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 six months ended June 30, 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 half of 2018, said, “We are very pleased with the outcome of our efforts this year to fix our capital structure, reduce our leverage and strengthen our balance sheet. Over senior debt is now down to $93 million, about half of what it was two years ago. Our operating success at Segovia, one of the top highest-grade underground gold operations globally, has been a solid engine driving our free cash flow that has enabled us to refinance our convertible debentures and put cash back on our balance sheet rather than in sinking funds. Our first half 2018 operating and financial results reaffirm that we are seeing continuous improvement in production, adjusted EBITDA and free cash flow. We can now step into a new era, one where we use our internally generated cash flows and our high quality assets to take this Company to the next level as a cash generating, mid-size Latin America-focused gold producer.”
Second Quarter and First Half 2018 Highlights
Financial and Operating Summary
A summary of the financial and operating results for the second quarter and First Half of 2018 and 2017 is as follows:
|Second Quarter||First Half|
|Gold produced (ounces)||52,906||46,075||105,578||85,083|
|Gold sold (ounces)||53,051||45,179||102,661||83,613|
|Average realized gold price ($/oz sold)||$||1,286||$||1,225||$||1,290||$||1,201|
|Total cash costs ($/oz sold) (1)||696||676||683||709|
|All-in sustaining costs ($/oz sold) (1)||913||884||905||910|
|Financial data ($000’s, except per share amounts)|
|Adjusted EBITDA (1)||26,506||21,263||53,949||34,854|
|Net (loss) income||(30,742||)||33,783||(25,390||)||32,999|
|Per share – basic||(1.09||)||1.65||(1.02||)||1.64|
|Per share – diluted||(1.09||)||0.39||(1.02||)||0.44|
|Adjusted net income (1)||8,205||6,839||18,051||9,923|
|Per share – basic||0.29||0.33||0.72||0.50|
|Per share – diluted||0.13||0.08||0.25||0.13|
|Excess Cash Flow (1)||11,208||3,228||13,762||5,504|
|June 30,||December 31,|
|Balance sheet ($000’s):|
|Cash and cash equivalents||$||24,915||$||3,272|
|Cash in trust for Senior Debentures (2)||3,530||11,911|
|Gold Notes, including current portion, net of gold in Gold Trust Account (3)||78,235||–|
|Senior Debentures, including current portion (4)||31,870||98,713|
|Other debt, including current portion||299||439|
At the Segovia Operations, gold production in the second quarter of 2018 amounted to 47,071 ounces, bringing the total for the first half of 2018 to 93,543 ounces, up 28% compared to the first half of 2017. This brings Segovia’s trailing 12-months’ total gold production as of June 2018 to 169,206 ounces, up 14% from 2017 fuelled by continuing growth in the Company’s three mines which represented 95% of Segovia’s first half 2018 and trailing 12-months’ total gold production. The Company processed an average of 972 tonnes per day (“tpd”) in the first half of 2018 with an overall average head grade of 16.7 g/t, continuing to benefit from growth in production from its high-grade Providencia mine. In July 2018, Segovia’s gold production amounted to 17,164 ounces. Based on its performance to-date, the Company now expects that the Segovia Operations’ annual gold production will surpass 175,000 ounces for 2018.
The increased production level at the Segovia Operations in 2018 continues to have a positive impact on total cash costs, reducing fixed operating costs on a per ounce basis compared with 2017. Segovia’s total cash costs per ounce averaged $620 in the first half of 2018 compared with $652 in the first half last year. The Company continues to expect that Segovia’s total cash costs will remain below $700 per ounce in 2018.
The Company’s AISC of $905 per ounce for the first half of 2018 included $16.9 million of sustaining capital expenditures, equivalent to $165 per ounce sold ($15 per ounce higher than the first half of 2017), the major components of which included (i) $7.7 million for exploration and mine development at Segovia, including 11,186 meters of the 2018 drilling program, (ii) $4.9 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) $2.3 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, (iv) $0.8 million related to the 44kV connection at the Segovia mines, and (v) $1.1 million at the Marmato Operations, including $0.5 million for technical studies and the first 164 meters of the 2018 drilling program which commenced in June 2018 and $0.6 million of expenditures related to the existing mine and plant.
