Gran Colombia announces a significant reduction in All-In Sustaining Costs in Phase II to approximately $1,200 per ounce and a substantial increase in the high grade measured and indicated resources at its producing Segovia Operations

TORONTO, Aug. 1, 2013 /PRNewswire/ - Gran Colombia Gold Corp. (TSX: GCM, OTC: TPRFF) is pleased to provide a business update and to report a new mineral resource estimate for its producing Segovia Operations located in Antioquia, Colombia.  All financial figures contained herein are expressed in U.S. dollars unless otherwise noted.

The company expects to report its full financial and operating results for the second quarter of 2013 after market close on August 14, 2013. Investors will have an opportunity to discuss results with management in a webcast on August 15, 2013.  Details for the webcast will be announced by August 8, 2013.

Highlights:

• Continued positive results from the company's ongoing initiatives to cut costs and reduce spending resulted in a $267 per ounce decrease in all-in sustaining costs¹ to $1,278 per ounce in the second quarter of 2013 from $1,545 per ounce in the first quarter of 2013. Actions initiated in the second quarter have since reduced all-in sustaining costs in July to approximately $1,200 per ounce.

• Record gold production of 21,891 ounces at its Segovia Operations in the second quarter of 2013, an increase of 15 percent compared to the first quarter of 2013. Total gold production increased by 12 percent to 27,151 ounces for the second quarter of 2013 bringing the first half 2013 total gold production to 51,501 ounces. The company also produced 73,641 ounces of silver in the first half of 2013.

• The recently completed mineral resource update at the company's Segovia Operations delivers on the company's stated objective of upgrading resources to support the initial mining phase in the Pampa Verde Project with a 58 percent increase in the Measured and Indicated categories to 461,000 ounces of gold with an average grade of 15.2 grams per tonne (g/t). The mineral resource update also includes an additional 1,443,000 ounces of gold with an average grade of 11.0 g/t in the Inferred category (refer to table below for details).

• The Pampa Verde Project, which will deliver mechanized, low-cost mining and processing operations to the company's Segovia Operations, remains on schedule with construction activities set to begin in August.

Commenting on the recent results, Serafino Iacono, Executive Co-Chairman of Gran Colombia, stated, "We have focused our attention on the controllable aspects of our cash generation, reviewing all spending to identify opportunities to become a leaner organization and to ensure we meet our financial obligations. While we have been successful in lowering our all-in sustaining costs to approximately $1,200 per ounce at the present time, we are continuing our efforts to lower our costs while the modern, mechanized operations at Pampa Verde are being constructed. The recently completed mineral resource update at the Segovia Operations gives us a solid base to plan production for at least the next five years, ensuring we will generate the funds required to service our financial obligations under the gold- and silver-linked notes."

All-In Sustaining Costs

In early 2013, following a comprehensive review of its operations, management implemented $10 million in annualized cost savings to lower its total cash cost of production and its general and administrative ("G&A") expenses. The company realized an average of $1,639 per ounce on its gold sales in the first quarter of 2013. All-in sustaining costs in the first quarter of 2013 amounted to $1,545 per ounce, of which total cash costs were $1,281 per ounce, G&A expenses were $158 per ounce and sustaining capital expenditures totalled $106 per ounce.

Early in the second quarter, there was a significant decline in gold market prices, resulting in the company realizing an average of $1,457 per ounce on its second quarter gold sales. Management responded with Phase II of its cost reduction program that led to a $267 per ounce decrease in its all-in sustaining costs to $1,278 per ounce in the second quarter of 2013. Savings in operating costs at the company's Segovia Operations were the key to decreasing its total cash costs to $1,127 per ounce in the second quarter and the company's average total cash cost to $1,133 per ounce. In addition, the company reduced G&A expenses from $3.6 million in the first quarter of 2013 to $2.9 million in the second quarter of 2013 representing an average of $99 per ounce in the second quarter. Sustaining capital expenditures in the second quarter of 2013 were limited to $1.3 million, or $46 per ounce.

With continued uncertainty regarding gold market prices, management has continued with company-wide spending reductions to preserve cash generated from its mining operations. Actions taken as part of Phase II in June and July to reduce spending, including a 40% decrease in the size of its board of directors, have since reduced all-in sustaining costs to approximately $1,200 per ounce.

Gold Production

Gran Colombia achieved record gold production of 21,891 ounces at its Segovia Operations in the second quarter of 2013, an increase of 15 percent compared to the first quarter of 2013.  Total company production in the second quarter of 2013 totaled 27,151 ounces of gold, a 12 percent increase compared to the first quarter of 2013.

