TORONTO, Aug. 14,
2012 /PRNewswire/ - Gran Colombia Gold Corp. (TSX: GCM) announced today
the release of its unaudited interim condensed consolidated financial statements
for the second quarter ended June 30, 2012 and
accompanying management's discussion and analysis. All financial figures
contained herein are expressed in U.S. dollars unless otherwise noted.
Second Quarter 2012 Highlights
- Gold production of 25,607 ounces in the second quarter of 2012 represented a 15 percent improvement over the same quarter last year bringing total gold production for the first half of 2012 to 51,867 ounces, up 21 percent over the first half of last year. After experiencing some delays in the second quarter, the new ball mill at Maria Dama came on-line in mid-May. Mill throughput subsequently increased, reaching an average of 737 tpd in the month of June, a 45 percent increase compared with the first quarter of 2012. Testing of the new ball mill has proved that it can handle loads of 1,000 tonnes of ore per day ("tpd"). New flotation cells being installed in the third quarter as part of the plant upgrade will address the issues that impacted mill recovery rates in the second quarter, enabling the plant to handle the increased volumes combined with the much higher grade ore delivered by the artisanal miners.
- Revenues of $40.7 million, 47 percent higher than the second quarter of 2011, brought total revenues for the first half of 2012 to $83.4 million. In the first half of 2012, the Company sold 49,232 ounces of gold at an average realized price of $1,650 per ounce.
- Consolidated cash cost of $1,313 per ounce of gold sold increased 10 percent from the first quarter of 2012, primarily due to a 10 percent decrease in the mill recovery rate at Maria Dama at Segovia. Actions are being taken by management to improve operations at Maria Dama in the third quarter and to increase production in the second half of the year at Segovia, which are expected to reduce consolidated cash costs below $1,100 per ounce by the end of 2012.
- General and administrative ("G&A") expenses, which include $0.3 million of one-time advisory fees that helped the Company to begin recovering overdue VAT claims in Colombia, amounted to $4.2 million and $7.8 million, for the second quarter and first half of 2012, respectively. G&A expenses in the first half of 2012 represent a 25 percent reduction compared with the post-merger G&A expenses in the second half of 2011 (G&A in the second quarter and first half of 2011 is not comparable to the current year as it did not include G&A from Medoro Resources (Yukon) Inc. ("Medoro") prior to the June 10, 2011 merger).
- Net loss attributable to shareholders of $13.7 million, or $0.04 per share, in the second quarter of 2012, includes an impairment charge of $3.4 million related to the carrying value of its Mazamorras exploration property after entering into an agreement to sell the property for total consideration of $5.5 million, $2.9 million of mark-to-market losses on financial instruments and a $3.3 million foreign exchange loss.
- Cash balance at June 30, 2012 was $4.1 million. During the second quarter of 2012, the Company used $1.0 million of its cash on hand, together with $3.7 million generated from operating activities and $0.9 million of net proceeds from additional Colombian bank debt facilities to fund $5.7 million of investing activities during the quarter.
- Exploration activities in the second quarter included the completion of a 12,000 metres drilling program at the El Zancudo Project that had commenced in April 2011. Gran Colombia announced its exploration and in-fill drilling program had returned high grade gold and silver mineralization over a strike length of some 450 metres and dip length of 170 metres on the newly discovered Santa Catalina vein, which is open in all directions. An updated technical report is expected to be completed by the end of 2012.
- A Mineral Resource Estimate announced on June 21, 2012, highlighted an 18 percent increase to 11.8 million ounces of gold and a 26 percent increase to 80.3 million ounces of silver in the Measured and Indicated categories at the Company's Marmato Project.
- Financing: Gran Colombia made further progress in the second quarter related to a proposed $100 million debt facility to fund the planned expansion of the Segovia Operations. In addition to supporting the ongoing due diligence activities of Standard Bank Plc, the Company has commenced a parallel process to explore competitive proposals from several other financial institutions.
- Corporate: During the second quarter of 2012, the Company made several announcements related to common share purchases made by its Executive Co-Chairmen, Serafino Iacono and Miguel de la Campa, who increased their shareholdings to 3.3 percent and 0.9 percent, respectively, in the issued and outstanding common shares of the Company.
Commenting on the Company's progress in the second quarter of
2012, Maria Consuelo Araujo, Chief Executive
Officer of the Company, said "We continue to focus on achieving our long-term
target of developing our Segovia Operations to achieve a 200,000 ounce per year
level. Due to process issues at our Maria Dama plant, we have accelerated our
planned upgrades to the plant infrastructure and now expect to achieve a run
rate production of 1,000 tonnes per day in the fourth quarter, with the
completion of the work to achieve a maximum capacity of 1,500 tonnes per day in
early 2013. Upon completion of a proposed $100
million project financing facility, we will move quickly to commence
development of the mine and construction of the new mill at Segovia. At
Marmato, while the Company continues to explore the impact of deep zone
mineralization on the options for the project, we continue working closely with
the community and other key stakeholders to build a strong foundation for our
development of the project."
