| Loss  attributable to the Successor/Predecessor shareholders                                      |       | $                                     | (1.57      | )                       | $                 | (0.23      | )                        |       | $ | (0.23 | ) |
| ** **                                                                                        |       |                                  |       |                    |              |       |                     |       |
| **Weighted average Common Stock/Ordinary Shares outstanding -  basic**                            |       | 4,497,126                             |       | 2,987,735               |              |       | 59,000,832               |       |
| **Weighted average Common Stock/Ordinary Shares outstanding -  diluted**                          |       | 4,497,126                             |       | 2,987,735               |              |       | 69,171,400               |       |

 

The accompanying notes form an integral part of theseconsolidated financial statements. 

 

4

----

Table of Contents

 

**GOLDEN MINERALS COMPANY**

# **CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Expressedin United States dollars)**

**(Unaudited)**

 
| ** **                                                                                                     | ** ** | ** **              | ** ** | **For The Period**      | ** **        | ** ** | **For The Period**       | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|-------------------|------------|--------------------------|------------|
| ** **                                                                                                     | ** ** | **Three Months**        | ** ** | **March 25, 2009** | ** **        | ** ** | **January 1, 2009** | ** ** |
| ** **                                                                                                     | ** ** | **Ended**               | ** ** | **Through**             | ** **        | ** ** | **Through**              | ** ** |
| ** **                                                                                                     | ** ** | **March 31, 2010** | ** ** | **March 31, 2009** | ** **        | ** ** | **March 24, 2009**  | ** ** |
| ** **                                                                                                     | ** ** | **(Successor)**         | ** ** | ** **              | **(Predecessor)** | ** ** |
| ** **                                                                                                     | ** ** | **(in thousands)**      | ** ** |
| Cash  flows from operating activities:                                                                         |       |                    |       |                    |              |       |                     |       |
| Net  cash used in operating activities (Note 14)                                                               |       | $                       | (3,847     | )                       | $                 | (1,247     | )                        |       | $ | (13,849 | ) |
| Cash  flows from investing activities:                                                                         |       |                    |       |                    |              |       |                     |       |
| Purchase  of available for sale investments                                                                    |       | (5,005                  | )          | —                  |              |       | (4,447                   | )          |
| Sale  of available for sale investments                                                                        |       | 296                     |       | —                  |              |       | 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                                                                                  |       | 125                     |       | —                  |              |       | —                   |       |
| Capitalized  costs and acquisitions of property, plant and equipment                                           |       | (127                    | )          | —                  |              |       | (4,580                   | )          |
| Net  cash provided by (used in) investing activities                                                           |       | $                       | (4,711     | )                       | $                 | —     |                     |       | $ | 43,043 |   |
| Cash  flows from financing activities:                                                                         |       |                    |       |                    |              |       |                     |       |
| Proceeds  from issuance of common stock, net of issue costs                                                    |       | 40,606                  |       | —                  |              |       | —                   |       |
| 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                                                           |       | $                       | 40,606     |                    | $                 | —     |                     |       | $ | (37,297 | ) |
| Net  increase (decrease) in cash and cash equivalents                                                          |       | 32,048                  |       | (1,247                  | )                 |       | (8,103                   | )          |
| Cash  and cash equivalents - beginning of period                                                               |       | 8,570                   |       | 25,620                  |              |       | 33,723                   |       |
| Cash  and cash equivalents - end of period                                                                     |       | $                       | 40,618     |                    | $                 | 24,373     |                     |       | $ | 25,620 |   |

 

SeeNote 14 for supplemental cash flow information.

 

The accompanying notes form an integral part of theseconsolidated financial statements.

 

5

----

Table of Contents

 

**GOLDEN MINERALS COMPANY**

**CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(DEFICIT)**

**(Expressed in United States dollars)**

**(Unaudited)**

** **
| ** **                                                           | ** ** | ** **                            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **  | ** ** | **Accumulated**    | ** **   | ** **   | ** ** | ** **    | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------------|------------|-------------|------------|-----------------|------------|-------------|------------|--------------------|--------------|--------------|------------|---------------|------------|
| ** **                                                           | ** ** | ** **                            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **  | ** ** | **Other**          | ** **   | ** **   | ** ** | ** **    | ** ** |
| ** **                                                           | ** ** | ** **                            | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **  | ** ** | **Comprehensive**  | ** **   | ** **   | ** ** | **Total**     | ** ** |
| ** **                                                           | ** ** | **Common  Stock**                     | ** ** | **Paid-in** | ** ** | **Accumulated** | ** ** | **income**  | ** ** | **Noncontrolling** | ** **   | **Equity**   | ** ** |
| ** **                                                           | ** ** | **Shares**                            | ** ** | **Amount**  | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **(loss)**         | ** **   | **Interest** | ** ** | **(Deficit)** | ** ** |
| ** **                                                           | ** ** | **(in  thousands except share data)** | ** ** |
| **(Predecessor)**                                                    | ** ** | ** **                            | ** ** | ** **  | ** ** | ** **      | ** ** | ** **  | ** ** | ** **         | ** **   | ** **   | ** ** | ** **    | ** ** |
| **Balance, December 31, 2008**                                  | ** ** | **59,000,832**                        | ** ** | **$**       | **590.0**  | ** **      | **$**      | **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                                            |       | (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          |       | 12,949          |       | —      |       | —             |         | —       |       | 12,967        |       |
| Public  offering, net                                                |       | 3,652,234                             |       | 36          |       | 27,604          |       | —      |       | —             |         | —       |       | 27,640        |       |
| Stock  compensation accrued                                          |       | —                                |       | —      |       | 522             |       | —      |       | —             |         | —       |       | 522           |       |
| Unrealized  loss on marketable equity securities                     |       | —                                |       | —      |       | —          |       | —      |       | (288               | )            | —       |       | (288          | )          |
| Net  loss                                                            |       | —                                |       | —      |       | —          |       | (7,039      | )          | —             |         | —       |       | (7,039        | )          |
| **Balance, March 31, 2010**                                     | ** ** | **9,040,608**                         | ** ** | **$**       | **90**     | ** **      | **$**      | **79,719**  | ** ** | **$**              | **(27,315**  | **)**        | **$**      | **(134**      | **)**      | **$** | **—** | ** ** | **$** | **52,360** | ** ** |

 

The accompanyingnotes form an integral part of these consolidated financial statements.

 

6

----

Table of Contents

** **

**GOLDENMINERALS COMPANY**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**(Expressedin United States dollars)**

 

**1.****             ****Basis of Preparation of FinancialStatements and Nature of Operations**

 

GoldenMinerals Company (the “Company”), a Delaware corporation, has prepared theseunaudited interim consolidated financial statements in accordance with the rules andregulations of the Securities and Exchange Commission (“SEC”). Such rules andregulations allow the omission of certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States (“GAAP”), so longas such omissions do not render the financial statements misleading.

 

In theopinion of management, these financial statements reflect all adjustments thatare necessary for a fair statement of the financial results for the periodspresented. These interim financial statements should be read in conjunctionwith the annual financial statements included in the 2009 Annual Report on Form 10-K.

