Gran Colombia Gold Corp. (TSX:GCM) announced today the release of
its unaudited interim condensed consolidated financial statements
and accompanying management’s discussion and analysis (MD&A)
for the three months ended March 31, 2018. All financial figures
contained herein are expressed in U.S. dollars (“USD”) unless
otherwise noted.
Serafino Iacono, Executive Co-Chairman of Gran
Colombia, commenting on the Company’s results for the first quarter
of 2018, said, “We have reached another milestone with the
successful completion of our debt refinancing which will shortly
conclude with the full repayment of the principal amount of our
2020 Debentures and 2024 Debentures. We are also pleased with the
continued improvement in the operating and financial results we are
reporting today. With the enhanced liquidity made possible by the
debt refinancing, we have a stronger balance sheet that, together
with our internally generated cash flow, will allow us to forge
ahead with the execution of our strategy to create value by
exploring, developing and modernizing our mining operations.”
First Quarter 2018
Highlights
- The Company successfully closed its $98 million
Offering of Units on April 30, 2018 (the “Closing Date”)
to refinance its 2020 Debentures and 2024 Debentures (collectively
the “Senior Secured Debentures”), providing the Company with
greater access to its internally generated free cash flow to
explore, expand and modernize its mining operations, and
significantly reducing the potential dilution to the Company’s
shareholders compared with the existing capital structure. On the
Closing Date, the Company deposited sufficient net proceeds from
the Offering with the trustee for the Senior Secured Debentures to
fund their redemption on May 14, 2018 (the “Redemption Date”). By
extinguishing the full amount of the issued and outstanding Senior
Secured Debentures with the net proceeds of the Offering, the $9.6
million of cash in trust as of March 31, 2018, representing the
sinking fund for the Senior Secured Debentures, has since been
released for inclusion in the Company’s unrestricted cash balance,
which stood at $3.4 million at March 31, 2018. Since the Closing
Date, a further $2.3 million aggregate principal amount of Senior
Secured Debentures have been converted by holders into common
shares, decreasing the ultimate amount required to be redeemed. At
the Redemption Date, the excess funds deposited with the trustee
for the redemption of the Senior Secured Debentures will be
returned to the Company, further bolstering its cash position. The
current issued and outstanding aggregate principal amount of the
Senior Secured Debentures is $88.6 million and the Company has
29,317,798 common shares issued and outstanding.
- The Company also settled $7.3 million aggregate
principal amount of its 2018 Debentures on April 30, 2018
through a concurrent offer to holders of its 2018 Debentures to
voluntarily settle their debt prior to maturity with a combination
of 19% in cash, funded by the sinking fund, and 81% in common
shares at the conversion price. The Company continues to expect
that it will use its option to settle its remaining 2018
Debentures, of which $34.4 million aggregate principal amount is
currently issued and outstanding, at maturity in August 2018 with
common shares to the maximum extent possible. In accordance with
the 2018 Debenture holders consent solicitation process to
facilitate the Offering, the Company has increased the annual
interest rate on the remaining issued and outstanding 2018
Debentures from 1% to 5% effective the Closing Date and through to
their maturity.
- The Company is on track to meet its guidance for 2018
with total gold production of 52,672 ounces in the first quarter of
2018, up 35% over the first quarter of 2017, and a further
16,119 ounces produced in April 2018. Fueled by continued
growth in the Company’s high-grade Segovia Operations, the
Company’s trailing 12-months’ total gold production increased to
187,485 ounces as of March 2018, up 8% over the total for 2017 of
173,821 ounces and within the Company’s guidance range for 2018 of
between 182,000 and 193,000 ounces.
- Revenue increased 42% in the first quarter of
2018 over the first quarter last year to $64.8 million, positively
impacted this year by the increased level of gold production as
described above and 10% better realized gold prices in the first
quarter of 2018 as spot gold prices rose 9% compared with the first
quarter last year.
