Gran Colombia Gold Corp. (TSX: GCM) (OTCQX: TPRFF) announced today the release of its audited consolidated financial statements and accompanying management’s discussion and analysis (MD&A) for the year ended December 31, 2018. All financial figures contained herein are expressed in U.S. dollars unless otherwise noted.
Serafino Iacono, Executive Chairman of Gran Colombia, commenting on the Company’s results for 2018, said, “2018 was the watershed year for us, the one where everything we had being doing to turn things around in the two prior years all came together. 2018’s gold production surpassed 200,000 ounces for the first time, up 25% from 2017 as our high-grade Segovia Operations delivered another solid year with grades over 17 g/t. Adjusted EBITDA increased by 36% over last year, surpassing the $100 million mark for the first time, and being a key catalyst in the 58% increase in our operating cash flow to almost $80 million and the 72% increase in our free cash flow(1) to $44 million. Our debt refinancing earlier in 2018 did exactly what we hoped for, lifting the dilution overhang off of our stock and we strengthened our balance sheet, increasing our cash and cash equivalents to $35.6 million, and reducing our debt by 37% to $88.3 million, by the end of 2018. We made further progress in our strategy to enhance the value of our assets with additional positive results from our ongoing exploration programs at Segovia and Marmato. This brings us to 2019, where we plan to deliver another solid year and we will gain momentum with our pipeline of projects aimed to take us to the next level. With the proceeds from the bought deal private placement we will be closing next week, we can dramatically accelerate our exploration programs at Segovia. We expect to complete the technical studies later this year at Marmato and then be in a position to determine how we will take the underground mine expansion forward. We are working closely with Sandspring’s management team on both their Toroparu and Chicharron projects and we see potential in the changes evolving in Venezuela that may open a door for us to get back into our gold projects there.”
Fourth Quarter and Full Year 2018 Highlights
Selected Financial Information
|Gold produced (ounces)||55,260||51,699||218,001||173,821||149,708|
|Gold sold (ounces)||56,360||56,100||214,622||173,645||148,962|
|Average realized gold price ($/oz sold)||$||1,198||$||1,252||$||1,239||$||1,226||$||1,218|
|Total cash costs ($/oz sold) (1)||698||719||680||720||706|
|All-in sustaining costs ($/oz sold) (1)||929||899||907||918||850|
|Financial data ($000’s, except per share amounts)|
|Adjusted EBITDA (1)||23,736||26,758||102,386||75,456||66,044|
|Net income (loss)||8,038||4,896||(3,379||)||36,848||3,709|
|Per share – basic||0.17||0.23||(0.10||)||1.81||0.30|
|Per share – diluted||0.17||0.11||(0.11||)||0.61||0.23|
|Adjusted net income (1)||14,346||9,137||42,327||22,895||15,641|
|Per share – basic||0.30||0.44||1.22||1.13||1.26|
|Per share – diluted||0.29||0.11||0.59||0.30||0.24|
|Net cash provided by operating activities||23,561||17,972||79,741||50,527||33,274|
|Free cash flow (1)||14,444||10,928||44,040||25,560||16,564|
|Balance sheet ($000’s):|
|Cash and cash equivalents||$||35,645||$||3,272||$||2,783|
|Cash in trust for Senior Debentures (2)||–||11,911||537|
|Gold Trust Account (3)||3,210||–||–|
|Gold Notes, including current portion – principal amount outstanding (4)||88,250||–||–|
|Senior Debentures, including current portion – principal amount outstanding (5)||–||140,811||150,904|
|Other debt, including current portion||43||439||1,652|
At the Segovia Operations, gold production in the fourth quarter of 2018 amounted to 48,809 ounces, bringing the total for 2018 to 193,050 ounces, up 30% over 2017 fuelled by continuing growth in the Company’s three operating mines. The Company processed an average of 1,015 tonnes per day (“tpd”) in the 2018, up 33% from last year, with an overall average head grade of 17.1 g/t, benefitting from the 70% growth in production from its high-grade Providencia mine in 2018. With a total of 35,416 ounces of gold already produced in the first two months of 2019, the Company expects that the Segovia Operations’ will produce between 186,000 and 199,000 ounces of gold for the full year.
Total cash costs per ounce of $635 per ounce in the fourth quarter of 2018 brought the average for the full year 2018 to $623 per ounce, down from $664 per ounce last year. Overall, the increased production level at Segovia in 2018 continued to have a positive impact reducing fixed operating costs on a per ounce basis compared with 2017. The Company expects that Segovia’s total cash costs will remain below $700 per ounce in 2019.