 

TheCompany is primarily engaged in the exploration and advancement of itsportfolio of exploration properties in South America and Mexico and inproviding operations management services to Sumitomo for the San Cristóbalmine.  The financial statements have beenprepared on a going concern basis under which an entity is considered to beable to realize its assets and satisfy its liabilities in the normal course ofbusiness.  However, the continuingoperations of the Company are dependent upon its ability to raise sufficientcapital and to generate future profitable operations.  The underlying value and recoverability ofthe amounts shown as mineral properties in the consolidated balance sheet aredependent on 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.

 

Priorto its emergence from Chapter 11 and the sale of the San Cristóbal mine, ApexSilver Mines Limited (“ASML”) was the 65% owner and operator of the SanCristóbal silver and zinc mine in Bolivia. Upon emergence from Chapter 11 reorganization on March 24, 2009,the Company became the successor to ASML for purposes of reporting under theU.S. federal securities laws.  Referencesin this Form 10-Q to “Successor” refer to the accounts of the Company andits subsidiaries on or after March 25, 2009, the day following emergencefrom Chapter 11.  References to “Predecessor”refer to the accounts of ASML and its subsidiaries prior to March 25,2009.

 

**2.****             ****Discontinued Operations**

 

Resultsof operations of the San Cristóbal mine and related subsidiaries are presentedas discontinued operations for the periods on the Consolidated Statements ofOperations and Comprehensive Income (Loss) through March 24, 2009, thedate the San Cristóbal mine and related subsidiaries were sold, including alldirect financing related to the San Cristóbal mine.  Additionally, costs incurred for managementservice fees that were previously eliminated upon consolidation have not beeneliminated and are reflected as a cost of service between the discontinuedoperations and the Company.

 

7

----

Table of Contents

 

Theresults of discontinued operations for the period January 1, 2009 through March 24,2009 are as follows (amounts in thousands):

 
| ** **                                      | ** ** | **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, 2010the Company 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 entity that hasboth of the following characteristics: (i) the power to direct the activitiesof a VIE that most significantly impact the entity’s economic performance and (ii) theobligation to absorb losses or receive benefits from the entity that couldpotentially be significant to the VIE. The updated guidance also requiresongoing reassessments of the primary beneficiary of a VIE. The Companycurrently has no VIEs.

 

*Recently Issued Pronouncements*

 

In January 2010, ASCguidance for fair value measurements and disclosure was updated to requireadditional disclosures related to: (i) transfers in and out of level 1 and2 fair value measurements and (ii) enhanced detail in the level 3reconciliation. The guidance was amended to provide clarity regarding the levelof disaggregation required for assets and liabilities and the disclosures requiredfor inputs and valuation techniques used to measure the fair value of assetsand liabilities that fall in either level 2 or level 3.  The updatedguidance is effective for the Company’s fiscal year beginning January 1,2010, with the exception of the level 3 disaggregation which will be effectivefor the Company’s fiscal year beginning January 1, 2011. The adoption hadno impact on the Company’s condensed consolidated financial position, resultsof operations or cash flows. Refer to Note 8 for further details regarding theCompany’s assets and liabilities measured 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.

 

8

----

Tableof Contents

 

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 other thantemporary, a charge is made to net income (loss) for the period.

 

The followingtables summarize the Company’s investments at March 31, 2010 and December 31,2009:

 
| **March 31, 2010**          | ** ** | **Cost**   | ** ** | **Estimated  Fair Value** | ** ** | **Carrying  Value** | ** ** |
|----------------------------------|------------|------------|------------|---------------------------|------------|---------------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **(in thousands)**        | ** ** | ** **          | ** ** |
| Investments:                     |       |       |       |                      |       |                |       |
| Short-term:                      |       |       |       |                      |       |                |       |
| Available  for sale              |       |       |       |                      |       |                |       |
| U.  S. treasury securities       |       | $          | 5,005      |                      | $          | 5,005               |       | $ | 5,005 |   |
| Warrant  to purchasecommon stock |       | 124        |       | 64                        |       | 64                  |       |
| Common  stock                    |       | 275        |       | 201                       |       | 201                 |       |
| Total  available for sale        |       | 5,404      |       | 5,270                     |       | 5,270               |       |
| Total  short term                |       | $          | 5,404      |                      | $          | 5,270               |       | $ | 5,270 |   |

 
| **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 March 31,2010 and December 31, 2009 were used to determine the estimated fairvalues of the above investments except for the warrant to purchase commonstock. The fair value of the warrant to purchase common stock was determinedusing a Black-Sholes model with inputs based on quoted market price, historicvolatilities, risk free interest rates and the life of the warrant (see Note8).

 

*Credit Risk*

 

Credit risk is the riskthat a third party might fail to fulfill its performance obligations under theterms of a financial instrument. For cash and cash equivalents and investments,the Company’s maximum exposure to credit risk represents the carrying amount onthe balance sheet. The Company attempts to mitigate credit risk for cash andcash equivalents and investments by placing its funds and investments with highcredit-quality financial institutions, limiting the amount of exposure to eachfinancial institution, monitoring the financial condition of the financialinstitutions and investing only in government and corporate securities rated “investmentgrade” or better. The Company invests with financial institutions that maintaina net worth of not less than $1.0 billion and are members in good standing ofthe Securities Investor Protection Corporation.

 

9

----

Table of Contents

 

**5.   Prepaid expenses and other current assets**

 

Prepaid expenses andother current assets consist of the following:

 
| ** **                                   | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                   | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| ** **                                   | ** ** | **(in thousands)** | ** ** |
| Prepaid  insurance                           |       | $                  | 283        |                  | $          | 306 |   |
| Prepaid  contractor fees and vendor advances |       | 503                |       | 191                   |       |
| Deferred  leasehold costs                    |       | 283                |       | 329                   |       |
| Prepaid  offering costs                      |       | —             |       | 576                   |       |
| Recoupable  deposits and other               |       | 379                |       | 685                   |       |
|                                         |       | $                  | 1,448      |                  | $          | 2,087 |   |

 

*March 31,2010*

 

The deferredleasehold costs are related to the Company’s headquarters office lease inGolden, Colorado.  Prepaid contractorfees and vendor advances consist primarily of advance payments made tocontractors and suppliers primarily at our El Quevar project in Argentina.

 

In addition,included in non-current assets is approximately $469,000 of prepaid insuranceon which amortization will be recognized through 2015.

 

*December 31,2009*

 

The deferredleasehold costs are related to the Company’s headquarters office lease inGolden, 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 $188,000 receivablerelated to the sale of certain investments which settled January 4, 2010and a $152,000 recoupable deposit made to a firm providing legal servicesrelated to the reorganization that was returned to the Company during the firstquarter 2010.

