Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: SafetyinNumbers on August 19, 2016, 08:48:13 AM

Title: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 19, 2016, 08:48:13 AM
Gran Colombia Gold is a producing gold company based in Colombia (but you could probably guess all of that from the name!). Gold stocks have been on an amazing run this year but I think this one has been a bit under the radar because of a debt restructuring and an odd capital structure. It also may have lagged a bit because they are in Colombia and they have interference from gangs at times but they are on the right side of the law so while it may cause disruptions at times (that could hurt the stock), I do not think it's an impairment.

They have a good website that details the capital structure and they provide annual guidance which they just raised the past quarter so I don't want to spend too much time rehashing information.

Basically in addition to about 250m shares outstanding, there are two sets of convertibles outstanding GCM.DB.U and GCM.DB.V, with face value of about US$53m and US$100m outstanding. Both sets of converts trade on the TSX in USD and are convertible at US$0.13 vs the last trade of the equity at C$0.125.

Based on the high end of their cash cost guidance of US$750 and using the spot gold price of $1350 and assuming 145k oz of production next year ( I think this is low based on their production growth so far this year and discussions with management), their potential EBITDA for 2017 is about US$87m or about C$110m.

To calculate EV/EBITDA you have some choices for EV. You can use the fully diluted share count as the valuation seems to cheap for the stock to trade at US$0.13 or below even with 1.46bn shares outstanding or you can fix the debt at face value and add the equity value. Either way projected EV/EBITDA is less than 2x.

I own some of the GCM.DB.U and mostly the GCM.DB.V. The latter has a 6% coupon paid monthly, is senior secured and trades at 86 on the dollar so not too far from conversion value. The former only has a 1% coupon and trades at 77 and often trades below conversion value.

This has created an arb at times and hedge funds are rightly buying the debs and converting to stock and selling in the market. In fact the share count has more than doubled this year so far and the amount of GCM.DB.U outstanding has dropped by a decent amount. This overhang is also constraining valuation.

The final thing I want to add is that there is a cash sweep for the debentures on any "excess cash flow" and the company must use it to buy back debentures and they have started that program. This could offset some of the dilution but they have said they will not pay above par for the debs (not a problem yet).

The multibagger potential comes from getting to say 6x EV/EBITDA which would be more in line with tier 3 producers. Even if it gets to 4x and the gold price lifts or they continue to grow it could be a multi-bagger.

Any feedback welcome.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 25, 2016, 03:58:57 PM
One of the biggest holders buying more of the GCM.DB.V.

Now owns US$18.9m worth.

http://www.marketwired.com/press-release/lloyd-i-miller-iii-acquires-2020-senior-secured-convertible-debentures-gran-colombia-2153509.htm
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: influx on August 25, 2016, 11:56:02 PM
I am curious, how did you find this debenture?
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 26, 2016, 04:24:01 AM
I think from some of the press releases around the time of the restructuring in January. There were so many iterations in the restructuring that I actually read the wrong circular and bought common and then the GCM.DB.U before figuring out the GCM.DB.V were the best way to get exposure. That being said, at that time the GCM.DB.V and GCM.DB.U were trading at the same price but now with the gap, the GCM.DB.U is pretty compelling too.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: bskptkl on August 26, 2016, 06:48:07 AM
Gran Colombia Gold is a producing gold company based in Colombia (but you could probably guess all of that from the name!). Gold stocks have been on an amazing run this year but I think this one has been a bit under the radar because of a debt restructuring and an odd capital structure. It also may have lagged a bit because they are in Colombia and they have interference from gangs at times but they are on the right side of the law so while it may cause disruptions at times (that could hurt the stock), I do not think it's an impairment.

They have a good website that details the capital structure and they provide annual guidance which they just raised the past quarter so I don't want to spend too much time rehashing information.

Basically in addition to about 250m shares outstanding, there are two sets of convertibles outstanding GCM.DB.U and GCM.DB.V, with face value of about US$53m and US$100m outstanding. Both sets of converts trade on the TSX in USD and are convertible at US$0.13 vs the last trade of the equity at C$0.125.

Based on the high end of their cash cost guidance of US$750 and using the spot gold price of $1350 and assuming 145k oz of production next year ( I think this is low based on their production growth so far this year and discussions with management), their potential EBITDA for 2017 is about US$87m or about C$110m.

To calculate EV/EBITDA you have some choices for EV. You can use the fully diluted share count as the valuation seems to cheap for the stock to trade at US$0.13 or below even with 1.46bn shares outstanding or you can fix the debt at face value and add the equity value. Either way projected EV/EBITDA is less than 2x.

I own some of the GCM.DB.U and mostly the GCM.DB.V. The latter has a 6% coupon paid monthly, is senior secured and trades at 86 on the dollar so not too far from conversion value. The former only has a 1% coupon and trades at 77 and often trades below conversion value.

This has created an arb at times and hedge funds are rightly buying the debs and converting to stock and selling in the market. In fact the share count has more than doubled this year so far and the amount of GCM.DB.U outstanding has dropped by a decent amount. This overhang is also constraining valuation.

The final thing I want to add is that there is a cash sweep for the debentures on any "excess cash flow" and the company must use it to buy back debentures and they have started that program. This could offset some of the dilution but they have said they will not pay above par for the debs (not a problem yet).

The multibagger potential comes from getting to say 6x EV/EBITDA which would be more in line with tier 3 producers. Even if it gets to 4x and the gold price lifts or they continue to grow it could be a multi-bagger.

Any feedback welcome.
So you asked for feedback:

I have a stake in another Columbian gold company and I asked around about GCM. I was told it was headed towards bankruptcy but bailed out by gold price. Was told most of their production comes from buying ore from small miners and they are trying to sell Marmato. Mine is old and capital starved. Relations with union are poor.

So I guess the arb could still make sense, but I wouldn't want to bet on it becoming an efficient mine.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 26, 2016, 07:03:19 AM
Much appreciated!

I can't disagree with a lot of this. They were bailed out by gold price and by the peso devaluation. You can see the decline in their cash costs and AISC. The last few quarters are very different than what your source is providing because there has been a significant change in performance.

The first two quarters of 2016 a lot of the cash flow was held back from excess cash flow so they could spend money on capex as the operations were capital starved because of the issues they see having with two much debt with coupons that were too high. They are planning on spending a lot on capex in the second half too.

They do use contract miners but a higher gold price helps make relations better quickly. I'm not sure if they are trying to sell Marmato. That may have been one of the plans considered to deal with the debt issue before it was restructured.

At the end of the day though, they have been putting up strong EBITDA. US$18m last quarter on a much lower gold price and production and gold price are up this quarter. They are also active on the buyback of the debentures.

This investment is not about the arb but about the valuation of this cash flow stream once it gets analyst coverage and the market cap gets big enough to show up on the radar of gold and generalist investors.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 01, 2016, 07:17:27 PM
The FD share count is down about 6m since the last update on August 11, I believe.

It looks like they did a big purchase on Aug 31 of some of the debs but it won't settle until after Sept 1 so not sure if that's in the numbers.

Anyway, 6m shares on 1.459bn (now 1.453bn) isn't much but that's over 3 weeks and the buybacks should continue.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 06, 2016, 09:08:12 PM
Positive update tonight on August production and highlighting the debenture repurchases and conversions. This update actually lowered my pro forma share count by another 4m shares as it confirmed what I had expected that the last debenture purchase on August 31 was not reflected in the month end share count on the website.