- Total cash costs (1) and all-in
sustaining costs (“AISC”) (1) averaged
$670 per ounce and $896 per ounce, respectively, for the first
quarter of 2018, down from $748 per ounce and $941 per ounce,
respectively, in the first quarter last year. An increase in the
proportion of the Company’s total gold sales coming from the lower
cost Segovia Operations coupled with a reduction in Segovia’s total
cast cost to $616 per ounce as a result of head grade improvement
in the Company-operated areas of the Providencia mine and further
reduction of fixed costs on a per ounce basis, led to the improved
total cash cost per ounce for the Company in the first quarter of
2018 compared with the first quarter last year. AISC in the first
quarter of 2018 included $180 per ounce of sustaining capital
expenditures, up from $143 per ounce in the first quarter of 2017,
reflecting the Company’s continuing commitment to explore, develop
and modernize its high-grade Segovia Operations in the improving
gold price environment.
- Adjusted EBITDA(1) doubled in
the first quarter of 2018 to $27.4 million compared with $13.6
million in the first quarter of 2017, bringing the trailing
12-months total adjusted EBITDA at the end of March 2018 to $89.3
million, up 18% compared with 2017.
- The Company generated $2.6 million of Excess Cash
Flow (1) in the first quarter of 2018, up
from $2.3 million in the first quarter last year. The Company took
advantage of its improved operating cash flow in the first quarter
of 2018 to accelerate $5.6 million of its income tax payments that
ordinarily would have been made in the second quarter of 2018 to
facilitate the commencement in May 2018 of the monthly physical
gold deliveries to the Gold Trust Account under the new gold-linked
notes issued pursuant to the Offering.
- The Company reported net income for the first
quarter of 2018 of $5.4 million, or $0.25 per share, compared with
a net loss of $0.8 million, or $0.04 per share, in the first
quarter last year, with the year-over-year improvement principally
attributable to the increased income from operations in the first
quarter of 2018 driven by higher gold sales volumes and realized
gold prices and lower total cash costs per ounce.
- Adjusted net income (1) for
the first quarter of 2018 of $9.8 million, or $0.46 per share, up
from $3.1 million, or $0.16 per share, in the first quarter last
year, also reflected the improvement in income from operations as
noted above.
(1) Refer to “Non-IFRS Measures” in the Company’s
MD&A
Financial and Operating
Summary
A summary of the financial and operating results
for the first quarters of 2018 and 2017 follows:
|
|
First Quarter |
|
|
2018 |
2017 |
|
|
|
|
|
Operating data |
|
|
|
|
Gold
produced (ounces) |
|
|
52,672 |
|
39,008 |
|
|
Gold sold
(ounces) |
|
|
49,610 |
|
38,434 |
|
|
Average
realized gold price ($/oz sold) |
|
$ |
1,293 |
$ |
1,174 |
|
|
Total
cash costs ($/oz sold) (1) |
|
|
670 |
|
748 |
|
|
All-in
sustaining costs ($/oz sold) (1) |
|
|
896 |
|
941 |
|
|
|
|
|
|
|
|
|
|
Financial data ($000’s, except per share
amounts) |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
64,786 |
$ |
45,717 |
|
|
Adjusted
EBITDA (1) |
|
|
27,443 |
|
13,591 |
|
|
Net
income (loss) |
|
|
5,352 |
|
(784 |
) |
|
Per share
- basic |
|
|
0.25 |
|
(0.04 |
) |
|
Per share
- diluted |
|
|
0.12 |
|
(0.04 |
) |
|
Adjusted
net income (1) |
|
|
9,846 |
|
3,084 |
|
|
Per share
- basic |
|
|
0.46 |
|
0.16 |
|
|
Per share
- diluted |
|
|
0.12 |
|
0.04 |
|
|
Excess
Cash Flow |
|
|
2,554 |
|
2,276 |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
December 31, |
|
|
2018 |
2017 |
|
|
|
|
Balance sheet ($000’s): |
|
|
|
Cash and cash
equivalents |
|
$ |
3,400 |
$ |
3,272 |
|
|
Cash in trust for
Senior Debentures (2) |
|
|
14,465 |
|
11,911 |
|
|
Senior debt, including
current portion (3) |
|
|
101,042 |
|
98,713 |
|
|
Other debt, including
current portion |
|
|
394 |
|
439 |
|
(1) Refer to “Non-IFRS
Measures” in the Company’s MD&A.(2)
Represents amounts deposited into sinking funds for the Senior
Debentures, net of cash used for the NCIBs and partial
redemption.(3) Represents carrying amounts, which are
at a discount to principal amounts, for the Senior Debentures. At
March 31, 2018, the aggregate principal amounts of the 2018
Debentures, 2020 Debentures and 2024 Debentures issued and
outstanding were $44.0 million, $48.0 million and $43.3 million,
respectively (December 31, 2017 - $45.2 million, $48.7 million and
$47.0 million, respectively).
