Gran Colombia Gold Reports Second Quarter 2017 Results; Announces Mine Life Extension at Its Segovia Operations – MarketWatch

Posted: August 14, 2017 at 7:44 pm

Aug 14, 2017 (Marketwired via COMTEX) — TORONTO, ON–(Marketwired – August 14, 2017) – Gran Colombia Gold Corp. (GCM) announced today the release of its unaudited interim consolidated financial statements and accompanying management’s discussion and analysis (MD&A) for the three and six months ended June 30, 2017. All financial figures contained herein are expressed in U.S. dollars (“USD”) unless otherwise noted.

Lombardo Paredes Arenas, Chief Executive Officer of Gran Colombia, commenting on the Company’s results for the first half of 2017, said, “As we reach the midpoint of 2017, we are pleased to report that our operating and financial results have been tracking to our guidance for the year. Our exploration effort in 2016 has paid off with a four-year extension of the expected mine life at our Segovia Operations to 2026 and we are now 40% of the way through our 2017 drilling program. We believe that our investment and social programs in Segovia over the last seven years have positively impacted the local community, respecting the role that responsible mining plays in the local culture and economy. The recent civil disruption is not an issue caused by Gran Colombia. It is the response by illegal miners to the Colombian government’s recent regulations aimed at illegal mining in the country, including restrictions on the use of mercury. While we hope that the Colombian government will soon be able to restore order in the community so that our people and their families can safely go about their daily lives and we can return to normal operations, we are continuing our negotiations to formalize illegal mining within our title.”

Second Quarter and First Half 2017 Highlights

Gran Colombia has updated the life-of-mine (“LOM”) plan for its Segovia Operations to incorporate the Mineral Resource estimate announced on April 19, 2017, extending the expected mine life at Segovia by four years to 2026. Measured and Indicated Resources at the Segovia Operations increased to 2.9 million tonnes at a grade of 12.0 g/t totalling 1.1 million ounces of gold, up 174% compared to the Mineral Resource estimate as of December 31, 2016. Gran Colombia also added 0.4 million ounces of gold to the Inferred category at Segovia bringing total Inferred Mineral Resources to 3.1 million tonnes at an average grade of 9.9 g/t representing 1.0 million ounces of gold. Gran Colombia is continuing its exploration campaign at Segovia in 2017 with approximately 40% of the planned 20,000 meters drilling program completed in the first half of the year. The mine life extension, coupled with an increase in the expected long-term gold price to $1,250 per ounce, resulted in a $35.5 million after-tax reversal of impairment related to the Segovia Operations in the second quarter of 2017.

On May 31, 2017, Gran Colombia extended the maturity date for $47.0 million of its Senior Secured Convertible Debentures due 2020 (the “2020 Debentures”) to 2024.

Gran Colombia’s adjusted EBITDA of $21.3 million in the second quarter of 2017 represented a 16% increase over the second quarter last year. This brings the trailing 12-months’ adjusted EBITDA to $71.0 million, up 8% from the end of 2016. See the Company’s MD&A for the computation of this non-IFRS measure.

Gran Colombia generated $3.2 million of Excess Cash Flow (see the Company’s MD&A for the computation) in the second quarter of 2017, bringing the total for the first half of 2017 to $5.5 million, as expected.

Gran Colombia has continued to execute its strategy to aggressively reduce its Senior Debentures with its Excess Cash Flow, repurchasing and cancelling $1.7 million of 2020 Debentures under its Normal Course Issuer Bid (“NCIB”) in the second quarter of 2017. Subsequent to June 30, 2017, the Company repurchased and cancelled an additional $0.7 million of 2020 Debentures and completed a $3.0 million partial redemption at par of the 2020 Debentures on July 31, 2017. Collectively, these actions reduced the potential dilution from conversion of the 2020 Debentures by approximately 2.8 million shares, equivalent to approximately 3% of total shares on a fully diluted basis (excluding stock options and warrants), and saves future interest costs of about $0.8 million. Gran Colombia intends to continue using the sinking fund balance to repurchase 2020 Debentures in the open market under the NCIB, when available, or to make further partial redemptions.

Gold production in the second quarter of 2017 totalled 46,075 ounces, up 21% from the second quarter last year led by continuing strong performance at its Segovia Operations. For the first half of 2017, gold production increased by 22% over the first half last year to a total of 85,083 ounces. The trailing 12-months’ total gold production as of the end of June 2017 stands at 165,073 ounces, up 10% over 2016’s annual gold production and above the Company’s production guidance for the 2017 calendar year of a total of 150,000 to 160,000 ounces. Gold production in July 2017 totalled 14,980 ounces. However, production in the first half of August 2017 has been adversely impacted by a civil disruption in Segovia and Remedios convened by illegal miners commencing in late July, preventing many of the Company’s personnel from safely reporting to work. The Company has implemented its contingency plans during this civil disruption, including ensuring sufficient cash is set aside to meet the interest payments on the Senior Debentures at the end of August. Certain capital projects have been suspended until the civil disruption subsides and Gran Colombia is currently able to conduct some mining, processing and maintenance activities until order is restored by the Colombian government. Negotiations between Gran Colombia and representatives of the Cogote and San Nicolas mines operating in the Company’s mining title at Segovia are continuing at this time.