The production update was interesting as it was almost identical to last month with a little more production from Marmato and a little less from Segovia. This trend should continue to the end of the year if they are to meet there year end guidance. If Segovia production can remain this high and they can meet their Marmato guidance, however, they have a good chance of beating the high end of their production guidance.

One risk, is that higher Marmato production and lower Segovia production in the back half might mean higher costs but that is somewhat reflected in their AISC guidance.

I still see it less than 2x EV/EBITDA and think it moves higher as the debenture overhang continues to dissipate.

http://www.marketwired.com/press-release/gran-colombia-gold-provides-positive-updates-on-senior-debt-reduction-gold-production-tsx-gcm-2155951.htm
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 16, 2016, 07:26:12 AM
Looks like the board is frustrated with the valuation too as they have launched a strategic review.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2016/Gran-Colombia-Gold-Announces-Strategic-Review-Process/default.aspx
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 16, 2016, 10:44:48 AM
With the recent dip in the gold price down to $1310, I just reran my run rate EBITDA estimates.

Assumptions:
Gold = US$1310
Production = 145k oz (high end of 2016 guidance but management discussions indicate up next year)
Cash costs = US$725 (guidance for 2016E is US$700-750 while under $700 for H116)
FD share count = 1.45bn (all debt is convertible at US$0.13).
On that basis, I get US$76m in annual run rate EBITDA. They did US$18.3m in Q2 EBITDA so this estimate shouldn't be controversial!

EV/EBITDA Sensitivity table:

Multiple   C$ share price
    2                  0.14
    3                  0.21
    4                  0.28
    5                  0.35
    6                  0.42

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: influx on September 19, 2016, 05:47:50 AM
http://www.elcolombiano.com/antioquia/paro-por-cierre-de-minas-en-segovia-y-remedios-GG4998686
http://www.elcolombiano.com/antioquia/mineros-de-segovia-y-remedios-preparan-paro-civico-GB4982888

You may want to dig more though...
I dont know what is going on
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 19, 2016, 06:03:58 AM
Thanks.

Labour relations are definitely a risk. GCM relies on contract miners but they are also trying to convert illegal miners into legitimate miners and they have had some success so far.

In every company, I have ever owned that has had a strike, it has always ended. This could have a short term impact but it's not an impairment, in my view.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: influx on September 19, 2016, 07:15:54 AM
Probably :)

I hear good news generally from Colombia lately..so I guess it will be well for you

What kind of capital gain are you happy with, in gross numbers with this?
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 19, 2016, 07:30:04 AM
I'm usually just happy making money versus losing it!

In this case, I own all the different parts of the capital structure and have made some decent gains already on the debentures but I still think 100% upside from here is not unreasonable.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 19, 2016, 04:05:07 AM
Despite some labour issues during the quarter, GCM continues to impress on the production front.

YTD production is now 108k oz and full year guidance maintains at 135-145k oz.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2016/Gran-Colombia-Gold-Provides-Production-Update-and-Details-for-the-Third-Quarter-2016-Results-Webcast/default.aspx

The most recent presentation highlights the valuation discrepancy between GCM and its peers.

http://www.grancolombiagold.com/news-and-investors/events-and-presentations/presentations/default.aspx



Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on November 17, 2016, 04:48:47 PM
Another good quarter reported this week with production guidance raised and cost guidance narrowed.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2016/Gran-Colombia-Gold-Announces-Third-Quarter-and-First-Nine-Months-2016-Results-Expecting-Over-144000-Ounces-of-Annual-Gold-Production-for-2016-at-an-AISC-Below-850-per-Ounce/default.aspx

Still trading well below 3x EBITDA even at these lower gold prices.

I now own some common as well as the senior debt.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on January 12, 2017, 03:36:58 AM
Spectacular monthly production number in a December and a very large beat of full year guidance. With gold starting to lift again, it's possible some value investors might look at gold stocks and at less than 2.5x EV/EBITDA, GCM might get some attention.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Surpasses-Guidance-and-Sets-Record-in-2016-With-149687-Ounces-of-Gold-Produced/default.aspx
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: rukawa on January 28, 2017, 06:30:40 PM
I don't really understand why the GCM.DB.U aren't considered the most attractive security here.  They have the highest yield to maturity, same conversion price as the .V and highest yield to maturity. Plus the maturity date is earlier and they have a smaller principal so easier to payoff.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on January 28, 2017, 11:28:12 PM
The Us are 81% mandatory convertible so the effective "par value" of the bonds at current stock price is about 69. Still much better than the stock because the downside is less with the 19% payable in cash while still the same upside as the stock.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on February 11, 2017, 01:31:38 PM
Decent sized insider buying of GCM.DB.V by one of the executive chairmen.

The equivalent of 7.6m shares.

https://www.canadianinsider.com/company?menu_tickersearch=GCM%20%7C%20Gran%20Colombia%20Gold
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on March 06, 2017, 04:45:18 AM
Interesting press release today.  http://www.marketwired.com/press-release/gran-colombia-gold-announces-2017-outlook-and-proposals-to-improve-capital-structure-tsx-gcm-2200586.htm

Guidance seems fine. The proposal to extend the 2020 debt is interesting. Those bonds are my primary holding and an increase in the interest rate and enhancement of option value seem like good things at first glance since I do think the equity is undervalued.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on March 16, 2017, 05:12:08 PM
New agreement w/ IAMGOLD for a exploration property that is likely valued for zero by anyone analyzing GCM!

http://web.tmxmoney.com/article.php?newsid=5245081097633691&qm_symbol=GCM

Seems like a good idea as it allows for some exploration dollars in a property they probably would not have a chance to spend money on for many years.

This is a bit of a stretch but it also potentially lets IMG warm up to Colombia for an eventual takeover of GCM. IMG is already in some "high risk" countries and have a relatively low valuation so they could make a very accretive deal by paying say 15% of their market cap to increase their production/EBITDA by 20%.

15% of IMG's market cap works out to about 25 cents CAD/share (vs the 10 cent close today) on a fully diluted basis for GCM. Of course that could be a lot more if GCM can buy back a bunch of debentures in the mean time.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on March 27, 2017, 08:03:34 AM
The company announced last week they will do a 15-1 consolidation instead of a 10-1 based on feedback from investors.

I ran through my estimates based on this higher gold price ($1255) and I get run-rate EBITDA on forward twelve months around US$67m.

Given they have guided to about US$15m in free cash flow to buy back debt this year with gold around $1225, I figure they can buy back around US$25m in debt by August 2018 when the GCM.DB.U convert to stock (they are 81% mandatory convertible).

At that point debt/ebitda will be around 1.25x TTM EBITDA and at the current share price EV/EBITDA would be around 1.9x TTM EBITDA. At that point, every multiple point increase would be worth about CAD 15 cents per share vs the CAD 9.5 cents share price.

Of course, once the stock trades above US$0.13, the debentures are all in the money so they will also convert to stock which will dilute shareholders but even fully diluted valuation is still extremely compelling especially for a company with no debt at that point!

The safer play is the GCM.DB.V, the senior secured convertible debt, which is likely going to be extended to 2024 and have an 8% coupon while being convertible at US$0.13. It is currently offered at 83.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on March 27, 2017, 09:23:50 AM
I have not done any DD but, what is the reserve life at current run rate?

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on March 27, 2017, 12:35:52 PM
It's currently 2022 on the main money producer, Segovia, but they haven't spent any money for a long time on drilling until this past year as cash flow started to rebound. We should see reserves increase as they update estimates after incorporating the drilling. The smaller producing mine has 14m oz of reserves but they don't have the capital or political flexibility to develop that right now. They spent ~$500m for that asset back in 2011.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 07, 2017, 04:22:03 AM
The company just did its annual issuance of options and it set the strike price at 17 cents or almost double the close last night at 9 cents.