The Offering
On April 30, 2018, the Company completed a
private placement of 97,992 units (the “Units”) of the Company for
aggregate gross proceeds of $97,992,000 (the “Offering”) to
refinance its Senior Secured Debentures. Each Unit consists of
$1,000 principal amount of senior secured gold-linked notes (the
“Notes”) and 124 common share purchase warrants (the “Warrants” and
each, a “Warrant”) of the Company (12,151,008 Warrants in
aggregate). Each Warrant has an exercise price of CA$2.21 and
entitles the holder thereof to purchase one common share in the
capital of the Company at any time prior to the maturity of the
Notes. The Notes and Warrants comprising each Unit will not
separate until 45 days following the Closing Date. The Notes and
the Warrants are also subject to a hold period equal to four months
and a day following the Closing Date, and the Company will take
commercially reasonable steps to obtain approval for the listing
and trading of the Notes and the Warrants on the Toronto Stock
Exchange by the end of the hold period. The Notes bear interest at
8.25% per annum, to be paid monthly, and have a six-year term. The
Company is required to set aside an amount of physical gold each
month in a trust account (the “Gold Trust Account”) and the
proceeds from the quarterly sale of the gold will be used to repay
the principal amount of the Notes based on a guaranteed floor price
of $1,250 per ounce. The scheduled annual number of physical gold
ounces to be deposited into the Gold Trust Account will vary by
year, representing approximately 10% of the projected annual gold
production from the Company’s Segovia Operations and ranging from
15,594 ounces in the first year down to 10,000 ounces in the final
year of the term of the Notes.
Segovia Operations
At the Segovia Operations, gold production in
the first quarter of 2018 of 46,472 ounces was up 42% compared to
the first quarter of 2017 primarily due to improved head grades in
the Company-operated areas at the Providencia mine. This brings the
Company’s trailing 12-months’ total gold production from Segovia to
162,363 ounces, up 9% from 2017 fuelled by continuing growth in the
Company mines which represented 94% of Segovia’s trailing
12-months’ production. With a further 14,331 ounces produced in
April, the Company continues to expect Segovia’s annual gold
production for 2018 will range between 158,000 and 167,000
ounces.
Total cash costs per ounce at the Segovia
Operations (which represented approximately 90% of total gold sales
in the first quarter of 2018) improved to $616 per ounce in the
first quarter of 2018 compared with an average of $690 per ounce in
the first quarter of 2017. The increased production level at
Segovia in the first quarter of 2018 continues to have a positive
impact reducing fixed operating costs on a per ounce basis compared
with the first quarter of 2017. The improvement in head grades at
the Company-operated areas in the Providencia mine also had a
positive impact on Segovia’s total cash cost per ounce in the first
quarter of 2018. The Company continues to expect that Segovia’s
total cash costs will remain below $700 per ounce in 2018.
