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 and nine months ended September 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
nine months of 2017, said, “In the third quarter we faced some
adversity as we dealt with the challenges of the 42-day civil
disruption in Segovia. While our third quarter results were
adversely impacted by the work slowdown, we demonstrated our
resiliency once operations returned to normal in early September,
rebounding with two of our best production months this year. We
have since signed some new contracts with small mining cooperatives
in Segovia and negotiations are continuing with the rest. We now
believe our 2017 gold production will total between 165,000 to
170,000 ounces.”
Third Quarter and First Half 2017
Highlights
- Gran Colombia has raised its annual gold production
guidance for 2017 to a range from 165,000 to 170,000
ounces from the previous guidance of 150,000 to 160,000
ounces. Although gold production in the third quarter of 2017 of
37,039 ounces was down 5% from the third quarter last year due to
the impact of the 42-day civil disruption on the Segovia
Operations, year-to-date gold production of 122,122 ounces is up
12% over the first nine months of 2016. With a further 16,995
ounces produced in October 2017, the trailing 12-months’ total gold
production as of the end of October 2017 stands at 166,995 ounces,
up 11% over 2016’s annual production.
- Revenue has been positively impacted this year
by the increased level of gold production compared with last year
and is up 8% in the first nine months of 2017 to $144.4 million.
Gold sales volume in the third quarter of 2017, adversely impacted
by the civil disruption at Segovia, and 4% lower spot gold prices
in the third quarter of 2017 compared with the third quarter last
year, contributed to a 17% year-over-year decline in third quarter
revenue to $42.7 million in 2017. With Segovia’s operations back to
normal and spot gold prices in October and the first half of
November generally above $1,270 per ounce, Gran Colombia is
expecting stronger revenue performance in the fourth quarter of
2017.
- Gran Colombia’s total cash costs and
all-in sustaining costs (“AISC”)
averaged $748 per ounce and $970 per ounce, respectively, in the
third quarter of 2017, reflecting the adverse impact of the reduced
level of production on fixed costs and capital spending on a per
ounce basis. This brings the average total cash costs and AISC for
the first nine months of 2017 to $720 per ounce and $927 per ounce,
respectively, compared with $699 per ounce and $832 per ounce,
respectively, in the first nine months of 2016. Gran Colombia
continues to expect that its total cash costs and AISC averages for
the full year will remain below $720 and about $900 per ounce sold,
respectively. See the Company’s MD&A for the computation
of these non-IFRS measures.
- Gran Colombia’s trailing 12-months’ adjusted
EBITDA stood at $65.1 million at the end of September
2017. Although adjusted EBITDA for the third quarter of 2017 was
adversely impacted by the factors that affected revenue and total
cash costs per ounce as outlined above, declining to $13.8 million
compared with $19.7 million in the third quarter last year, the
Company’s adjusted EBITDA for the first nine months of 2017 totaled
$48.7 million compared with $49.6 million for the first nine months
last year. See the Company’s MD&A for the computation of this
non-IFRS measure.
- The Company generated $2.3 million of Excess Cash
Flow (see the Company’s MD&A for the computation in
accordance with the indentures for the Senior Debentures) in the
third quarter of 2017, bringing the total for the first nine months
of 2017 to $7.8 million. Gran Colombia continues to expect to reach
its guidance of $16 million of Excess Cash Flow for the full year
in 2017.
- Gran Colombia continued to execute its strategy in the third
quarter of 2017 to reduce its Senior
Debentures ahead of maturity with its Excess Cash Flow,
repurchasing and cancelling an additional $0.7 million of 2020
Debentures at a discount under its Normal Course Issuer Bid
(“NCIB”) and completing a $3.0 million partial redemption at par of
the 2020 Debentures on July 31, 2017.