 

**6.   Property, Plant and Equipment and AssetsHeld for Sale**

 

*Property,plant and equipment*

 

The components of property, plant and equipment are as follows:

 
| ** **                      | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                      | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| ** **                      | ** ** | **(in thousands)** | ** ** |
| Exploration  properties         |       | $                  | 4,230      |                  | $          | 4,228 |   |
| Royalty  properties             |       | 1,207              |       | 1,207                 |       |
| Construction  in progress       |       | —             |       | —                |       |
| Buildings                       |       | 619                |       | 383                   |       |
| Mining  equipment and machinery |       | 1,837              |       | 1,984                 |       |
| Other  furniture and equipment  |       | 769                |       | 601                   |       |
|                            |       | 8,662              |       | 8,403                 |       |
| Less:  Accumulated depreciation |       | (758               | )          | (629                  | )          |
|                            |       | 7,904              |       | 7,774                 |       |
|                                 |            |                    |            |                       |            |  |  |

 

10

----

Table of Contents

 

*AssetsHeld for Sale*

 

The Company has obtainedapproval from its board of directors to sell its Paca Pulacayo property inBolivia. The $0.7 and $0.8 million carrying value of the property is reflectedin assets held for sale in the accompanying consolidated balance sheets at March 31,2010 and December 31, 2009, respectively, per the guidance of ASC 360, “Property,Plant and Equipment”.  Completion of thetransaction is subject to negotiation and execution of definitive agreements,approval of our board of directors, consents and approvals of third partiesincluding governmental entities and the TSX Venture Exchange, and othercustomary closing conditions.  Thecarrying value of the asset held for sale is adjusted at the end of each periodper the guidance of ASC 360.  During thefirst quarter 2010 the Company recorded a negative adjustment of approximately$0.1 million to the carrying value of the property which is reflected ininterest and other expense on the accompanying consolidated statements ofoperations.

 

**7.   Accounts Payable and Other AccruedLiabilities**

 

The Company’s accountspayable and other accrued liabilities consist of the following:

 
| ** **                                  | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| ** **                                  | ** ** | **(in thousands)** | ** ** |
|                                        |       |               |       |                  |       |
| Accounts  payable and accruals              |       | $                  | 1,738      |                  | $          | 1,863 |   |
| Income  taxes payable                       |       | 19                 |       | 22                    |       |
| Accrued  employee compensation and benefits |       | 1,045              |       | 543                   |       |
| Deferred  revenue                           |       | 667                |       | —                |       |
|                                        |       | $                  | 3,469      |                  | $          | 2,428 |   |

 

*March 31,2010*

 

Accounts payable andaccruals consist of $1.1 million related to our exploration and corporate administrativeactivities and $0.6 million related to amounts due to contractors and suppliersat our El Quevar project, respectively.

 

Accrued employeecompensation and benefits consist of $0.5 million related to withholding taxesand benefits payable, $0.3 million related to bonuses payable and $0.2 millionof accrued vacation payable.

 

Deferred revenue relatesto fees collected under the Management Agreement for services not yetperformed.

 

*December 31,2009*

 

Accounts payable andaccruals consist of $1.0 million related to our exploration and corporateadministrative activities and $0.9 million related to amounts due tocontractors and suppliers, respectively.

 

Accrued employeecompensation and benefits consist $0.3 million related to withholding taxes andbenefits payable and $0.2 million of accrued vacation payable.

 

**8.             Fair Value Measurements**

 

Effective January 1,2008 the Company adopted ASC 820, “Fair Value Disclosure and Measurements”, forthe financial assets and liabilities and nonfinancial assets and liabilitieswhich are measured at fair value on a recurring (annual) basis.  ASC 820 establishes a framework for measuringfair value in the form of a fair value hierarchy which prioritizes the inputsinto valuation techniques used to measure fair value into three broadlevels.  This hierarchy gives the highestpriority to quoted prices (unadjusted) in active markets and the lowestpriority to unobservable inputs. Further, financial assets and liabilities should be classified by levelin their entirety based upon the lowest level of input that was significant tothe fair value measurement.  The threelevels of the fair value hierarchy per ASC 820 are as follows:

 

**Level1: **Unadjusted quoted market prices in active markets foridentical assets or liabilities that are accessible at the measurement date.

 

11

----

Table of Contents

** **

**Level2: **Quoted prices in inactive markets for identical assetsor liabilities, quoted prices for similar assets or liabilities in activemarkets, or other observable inputs either directly related to the asset orliability or derived principally from corroborated observable market data.

 

**Level3: **Unobservable inputs due to the fact that there islittle or no market activity. This entails using assumptions in models whichestimate what market participants would use in pricing the asset or liability.

 

The following tablesummarizes the Company’s financial assets at fair value at March 31, 2010,by respective level of the fair value hierarchy:

 
| ** **                                | ** ** | **Level 1**        | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|-------------------------------------------|------------|--------------------|------------|-------------|------------|-------------|------------|-----------|------------|
| ** **                                | ** ** | **(in thousands)** | ** ** |
| Assets:                                   |       |               |       |        |       |        |       |      |       |
| Cash  equivalents                         |       | $                  | 31,629     |        | $          | —      |       | $         | —     |   | $ | 31,629 |   |
| Short-term  available for sale securities |       | 5,206              |       | —      |       | —      |       | 5,206     |       |
| Warrant  to purchase common stock         |       | —             |       | 64          |       | —      |       | 64        |       |
|                                      |       | $                  | 36,835     |        | $          | 64          |       | $         | —     |   | $ | 36,899 |   |

 

The Company’s cashequivalents, comprised principally of U.S. treasury securities, are classifiedwithin Level 1 of the fair value hierarchy.

 

The Company’s short-termavailable for sale securities are classified within Level 1 of the fair valuehierarchy.  These securities arecomprised of common stock and U.S. treasury securities, which have been valuedusing quoted prices in active markets.

 

The Company’s warrant topurchase common stock is classified within Level 2 of the fair value hierarchy.The fair value of the warrant to purchase common stock was determined using aBlack-Sholes model with inputs based on quoted market price, historicvolatilities, risk free interest rates and the life of the warrant.

 

**9.             Income Taxes**

 

The Company, a Delawarecorporation, and its subsidiaries file tax returns in the United States and invarious foreign jurisdictions.  The tax rules andregulations in these countries are highly complex and subject tointerpretation. The Company’s income tax returns are subject to examination bythe relevant taxing authorities and in connection with such examinations,disputes can arise with the taxing authorities over the interpretation orapplication of certain tax rules within the country involved.  The Company’s total unrecognized tax benefits,representing uncertain tax positions taken or expected to be taken on taxreturns, were $1.4 million as of March 31, 2010 and December 31,2009, which resulted in a reduction to the Company’s deferred tax assets as of March 31,2010 and December 31, 2009.

 

For the quarter ending March 31,2010, the Company incurred operating losses and recognized income tax of $0.5million consisting of $0.4 million Bolivian withholding tax on managementservices provided in Bolivia, and $0.1 million for the reversal of the taxeffects of other comprehensive income reported as of December 31,2009.  Based on the limited history ofthe Company, an estimated effective tax rate is not used to report theyear-to-date results.  The Predecessorrecognized income tax of $0.2 million for the period January through March 24,2009, also due to Bolivia, withholding tax on management services, and incometax of $2.5 million is included in discontinued operations for the same periodin the accompanying consolidated statement of operations and comprehensiveincome (loss).

 

Following the sale of theSan Cristóbal mine, the Company received the remaining assets of thePredecessor, which included investments in subsidiaries, some of which aredisregarded for U.S. tax purposes.  TheUS tax basis of the assets received from the Predecessor is limited to the fairvalue placed on them for fresh start purposes. A deferred tax liability of $0.5 million was recognized for fresh startpurposes for assets whose fresh start value exceeded the tax basis.  Deferred tax liabilities were reduced to $0.2million as of March 31, 2010, and December 31, 2009, as the result of therecognition of $0.3 million of deferred tax benefits resulting from lossesincurred during the period March 25, 2009 through December 31, 2009.

