Gran Colombia Gold (GCM) - Dividend Paying Mid Tier in the Making

Gran Colombia Gold 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 high-grade Segovia Operations. 

Since we last spoke to Gran Colombia two years ago, they have been busy in several areas. Gran Colombia is now producing gold and their guidance for this year is 200-220,000 oz and they are well on track to meet that target.

We recently caught up with Serafino Iacono, Executive Chairman of Gran Colombia, a Canadian mid-sized gold producer operating primarily in northern South America. He discussed some of the recent things happening with the company.

Overview of Gran Colombia

Gran Colombia Gold is a Canadian-based mid-tier gold producer with principal activities in Colombia and Guyana.  The firm is listed on the Toronto Stock Exchange and the OTC market and boasts a proven track record of mine building and operating in Latin America. 

Founded in 1992, the company has over 61 M shares outstanding. Its market capitalization is $321.4 M.

Management Team

In addition to Iacono, the company has six other members on the management team. These are: Lombardo Paredes Arenas, CEO; Mike Davies, CFO; Alessandro Cecchi, Vice President Exploration; Jose Ignacio Noguera, Vice President Corporate Affairs; Christopher Haldane, Vice President Investor Relations; and Amanda Fullerton, Vice President Legal and Corporate Secretary. A five-member board of directors counsels the management team.

Gran Colombia’s Assets

The company has two main asset areas: In Colombia, Gran Colombia is currently the largest subsurface gold and silver producer with several mines in operation at its high-grade Segovia Assets. In Guyana, the company is advancing the recently acquired Toroparu Project, one of the largest undeveloped gold projects in the western hemisphere.

In addition, Gran Colombia holds equity interest in several other firms operating in North and South America and Spain. These firms are Gold X, Aris Gold, Denarius, and Western Atlas. 

Key CEO Points

Since we last talked to Crux, the company has been doing quite well, said Iacono. The production this year, he said, is on track to somewhere near 220,000 ounces. Additionally, they’ve brought their costs way down. They are paying out a dividend of about 3 percent per annum. The debt has been reduced from nearly $100 m to $19 M, and will be zero by the year-end, he told us. In addition, we acquired Gold X and advanced the Marmato Mine in Colombia into a real value proposition. Today, the company trades in the $5 to $6 range, which is quite a return for investors so far, he told us.  

Segovia

Tell us about the activity at Segovia, we asked. Iacono told us that Segovia is a high-grade underground mine and produces cash for the company. It is on track to produce some 220,000 ounces of gold in 2021. It has 2.5M ounces of resources and 600,000 ounces in reserves. Last year, the project did some $170M in EBITA. Quite a turn-around, he said, for a company that was in restructuring mode and had no cash only 8 years ago.

Corporate Creativity or Confusion

We then turned our attention to some of the company’s other recent activities, namely acquisitions and spin-offs.  You've had activity with Gold X, Aris, and Denarius. What do people think about all of that, we asked?

Iacono replied that they are not looking for shareholders that just collect dividends, he said. We are in the model of a company like Yamana, where we want to create value and grow. Gold X was acquired for future value creation, he said. Gran Colombia also owns 44% of the Aris Gold spinout, he told us, and they have a fantastic mine with 6 M ounces of gold.

Furthermore, he said, the company has decided that the next place they want to be is in Guyana. That is where they are going to develop a multi-million ounce project, he added. 

It’s somewhat of a puzzle to us, he said, that the value of these activities has not been seen for what they are: Value creators for Gran Colombia. Look, he said, the company has CAD $100 M in dry powder, is flowing cash and pays a dividend. We bought Gold X for $250 M and now it’s worth $400 M.

The job that he has to do, he said, is to connect with investors. On break-up value alone, his company is undervalued, he proposed. But, then again, they trade a healthy 600,000 shares a day, he said.

Gran Colombia Shareholder Registry

Next, we asked Iacono about the composition of his shareholders. It is about 55% institutional and 45% retail, he told us. And some of these retail shareholders have been involved for a long time, back when the shares were valued at 75 cents or so. These long-term retail holders have made a great deal of profit, he said.

He commented a bit about short selling during our discussion, saying he thinks that there is quite a bit of it going on with Gran Colombia and with other gold miners among a segment of the retail crowd, contributing to excess volatility. He’d like to reduce his retail shareholder percentage a bit to combat against that, he told us.

Indeed, he told us that they are serious about getting listed on the London Stock Exchange. The institutions they have are largely US-based. The Canadian buyers may be tapped out a bit, he said. By listing in London, they believe that they will create a market in an area that has a need for this product.

Again, he told us that his job as a manager is to get the company story out there and where they're going to be. The story has changed: They are not a single mine business, and they have a fantastic mine that creates an incredible amount of cash flow. It's going to do that for many years. They are going to go into Guyana and develop the next big project there.

The Toroparu Story in Guyana and More

We then asked Iacono about the story at Toroparu in Guyana. We understand that it holds 7.35M ounces of measured and indicated gold resource and that much of it is low-grade ore, we told him. 

He told us that they have two deposits in Guyana. The bigger one is low grade, but “fantastic low grade”, at 1.5 g/t and 0.5% Cu, he said. That one will be very low cost to produce, with no explosives needed and no tax. 

They are also involved in Gold X’s Hill project. It has about 3.4 M ounces total, with 1.5 M ounces at well-defined open pit locations, he said. The ore grade at Hill is better, about 2.5 to 3.0 g/t. This could be really big, having a strike length over 3 km including the underground portion. He likens Hill to the Choco mine in Venezuela, which he developed about 15 years ago. It will take about $300 M to build Hill out and they are targeting production of some 7000 t/day. They will have an announcement on this toward the end of summer 2021, he indicated. It will make great money, and financing will not be a problem, he summarized.

Iacono’s View On South America in General

Nearing the end of our chat, we asked Iacono about South America in general. He responded that there are four countries, representing about 70% of the South American populations going to election at about the same time. In addition, South America is tired of COVID. Many people have no money and are out of a job. 

Some of these countries will emerge in better condition than others, he predicted. He believes that Colombia is one that will be better off because they have a very conservative, ethnically diverse populace with a lot of middle class. Other situations, especially those with major corruption problems, may not fare so well, he suggested.

Final Points

We closed the interview with Iacono by thanking him for his high-level overview of the goings on at Gran Colombia. He made sure to tell us that similar to last year, they would meet their guidance. We will talk with him again soon to do a deeper dive on some of the company’s business endeavors in Colombia and Guyana.

To find out more, go to the Gran Colombia Website