The Company’s AISC of $907 per ounce for 2018 included $31.2 million of sustaining capital expenditures attributable to the Segovia Operations, equivalent to $146 per ounce sold, the major components of which included (i) $6.2 million for exploration (including approximately 26,800 meters of the 2018 drilling program) and $9.0 million for mine development, (ii) $8.2 million for the mines including underground equipment and ventilation improvements at the El Silencio mine, completion of a ventilation shaft and further infrastructure upgrades at the Providencia mine, and underground equipment and infrastructure improvements at the Sandra K mine, (iii) $5.7 million for further upgrades of equipment in the Maria Dama plant and laboratory together with costs associated with tailings storage facilities, including a new filter press and the project to construct the new El Chocho tailings storage facility, (iv) $0.8 million related to the 44kV connection at the mines and (v) $1.3 million associated with upgrades to minesite buildings and facilities, IT infrastructure and security.
Better head grades helped the Company’s Marmato mine increase its production in the second half of 2018. For the fourth quarter of 2018, Marmato produced 6,451 ounces of gold bringing the total for 2018 to 24,951 ounces, almost on par with 2017. Since coming into the Company in 2011, the Marmato mine has been a very steady producer and the Company expects that 2019’s annual gold production from Marmato will range between 24,000 and 26,000 ounces.
Total cash costs per ounce increased to an average of $1,132 per ounce in 2018 compared with $1,049 per ounce in 2017. The Company expects the mine’s total cash cost per ounce will decrease to below $1,100 per ounce in 2019.
The Company’s AISC of $907 per ounce for 2018 included $4.5 million of sustaining capital expenditures attributable to Marmato, equivalent to $21 per ounce sold, the major components of which included (i) $2.2 million for mine infrastructure and equipment, processing plant upgrades, tailings storage facility upgrades, security, and health and safety initiatives and (ii) $2.3 million to advance the evaluation of the opportunity to expand underground mining operations, including $2.2 million incurred in connection with the 2018 drilling program which commenced in June and comprised approximately 8,200 meters and $0.1 million for technical studies.
The Company started off 2019 with a total of 39,276 ounces of gold production in the first two months and expects to produce a total of 210,000 to 225,000 ounces of gold for the full year compared with the 218,001 ounces produced in 2018.
The Company has already commenced a 20,000 meters drilling campaign in 2019 at its Segovia Operations focused on step-out drilling at Providencia and Sandra K, deep zone drilling to extend El Silencio another 200 meters below its currently delineated mineral resource, and brownfield drilling on the Cogote vein system. Using the net proceeds from the recently announced CA$20 million bought deal private placement which is expected to close on or about April 2, 2019, the Company will accelerate its ongoing exploration programs at Segovia, including technical and other studies to be carried out over the next approximately six months to identify and prioritize drilling targets followed by a drilling campaign, over and above what is already planned by the Company in 2019 and 2020. The objective of the drilling program is to increase mineral reserves for future production growth and to extend the mine life of the Segovia Operations.
Capital investment in 2019 at the Segovia Operations, expected to total approximately $25-$30 million (excluding exploration) in 2019, will continue to focus on ongoing mine development at its Providencia, El Silencio and Sandra K mines, along with ongoing investments in mine infrastructure upgrades, ventilation, health, safety and environmental initiatives, mine equipment and further expansion of the El Chocho tailings storage facility, including commissioning of a filter press. Sustaining capital expenditures at the Marmato mine and processing plant in 2019 are expected to be about $1.5 million. As the Company advances its evaluation of the underground mine expansion opportunity at Marmato toward the completion of a NI 43-101 compliant technical report before the end of the year, it expects to spend approximately $2 million in 2019, including another 8,000 meters of drilling to extend the Deeps Zone further along strike and to test the high-grade core of the Deeps Zone up to 600m asl.
The Company’s total cash cost averaged $680 per ounce sold in 2018. In 2019, the Company expects that its total cash cost may increase slightly but continuing to average less than $720 per ounce sold for the full year. The Company entered into a new refining contract in January 2019 with more favorable terms than its previous contract. Expected savings in refining costs of up to $20 per ounce will enhance the Company’s realized selling price for its gold and help to mitigate some of the impact of any potential increases in its total cash costs on adjusted EBITDA and operating cash flow. The Company also expects that with its planned capital investment program in 2019, including the ongoing exploration activities at Segovia and execution of the drilling program and technical studies at Marmato, its AISC for the full year may increase from 2018’s full year AISC average of $907 per ounce but will remain below $950 per ounce.
Executive Title Changes
In recognition of the evolution of the roles that each of the Company’s Executive Co-Chairmen fulfill in the operations of the Company, the Board is pleased to announce that, effective today, Serafino Iacono will become Executive Chairman and Miguel de la Campa will become Vice Chairman. Messrs. Iacono and de la Campa remain fully committed to the success of Gran Colombia, which they co-founded in 2010, and feel that the change in their titles will ensure the market has a clear understanding of their respective roles.
About Gran Colombia Gold Corp.
Gran Colombia is a Canadian-based mid-tier gold producer with its primary focus in Colombia where it is currently the largest underground gold and silver producer with several mines in operation at its Segovia and Marmato Operations. Gran Colombia is continuing to focus on exploration, expansion and modernization activities at its high-grade Segovia Operations.
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