The Company’s Marmato mine produced 5,835 ounces of gold in the second quarter of 2018, bringing the total for the first half of 2018 to 12,035 ounces, on par with the first half of 2017. In April 2018, the grades at the Marmato mine dropped to about 2.2 g/t, having an adverse impact of total cash costs per ounce. To improve the situation, mine management increased the cut-off grades for material being mined and in June 2018, head grades improved to just over 3 g/t, reducing tonnes processed in the month to an average of 832 tpd and the average for the second quarter of 2018 fell to 919 tpd. As of June 2018, Marmato’s trailing 12-months’ total gold production amounted to 25,110 ounces, on par with 2017’s annual production and within the Company’s guidance range for 2018 of between 24,000 and 26,000 ounces. Tonnes processed in July 2018 averaged 890 tpd at an average head grade of 2.9 g/t resulting in gold production of 2,132 ounces for the month.
Total cash costs per ounce at Marmato increased to an average of $1,176 per ounce in the first half of 2018 compared with $1,061 per ounce in the first half of 2017, reflecting the impact on production of the lower head grades in the early part of the second quarter of 2018 as noted above. By raising the cut-off grade, mine management successfully brought the mine’s total cash cost per ounce back down below $1,100 per ounce by June 2018.
The Company produced a total of 105,578 ounces of gold production in the first half of 2018 and another 19,296 ounces in July 2018. The Company has raised its guidance for 2018 and now expects that it will produce over 200,000 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 more than 175,000 ounces in 2018.
With the initiatives in 2018 to simplify the Company’s capital structure and strengthen its balance sheet now complete, the Company’s focus will center on taking its Segovia Operations to the next level. Capital investment in 2018 at the Segovia Operations amounted to $15.6 million in the first half of 2018 and is expected to total close to $30 million this year. Emphasis will continue to focus on exploration, including the additional $2.3 million of drilling announced in early August at the deepest levels of the El Silencio mine, and ongoing mine development at its Providencia and El Silencio mines. Mine development has also commenced to expand production operations at the Sandra K mine in the second half of 2018. Capital spending at Segovia in 2018 also includes ongoing investments in mine infrastructure upgrades, ventilation, health, safety and environmental initiatives, mine equipment and expansion of tailings storage facilities at El Chocho.
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 new mineralization identified below the existing mine (“Deeps”). In 2018, the Company is following up with further technical studies and, in mid-June, commenced a drilling program of up to 10,000 meters to gather additional data related to the Deeps mineralization to support the technical studies. These efforts are intended to provide further analysis of the underground mine expansion opportunity at Marmato, leading toward the expected completion of a preliminary economic assessment in early 2019.
The Company’s total cash cost averaged $683 per ounce sold in the first half of 2018 and the Company continues to expect that its total cash cost will average less than $735 per ounce sold for the full year. The Company also continues to expect that its AISC for the full year will remain below $950 per ounce.
The Company generated $13.8 million of Excess Cash Flow in the first half of 2018. Spot gold prices, which averaged $1,318 per ounce in the first half of 2018, have dropped thus far in the first half of the third quarter to a range from $1,262 to as low as $1,209 per ounce, averaging about $1,233 per ounce. If gold prices remain at this level throughout the back half of 2018, the Company expects that it will continue to generate positive Excess Cash Flow, but it will be at a reduced level compared with the first half of this year.
The Company is continuing to deposit 1,300 ounces on a monthly basis in 2018 into the Gold Trust Account as required for the Gold Notes. The next scheduled quarterly principal repayment will take place on October 31, 2018 and the Company has a put option contract in place at $1,250 per ounce to protect the guaranteed floor price for this repayment. The Company is continuing to review its strategy to hedge quarterly repayments beyond 2018 on a commercially reasonable basis.
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.
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