Gran Colombia’s AISC of $896 per ounce for the
first quarter of 2018 included $8.9 million of sustaining capital
expenditures, equivalent to $180 per ounce sold ($37 per ounce
higher than the first quarter of 2017), the major components of
which included (i) $4.0 million for exploration and mine
development at Segovia, including 5,400 meters of the 2018 drilling
program, (ii) $2.2 million for the Segovia mines including
underground equipment and ventilation improvements at the El
Silencio mine and completion of a ventilation shaft and further
infrastructure upgrades at the Providencia mine, (iii) $1.1 million
for further upgrades of equipment in the Maria Dama plant and
laboratory at Segovia together with costs associated with a new
filter press and the project to construct the new El Chocho
tailings storage facility, and (iv) $0.7 million related to the
44kV connection at the Segovia mines.
National Instrument 43-101 Technical
Report for Segovia Operations
Gran Colombia announced today that it has filed
a prefeasibility study (“PFS”) technical report on its Segovia
Operations (the “Technical Report”) pursuant to National Instrument
43‐101 - Standards of Disclosure for Mineral Projects (“NI
43‐101"). The Technical Report supports the disclosure made by the
Company in its 2017 Annual MD&A dated March 27, 2018 and
related news release and is based on the Mineral Reserve and
Mineral Resource estimate for the Segovia Operations with an
effective date of December 31, 2017.
The PFS has provided Segovia’s first reported
Mineral Reserve of 660,000 ounces of gold based on 1.7 million
tonnes of material at an average head grade of 12.4 g/t. Although
the preliminary results announced on March 27, 2018 identified all
of the Mineral Reserve as probable, the final results included in
the Technical Report comprise 68,000 ounces of proven Mineral
Reserve based on 46,000 tonnes at an average head grade of 45.4 g/t
and 592,000 ounces of probable Mineral Reserve based on 1.6 million
tonnes at an average head grade of 11.4 g/t.
The PFS life-of-mine (“LoM”) production schedule
foresees the total 1.7 million tonnes of material being processed
over a six-year mine life resulting in a total gold production of
610,000 ounces produced at an average LoM total cash cost (1) of
$669 per ounce and an AISC(1) (excluding corporate G&A) of $896
per ounce. At an expected long-term gold price of $1,300 per ounce,
total LoM undiscounted after-tax free cash flow from mining
operations amounts to $148 million. The PFS production schedule
includes only proven and probable Mineral Reserves, and as such,
the projected mine life for the PFS will be shorter than the
Company’s current expectations (which remains at 2026 as per the
previous Preliminary Economic Assessment) due to the exclusion of
Inferred Resources which the Company currently mines and intends to
mine in the future. The contract miner material processed at the
Company’s Maria Dama plant from the small mines located in the
Company’s mining title is also not included in the LoM production
schedule in the PFS as it falls outside the Company’s mines and
Mineral Reserves.
The Technical Report, with a report date of May
10, 2018 and an effective date of December 31, 2017, was prepared
by SRK Consulting (U.S.), Inc. (“SRK”) and is entitled "NI 43-101
Technical Report Prefeasibility Study Segovia Project Colombia".
The “qualified persons” for the purposes of NI 43-101 include Ben
Parsons, MSc, MAusIMM (CP), Principal Resource Geologist; Brian
Olson, BS Chemical Engineering, P.ENG, MMSAQP, Senior Metallurgist;
Cristian A. Pereira Farias, SME-RM, Senior Hydrogeologist; David
Bird, MSc, PG, SME-RM, Principal Geochemist, John Tinucci, PhD, PE,
ISRM President/Practice Leader/Principal Geotechnical Engineer;
Jeff Osborn, BEng Mining, MMSAQP, Principal Mining Engineer;
Fernando Rodrigues, BS Mining, MBA, MAusIMM, MMSAQP, Practice
Leader/Principal Mining Engineer; Clara Balasko, MSc, PE, Senior
Civil Engineer; and, Mark Allan Willow, MSc, CEM, SME-RM, Practice
Leader/Principal Environmental Scientist.
The report is available on the Company’s website
at www.grancolombiagold.com and under the Company’s profile on
SEDAR at www.sedar.com.
(1) Total cash cost per ounce and AISC per ounce are
non-IFRS measures and are disclosed herein in accordance with the
Company’s basis of calculation as disclosed in its MD&A. In the
Technical Report, SRK included $26 per ounce of smelting and
refining costs in these non-IFRS measures which the Company
includes as a deduction in deriving its reported realized gold
price per ounce sold.