17 cents is effectively US$0.13 which is the conversion price of the convertible debt so it makes sense that they don't want any dilutive instruments to have strikes below the bonds but management teams rarely do what's right when it comes to options.

The shareholder meeting to vote on consolidation and extension of the 2020 debentures is on April 24. I think it's possible the 15-1 consolidation could be a decent catalyst if only it makes the stock show up on some quant screens. Not many stocks trading at $1.35 with trailing TTM EBITDA of over US$3.25/share!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on April 11, 2017, 07:04:55 AM
I was starting to warm-up to the idea of the GCM.DB.V with: near 10% interest yield post approval, conversion price 80% above current price or just under 50% if you take into account the discount to par to buy them, effectively the only debt of the company with the "U" forced to mostly convert into shares, a company that makes money and a gold price ready to move up.

Now this:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aGCM-2459925&symbol=GCM&region=C

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 11, 2017, 07:14:54 AM
Yeah that was out a few weeks ago. Marmato has a giant resource but they have only done small scale mining there because of the impediments. It's status quo in terms of current operations. Most of the cash flow and production comes from the Segovia mine while Marmato has been steady state and relatively higher cost.

There is a potentially giant opportunity if they can get a resolution on Marmato for a large scale mine and seemingly this lawsuit is part of moving that process along. They would likely need a partner for the capital to develop.

Current operations more than support the debenture value and a much higher stock price.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on April 13, 2017, 07:33:22 AM
Was that disclosed in their last conference call? Unless I missed it, I did not see anything in their filings.

Pretty solid update relative to their yearly guidance. I am surprised that the stock did not react positively along with the gold price moving up:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aGCM-2460161&symbol=GCM&region=C

I definitely see potential here.

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 13, 2017, 07:56:39 AM
It was in the Colombian press but I guess didn't get a lot of play in the Canadian press until the FP article. They didn't talk about it on the call. I assume its because it doesn't impact the current operations but I guess they probably should have. Here is a link from end of February: http://www.americaeconomia.com/negocios-industrias/gran-colombia-gold-anuncia-demanda-contra-el-estado-colombiano-por-us700m

Someone on this site suggested that I post too much about the name and might be too close too it and they might be right. I saw the lawsuit as potentially long term positive as it potentially results in a long term plan to either develop Marmato or some financial compensation (they paid US$500m for it in 2011 so the US$700m seems reasonable in that context). It seems though that investors responded by selling the stock. I just don't see any value being ascribed to it in the stock right now as the cash flow from Segovia alone is enough to support the valuation.

Shareholder meeting is on April 24 in Toronto and I will likely attend.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on April 13, 2017, 08:29:49 AM
"Someone on this site suggested that I post too much about the name and might be too close too it and they might be right." LOL!

Is that same person advising the ones posting endlessly about FNMA or SHLD the same thing?

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 13, 2017, 08:42:10 AM
"Someone on this site suggested that I post too much about the name and might be too close too it and they might be right." LOL!

Is that same person advising the ones posting endlessly about FNMA or SHLD the same thing?

Cardboard

That I don't know!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: moustachio on April 13, 2017, 07:25:16 PM
"Someone on this site suggested that I post too much about the name and might be too close too it and they might be right"

Please ignore them. A lot of people like me read these threads, but don't necessarily post. Its also not like there is so much posting in the investments section that it is hard to follow. This is an interesting company.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 19, 2017, 05:04:56 PM
GCM released new reserve numbers for Segovia.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Announces-Update-of-Segovias-High-Grade-Mineral-Resources-With-a-174-Increase-in-Total-Measured--Indicated-Gold-Resources-to-11-Million-Ounces/default.aspx

Overall, seems very constructive as M&I reserves were increased substantially from the last update in 2013 and shows a mine life that likely extends beyond 2022 they had disclosed previously. They are continuing to drill this year and reserves will likely continue higher for those concerned about mine life.

Segovia, is the cash cow. Last year it produced 126k oz at cash costs under US$700 and it will likely grow a bit this year based on guidance.

Last year EBITDA for GCM was US$66m in total and this year based on the current gold price it should north of US$70m.

Current EV with 2018 debt 81% converted to stock is ~US$150m.

I own a decent amount of equity on top of the GCM.DB.V as I think both are very compelling now.

Special shareholder meeting to vote on consolidation and extension of the V converts is this Monday (April 24) in Toronto if anyone is interested in attending. 
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 24, 2017, 11:25:52 AM
Went to the meeting today.

Shareholders passed both resolutions for the consolidation of the shares and extension of the 2020 debentures to 2024.

A majority of debentureholders now have to consent to the extension of the debentures by May 11. You can consent to the extension and choose not to extend but they need a majority to chose to allow the extension (not necessarily to extend). Does that make sense?

Allowed me to confirm that at these gold prices, free cash flow to the sinking fund, should be around US$15m. The sinking fund won't be replenished again until they report Q1 about a month away. The tax rate is dropping in 2018 and again in 2019 which should enhance FCF next year and the year after, all else being equal.

We should be getting a resource update on Marmato soon.

I thought the most interesting thing that is not in guidance is any resolution with some of the illegal mining at Segovia that could bring those mines into GCM's numbers. While they would have higher cash costs than the current cash costs, the AISC would be lower so should be very FCF positive. This could add 1-2k oz per month to current production at Segovia and the mill has plenty of capacity to take on this material. Apparently, some new laws around mercury handling may persuade the illegal miners to come on board.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on April 25, 2017, 06:05:00 PM
Share consolidation will be effective on Thursday, April 27, 2017 (link below) ahead of going to the Mines and Money Conference (May 3-4) next week in NY.

Other upcoming potential catalysts are:

May 11 expiry of Debenture extension proposal
May 16 Q1 results
~May 19, replenishment of sinking fund to buy back of convertible debentures
By end of Q2 - Marmato resource update


http://web.tmxmoney.com/article.php?newsid=7734448240638792&qm_symbol=GCM
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on May 01, 2017, 06:05:04 AM
What happens if you consent to amend the terms of the indenture but, not to the extension?

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 01, 2017, 06:23:38 AM
You keep the GCM.DB.V bonds with a 6% coupon that mature in 2020. If you choose to consent and extend you will get an adjusted bond GCM.DB.X with an 8% coupon and a 2024 maturity.

They need 50% to consent to the extension but not necessarily to extend. I think it's fair to assume the BOD will agree to extend the bonds they own but otherwise, it's a bit of an open question.

I'm struggling with the decision to extend or not. It's easy to agree to consent to amend the debenture because even if you keep the shorter maturity, you improve your chances of getting paid if the stock still isn't above US$0.13 by then. The shorter maturity has a higher YTM all else being equal despite the lower coupon.

What do you think?
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on May 01, 2017, 06:59:26 AM
Ok, I get it now. Thanks.

IMO, you go for the GCM.DB.X with the 8% coupon. The point of these convertible debentures is to get paid while you wait for good things to happen. Yield to maturity is misleading in my view since if they don't have the cash on hand by 2020, they will propose again another extension with improved terms for those remaining debentures and "trapped" debentureholders will be forced to accept.

Once this is approved, I suspect that one could see a market loss on the 6% bonds and a gain on the 8%. If things get too much out of whack, then you can sell the 8% and buy the 6%.

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 01, 2017, 07:02:17 AM
Good points!