 

12

----

Table of Contents

 

**10.   Equity**

 

*Issuanceof common stock for mineral property interest*

 

During January 2010the Company acquired Hochschild Mining Group’s (“Hochschild”) 35% interest inMinera El Quevar S.A. in exchange for 400,000 shares of its common stock and awarrant to acquire 300,000 shares of its common stock exercisable for threeyears at an exercise price of $15.00 per share. In accordance with ASC 810, “Consolidations”, the Company has reflectedthis transaction in equity with charges to common stock and additional paid incapital and the elimination of approximately $0.8 million of noncontrolling interest.No gain or loss was recognized on the transaction. With the completion of thistransaction, the Company now owns or controls 100% of the concessions relatedto the El Quevar project.

 

*Publicoffering and private placements of the Company’s common stock*

 

During January 2010the Company completed a private placement of 844,694 shares of its common stockto two investment funds managed by The Sentient Group (“Sentient”), whichincludes 745,318 shares issued in the initial private placement plus anadditional 99,376 shares issued upon exercise of Sentient’s contractualpre-emptive right in order to maintain its 19.9% equity interest in the Companyfollowing completion of the Hochschild transaction. These shares were sold at apurchase price of Cdn$7.06 per share, resulting in net proceeds to the Companyof approximately $5.5 million.

 

On March 24, 2010the Company completed a public offering of 4,000,000 shares of common stock atan offering price of $8.50 per share. The Company sold 3,652,234 shares and aselling stockholder sold 347,766 shares. Concurrent with the public offering, Sentient exercised its existingpre-emptive right and purchased in a private placement pursuant to Regulation Sunder the U.S. Securities Act of 1933 an additional 905,065 shares of commonstock at the public offering price of $8.50 per share. The aggregate netproceeds to the Company from the sale of the shares in the public offering andthe sale of the shares to Sentient was approximately $35.1 million afterdeducting underwriting discounts, commissions and expenses.

 

*EquityIncentive Plans*

 

In April 2009, theCompany adopted the 2009 Equity Incentive Plan (the “Equity Plan”) pursuant towhich awards of the Company’s common stock may be made to officers, directors,employees, consultants and agents of the Company and its subsidiaries. The Company recognizes stock-based compensation costs using a graded vestingattribution method whereby costs are recognized over the requisite service periodfor each separately vesting portion of the award.

 

The following tablesummarizes the status of the Company’s restricted stock grants issued under theEquity Plan at March 31, 2010 and changes during the quarter 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             |       | —                |       | —                                                 |       |
| Restrictions  lifted during the period |       | —                |       | —                                                 |       |
| Forfeited  during the period           |       | —                |       | —                                                 |       |
| Outstanding  at March 31, 2010    |       | 230,000               |       | $                                                      | 10.75      |   |

 

The restricted shareawards were granted in April 2009, vesting in two equal tranches on thefirst and second anniversaries of the grant date, provided that the officer oremployee continues to be employed by or serve the Company through theapplicable vesting date. For the period January 1, 2010 through March 31,2010 the Company recognized approximately $0.4 million of compensation expenserelated to the restricted stock grants and the Company expects to recognizeadditional compensation expense related to these awards of approximately $0.6million over the next 12 months.

 

Also, pursuant to theEquity Plan, the Company’s board of directors adopted the Non-Employee Director’sDeferred Compensation and Equity Award Plan (the “Deferred Compensation Plan”).  Pursuant to the Deferred Compensation Planthe non-employee directors have received a portion of their compensation in theform of Restricted Stock Units (“RSUs”) issued under the Equity Plan. Thenon-employee directors were granted a total of 25,000 RSUs, with a grant dateof May 

 

13

----

Table of Contents

 

20, 2009. The RSUs vestedon April 2, 2010. Each RSU entitles the director to receive oneunrestricted share of common stock upon the termination of the director’s boardservice.

 

The following tablesummarizes the status of the RSU grants issued under the Deferred CompensationPlan at March 31, 2010 and changes during the quarter 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             |       | —                            |       | —                                                 |       |
| Restrictions  lifted during the period |       | —                            |       | —                                                 |       |
| Forfeited  during the period           |       | —                            |       | —                                                 |       |
| Outstanding  at March 31, 2010    |       | 25,000                            |       | $                                                      | 10.92      |   |

 

Forthe period January 1, 2010 through March 31, 2010 the Companyrecognized approximately $0.1 million of compensation expense related to theRSU grants.

 

DuringApril 2010, additional awards were granted under the Equity Plan asdiscussed in Note 15.

 

**11.   Noncontrolling Interest**

 

On January 1, 2009the Company adopted the provisions of ASC 810 related to noncontrollinginterest, 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 March 31,2010 the Company has no noncontrolling interests.

 

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

 
| ** **                                                                                                  | ** ** | ** **              | ** ** | **For The Period**      | ** **        | ** ** | **For The Period**       | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|-------------------|------------|--------------------------|------------|
| ** **                                                                                                  | ** ** | **Three Months**        | ** ** | **March 25, 2009** | ** **        | ** ** | **January 1, 2009** | ** ** |
| ** **                                                                                                  | ** ** | **Ended**               | ** ** | **Through**             | ** **        | ** ** | **Through**              | ** ** |
| ** **                                                                                                  | ** ** | **March 31, 2010** | ** ** | **March 31, 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                                                                   |       | $                       | (7,039     | )                       | $                 | (683       | )                        |       | $ | 243,621 |   |
| Loss  from discontinued operations                                                                          |       | —                  |       | —                  |              |       | (12,022                  | )          |
| Net  income (loss)                                                                                          |       | $                       | (7,039     | )                       | $                 | (683       | )                        |       | $ | 231,599 |   |

 

**12.   Revenue and Cost of Services**

 

The Company entered intoa Management Agreement with Sumitomo under which it provides certain managementservices with respect to the San Cristóbal mine. The Management Agreementprovides for an annual fee of $11.4 million which includes approximately $5.4million that constitutes reimbursement for direct administrative expenses theCompany incurs on behalf of the San Cristóbal mine. Under the terms of theManagement Agreement, the Company receives the fee and any reimbursements netof any Bolivian withholding taxes. The fee and reimbursements foradministrative costs and Bolivian withholding taxes are reported as “Revenuefrom Services” in the statement of operations following the guidance of ASC 605,“Revenue Recognition” regarding “income statement characterization ofreimbursements received for ‘out-of-

 

14

----

Table of Contents

 

pocket’ expenses incurred”and “reporting revenue gross as a principal versus net as an agent”.  ASC 605 supports recording as gross revenuefees received for the reimbursement of expenses in situations where therecipient is the primary obligor and has certain discretion in the incurrenceof the reimbursable expense. The actual costs incurred for the reimburseddirect administrative expenses are reported as costs of services in thestatement of operations. Reimbursed Bolivian withholding taxes are reported asincome taxes in the statement of operations. Prior to entering into theManagement Agreement, ASML received a management fee of $450,000 per month fromSan Cristóbal to cover certain costs incurred directly by ASML.

 

For the quarter ended March 31,2010 the Company recorded $3.2 million as revenue related to the ManagementAgreement, comprised of $2.8 million of fees and $0.4 million for reimbursedwithholding taxes. The Company also recorded corresponding charges of $1.6million to cost of services and $0.4 million to income taxes for the actualadministrative costs and withholding taxes reimbursable under the ManagementAgreement.