The Maria Dama plant at the Segovia Operations continued to run steadily during the second quarter of 2013 and by the end of June had completed four consecutive months of processing more than an average of 1,000 tonnes per day.

Segovia Resource Estimate

Gran Colombia is pleased to report a new mineral resource estimate² prepared by SRK Consulting (UK) Ltd., for its producing Segovia Operations containing 461,000 ounces of gold with a an average grade of 15.2 g/t in the Measured and Indicated categories and an additional 1,443,000 ounces of gold with an average grade of 11.0 g/t in the Inferred category. This mineral resource represents a 58 percent increase in measured and indicated gold ounces compared to the previous mineral resource estimates³.

 

The update mineral resource supports the company's annual production target of 200,000 ounces of gold for the initial five year mine plan of the Pampa Verde Project, which the company expects to begin production at the end of the third quarter of 2014.

The company has identified several areas for future exploration with the potential to increase its mineral resources including drilling the down-plunge extension of the main high-grade ore-shoots of the El Silencio Mine.  Additionally, the Providencia, Sandra K, El Silencio and Carla mines are still open at depth and laterally, and the company has identified a number of other veins which have been mined in the past and for which there is only limited historical drilling.

The Segovia Operation is wholly-owned by the company and exploration is operated by the company.  This resource estimate includes an update of the resource of the Providencia, El Silencio, Sandra K and Carla mines as well as initial resource estimates for the Las Aves Vein System, which make up the Company's Segovia Operations. The estimate has been reported according to Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards and will be supported by a National Instrument 43-101 independent report which will be published and filed on the Company's website and SEDAR profile within 45 days.

The above estimate is based on 747 diamond drill holes totaling 114,000 metres and more than 75,549 underground channel samples.  The diamond cores were fire assayed for gold by SGS Peru, and underground channel samples assayed at the Mine Laboratory, with check analysis completed at SGS. During the 2012 drilling program a comprehensive QAQC has demonstrated that sample preparation and laboratory performance for all drilling campaigns provided assays which are fit for the purpose of this estimate.

The grade estimation at Providencia, Las Verticales, Sandra K and El Silencio was undertaken into block models created from the three dimensional geological interpretation of veins, integrated with a three dimensional structural model. The gold grades were then interpolated using appropriate parameters related to the geological and grade continuity and sample spacing, using an Ordinary Kriging routine.

SRK has considered sampling density and distance from samples in order to classify the Mineral Resource according to the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserves (December 2005) as required by NI 43-101. SRK has assumed a grade of 3 g/t is required over a minimum mining width of 1.0 m, to filter out areas of lower grade material within thinner portions of the vein. SRK has compared these areas to the historic mined areas and this displayed a strong correlation.

Qualified Person

Ben Parsons, Senior Resource Geologist with SRK Consulting (UK) Ltd., prepared the Segovia mineral resource estimate. He is a Qualified Person as defined by NI 43-101.  For detailed information on the key assumptions, parameters and methods used to estimate the mineral resources, along with other information about Segovia, please refer to the Technical Report to be filed.

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. In addition, Gran Colombia is advancing a project to develop a large-scale, gold and silver mine at its Marmato operations, and has an advanced stage property in Venezuela.

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 the future financial or operating performance of the Company and its projects and, specifically, statements concerning anticipated growth in annual gold production and reduction of cash costs. 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 26, 2013 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.

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¹ "All-in sustaining costs per ounce" is a non-GAAP measure and includes total cash costs per ounce plus the sum of G&A, sustaining capital and exploration and evaluation costs, all divided by the number of ounces sold. As this measure seeks to reflect the full cost of gold production from current operations, new project capital is not included in the calculation of all-in sustaining costs per ounce. Additionally, certain other cash expenditures, including income and equity tax payments and financing costs, are not included. The company will provide a reconciliation of total cash costs per ounce and all-in sustaining costs per ounce to the interim financial statements in its MD&A for the second quarter ended June 30, 2013.

² The mineral resources are reported at an in situ cut-off grade of 3.0 g/t Au, which has been derived using a gold price of US$1,400/oz, and suitable benchmarked technical and economic parameters for underground mining and conventional gold mineralised material processing. The mining areas have been sub-divided into Pillar areas, which represent the areas within the current mining development, and Long-Term Mineral Resources, which lies along strike or down dip of the current mining development.  Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All composites have been capped where appropriate.

³ The previous mineral resource estimates are dated March 5th, 2012, and includes an update of the resource of the Providencia, El Silencio and Sandra K mines, as well as for the Las Verticales Vein System, and the subsequent mineral resource estimate for the Carla Mine dated May 15th, 2012.

 

 

SOURCE Gran Colombia Gold Corp.

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