The counter point to that is the debenture buyback will be focused on the GCM.DB.V as long as they are trading under par.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: clutch on May 01, 2017, 09:04:56 AM
(Sorry for the dumb question)

How would I convert debentures into shares with a discount brokerage? Do I just call them up to exercise conversion? What is the typical fee associated with this?
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 01, 2017, 09:36:37 AM
I would call your broker. I think fees if any vary.

Why would you want to convert your debs to shares?
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: clutch on May 01, 2017, 10:25:50 AM
I would call your broker. I think fees if any vary.

Why would you want to convert your debs to shares?

Just wanted to know how it would work before I buy the debentures. Thanks.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 01, 2017, 11:19:36 AM
Generally, if the market is being somewhat efficient you should be able to sell the debentures at the equivalent of the share price or higher so you don't have to worry about converting.

Personally, I would stay away from GCM.DB.U as they are trading above intrinsic value, are mandatory convertible (81%) and have only a 1% coupon.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 02, 2017, 07:44:21 PM
More bonds bought back and quarterly results conference calls details

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Continues-to-Repurchase-2020-Debentures-and-Provides-Details-for-Its-First-Quarter-2017-Results-Webcast/default.aspx

Its interesting to note, that with that purchase last week, they exhausted the sinking fund that was available at end of December 31, 2016. Granted, it wasn't much but the sinking fund will replenish a few days after they report Q1 so that will be a number to look for when they report.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 08, 2017, 05:42:28 AM
In case anyone owns the GCM.DB.V bonds, the deadline for the consent solicitation is May 11 but my broker set a deadline of May 9 at 5pm so maybe yours did too! Whether you wish to extend your bonds or not, it's likely providing the consent (Option 1) is in your best interest as it moves out some of the liability 4 years.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 12, 2017, 05:42:53 AM
The consent solicitation was successful and about half of the bonds were extended to 2024. I think this is a good result and also reflects it was a tough decision to extend or not which makes it a good offer. Based on the current gold price and the FCF forecast for this year, they should be able to buyback all or almost all the 2020 bonds by maturity if the stock doesn't head north of US$1.95.

Next catalyst is results for Q1 which are out Monday night with the conference call on Tuesday morning. It's the only company, I know, that takes questions via the webcast.

http://www.marketwired.com/press-release/gran-colombia-gold-receives-consent-extend-maturity-us47-million-senior-secured-convertible-tsx-gcm-2216002.htm
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 15, 2017, 05:45:54 PM
Q1 results are out. http://www.marketwired.com/press-release/gran-colombia-gold-announces-first-quarter-2017-results-tsx-gcm-2216505.htm

EBITDA was US$13.6m which is a bit lower than I expected based on slightly higher than expected cash costs. Overall, they kept their cash cost guidance for the year so I still think EBITDA north of US$60m is reasonable with current gold prices.

April production was very strong at 14.4k oz, which puts them at 53.3koz for the year to date. This puts them in a very good spot to meet and maybe even beat their guidance of 150-160k oz for the year.

Adjusted EPS for the quarter was US$0.16 which looks good versus the stock price of C$1.52. Maybe some quant fund will notice.

Finally, the sinking fund to buy back the GCM.DB.V grew by US$2.3m versus the outlook of ~US$15m they expect to contribute this year.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Cardboard on May 16, 2017, 01:52:18 PM
http://www.kitco.com/news/2017-05-16/Colombia-apos-s-mining-sector-could-receive-1-5-bln-annually-over-5-years.html

Cardboard
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 16, 2017, 02:43:41 PM
Thanks Cardboard! Interesting article.

Perhaps on a related note, on the call today, it sounded like GCM might be close to terms with one of the larger illegal mines. My math suggests this could add $5-10m of EBITDA/year but probably more importantly it could change the psychology on the name. After all, an additional US$5m in EBITDA would take pro forma EV/EBITDA from 2.2x to 2.1x.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: Green King on May 16, 2017, 08:22:44 PM
Man Columbia is a fun place. :D

http://www.mining.com/coalcorp-saga-a-lesson-for-miners-in-colombia/
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 17, 2017, 03:55:09 AM
Yeah for sure. When I find a stock/debenture as cheap as GCM, I need to know why this opportunity exists and there are plenty of reasons here like the company's previous struggles and the general environment. On the first point, they seemed to have overcome a lot operationally evidenced by the soaring production and they have been helped by the peso decline/gold rally and on the second point, the government seems to want to change the culture. Certainly other Colombian-based companies aren't painted with the same brush as GCM.

Perhaps if they make a deal with the illegal miners at Segovia which sounded from the call like it could be imminent, it might change how the market views the company and result in multiple expansion.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on May 28, 2017, 03:03:39 PM
GCM is at the International Mining Writers conference today and tomorrow in Vancouver.

They are presenting on a panel tomorrow at noon. If anyone is going, any feedback would be appreciated.

https://metalwriters.com/e/international-metal-writers-conference-68/agenda#day-0

As an aside, I was talking to a pretty smart investor on Friday and he had dismissed GCM because the 2018 bonds trading in the 60s made him assume it was distressed. Of course he didn't realize the 2018 bonds are 81% mandatory convertible so they are actually trading effectively at par. It's an easy mistake to make, especially for equity investors who assume bond investors are smarter (they usually are).
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on June 13, 2017, 03:16:28 PM
Very constructive developments from the company today, especially for the 2020 debenture holders.

The company is effectively redeeming 5.7% of the 2020 bonds at par as of July 31, 2017. This may be an indication of how difficult the company is finding it to source bonds using the buy back (recall, they can only execute block purchases if they want to do any size and it cannot be on an uptick.

The production numbers for May were also very impressive and they are currently trending above their guidance range although they have not increased guidance yet.

Details are in the press release. The AGM is next week in Toronto if anyone is interested in attending.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-to-Redeem-Approximately-57-of-2020-Debentures-on-July-31-2017-Sets-New-Monthly-Production-Record/default.aspx
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on June 21, 2017, 05:14:27 AM
The AGM is tomorrow morning in Toronto, if anyone wants to hear the story up close and personal.

The recent decision to start redeeming the V bonds at par is very interesting when paired with the decision of executive board members to convert all of their V bonds to X bonds. They have effectively kept their long term exposure while forcing the 2020 bond holders to sell at par. Acceleration of the YTM is a nice thing and the V bond holders might choose to take the cash they get to buy more V bonds or X bonds or common stock. The common stock could move quickly if those dollars flow back in that way as the market cap is so tiny in relation.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on June 23, 2017, 04:28:27 AM
I went to the AGM yesterday and continued to hear very positive developments in the story.

The most important thing they are doing is buying back the convertible debt as it reduces the fully diluted share count and reduces leverage. At the current gold price they should be able to buy back all of the 2020 bonds before they are due. I'm hoping the stock price is up so much by then that bond holders end up converting some into equity anyway!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on June 25, 2017, 05:43:30 AM
There was some insider buying by the CFO of the common shares on Friday after the meeting.

 https://www.canadianinsider.com/company?menu_tickersearch=GCM%20%7C%20Gran%20Colombia%20Gold

I think it's rare to see a company's long term debt trade from 60 to 90 in 12 months while the common equity does nothing. There seems to be very high confidence they will be able to pay off the US$105m in debt remaining (recall the 2018's are 81% mandatory convertible) but the equity market cap will stay at less than US$45m (assuming the 81% of 2018s become stock).