 

**13.   Commitments and Contingencies**

 

As previously disclosed,the Predecessor concluded, based on the results of an internal investigationconducted under the direction of its Audit Committee in late 2005 and early2006, that certain former senior employees of one of its South Americansubsidiaries were involved in making impermissible payments of approximately$125,000 to government officials in 2003 and 2004. The Predecessor contactedthe Department of Justice (“DOJ”) and SEC during 2006 and reported the resultsof the internal investigation and was informed that the SEC and DOJ wouldcommence investigations with respect to these matters, including possibleviolations of the Foreign Corrupt Practices Act. Subsequently, the Predecessorand then the Company entered into discussions with the SEC staff concerning asettlement of the conduct subject to the SEC’s investigation. As a result, theCompany reached an agreement in principle with the SEC staff which, if approvedby the Commission, would resolve this matter with the SEC. Under the terms ofthe proposed settlement, the Company, on neither an admit nor deny basis, wouldagree to the entry of an administrative cease and desist order prohibiting theCompany from future violations of Sections 13(b)(2)(A), 13(b)(2)(B) and30A of the Securities Exchange Act of 1934. Moreover, under the terms of theproposed settlement, the SEC staff would not recommend that the Commissionrequire the payment of disgorgement, civil money penalties, prejudgmentinterest or the appointment of a corporate monitor. The proposed settlement issubject to Commission approval. The Company cannot guarantee that theCommission will ultimately accept the terms of the proposed settlement.

 

In August 2009, theDOJ informed the Company that it has closed its investigation based on, amongother things, the Company’s pending settlement with the Commission.

 

15

----

Table of Contents

 

**14.   Supplemental Cash Flow Information**

 

The following tablereconciles net income (loss) for the period to cash from operations:

 
| ** **                                                                                   | ** ** | ** **              | ** ** | **For The Period**      | ** **        | ** ** | **For The Period**       | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|-------------------|------------|--------------------------|------------|
| ** **                                                                                   | ** ** | **Three Months**        | ** ** | **March 25, 2009** | ** **        | ** ** | **January 1, 2009** | ** ** |
| ** **                                                                                   | ** ** | **Ended**               | ** ** | **Through**             | ** **        | ** ** | **Through**              | ** ** |
| ** **                                                                                   | ** ** | **March 31, 2010** | ** ** | **March 31, 2009** | ** **        | ** ** | **March 24, 2009**  | ** ** |
|                                                                                         |       | **(Successor)**         |       |                    | **(Predecessor)** |       |
|                                                                                         |       | **(in  thousands)**     |       |
| Cash  flows from operating activities:                                                       |       |                    |       |                    |              |       |                     |       |
| Net  (loss) income before noncontrolling interests                                           |       | $                       | (7,039     | )                       | $                 | (683       | )                        |       | $ | 239,468 |   |
| Adjustments  to reconcile net income (loss) to net cash used in operating activities:        |       |                    |       |                    |              |       |                     |       |
| Amortization  and depreciation                                                               |       | 109                     |       | 9                       |              |       | 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                                                       |       | (264                    | )          | —                  |              |       | —                   |       |
| Fair  value of stock/warrants received for mineral rights                                    |       | (231                    | )          | —                  |              |       | —                   |       |
| Gain  on sale of assets, net                                                                 |       | (123                    | )          | —                  |              |       | —                   |       |
| Loss  on auction rate security investments                                                   |       | —                  |       | —                  |              |       | 828                      |       |
| Income  tax provission                                                                       |       | 91                      |       | —                  |              |       | —                   |       |
| Gain  on extingushment of debt                                                               |       | —                  |       | —                  |              |       | (248,165                 | )          |
| Loss  (gain) on sale of interest in subsidiary                                               |       | —                  |       | —                  |              |       | 8,409                    |       |
| Fresh  start accounting adjustment                                                           |       | —                  |       | —                  |              |       | (9,122                   | )          |
| Stock  compensation                                                                          |       | 522                     |       | —                  |              |       | 2,920                    |       |
| Changes  in operating assets and liabilities:                                                |       |                    |       |                    |              |       |                     |       |
| (Increase)  decrease in trade accounts receivable                                            |       | 1,369                   |       | —                  |              |       | (11,893                  | )          |
| (Increase)  decrease in accrued interest receivable                                          |       | —                  |       | (124                    | )                 |       | 84                       |       |
| Port  fees applied to Port of Mejillones note receivable                                     |       | —                  |       | —                  |              |       | 709                      |       |
| Decrease  in prepaid expenses and other assets                                               |       | 668                     |       | —                  |              |       | 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                                                     |       | 667                     |       | —                  |              |       | (3,227                   | )          |
| Increase  (decrease) in accounts payable and accrued liabilities net of amounts  capitalized |       | 374                     |       | (449                    | )                 |       | 2,462                    |       |
| Decrease  in deferred taxes, net                                                             |       | —                  |       | —                  |              |       | (2,262                   | )          |
| Other  increase                                                                              |       | 10                      |       | —                  |              |       | 795                      |       |
| Net  cash used in operating activities                                                       |       | $                       | (3,847     | )                       | $                 | (1,247     | )                        |       | $ | (13,849 | ) |

 

The following table setsforth supplemental cash flow information and non-cash transactions:

 
| ** **                                              | ** ** | ** **              | ** ** | **For The Period**      | ** **        | ** ** | **For The Period**       | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|-------------------------|-------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **Three Months**        | ** ** | **March 25, 2009** | ** **        | ** ** | **January 1, 2009** | ** ** |
| ** **                                              | ** ** | **Ended**               | ** ** | **Through**             | ** **        | ** ** | **Through**              | ** ** |
| ** **                                              | ** ** | **March 31, 2010** | ** ** | **March 31, 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        |                    | $                 | —     |                     |       | $ | — |   |

 

**15.   Subsequent Events**

 

*EquityIncentive Grants*

 

During April 2010,the Company agreed to grant to each of its non-employee directors an awardvalued at $50,000 pursuant to the Company’s Equity Plan, effective on the dateof the Company’s 2010 annual meeting of stockholders, scheduled to occur on May 27,2010. The awards granted will be a combination of restricted stock units andstock options (with the restricted stock units granted pursuant to the Company’sDeferred Compensation Plan), with 70% of the grant

 

16

----

Table of Contents

 

value to be awarded asrestricted stock units and 30% awarded as stock options. The restricted stockunits will vest after one year and the stock options will vest in three equaltranches on the first, second and third anniversary of the grant date. Thenumber of restricted stock units and stock options granted will be determinedon the grant date.

 

Effective April 12,2010, the Company granted restricted common stock and stock options to certainof its executive officers and employees pursuant to the Company’s EquityPlan.  The restricted common stock andstock options vest in three equal tranches on the first, second and thirdanniversaries of the grant date, provided that the officer or employee continuesto be employed by or serve the Company through the applicable vesting date. Atotal of 259,250 restricted shares were granted to the executive officers andemployees and a total of 121,500 stock options were granted to the executiveofficers. The stock options permit the holder to acquire one share of commonstock upon the exercise of each vested stock option at an exercise price of$8.00, the closing price of the Company’s common stock on the NYSE Amex on April 12,2010. The stock options expire on April 12, 2020.