- Gran Colombia reported a net loss for the
third quarter of 2017 of $1.0 million, or $0.05 per share, compared
with net income of $8.1 million, or $0.52 per share, in the third
quarter last year, primarily reflecting the reduction in adjusted
EBITDA compared with the third quarter last year. For the first
nine months of 2017, net income was $34.3 million, or $1.70 per
share, including a $35.5 million after-tax reversal ($1.76 per
share) of impairment related to the Segovia Operations. Net income
for the first nine months of 2016 was $19.0 million, or $1.82 per
share, including a $14.1 million after-tax gain ($1.35 per share)
on financial instruments.
- Adjusted net income for the third quarter of
2017 was $3.8 million, or $0.19 per share, down from $8.1 million,
or $0.52 per share, in the third quarter last year, principally due
to the lower adjusted EBITDA offset partially by a reduction in
adjusted income taxes. For the first nine months of 2017, adjusted
net income amounted to $11.0 million, or $0.55 per share, compared
with $12.2 million, or $1.17 per share, in the first nine months
last year. See the reconciliation in the Company’s MD&A for the
computation of this non-IFRS measure.
- On October 4, 2017, Gran Colombia announced an updated
Mineral Resource Estimate for its Marmato
Project, shifting focus for potential future development
from the previous open pit concept, and increasing cut-off grades
in anticipation of developing an expanded underground mining
operation. Measured and Indicated Resources consist of 3.9 million
ounces of gold and Inferred Resources are 4.2 million ounces of
gold. In 2018, Gran Colombia intends to proceed with a preliminary
economic assessment for the Marmato Project and to perform
additional drilling on the deep mineralization to understand the
deposit’s total mineral potential.
Financial and Operating
Summary
A summary of the financial and operating results
for the third quarter and first nine months of 2017 and 2016
follows:
|
|
|
Third Quarter |
|
|
First Nine Months |
|
|
|
2017 |
|
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
Operating
data: |
|
|
|
|
|
Gold produced
(ounces) |
|
|
37,039 |
|
|
|
39,111 |
|
|
122,122 |
|
|
108,829 |
Gold sold
(ounces) |
|
|
33,932 |
|
|
|
39,017 |
|
|
117,545 |
|
|
107,605 |
Average realized
gold price ($/oz sold) |
|
$ |
1,246 |
|
|
$ |
1,296 |
|
$ |
1,214 |
|
$ |
1,225 |
Total cash costs
($/oz sold) (1) |
|
|
748 |
|
|
|
728 |
|
|
720 |
|
|
699 |
All-in
sustaining costs ($/oz sold) (1) |
|
|
970 |
|
|
|
884 |
|
|
927 |
|
|
832 |
Financial data ($000’s, except per share
amounts): |
|
|
|
|
Revenue |
|
$ |
42,737 |
|
|
$ |
51,224 |
|
$ |
144,427 |
|
$ |
133,708 |
Adjusted EBITDA
(1) |
|
|
13,844 |
|
|
|
19,712 |
|
|
48,698 |
|
|
49,597 |
Reversal of
impairment charges, net of tax |
|
|
- |
|
|
|
- |
|
|
35,460 |
|
|
- |
Net income |
|
|
(1,047 |
) |
|
|
8,072 |
|
|
34,341 |
|
|
18,963 |
Basic and
diluted (loss) income per share (2) |
|
|
(0.05 |
) |
|
|
0.52 |
|
|
1.70 |
|
|
1.82 |
Adjusted net
income (1) |
|
|
3,835 |
|
|
|
8,103 |
|
|
11,042 |
|
|
12,211 |
Basic and
diluted adjusted income per share (1) (2) |
|
|
0.19 |
|
|
|
0.52 |
|
|
0.55 |
|
|
1.17 |
Excess Cash Flow
(1) |
|
|
2,293 |
|
|
|
112 |
|
|
7,797 |
|
|
2,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Refer to “Non-IFRS and Additional Financial Measures” in the
Company’s MD&A.
- Per share information has been adjusted to reflect the 1:15
consolidation completed on April 25, 2017.