Even if the EV stayed constant, the market cap would more than double in the next few years as they use the FCF to pay off 19% of the 2018s and buyback the 2020s.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on June 29, 2017, 12:26:37 PM
The company has put up a new summary page for anyone who wants to get up to speed quickly on the name.

http://s21.q4cdn.com/834539576/files/doc_presentations/GranColombia_05.pdf

It overstates debt a little as the 2018 debt is 81% mandatory convertible at US$1.95 vs the stock at C$1.45.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on July 12, 2017, 05:26:35 PM
Another impressive month of production from GCM in June. They finished H1'17 at 85k oz vs the current guidance of 150-160k oz for the full year '17. I believe they will likely increase guidance in Q4 but we'll see how they continue to progress.

They put up about US$13.6m in EBITDA in Q1 on 39k oz of production and given they produced 46k oz in Q2 and the gold price increased, I'm modeling about US$20m in EBITDA in Q2. I'm being somewhat conservative on costs, keeping them at the high end of guidance but I'll be pleased if they beat my numbers.

http://www.marketwired.com/press-release/gran-colombia-steadily-improving-gold-production-with-22-increase-first-half-2017-total-tsx-gcm-2225934.htm

The 2020 debs TSX:GCM.DB.V are the most interesting if you are risk averse as they have begun redeeming bonds at par starting at the end of this month, while the bonds trade at 85 with a 6% coupon. I'm expecting redemptions every quarter to use up the sinking fund.

The common is the most interesting if someone notices that the 2017E EV/EBITDA at the current price of C$1.40 is 2.3x and because of the financial leverage at an EV/EBITDA of 3.3x, the stock more than doubles. I haven't factored in that the debt will be declining every quarter but I have factored in the redemption that has been announced for month end.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on July 27, 2017, 02:42:18 PM
1. New blog post on the GCM common shares.

https://reminiscencesofastockblogger.com/2017/07/27/buying-gran-colombia-gold-a-levered-free-cash-flow-generating-gold-producer/

2. There is also a strike going on in the region with the illegal miners not wanting to accept the proposed terms of Gran Colombia to become formalized miners. I'm not clear how this impacts current production but the same thing happened last September but it really didn't impact production in the quarter.

If they can come to a resolution, it would be very positive as there would be more ore to process in the mill and it would likely come at a lower than current AISC. Ideally, we would see incremental cash flow and normalization of community relations in the region which might reverse investor concerns and allow the multiple to lift.

http://www.mining.com/artisanal-miners-strike-impacts-colombian-town/

3. The 2020 debs went "ex-redemption" on Tuesday for about 6% of holdings. Based on GMPs activity in the trading there, the company may have bought over $600k in bonds at 87 in addition to the $3m redeemed at par effective July 31. Every $1m in bonds they buy reduces the FD share count by ~500k shares so this month's actions may account for almost 2% reduction in the fully diluted share count (recall all debentures are convertible at US$1.95).
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 14, 2017, 03:44:34 PM
GCM reported solid numbers for Q2 w/ adjusted EBITDA coming in at US$21.3m which is just under what the market cap is at US$22.5m.

http://www.marketwired.com/press-release/gran-colombia-gold-reports-second-quarter-2017-results-announces-mine-life-extension-tsx-gcm-2230185.htm

They also extended the mine life at Segovia to 2026 with continued drilling and reversed a previous impairment as the long term gold price assumption was moved to US$1250. On that basis, basic EPS was actually US$1.77/share but excluding the reversal, adjusted EPS was US$0.20/share for the quarter vs the stock price of US$1.10.

Overshadowing all of this though is the continued labour disruptions at their Segovia property (which produces the bulk of the cash flow) which began in late July. They were able to produce ~15k oz in July, they have indicated the disruption is having an impact but it's not clear how much. Maybe we'll get some colour tomorrow on the call. They do say they are negotiating with two of the illegal mines on their site so perhaps a resolution there could lead to an end of the dispute (maybe just wishful thinking on my part).

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 15, 2017, 12:12:58 PM
If you are interested in this stock or the debentures, it's worth listening to the conference call.

It sounds like they expect a resolution on the labour disruption in the next few weeks and they are close in negotiations with some of the larger illegal mines on their property. Solving both of these problems would have a significant impact on cash flow and some of the reasons why this company trades at such a big discount to its peers on almost every metric.

http://www.grancolombiagold.com/news-and-investors/events-and-presentations/webcasts/default.aspx
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 23, 2017, 08:09:01 AM
Following from the conference call, it seems like a proposal is now in front of the miners:

https://www.larepublica.co/empresas/tras-33-dias-de-protestas-gran-colombia-gold-llego-a-un-acuerdo-con-la-gobernacion-de-antioquia-2539274

This looks really interesting as while it increases cash costs at Segovia, it should reduce AISC. Further, significantly more production should come online which would increase cash flow / EPS. Perhaps most importantly though is that we could see multiple expansion as they illegal mining problems fade to the background.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 28, 2017, 04:01:02 PM
This article from today suggests decent progress on negotiations but still some hostility.

http://www.eltiempo.com/colombia/medellin/violencia-durante-negociaciones-en-paro-en-antioquia-124506

If they can come to a resolution, we could see EBITDA north of US$90m on a forward 12 month basis based on recent production rates and some additional production from illegal miners.

Current EV is US$148m.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on August 31, 2017, 07:09:27 AM
Lots of articles in Colombia suggesting the strike is ending and an agreement has been reached. Impossible to tell what the terms of the deal will mean for costs I would expect cash costs to rise along with production.

http://www.rcnradio.com/locales/antioquia/gobierno-y-mineros-llegaron-a-acuerdo-para-levantar-el-paro-en-segovia-y-remedios/amp/
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 05, 2017, 05:56:34 AM
Normal operations at Segovia.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Announces-Resumption-of-Normal-Operations-at-Segovia/default.aspx

Unfortunately we didn't get an exact number on August production but that's probably because they don't have it yet. Likely in a few weeks we'll have an update.

It reads like any new mining collectives that agree to deals with GCM will be incremental to existing production but might come at a lower margin.

I wish there was more clarity in the press release but given the market cap, peace on the labour front should increase the value considerably.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 05, 2017, 03:48:03 PM
The numbers get kind of crazy when you slap a normal mid-tier producer multiple on GCM of 6x EBITDA.

At the current gold price at a production rate of 170k oz (they produced 85k oz in H1 and production was accelerating before the strike), forward 12 month EBITDA could be over US$85m. Theoretically any illegal mining that is formalized through agreements will be accretive to that.

On a fully diluted basis there would be 93m shares outstanding so 6x EV/EBITDA gets you a share price of C$6.80 vs the current share of C$1.60.

If they are able to buy back debentures, which they should be able to do unless the stock starts to run very fast above US$1.95 (the conversion price), then the price of the shares at that multiple will be even higher as there will be less dilution.

Recall there are only 20.5m shares outstanding right now so there is lots of opportunity (but maybe not time) to reduce dilution through redemption/buybacks of debentures.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 10, 2017, 06:28:00 AM
Anyone else still reading these rantings of a mad man?

It looks like there was some decent insider buying the last few days ahead of what may be some decent catalysts and after some very good news with the labour settlement.

The insider marker shows about 40k shares purchased in total over the past couple of days.

https://www.canadianinsider.com/company?ticker=GCM#ui-id-7

There has been no filing on SEDI yet, however.

In terms of catalysts, there is expected release of the Marmato drill results which I'm hoping come before the marketing beginning next week at two Colorado gold conferences and finally there is a chance that the company finally gets some analyst coverage.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: awindenberger on September 10, 2017, 07:47:25 AM
Anyone else still reading these rantings of a mad man?