 

*AuctionRate Securities Arbitration*

 

On May 3,2010, the Company filed a financial industry customer arbitration claim againstCredit Suisse (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 Company alleged in its Statement of Claim that Credit Suissemisrepresented or failed to disclose material facts to the Company regardingthe risk of the securities.  As of thedate of this filing, no case number has been assigned.  There can be no assurance that the Company’sclaim will be successful or that the Company will recover any amount.

 

17

----

Table of Contents

 

**Item 2: Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

**General**

 

GoldenMinerals Company (“Golden Minerals” or “we”) was incorporated in Delaware underthe Delaware General Corporation Law in March 2009, and is the successorto Apex Silver Mines Limited (“ASML”) for purposes of reporting under U.S.federal securities laws.  References inthis discussion 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 area mineral exploration and mining services company with a diversified portfolioof precious metals and other mineral exploration properties located in or nearthe traditional precious metals producing regions of Mexico and South America.We are currently focused on the advancement of our El Quevar silverproject in northwestern Argentina.

 

Ourteam of mining professionals also provides mine management services. Wecurrently manage the San Cristóbal silver, zinc and lead mine in Boliviafor Sumitomo Corporation (“Sumitomo”).

 

Currently,our only sources of revenue are fees under our management services agreementwith Sumitomo, royalty and interest income, and sales of non-core propertiesfor cash. We incurred a net operating loss for the first quarter 2010 andexpect to incur a net operating loss for the remainder of 2010 and futureperiods unless and until El Quevar or one of our other explorationproperties is developed and begins to generate operating income. We cannotpredict when or if that will occur.

 

Thisdiscussion should be read in conjunction with Management’s Discussion andAnalysis included in our Annual Report on Form 10-K for the fiscal yearended December 31, 2009.

 

**Overview**

 

Duringthe first quarter 2010 we focused our efforts primarily on raising additionalcapital, advancing our El Quevar project and managing theSan Cristóbal mine for Sumitomo under the terms of the San CristóbalManagement Services Agreement (the “Management Agreement”). We have alsocontinued to make progress in advancing the exploration of our portfolio ofexploration properties. Significant events occurring during the first quarter2010 are described below:

 

·                  On January 7, 2010, we completed a transactionwith Hochschild Mining Group (“Hochschild”), pursuant to which we acquiredHochschild’s 35% interest in Minera El Quevar S.A., an Argentine company inwhich we held the other 65% interest.  Weissued 400,000 shares of our common stock to Hochschild and a warrant toacquire an additional 300,000 shares of our common stock exercisable for threeyears at an exercise price of $15.00 per share. With the completion of this transaction, we now own or control 100% ofthe concessions related to the El Quevar project.

 

·                  In January 2010, we sold to Sentient GlobalResources Fund III, LP and SGRF III Parallel I, LP, collectivelyreferred to as “Sentient”, a total of 844,694 shares of our common stock, in aprivate placement at a price of Cdn$7.06 per share, resulting in net proceedsto us of approximately $5.5 million. Following this transaction, Sentient held approximately 19.9% of ouroutstanding common stock, excluding restricted stock held by our employees.

 

·                  In March 2010, we closed a publicoffering of 4,000,000 shares of our common stock, of which 3,652,234 shareswere sold by us and 347,766 shares were sold by a selling stockholder. All ofthe shares were sold at a price per share of $8.50.  Concurrent with the public offering, Sentientexercised its existing pre-emptive right and purchased in a private placementpursuant to Regulation S under the Securities Act an additional 905,065 sharesof our common stock at the public offering price of $8.50, maintaining its19.9% shareholding. The aggregate net proceeds to us from the public offeringand the Sentient private placement was approximately $35.1 million, net ofoffering costs of approximately $1.3 million, the underwriting discount ofapproximately $2.1 million, and the placement agent commission of approximately$0.3 million.

 

·                  Our common stock commenced trading on the NYSE AmexLLC on March 19, 2010 under the ticker symbol “AUMN”.

 

18

----

Table of Contents

 

·                  We completed additional drilling at El Quevarduring the quarter, focused on extending and further defining the strikeextensions of the high grade Yaxtché deposit and on providing infill drillintercepts in the west area to support and update resource estimations.  Through May 3, 2010 we have drilled a totalof 205 holes totaling approximately 41,700 meters at El Quevar. Drillingresults indicated that mineralization remains open up and down dip at theYaxtché deposit and continues to the west beneath the post mineral volcaniccover.

 

·                  We completed approximately 5,900 meters of drilling onan initial 24 drill hole test of the Panuco silver-gold target, in the northernpart of the Zacatecas district, resulting in intercepts of silvermineralization in epithermal veins.

 

·                  In January 2010, we reached a non-bindingagreement in principle to sell to Apogee Minerals Ltd. our subsidiary thatowns the Paca Pulacayo exploration property in Bolivia for 5 millioncommon shares of Apogee at closing and an additional 3 million commonshares of Apogee and $500,000 to be paid 18 months following closing. Theproperty is currently subject to a joint venture arrangement pursuant to whichApogee has the right to earn up to a 60% interest in the property. Completionof the transaction is subject to negotiation and execution of definitiveagreements, approval of our board of directors, consents and approvals of thirdparties including governmental entities and the TSX Venture Exchange, and othercustomary closing conditions. During the first quarter 2010 and fourth quarter2009 we recorded $0.1 and $1.7 million impairment charges, respectively,related to our Paca Pulacayo property to write down the property to itsestimated current fair value of $0.7 million, net of estimated sellingcosts.

 

**Resultsof Operations**

 

For the results ofcontinuing operations discussed below, we compare the first quarter 2010results from continuing operations of the Successor to (i) results of thecontinuing operations of the Successor for the period from March 25, 2009through March 31, 2009 and (ii) the results of continuing operationsof the Predecessor for the 83-day period ended March 24, 2009. The resultsof operations of the San Cristóbal mine and related subsidiaries that were soldduring the first quarter 2009 are aggregated and presented as discontinuedoperations of the Predecessor for the 83-day period ended March 24,2009.  The Successor has no discontinuedoperations to report.

 

**ThreeMonths Ended March 31, 2010**

 

*ContinuingOperations*

 

*Management service fees.*Werecorded $3.2 million of management service fees for the first quarter2010.  The management service fees arerelated to the Management Agreement and are comprised of $2.8 million of feesand $0.4 million for reimbursed withholding taxes. Management service fees forthe first quarter 2009 were $1.6 million ($0.2 million and $1.4 million for theSuccessor and Predecessor, respectively). The $1.4 million 2009 predecessoramount was related to fees received by the Predecessor from a subsidiaryincluded in discontinued operations.

 

*Cost of services.*We recorded$1.6 million of costs of services for the first quarter 2010. The cost ofservices is comprised of reimbursed direct administrative expenses incurred byus related to the Management Agreement. Cost of services for the first quarter 2009 was $0.1 million ($0.1million and $0.0 million for the Successor and Predecessor, respectively).

 

*Exploration*. Our explorationexpenses, including property holding costs and allocated administrativeexpenses, were $3.2 million for the first quarter 2010, as compared to $3.9million for the first quarter 2009 ($0.4 million and $3.5 million for theSuccessor and Predecessor, respectively). Exploration expenses for 2010 were incurred primarily in Argentina, andexclude amounts spent on the El Quevar project feasibility work, and in Mexicoand Peru and 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.