Financial and Operating Summary
A summary of the financial and operating results for the second
quarter of 2012 is as follows:
| Q2 2012 | Q1 2012 | Q2 2011(2) | |
| Operating Data | |||
| Gold produced (ounces) | 25,607 | 26,260 | 17,827 |
| Gold sold (ounces) | 24,418 | 24,814 | 17,533 |
| Average realized gold price ($/oz sold) | $ 1,623 | $ 1,676 | $ 1,529 |
| Total cash costs ($/oz sold) (1) | $ 1,313 | $ 1,199 | $ 1,409 |
| Financial Data (x1,000 except per share amounts) | |||
| Total revenues | $ 40,737 | $ 42,678 | $ 27,725 |
| Gross margin | $ 3,707 | $ 7,921 | ($ 2,246) |
| Net income (loss) attributable to shareholders | ($13,724) | ($ 1,128) | ($12,620) |
| Basic and diluted income (loss) per share | ($ 0.04) | ($ 0.00) | ($ 0.04) |
| Cash and cash equivalents | $4,076 | $ 5,113 | $5,892 |
| Total debt, including current portion | $85,554 | $ 83,168 | $7,180 |
| (1) | "Total cash costs" are presented on a per ounce sold basis and represent consolidated averages for the Company from both the Segovia Operations and existing Marmato Underground mine. See "Additional Financial Measures" in the MD&A. | |
| (2) | Represents 4,378 ounces of gold ounces produced at the Marmato Underground mine in the second quarter of 2011, prior to the merger with Medoro on June 10, 2011. |
Segovia Operations Update
In the second quarter of 2012 production at the Segovia
Operations totalled 20,610 ounces of gold with an average daily processing rate
of 591 tonnes of ore per day ("tpd"), compared to 20,637 ounces of gold with an
average daily processing rate of 509 tpd in the first quarter of 2012.
The Company is in the process of upgrading the Maria Dama plant
to achieve a maximum capacity of 1,500 tpd. The first phase of the expansion
plan was expected to enable the Company to ramp production up to 1,000 tpd early
in the second quarter of 2012, double the historical processing rate at Maria
Dama. The new ball mill came on-line in mid-May and was tested over the weeks to
follow under increasing loads. After experiencing some delays related to power
supply interruptions due to problems at EPM's La Cruzada substation, together
with the mill's motor bearings overheating due to misalignment problems, and
subsequent delays due to temporary problems with the original crusher, the mill
proved to be able to handle loads of 1,000 tpd. For the month of June 2012, the processing rate at Maria Dama reached an
average of 737 tpd, however, as mill throughput increased in May and June, mill
recovery rates decreased below historical levels, averaging only 86 percent for
the second quarter of 2012 or about 10 percent lower than the first quarter of
2012. Despite earlier metallurgical consulting opinions that the flotation cells
could handle the initial ramp up to 1,000 tpd, subsequent analysis showed that
the capacity of the existing flotation cells was insufficient to handle the
increased volumes combined with the exceptionally higher grade ore delivered by
the artisanal miners during the latter half of the second quarter.
The Company has accelerated plans to implement the second phase
of the Maria Dama expansion which includes the installation of six additional
flotation cells, the first two of which should be in operation in early
September and the other four during October. While these new flotation cells are
being installed, the Company is limiting mill throughput to approximately 800 to
900 tpd to maintain mill recovery rates between 80 percent and 85 percent, and
starting in October, to ramp up mill throughput to 1,000 tpd with mill recovery
rates expected to improve to 90 percent.
The completion of the Maria Dama expansion activities in 2012
to deliver a maximum capacity of 1,500 tpd will enable the Company to increase
Segovia's production in 2013 to between 120,000 and 140,000 ounces of gold.
Since the existing Maria Dama mill expansion is fully funded from existing cash
balances, operating cash flow and local Colombian bank debt, any delay in
closing the proposed $100 million debt financing
will not have an impact on the Company's ability to increase its gold production
at the Segovia Operations in 2012 and 2013 as planned.
Upon closing of a proposed $100
million debt financing, the Company will commence with development of the
new mechanized mine and construction of the new 2,500 tpd mill at its Segovia
Operations. The capital cost of the mill and mining equipment to be acquired
for this expansion project is currently estimated to cost approximately $100 million and it is expected the capital costs will be
spent over an approximately 18-month period following closing of the financing.
Gold production will commence within 12 months of commencing the project and the
new 2,500 mill will be commissioned for operation toward the end of the 18-month
period. At that time, the Company expects that the Maria Dama mill may then be
dedicated toward the processing of the higher grade ore from the artisanal
miners at Segovia.
Marmato Project Update
At the Marmato Underground Operations, an average of 740 tpd
was milled, producing 4,997 ounces of gold during the second quarter of 2012.
Mining operations encountered some lower grade ore zones that resulted in a
decrease in average head grades to 2.66 g/t in the second quarter of 2012 and
contributing to the 11 percent decrease in the second quarter's gold production
compared with the first quarter of 2012. Head grades for the second half of this
year are expected to be approximately 2.9 g/t while throughput will be increased
to an average of 750 tpd.
Gran Colombia commenced work on
a prefeasibility study of the Marmato Project in 2011 to examine a number of
feasible development options for mining, processing and mine waste management to
provide the foundation for decision making for the optimum development of the
project. The options include stand-alone open pit mining, modern underground
mining and a phased combination of both open pit and underground mining. As a
result of the newly discovered deep zone mineralization that is open at depth
with increasing grades, the Company decided to delay completion of the
prefeasibility study while its explores the significance of this high grade deep
zone mineralization and its impact on the Company's options for the development
of the Marmato Project.
Outlook
The Company now expects 2012 gold production is expected to be
between 113,000 and 123,000 ounces, including production at its Segovia between
90,000 and 100,000 ounces and approximately 23,000 ounces from its Marmato
Underground Operations.
The Company's longer term plan remains on track to reach a
production rate of 200,000 ounces of gold annually at its Segovia Operations by
2014.
Webcast
As a reminder, the Company will host a conference call and
webcast on Wednesday, August 15, 2012 at 9:00 a.m. Eastern Time (8:00
a.m. Bogota time) to discuss the results
and provide an operational update.
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