It looks like there was some decent insider buying the last few days ahead of what may be some decent catalysts and after some very good news with the labour settlement.

The insider marker shows about 40k shares purchased in total over the past couple of days.

https://www.canadianinsider.com/company?ticker=GCM#ui-id-7

There has been no filing on SEDI yet, however.

In terms of catalysts, there is expected release of the Marmato drill results which I'm hoping come before the marketing beginning next week at two Colorado gold conferences and finally there is a chance that the company finally gets some analyst coverage.

Haha, I for one am reading all your postings with interest. I still haven't committed any capital but am seriously considering it.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: valcont on September 10, 2017, 12:45:22 PM
Anyone else still reading these rantings of a mad man?

It looks like there was some decent insider buying the last few days ahead of what may be some decent catalysts and after some very good news with the labour settlement.

The insider marker shows about 40k shares purchased in total over the past couple of days.

https://www.canadianinsider.com/company?ticker=GCM#ui-id-7

There has been no filing on SEDI yet, however.

In terms of catalysts, there is expected release of the Marmato drill results which I'm hoping come before the marketing beginning next week at two Colorado gold conferences and finally there is a chance that the company finally gets some analyst coverage.

Why do you think the stock is a better play here than buying '20 or '24(my preference) debentures? Basically you are buying leaps that pays 6%/8% with no mandatory conversion. Talking about conversion , I can't figure out why the '18 debs are mandatory. Who would ever buy that at 70 when the mandatory conversion is at CAD $2.37 , a 45% premium?

Just a day's work so please correct me if I have missed anything.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 10, 2017, 01:03:28 PM
First, I got some messages that people are actually reading this stuff so I appreciate that. Thanks!

I actually own the entire capital structure with the biggest position being in the Vs.

I used to own only the Vs but my concern is with the strategy to redeem the Vs at par with sinking fund money. If the stock starts to move they will redeem the debs at par below conversion value. Definitely a high class problem. While you could convert the debs or sell them at conversion value at that point the return on the common would be significantly higher in that scenario. I sold some Vs and switched them into Xs but mostly I just bought common and the Us opportunistically.

"Who would ever buy that at 70 when the mandatory conversion is at CAD $2.37 , a 45% premium? "

The Us are only 81% convertible below US$1.95/share so the current value of the debs is actually about 74 with current share price and exchange rate. The stock value there is about 55 so with the recent trading price at 70, you are creating a less than one year piece of paper at 15 that is worth 19 in a year which is about 77 cents on the dollar while having a free option above US$1.95. I find that attractive. It's really sensitive to bid/ask spreads though!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: valcont on September 10, 2017, 04:21:07 PM
First, I got some messages that people are actually reading this stuff so I appreciate that. Thanks!

I actually own the entire capital structure with the biggest position being in the Vs.

I used to own only the Vs but my concern is with the strategy to redeem the Vs at par with sinking fund money. If the stock starts to move they will redeem the debs at par below conversion value. Definitely a high class problem. While you could convert the debs or sell them at conversion value at that point the return on the common would be significantly higher in that scenario. I sold some Vs and switched them into Xs but mostly I just bought common and the Us opportunistically.

"Who would ever buy that at 70 when the mandatory conversion is at CAD $2.37 , a 45% premium? "

The Us are only 81% convertible below US$1.95/share so the current value of the debs is actually about 74 with current share price and exchange rate. The stock value there is about 55 so with the recent trading price at 70, you are creating a less than one year piece of paper at 15 that is worth 19 in a year which is about 77 cents on the dollar while having a free option above US$1.95. I find that attractive. It's really sensitive to bid/ask spreads though!

Ah I see. Didn't notice the 81% conversion part. BTW take a look at page 19 of this report for the excess cash flow.What is the other working capital?

http://s21.q4cdn.com/834539576/files/doc_presentations/GCM-Corporate-Presentation-MAY-2017-(Final).pdf

These guys haven't made any money until a year or two ago.Right around when peso is devalued and gold prices had started moving up. Perfect tail wind. I am not disputing your bull case. I am just trying to understand why there is a discount?  Is it because the management seems shitty having restructured once or there is more to those mining disputes? Don't think debentures are causing any confusion. The terms are pretty clear and price looks good post 2018 dilution.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 10, 2017, 04:50:34 PM

Ah I see. Didn't notice the 81% conversion part. BTW take a look at page 19 of this report for the excess cash flow.What is the other working capital?

http://s21.q4cdn.com/834539576/files/doc_presentations/GCM-Corporate-Presentation-MAY-2017-(Final).pdf

These guys haven't made any money until a year or two ago.Right around when peso is devalued and gold prices had started moving up. Perfect tail wind. I am not disputing your bull case. I am just trying to understand why there is a discount?  Is it because the management seems shitty having restructured once or there is more to those mining disputes? Don't think debentures are causing any confusion. The terms are pretty clear and price looks good post 2018 dilution.

Eyeballing it the other working capital highlighted appears to be growth in accounts receivable and inventories but you can analyze the 2016 financial statements here: http://s21.q4cdn.com/834539576/files/doc_financials/2017/GCM-Financial-Statements-12-31-16-(FINAL).pdf

I disagree on the debentures. I have spoken to a few professional portfolio managers who see the 2018s trading at 70 and assume there is financial distress so they don't touch the equity. In fact, most of this year the 2018 debs traded above par on the partial conversion basis. I think the recent opportunity is just because the CAD rallied so quickly.

I think there are lots of reasons for the discount. I don't think all of them are fair which is why I own it but it explains the discount to me. A smart former colleague of mine once said "you can't buy a cheap stock unless you know why it's cheap!"

In this case:

1. Their costs were out of control under the old CEO, while the peso was really high and the gold price was falling. They have benefited on costs recently from the peso move but also the expansion in production at Segovia.
2. There was too much debt and they had to dilute equity shareholders in the past. With the way EBITDA and FCF has grown, the debt is at a very manageable level. Recall, the market cap with these very same assets was over $1 billion in the past. That's a lot of burned investors.
3. Labour relations have been awful and there is lots of illegal mining / gang activity. Hopefully the settlement in Segovia puts this in the rearview mirror but there will surely be flare ups like almost any mining company.
4. There is no analyst coverage. Hopefully resolved this fall as one would think with all of the fees GMP has received they will launch coverage soon!
5. Market cap is too small for many big investors to get involved. Ironic but true, I think. They will come rushing in when all of the debs are converted and the company is big enough to go in the GDXJ. 

I'm sure there are more reasons but those are the most glaring to me at least.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: valcont on September 10, 2017, 07:14:34 PM

Eyeballing it the other working capital highlighted appears to be growth in accounts receivable and inventories but you can analyze the 2016 financial statements here: http://s21.q4cdn.com/834539576/files/doc_financials/2017/GCM-Financial-Statements-12-31-16-(FINAL).pdf

I disagree on the debentures. I have spoken to a few professional portfolio managers who see the 2018s trading at 70 and assume there is financial distress so they don't touch the equity. In fact, most of this year the 2018 debs traded above par on the partial conversion basis. I think the recent opportunity is just because the CAD rallied so quickly.

I think there are lots of reasons for the discount. I don't think all of them are fair which is why I own it but it explains the discount to me. A smart former colleague of mine once said "you can't buy a cheap stock unless you know why it's cheap!"