 

*El Quevar feasibility*. During thefirst quarter 2010, we incurred $2.5 million of expenses related to feasibilitywork on the Yaxtché deposit of our El Quevar project in Argentina primarilyrelated to development of the exploration drift, drilling and engineeringwork.  Costs incurred for work performedoutside of the high grade Yaxtché deposit at our El Quevar project are includedin exploration discussed above. In addition to amounts expensed during thefirst quarter 2010, we purchased approximately $0.2 million of capitalizedequipment and made advance payments to equipment manufacturers of 

 

19

----

Table ofContents

 

approximately $0.5million.  We did not incur any costsrelated to the El Quevar project feasibility work during the first quarter2009.

 

*Administrative and reorganization*. Administrative expenses were $2.3 million for the first quarter 2010compared to $5.1 million for the first quarter 2009 ($0.4 million and $4.7million for the Successor and Predecessor, respectively).  Administrative expenses for 2010, includingpublic company costs, are primarily related to corporate activities in supportof our El Quevar feasibility work, exploration programs and our managementservices for the San Cristóbal mine. Administrative expenses for 2009 included public company costs and wereprimarily related to corporate activities in support of our operation of the SanCristóbal mine and exploration programs. Reorganization expenses for the first quarter 2009 were $3.8 million($0.1 million and $3.7 million for the Successor and Predecessor,respectively).  The reorganizationexpenses related to expenses for professional services incurred as a result ofour bankruptcy filing and the sale of our interest in the San Cristóbal mine toSumitomo during the first quarter 2009. We incurred no reorganization expenses during the first quarter 2010.

 

*Loss on Auction Rate Securities.* During the first quarter 2009 the Predecessor recorded a loss of $0.8million related to auction rate securities (“ARS”) investments.  The auctions for certain of our ARS began tofail during the third quarter of 2007 and continued to fail through thirdquarter 2009, at which point we sold all of our remaining ARS investments in asecondary market.  We did not hold anyARS investments during the first quarter 2010.

 

*Interestand Other Income*.  We recorded interest and other income of $0.7million for the first quarter 2010 compared to $1.1 million for the firstquarter 2009 ($0.1 million and $1.0 million for the Successor and Predecessor,respectively).  Interest and other incomefor the first quarter 2010 consisted primarily of $0.4 million of income fromthe sale of certain mineral rights and a $0.3 million gain on the sale ofmarketable securities. The first quarter 2009 amounts were primarily related tointerest earned on the higher average cash and investment balances held duringthat period as compared to amounts held during the first quarter 2010.

 

*Royalty Income*. During the first quarter 2010 we did not record any royalty incomecompared to $0.1 million for the first quarter 2009 ($0.0 million and $0.1million for the Successor and Predecessor, respectively).  The royalty income is from Excellon’s Platosamine in Mexico on which we retained a net smelter return royalty.

 

*Interest and Other Expense*.  During the first quarter 2010, we recordedother expense of $0.1 million for a fair market value adjustment of a mineralproperty held for sale at March 31, 2010. During the first quarter 2010, we held no debt and consequently werecorded no interest expense for the period. For the first quarter 2009, the Predecessor recorded interest and otherexpense in the amount of $0.3 million primarily for interest incurred onconvertible notes cancelled in connection with our emergence from bankruptcy.

 

*IncomeTaxes*.  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 $0.5 and $0.2for the first quarter 2010 and the first quarter 2009, respectively, andconsist primarily of withholding taxes either accrued or paid to Bolivia inconnection with management services provided to the San Cristóbal mine.

 

*DiscontinuedOperations — San Cristóbal.*

 

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

 

**Liquidity,Capital Resources and Going Concern**

 

At March 31,2010 our aggregate cash and short-term investments totaled $45.9 million,which included $40.6 million of cash and cash equivalents and$5.3 million of short term investments. Our cash and short-term investmentbalance is significantly higher than the $9.0 million in similar assetsheld at December 31, 2009 due to the receipt of (i) approximately$35.1 million in net proceeds received during March 2010 from the sale byus, at a price per share of $8.50, of 3,652,234 shares of our common stock in apublic offering in the US and Canada and 905,065 shares of our common stock toSentient in a private placement, (ii) net proceeds of approximately $5.5million from the sale of 844,694 shares of our common stock in January 2010in a separate private placement with Sentient, and (iii) $1.1 million in2009 bonus payments earned 

 

20

----

Table of Contents

 

under the ManagementAgreement, partially offset by $5.3 million spent during the quarter onexploration, El Quevar feasibility, management services, and general andadministrative activities, including changes in working capital.

 

As aresult of the proceeds received from the public offering and privateplacements, we plan to spend the following amounts during the last threequarters of 2010 pursuant to our long term business strategy:

 

·                  Up to $27.0 million to fund the completion of afeasibility study of the Yaxtché deposit at our El Quevar project,including the construction of an underground drift and related infrastructurein order to develop additional information regarding the deposit and detailedplant engineering;

 

·                  Approximately $6.5 million to fund targetedexploration on several of our exploration properties during 2010, includingapproximately $1.0 million to complete drilling programs at our Zacatecasproject in Mexico; approximately $2.0 million for exploration activities at theQuevar Norte targets and other targets outside of the Yaxtché deposit at ElQuevar; and approximately $2.5 million for early stage exploration on our Palcaproject in Peru and our Matehuapil and La Pinta projects in Mexico includinginitial drilling and bulk sampling;

 

·                  Approximately $3.0 million on other generativeexploration activities and property holding costs related to our remainingportfolio of exploration properties conducted through our principal explorationoffices located in South America;

 

·                  Depending on the success of the targeted explorationprogram and generative exploration activities noted above, we could spendadditional amounts for early and advanced stage drilling programs on ourcurrent or new properties.

 

·                  Approximately $6.5 million on general andadministrative costs.

 

Weplan to fund the expenditures described above from our cash and investmentbalances at March 31, 2010 of $45.9 million and from approximately$4.5 million of net cash flow from our management services agreement withSan Cristóbal, and approximately $1.0 million from royalties and otherincome through the remainder of 2010.

 

Asignificant portion of our expected 2010 cash inflows are payments to bereceived pursuant to the Management Agreement. The initial term of theManagement Agreement has been extended until June 30, 2010 and thereaftermay be terminated for any reason or no reason by us with twelve months’ priornotice or by Sumitomo with six months’ prior notice (or by Sumitomo with threemonths notice if Sumitomo has sold, directly or indirectly, more than 20% ofthe subsidiary that owns the mine). If terminated by Sumitomo, we would beentitled to a $1.0 million termination fee. We would not be required topay a termination fee. Should Sumitomo terminate the Management Agreement on July 1,2010, we will not receive cash flows from the Management Agreement subsequentto December 31, 2010, and we will be unable to rely on the ManagementAgreement as a source of funding for our business plans subsequent to thatdate.

 

If theEl Quevar feasibility study is positive, we currently anticipate that atleast an additional $65.0 to $85.0 million would be needed beyond 2010 tocomplete development and construction of an underground mine and processing facilityat El Quevar. This is a preliminary estimate and the actual cost may varysignificantly. There can be no assurance that we will be successful raisingadditional capital in the future on terms acceptable to us or at all. If we areunable to obtain additional capital during 2010 or 2011, the potentialdevelopment of the El Quevar project may be delayed.