Revenue has been positively impacted in 2017 by the increased level of gold production compared with last year, up 17% in the second quarter of 2017 to $56.0 million and up 23% in the first half of 2017 to $101.7 million.

Gran Colombia’s total cash costs and all-in sustaining costs (“AISC”) were also positively impacted in the second quarter of 2017 by the increased level of production, averaging $676 per ounce and $884 per ounce, respectively, bringing the averages for the first half of 2017 to $709 per ounce and $910 per ounce, respectively. The Company continues to expect that its total cash cost and AISC averages for the full year should remain below $720 and $900 per ounce sold according to its guidance for 2017, provided there is no prolonged adverse impact on production from the civil disruption. See the Company’s MD&A for the computation of these non-IFRS measures.

Net income for the second quarter of 2017 was $36.2 million, or $1.77 per share, compared with $0.1 million, or $0.01 per share, in the second quarter last year. For the first half of 2017, net income was $35.4 million, or $1.77 per share, compared with $10.9 million, or $1.40 per share, in the first half last year. Net income for the second quarter and first half of 2017 includes a $35.5 million after-tax reversal ($1.73 per share) of impairment related to the Segovia Operations. Net income in the first half of 2016 included a $14.5 million after-tax gain on financial instruments.

Adjusted net income for the second quarter of 2017 was $4.1 million, or $0.20 per share, compared with $3.9 million, or $0.42 per share, in the second quarter last year. For the first half of 2017, adjusted net income increased to $7.2 million, or $0.36 per share, compared with $4.1 million, or $0.53 per share, in the first half last year. See the reconciliation in the Company’s MD&A for the computation of this non-IFRS measure. The increase in adjusted EBITDA combined with reductions in finance costs and wealth tax, net of an increase in adjusted income taxes, in 2017 were the primary drivers behind the improvement in adjusted net income in the first half of 2017.

Financial and Operating Summary

A summary of the financial and operating results for the second quarter and first half of 2017 and 2016 follows:

Segovia Operations

In light of the updated Mineral Resource estimate for the Segovia Operations announced in April 2017, the Company collaborated with SRK Consulting (USA) Inc. (“SRK”) to update its internal LOM plan for Segovia. The updated LOM plan foresees a total of 4.1 million tonnes of material with an average head grade of 8.8 g/t being processed over an extended mine life through the end of 2026, four years longer than the previous LOM plans. Over this mine life, the updated LOM plan expects a total of 1.0 million ounces of gold to be produced at an average LOM total cash cost of $697 per ounce and an AISC (excluding corporate G&A) of $896 per ounce. At an expected long-term gold price of $1,250 per ounce, total LOM undiscounted after-tax free cash flow from mining operations amounts to $210 million. SRK is completing a NI 43-101 independent report that includes an updated Preliminary Economic Assessment for the Segovia Operations based on this updated LOM plan that is expected to be filed on the Company’s website and SEDAR profile within the next 45 days.

In the second quarter of 2017, tonnes processed at the Segovia Operations averaged 842 tpd, a 9% increase over the second quarter last year. In addition, head grades in the Company-operated mining areas improved to an average of 11.3 g/t in the second quarter of 2017, up from an average of 4.4 g/t in the second quarter last year, as a result of mining higher grade stopes in the Providencia mine this year. This brought the overall head grade for the Segovia Operations to an average of 15.9 g/t in the second quarter of 2017 compared with 13.8 g/t in the second quarter last year. Segovia’s gold production of 40,228 ounces in the second quarter of 2017 brought the total for the first half of 2017 to 72,996 ounces, up 26% over the same period last year. The trailing 12 months’ total gold production as of the end of June 2017 at Segovia was 141,374 ounces, up 12% over 2016’s annual gold production and above the Company’s production guidance range for the 2017 calendar year at Segovia of 126,000 to 134,000 ounces. Gold production in July 2017 was 12,651 ounces. However, production in the first half of August 2017 has been adversely impacted by the civil disruption and the impact of the civil disruption on 2017’s full year production guidance cannot be assessed at this time.

Segovia’s total cash costs were $620 per ounce in the second quarter of 2017, down from $690 in the first quarter of 2017 reflecting the favorable impact on fixed costs on a per ounce basis of the 23% increase in quarterly gold production at the Segovia Operations. Segovia’s second quarter 2017 total cash cost of $620 per ounce was slightly better than the $627 per ounce total cash cost reported for the second quarter of last year as the benefit of this year’s production increase was partially offset by the year-over-year appreciation of the Colombian peso (“COP”) against the U.S. dollar.