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
Balance sheet ($000’s): |
|
|
|
Cash and cash equivalents |
|
$ |
3,335 |
|
$ |
2,783 |
Cash in trust
for Senior Debentures (3) |
|
|
3,236 |
|
|
537 |
Senior debt
(4) |
|
|
93,477 |
|
|
84,602 |
Other debt,
including current portion |
|
|
519 |
|
|
1,652 |
|
|
|
|
|
|
|
- Represents amounts deposited into sinking funds for
the Senior Debentures, net of cash used for the NCIBs.
- Represents carrying amounts, which are at a discount to
principal amounts, for the Senior Debentures. At September 30,
2017, the aggregate principal amounts of the 2018 Debentures, 2020
Debentures and 2024 Debentures issued and outstanding were $46.0
million, $48.7 million and $47.0 million, respectively (December
31, 2016 - $49.7 million, $101.2 million and Nil,
respectively).
Segovia Operations
At the Segovia Operations, production was
adversely impacted in the third quarter of 2017 by a 42-day civil
disruption commenced in late July by the Mesa Minera, a local
mining collective comprised, in its majority, of illegal miners, in
response to the increased measures being implemented by the
Colombian government to restrict illegal mining, including
restrictions on access to mercury and explosives. During the course
of the civil disruption which ended in early September, Gran
Colombia continued its discussions regarding the financial and
operating parameters that will enable it to bring additional mining
collectives operating within its title into its contract mining
model, under which over 2,500 miners in Segovia and Remedios are
already working with the Company. To date, Gran Colombia has signed
seven additional new contracts with small mining collectives and
over the next few months it will continue to negotiate specific
operating contracts with each of the remaining mining collectives
based on general terms agreed to between the Ministry of Mines, the
Governor of Antioquia, the Mayors of Segovia and Remedios, the Mesa
Minera and the Company. The monetary compensation under these new
operating contracts is being established for each mining collective
individually with Gran Colombia retaining between 10% and 60% of
the spot price for each ounce of gold produced. The contracts also
require that all ore is to be processed at Gran Colombia’s Maria
Dama plant.
As a result of the civil disruption, tonnes
processed dipped to an average of 490 tpd in the third quarter of
2017 (736 tpd on an adjusted basis to exclude the days during the
civil disruption) compared with 790 tpd in the third quarter last
year. Head grades in the Company-operated mining areas improved to
an average of 17.5 g/t in the third quarter of 2017, up from an
average of 3.7 g/t in the third quarter last year, as a result of
continuing to mine higher grade stopes in the Providencia mine this
year. This brought the overall head grade for the Segovia
Operations to an average of 20.7 g/t in the third quarter of 2017
compared with 14.5 g/t in the third quarter last year. Segovia’s
gold production of 14,420 ounces in the month of September brought
the total for the third quarter of 2017 to 30,075 ounces and for
the first nine months of 2017 to 103,071 ounces, up 13% over the
first nine months last year. With a further 14,860 ounces of gold
produced in October 2017 (a new monthly record), the trailing
12-months’ total gold production as of the end of October 2017 at
Segovia was 141,584 ounces, up 12% over 2016’s annual gold
production. Consequently, Gran Colombia has increased its annual
gold production guidance for 2017 for the Segovia Operations to a
range of 140,000 to 145,000 ounces from the previous range of
126,000 to 134,000 ounces.
Segovia’s total cash costs increased from $620
per ounce in the second quarter of 2017 to $700 per ounce in the
third quarter of 2017 reflecting the adverse impact on fixed costs
on a per ounce basis of the civil disruption on quarterly gold
production. Although certain operating costs are variable in
nature, such as the amounts paid to contract miners based on gold
production and production taxes, other costs associated with the
operation and maintenance of the mines are more fixed in nature and
could not be fully reduced to offset the impact on production of
the civil disruption. Gran Colombia expects that Segovia’s total
cash cost per ounce will return to levels similar to the second
quarter of 2017 now that operations have returned to normal.