Marmato Operations
At the Marmato Operations, production remained
steady with 6,200 ounces of gold in the first quarter of 2018
compared with 6,240 ounces in the first quarter of 2017. This
brings Marmato’s trailing 12-months’ total gold production at the
end of March 2018 to 25,122 ounces, on par with 2017’s annual
production. The Marmato Operations produced 1,788 ounces in April
and the Company continues to expect that its annual gold production
will fall within its guidance range for 2018 of between 24,000 and
26,000 ounces.
Total cash costs at the Marmato Operations
(which represented approximately 10% of total gold sales in 2017)
increased to $1,141 per ounce in the first quarter of 2018 compared
with $1,061 per ounce in the first quarter of 2017 reflecting the
impact of the lower mill recovery on gold production in the first
quarter of 2018. The Company continues to expect that Marmato’s
total cash cost in 2018 will remain below 2017’s annual average of
$1,049 per ounce.
Outlook
The Company started off 2018 with a total of
52,672 ounces of gold production in the first quarter and another
16,119 ounces in April 2018. The Company continues to expect to
produce a total of 182,000 to 193,000 ounces of gold for the full
year compared with the 173,821 ounces produced in 2017. Production
growth will continue to be fuelled by the Company’s mines at its
high-grade Segovia Operations which are expected to produce between
158,000 and 167,000 ounces in 2018.
In the first quarter of 2018, the Company
executed approximately 5,400 meters or approximately 27% of its
planned 20,000 meters drilling campaign for the full year to
continue its efforts to upgrade and extend its mineral resources at
the Segovia Operations. Capital investment in 2018 at the Segovia
Operations will continue to focus on ongoing mine development at
its Providencia and El Silencio mines, and commence mine
development at its Sandra K mine, along with ongoing investments in
mine infrastructure upgrades, ventilation, health, safety and
environmental initiatives, mine equipment and expansion of tailings
storage facilities.
At Marmato, the Company completed a conceptual
study in 2017 to consider the potential for underground mining
operations combining the existing operating mine with the Deeps
mineralization. In 2018, the Company will follow up with further
technical studies and up to 10,000 meters of drilling leading
toward the expected completion of a preliminary economic assessment
by the end of the year.
The Company’s total cash cost averaged $720 per
ounce sold in 2017. In 2018, the Company expects that its total
cash cost will increase slightly, averaging less than $735 per
ounce sold for the full year, as a result of entering contracts in
the latter half of 2017 for additional higher cost, high-grade
material from the contract miners operating within its Providencia
and El Silencio mines. The Company also expects that with its
capital investment program in 2018, including the ongoing
exploration activities at Segovia and execution of the drilling
program and technical studies at Marmato, its AISC for the full
year will increase from 2017’s full year AISC average of $918 per
ounce but will remain below $950 per ounce.
Webcast
As a reminder, Gran Colombia will host a
conference call and webcast on Friday May 11, 2018 at 9:30 a.m.
Eastern Time to discuss the results.
Webcast and call-in details are as follows:
Live Event link: |
|
|
|
https://edge.media-server.com/m6/p/tck6woh8 |
International: |
|
|
|
1 (514) 841-2157 |
North America Toll
Free: |
|
|
|
1 (866) 215-5508 |
Colombia Toll
Free: |
|
|
|
01 800 9 156 924 |
Conference ID: |
|
|
|
46778182 |
A replay of the webcast will be available at
www.grancolombiagold.com from Friday, May 11, 2018 until Monday,
June 11, 2018.
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 exploration, expansion
and modernization activities at its high-grade Segovia
Operations.
Additional information on Gran Colombia can be
found on its website at www.grancolombiagold.com and by reviewing
its profile on SEDAR at 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 27, 2018, which
is available for view on SEDAR at 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
DaviesChief Financial Officer(416)
360-4653investorrelations@grancolombiagold.com
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