The Company’s AISC for the first half of 2017 included $12.6 million of sustaining capital expenditures, equivalent to $150 per ounce sold and $76 per ounce higher than the first half of 2016 due to the increased level of exploration, development and capital investment in the Segovia Operations this year. Sustaining capital expenditures in the first half of 2017 of $11.9 million at the Segovia Operations, equivalent to $142 per ounce sold, included (i) $4.8 million for exploration and mine development, (ii) $3.6 million for the mines including completion of a ventilation shaft at the Providencia mine, commencement of ventilation improvements at the El Silencio mine, installation of mine refuge stations, mine equipment and other infrastructure upgrades, (iii) $1.8 million for further upgrades of equipment in the Maria Dama plant and initiation of the project to expand the tailings storage facility, and (iv) $1.1 million to commence installation of a water treatment plant at the Maria Dama plant site to reduce the environmental discharge fees being incurred by the Company.

Marmato Operations

At the Marmato Operations, gold production continued to be steady with 5,847 ounces produced in the second quarter of 2017, bringing the total for the first half of 2017 to 12,087 ounces, up 2% over the same period last year. This brings Marmato’s trailing 12 months’ gold production at the end of June 2017 to 23,699 ounces, up 1% over its 2016 annual production. July’s production amounted to 2,329 ounces and the Company continues to expect Marmato’s annual gold production for 2017 will range between 24,000 and 26,000 ounces.

Total cash costs at the Marmato Operations were also steady in the second quarter of 2017 at $1,062 per ounce, but were $129 per ounce over its total cash cost in the second quarter last year as a result of the year-over-year COP appreciation and the impact on total cash costs on a per ounce basis of the impact on gold production of the lower head grades in the second quarter of 2017 compared with the second quarter last year.

Outlook

The Company produced a total of 100,063 ounces of gold production through the end of July 2017, keeping it on track to produce a total of 150,000 to 160,000 ounces of gold for the full year compared with the 149,708 ounces produced in 2016. However, the recent civil disruption in Segovia and Remedios has adversely impacted mining and plant operations at Segovia in the first half of August. Although the Company is able to conduct some operations at Segovia at this time, there can be no assurance regarding the duration of the current disruption or the extent of the impact that it will continue to have on production and cash flow during the balance of 2017.

The Company’s total cash cost and AISC averaged $709 and $910 per ounce sold, respectively, in the first half of 2017. These results were in line with the Company’s expectations and the Company continues to expect, provided there is no prolonged adverse impact on production through the balance of the year, that its total cash cost and AISC averages for the full year 2017 will remain below $720 and $900 per ounce sold, respectively.

The Company has deposited a total of $5.5 million representing its Excess Cash Flow for the first half of 2017 into the sinking funds for the Senior Debentures. In 2017, provided gold prices remain at least at the current levels and there is no prolonged adverse impact on operations from the civil disruption in Segovia, the Company expects to generate Excess Cash Flow for the full year in the order of $16 million and, to the extent possible, will use the cash in the sinking fund to make open market repurchases of the 2020 Debentures for cancellation. The Company also completed a $3.0 million partial redemption at par of the 2020 Debentures on July 31, 2017 and will continue to consider, as appropriate, additional partial redemptions going forward as a means to reduce its 2020 Debentures ahead of maturity.

Webcast

As a reminder, the Company will host a conference call and webcast on Tuesday, August 15, 2017 at 9:30 a.m. Eastern Time to discuss the results.

Webcast and call-in details are as follows:

Live Event link: http://edge.media-server.com/m/p/urfvuni7 International: 1 (514) 841-2157 North America Toll Free: 1 (866) 215-5508 Colombia Toll Free: 01 800 9 156 924 Conference ID: 45399427

A replay of the webcast will be available at http://www.grancolombiagold.com from Tuesday, August 15, 2017 until Thursday, September 14, 2017.

About Gran Colombia Gold Corp.

Gran Colombia is a Canadian-based gold and silver exploration, development and production company with its primary focus in Colombia. Gran Colombia is currently the largest underground gold and silver producer in Colombia with several underground mines in operation at its Segovia and Marmato Operations. Gran Colombia is continuing its expansion and modernization activities at its high-grade Segovia Operations.

Additional information on Gran Colombia can be found on its website at http://www.grancolombiagold.com and by reviewing its profile on SEDAR at http://www.sedar.com.

Cautionary Statement on Forward-Looking Information

This news release contains “forward-looking information”, which may include, but is not limited to, statements with respect to anticipated business plans or strategies. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Gran Colombia to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements are described under the caption “Risk Factors” in the Company’s Annual Information Form dated as of March 30, 2017, which is available for view on SEDAR at http://www.sedar.com. Forward-looking statements contained herein are made as of the date of this press release and Gran Colombia disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management’s estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

For Further Information, Please Contact: Mike Davies Chief Financial Officer (416) 360-4653 investorrelations@grancolombiagold.com

2017 Nasdaq, Inc. All rights reserved.

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Gran Colombia Gold Reports Second Quarter 2017 Results; Announces Mine Life Extension at Its Segovia Operations – MarketWatch

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