Gran Colombia’s AISC for the first nine months
of 2017 included $17.9 million of sustaining capital expenditures,
equivalent to $152 per ounce sold and $63 per ounce higher than the
first nine months 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
nine months of 2017 of $16.5 million at the Segovia Operations,
equivalent to $140 per ounce sold, included (i) $6.8 million
for exploration and mine development, (ii) $5.8 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) $2.5 million for
further upgrades of equipment in the Maria Dama plant and
laboratory and initiation of the project to expand the tailings
storage facility, and (iv) $1.2 million to commence installation of
a water treatment plant as part of Gran Colombia’s plan to improve
the quality of water being discharged into the environment from
dewatering of the mines and tailings ponds. It should also be noted
that Gran Colombia completed a number of initiatives in the third
quarter of 2017 that have eliminated the discharge of excess
operational waters to the environment, thereby reducing future
environmental discharge fees.
Marmato Operations
At the Marmato Operations, gold production
showed improvement in the third quarter of 2017 led by a 14%
increase in tonnes processed, compared with the first half of 2017,
to an average of 1,100 tpd. Gold production for the third quarter
of 2017 of 6,964 ounces, up 25% over the third quarter last year,
brought the total for the first nine months of 2017 to 19,051
ounces, up 10% over the same period last year. With a further 2,135
ounces of gold produced in October 2017, this brings Marmato’s
trailing 12-months’ gold production at the end of October 2017 to
25,324 ounces, up 8% over its 2016 annual production. For the full
year 2017, Gran Colombia continues to expect Marmato’s annual gold
production will range between 24,000 and 26,000 ounces.
Total cash costs at the Marmato Operations
showed improvement in the third quarter of 2017, decreasing 10%
from the first half of 2017 to $958 per ounce, aided by the
positive impact on fixed costs on a per ounce basis of the 15%
increase in in gold production in the third quarter of 2017
compared with the quarterly run rate in the first half this
year.
Outlook
Gran Colombia has produced a total of 139,117
ounces of gold through the first ten months of 2017 and now
believes it will produce a total of 165,000 to 170,000 ounces for
the full year compared with the 149,708 ounces produced in 2016.
Production growth at Gran Colombia’s Segovia Operations has been
solid in 2017, even with the impact of a 42-day disruption in
operations in the third quarter. With a total of 117,931 ounces of
gold produced through the first ten months of 2017, Segovia is on
pace to produce between 140,000 and 145,000 ounces this year, up
from 126,261 ounces in 2016 and the Marmato Underground mine is
expected to meet its 2017 production guidance range of 24,000 to
26,000 ounces of gold.
Gran Colombia’s total cash cost and AISC
averaged $720 and $927 per ounce sold, respectively, in the first
nine months of 2017. These results were adversely impacted by the
civil disruption at Segovia in the third quarter of 2017. Despite
this, Gran Colombia continues to expect that its fourth quarter
2017 operating and financial performance will bring the total cash
cost and AISC averages for the full year 2017 to below $720 and
about $900 per ounce sold, respectively.
Gran Colombia has deposited a total of $7.8
million representing its Excess Cash Flow for the first nine months
of 2017 into the sinking funds for the Senior Debentures. Provided
gold prices remain at least at the current level over the final two
months of the year and Segovia’s gold production in November and
December meets expectations, Gran Colombia expects to generate
Excess Cash Flow for the full year in the order of $16 million and
it will continue to consider, as appropriate, additional NCIB
purchases and /or partial redemptions, if appropriate, as a means
to reduce its 2020 Debentures ahead of maturity.
Webcast
As a reminder, Gran Colombia will host a
conference call and webcast on Tuesday, November 14, 2017 at 8:30
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/wyndm7kc
International: 1 (514) 841-2157North America Toll Free: 1
(866) 215-5508Colombia Toll Free: 01 800 9 156 924Conference
ID: 45894608
A replay of the webcast will be available at
www.grancolombiagold.com from Tuesday, November 14, 2017 until
Thursday, December 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 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 30, 2017, 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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