 

**SignificantAccounting Policies**

 

See Part I, Item 1. Note 3 to the UnauditedConsolidated Financial Statements for recently adopted standards and newaccounting standards.

 

21

----

Table of Contents

 

## **Forward-LookingStatements**

## ** **

Someinformation contained in or incorporated by reference into this report maycontain forward-looking statements. These statements include commentsregarding:

 

·                     Our expectation that cash on hand and anticipatedrevenues and income will be sufficient to fund general and administrative costsand exploration expenses through 2010;

 

·                     Our planned spending on general and administrative andexploration costs and our expected cash receipts from interest and royaltyincome and from the San Cristóbal management services agreement;

 

·                     The anticipated timing and cost of the advancement ofour El Quevar project, including the timing of completion of a feasibilitystudy and projected costs to complete development and construction if theresults of the feasibility study are positive;

 

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

 

Theuse of any of the words “anticipate,” “continues,” “estimate,” “expect,” “may,”“will,” “project,” “should,” “believe” and similar expressions are intended toidentify uncertainties. We believe the expectations reflected in thoseforward-looking statements are reasonable. However, we cannot assure that theseexpectations will prove to be correct. Actual results could differ materiallyfrom those anticipated in these forward-looking statements as a result of thefactors set forth below and other factors set forth in, or incorporated byreference into this report:

 

·                        Results offuture exploration at the El Quevar project;

 

·        Results of future exploration at our explorationportfolio properties;

 

·                        The economic viability of the El Quevarproject;

 

·        Our ability to raisenecessary capital to finance advancement of the El Quevar project;

 

·        Delay and increased costsassociated with the El Quevar feasibility study;

 

·        Negative feasibility studyresults at the El Quevar project;

 

·        Changes in target drilling programexpenses and priorities;

 

·                        Our ability to continue to retain keymanagement and mining personnel necessary to successfully manage the SanCristóbal mine;

 

·                        Our ability to successfully manage theSan Cristóbal mine on behalf of Sumitomo under the terms of the Management Agreementand our ability to successfully expand our mine services business, particularlyif metals prices experience significant declines;

 

·        Possible termination of the Management Agreement andresulting revenue loss;

 

·                        Worldwide economic and political eventsaffecting the market prices for silver, zinc, lead and other minerals which maybe found on our exploration properties;

 

·                        Political and economic instability in Argentina,Chile, Mexico, Peru and other countries in which we conduct our business;

 

·        Political and economic instability in Bolivia andfuture actions of the Bolivian government with respect to nationalization ofnatural resources or other changes in the mining or taxation policies of theBolivian government that may affect the management of the San Cristóbal mine;

 

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

 

Manyof those factors are beyond our ability to control or predict. You should notunduly rely on these forward-looking statements. These statements speak only asof the date of this report on Form 10-Q. Except as required by law, we arenot obligated to publicly release any revisions to these forward-lookingstatements to reflect future events or developments.

 

22

----

Table of Contents

 

## **Item 3.    Quantitative and Qualitative DisclosuresAbout Market Risk**

## ** **

## **Interest Rate Risk**

## ** **

Weinvest substantially all of our excess cash in U.S. government and debtsecurities rated “investment grade” or better. The rates received on such investments may fluctuate with changes ineconomic conditions. Based on the average cash, restricted cash, investmentsand restricted investment balances outstanding during the first quarter 2010, a1% decrease in interest rates would have resulted in a reduction in interestincome for the period of approximately $0.1 million.

 

## **Foreign CurrencyExchange Risk**

## ** **

Althoughmost of our expenditures are in U.S. dollars, certain purchases of labor,operating supplies and capital assets are denominated in other currencies.  As a result, currency exchange fluctuationsmay impact the costs of our operations. To reduce this risk, we maintain minimum cash balances in foreigncurrencies and complete most of our purchases in U.S. dollars.

 

## **Commodity PriceRisk**

## ** **

One ofour primary business activities is the exploration of properties containingsilver, zinc, lead and other minerals, As a result, decreases in the price of any of these metals have thepotential to negatively impact our ability to establish reserves and developour exploration properties.  None of ourproperties is in production and we currently hold no commodity derivativepositions.

 

# **Item4. Controls and Procedures**

# ** **

(a)          Evaluation of Disclosure Controls and Procedures

 

OurChief Executive Officer (principal executive officer) and Chief FinancialOfficer (principal financial officer) have evaluated the effectiveness of ourdisclosure controls and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Exchange Act) as of March 31, 2010 (the “EvaluationDate”). Based on such evaluation, such officers have concluded that, as of theEvaluation Date, our disclosure controls and procedures are effective to ensurethat information required to be disclosed by us in the reports that we file orsubmit under the Exchange Act are recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms and toensure that information required to be disclosed by us in the reports that wefile or submit 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 over Financial Reporting

 

Therehave been no changes in our internal control over financial reporting thatoccurred during the period covered by this report that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

 

23

----

Table ofContents

 

PART II: OTHER INFORMATION

 

## **Item 1.    Legal Proceedings**

## ** **

ASML concluded, based on the results of an internal investigationconducted under the direction of its Audit Committee in late 2005 and early2006, that certain former senior employees of one of our South Americansubsidiaries were involved in making impermissible payments of approximately$125,000 to government officials in 2003 and 2004. ASML contacted theDepartment of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”)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, ASML entered into discussions with the SEC staff concerninga settlement of the conduct subject to the SEC’s investigation. As a result, wehave reached an agreement in principle with the SEC staff which, if approved bythe Commission, would resolve this matter with the SEC. Under the terms of theproposed settlement, we, on neither an admit nor deny basis, would agree to theentry of an administrative cease and desist order prohibiting us from futureviolations of Sections 13(b)(2)(A), 13(b)(2)(B) and 30A of the SecuritiesExchange Act of 1934. Moreover, under the terms of the proposed settlement, theSEC staff would not recommend that the Commission require the payment ofdisgorgement, civil money penalties, prejudgment interest or the appointment ofa corporate monitor. The proposed settlement is subject to Commissionapproval.  We cannot guarantee that theCommission will ultimately accept the terms of the proposed settlement.

 

In August 2009, the DOJ informed us that it has closed itsinvestigation based on, among other things, the Company’s pending settlementwith the SEC.

 

## **Item 1A.  Risk Factors.**

## ** **

Risk factors affectingthe Company can be found in Item 1A of our Annual Report on Form 10-K forthe year ended December 31, 2009.

 

## **Item 2.    Unregistered Sales of Equity Securities andUse of Proceeds**

## ** **

None, other than aspreviously reported in a Current Report on Form 8-K filed on January 13, 2010and March 24, 2010.

 

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

## ** **

None.

 

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

## ** **

**Item 5.****          ****Other Information**

 

None.

 

**Item 6.    Exhibits**

 
| 10.1 | Form of  Non-Qualified Stock Option Award Agreement Pursuant to the 2009 Equity  Incentive Plan.                                           |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| 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). |

 

24

----

Table of Contents

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on behalf of the undersigned thereunto dulyauthorized.

 

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

 

25

----