In this case:

1. Their costs were out of control under the old CEO, while the peso was really high and the gold price was falling. They have benefited on costs recently from the peso move but also the expansion in production at Segovia.
2. There was too much debt and they had to dilute equity shareholders in the past. With the way EBITDA and FCF has grown, the debt is at a very manageable level. Recall, the market cap with these very same assets was over $1 billion in the past. That's a lot of burned investors.
3. Labour relations have been awful and there is lots of illegal mining / gang activity. Hopefully the settlement in Segovia puts this in the rearview mirror but there will surely be flare ups like almost any mining company.
4. There is no analyst coverage. Hopefully resolved this fall as one would think with all of the fees GMP has received they will launch coverage soon!
5. Market cap is too small for many big investors to get involved. Ironic but true, I think. They will come rushing in when all of the debs are converted and the company is big enough to go in the GDXJ. 

I'm sure there are more reasons but those are the most glaring to me at least.

Thanks Safety, I'll dig in to see the working capital adjustments and the costs on constant currency basis. Their normalized earnings over a commodity cycle don't look good so I'm trying to figure out how much of the peak earnings are baked into the upside thesis. The debentures are a good deal but US citizens can't buy them. The gold does seem to be breaking out so I'm looking at the basket of these stocks. 
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 10, 2017, 10:42:09 PM
I think it's hard to look at the historical results and determine what costs look like going forward. The significant increase in production has spread fixed costs out over more ounces at Segovia and I believe some (all?) of the agreements with contract miners are in USD their costs won't rise as much as one might think at Segovia at least.

I believe the CFO commented on the last conference call about the sensitivity being relatively low.

Maybe worth reaching out to him for some clarity?

In addition, there is a ton of option value at Marmato. If these drill results are encouraging, they might eventually entice a JV partner to step forward to help develop it (not sure on timeline). That could put a gigantic valuation number on Marmato where the current market might have zero. They already know there is a ton of gold there but they need to evaluate the potential for a large underground mine (need high grade material).
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 11, 2017, 08:31:26 AM


It looks like there was some decent insider buying the last few days ahead of what may be some decent catalysts and after some very good news with the labour settlement.

The insider marker shows about 40k shares purchased in total over the past couple of days.

https://www.canadianinsider.com/company?ticker=GCM#ui-id-7

There has been no filing on SEDI yet, however.

In terms of catalysts, there is expected release of the Marmato drill results which I'm hoping come before the marketing beginning next week at two Colorado gold conferences and finally there is a chance that the company finally gets some analyst coverage.

We have SEDI confirmation. The buyer was, Hernan Martinez, the former minister of mines of Colombia who sits on the BOD. He actually bought a little more than 75k shares. He owned less than 1k before. It's hard not to see this as very positive.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 14, 2017, 03:55:30 AM
More insider buying the last two days but still waiting for SEDI confirmation.

Marketing starts on Monday morning in Colorado at the Precious Metals Summit.

Webcast details below.

http://www.gowebcasting.com/conferences/2017/09/18/precious-metals-summit
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 18, 2017, 07:07:11 AM
More insider buying the last two days but still waiting for SEDI confirmation.

Marketing starts on Monday morning in Colorado at the Precious Metals Summit.

Webcast details below.

http://www.gowebcasting.com/conferences/2017/09/18/precious-metals-summit

GCM presenting at 12:45pm ET at the link above.

The company also put out some drill results today. I have no expertise in assessing drill results but anything that can extend the mine life is positive.

It will be interesting to see if the insider buying continues today.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 18, 2017, 09:33:56 PM
The insider buying did continue today and there was a filing today for Thursday and Friday's buying of almost 60k shares by the same director, Hernan Martinez. That's a total buying of ~135k shares over the last week and the buying today appears to be at least 32k shares.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 19, 2017, 10:44:34 AM
Anyone else still reading these rantings of a mad man?

It looks like there was some decent insider buying the last few days ahead of what may be some decent catalysts and after some very good news with the labour settlement.

The insider marker shows about 40k shares purchased in total over the past couple of days.

https://www.canadianinsider.com/company?ticker=GCM#ui-id-7

There has been no filing on SEDI yet, however.

In terms of catalysts, there is expected release of the Marmato drill results which I'm hoping come before the marketing beginning next week at two Colorado gold conferences and finally there is a chance that the company finally gets some analyst coverage.

Why do you think the stock is a better play here than buying '20 or '24(my preference) debentures? Basically you are buying leaps that pays 6%/8% with no mandatory conversion. Talking about conversion , I can't figure out why the '18 debs are mandatory. Who would ever buy that at 70 when the mandatory conversion is at CAD $2.37 , a 45% premium?

Just a day's work so please correct me if I have missed anything.

Just thought I should update and mention that I have sold all of my common and replaced with X's and U's. The X trading down while the stock has moved up so much, especially in US$ terms makes little sense. The stock value alone is around 77 in the debentures. Paying 84 for an 8%, security and optionality seems like a good deal!

Also, GMP, did a big trade at 84 and I think must have come out long so it provided the opportunity.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: doc75 on September 19, 2017, 11:33:54 AM
Just thought I should update and mention that I have sold all of my common and replaced with X's and U's. The X trading down while the stock has moved up so much, especially in US$ terms makes little sense. The stock value alone is around 77 in the debentures. Paying 84 for an 8%, security and optionality seems like a good deal!

Also, GMP, did a big trade at 84 and I think must have come out long so it provided the opportunity.

I've been thinking about this, and wondering why the insiders haven't been scooping up some of the debs.  At these prices it seems the obvious play.  But I'm usually missing something!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 19, 2017, 11:55:50 AM
Just thought I should update and mention that I have sold all of my common and replaced with X's and U's. The X trading down while the stock has moved up so much, especially in US$ terms makes little sense. The stock value alone is around 77 in the debentures. Paying 84 for an 8%, security and optionality seems like a good deal!

Also, GMP, did a big trade at 84 and I think must have come out long so it provided the opportunity.

I've been thinking about this, and wondering why the insiders haven't been scooping up some of the debs.  At these prices it seems the obvious play.  But I'm usually missing something!

The director who has been buying is a former Colombian Mining Minister so I imagine he is a Colombian resident and as I think Valcont previously noted, the debs can only be owned by Canadians or institutions.

Besides that some insiders already own a lot of GCM.DB.X.

This would appear to be an especially good opportunity for Canadians to take advantage of but there is some small risk that they get a cash infusion (sell stake in Marmato?) that allows them to redeem the bonds early.

Next catalyst is the Marmato scoping study which may come before the Denver Gold Show, next week.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: doc75 on September 19, 2017, 12:01:45 PM
The director who has been buying is a former Colombian Mining Minister so I imagine he is a Colombian resident and as I think Valcont previously noted, the debs can only be owned by Canadians or institutions.

Besides that some insiders already own a lot of GCM.DB.X.

This would appear to be an especially good opportunity for Canadians to take advantage of but there is some small risk that they get a cash infusion (sell stake in Marmato?) that allows them to redeem the bonds early.

Next catalyst is the Marmato scoping study which may come before the Denver Gold Show, next week.

Right - totally forgot about the restricted ownership of the debs. Thanks!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: valcont on September 19, 2017, 01:44:15 PM

Just thought I should update and mention that I have sold all of my common and replaced with X's and U's. The X trading down while the stock has moved up so much, especially in US$ terms makes little sense. The stock value alone is around 77 in the debentures. Paying 84 for an 8%, security and optionality seems like a good deal!

Also, GMP, did a big trade at 84 and I think must have come out long so it provided the opportunity.

That was a good call Safety.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 19, 2017, 02:54:44 PM
Thanks Valcont.

The debs have to follow sooner or later but if the stock ends up correcting, I don't think the Vs and Xs don't have much downside as they haven't rallied at all.

They should have a decent cash flow quarter in Q4 and will likely try to redeem more V debentures
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 23, 2017, 03:26:28 PM
More insider buying by Director Martinez.

https://www.canadianinsider.com/company?ticker=GCM

Looks like he bought around ~240k this week. He went from owning almost nothing to over 400k shares in a few weeks.

The company put out a press release indicating they weren't aware of any non public material information as to why the stock has increased with higher volume. Not sure how to take that as the Marmato scoping study should be out by the end of September.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 27, 2017, 06:51:15 AM
My thesis that, the director Hernan Martinez, that has been buying tons of stock couldnít buy debs appears to be false as he picked up US$365k of the 2018 bonds yesterday which is around 187k shares.

They are presenting today at the Denver Gold Forum.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on September 29, 2017, 09:21:30 AM
My thesis that, the director Hernan Martinez, that has been buying tons of stock couldnít buy debs appears to be false as he picked up US$365k of the 2018 bonds yesterday which is around 187k shares.

They are presenting today at the Denver Gold Forum.

Link to Denver Gold presentation:

http://www.denvergoldforum.org/dgf17/company-webcast/GCM:CN/
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: doc75 on October 01, 2017, 07:44:43 PM
Safety & others who care to comment:

I see the potential value here, but management sure makes me nervous.  How did you get comfortable with Iacono / de la Campa / Martinez after their sordid history with Pacific Rubiales?   Or do you just hold your nose and look at the metrics?  These guys are pretty much the epitome of the famous bad behaviour in the mining/resource sector.  How or why do you trust them now?

Not trolling. Serious question.  Thanks!
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 01, 2017, 08:10:49 PM
Safety & others who care to comment:

I see the potential value here, but management sure makes me nervous.  How did you get comfortable with Iacono / de la Campa / Martinez after their sordid history with Pacific Rubiales?   Or do you just hold your nose and look at the metrics?  These guys are pretty much the epitome of the famous bad behaviour in the mining/resource sector.  How or why do you trust them now?

Not trolling. Serious question.  Thanks!

I definitely think it's a fair question. I don't know the history of PRE too well, except I think they gave themselves a ton of options, used a ton of leverage and got lucky with a very strong oil price only to have it collapse on them. Luckily for them, they cashed out a ton of options before that happened.

In this case, the cheap valuation certainly helps. The low share count thus far means they haven't been able to issue too many options (on a fully diluted basis) and the ones they have been at the C$ equivalent of the debenture conversion price. I think that demonstrates the influence of the independent board members. We will have to watch as the board likely changes as the 2020 debentures are retired. They also own a lot of stock/debentures so are aligned but we will have to keep an eye on them as the capital structure becomes more equity heavy.

Personally, I have moved most of my exposure to GCM.DB.X (but I own all classes of the debs) as that is what Serafino mostly owns as well and while he really wants to buy back GCM.DB.V, I can't imagine him selling the GCM.DB.X for par.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: doc75 on October 02, 2017, 07:02:46 AM
Safety - thanks for the response. 

I've been reading more about the PRE story and it certainly leaves a nasty impression.  From abuse of workers and all the stuff you sadly "expect", to inflated reserve estimates and a sketchy restructuring of their options program that perversely benefited management.  Far less innocent than getting caught like so many others with too much leverage to the price of crude.   There seems to be plenty of evidence that you can't really trust promotional guys like Iacono and Guistra with capital. 

Objectively speaking, past performance of management and the BOD here is weak at best, and the major players seem to be of questionable integrity.   I see the value.  I see the insider ownership and purchase.  But if they're not honest brokers, then who knows what's really going on with local mining relations, reserve estimates etc.

So I was wondering how you address that type of risk in your price model, since it seems like you have a substantial position in this name.  Do you discount your numbers in any way?  Or do you just handle the "black box" risk through position sizing?

FWIW, there's some interesting/colourful and potentially quite biased reading about Iacono and friends available at http://incakolanews.blogspot.ca .  Just search the blog for Iacono or GCM.

Again, not trying to troll or bash.   Just trying to negotiate my fears.  I have a position in the X debs based purely on the numbers, but have kept it small because of the question marks.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 02, 2017, 07:29:06 AM
I donít think my risk approach is always very scientific. Of all of the allegations I have read on the BOD, none have suggested they misstated financial statements. I suppose with any resource company, I have to trust the reserve engineers as well.  At least there is production here.

I feel more comfort in owning the debt than the common which allows me to have a bigger position than I normally would if only the common were available. For example, I think JAG.TO is a very cheap gold stock (albeit with a checkered past) and I like the new(ish) CEO. I own less JAG than GCM because there is only common available.

I have read IKNís comments on GCM and he seems hung up on the contract model as not being real production for some reason but the cash flow does appear real.

The risk mitigation will be to begin selling the position as it approaches fair value long before it gets there if that makes sense.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 04, 2017, 05:18:17 AM
Marmato resource estimate is finally out. It seems enticing to grow production here to 125koz/yr for at least 12 years but with no cost estimates yet, I canít get too excited. The stockís value is entirely supported by Segovia so if Marmato is proved to be economic with a further PEA expected then that would be a nice bonus.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Announces-Underground-Mineral-Resource-Estimate-for-Its-Marmato-Project-Commencing-Scoping-Studies-for-Underground-Mine-Expansion/default.aspx
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 11, 2017, 05:05:31 PM
Q3 production numbers are out and while I was expecting a decline from last year, the September numbers were incredible and the grades for the quarter as a whole were also incredible. 

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Sets-New-Monthly-Gold-Production-Record-in-September-2017-and-Remains-on-Track-With-2017-Annual-Production-Guidance/default.aspx

The highlight to me was production of 16,664 oz in September which was a record and if they can keep that pace means 50k oz in Q4. I'm not expecting that but it sure would be impressive if they get there.

I have been using 170k oz for next year but it seems light given their performance but that at $1295 gold (current price) produces EBITDA around US$75-80m and every 10k oz in additional production adds another US$5m in EBITDA.

Recall fully diluted share count is ~95m and peers trade at 7x so even trading at half of the peers means a ~C$3.60 share price or about double the current price.

Also, if that happens, there will be no interest costs and tax rates are on there way down over the next two years so FCF generation should be very good.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: doc75 on October 11, 2017, 05:20:49 PM
Interesting that insiders were back in the market today.  Another 18200 shares flagged today as an insider buy.  I would have thought these pending production numbers would be viewed as material insider knowledge.
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 11, 2017, 05:43:16 PM
Interesting that insiders were back in the market today.  Another 18200 shares flagged today as an insider buy.  I would have thought these pending production numbers would be viewed as material insider knowledge.

Yeah, I was looking at that too. I guess we'll see who it was but not sure if the whole BOD would be privy to the monthly production numbers before they are published. They do put out production numbers around the same time every quarter. It's not even clear its "material" by definition but the appearance should be enough for insiders to be careful.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: doc75 on October 12, 2017, 07:57:40 AM
I'm quite surprised to see no market reaction to yesterday's production numbers.   Surely they were higher than anyone expected, given the strike.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on October 12, 2017, 08:12:24 AM
I'm quite surprised to see no market reaction to yesterday's production numbers.   Surely they were higher than anyone expected, given the strike.

With no analyst coverage, there arenít any expectations!

I guess they donít have to worry about trading ahead of ďmaterialĒ non-public information.

Next potential catalyst is results on Nov 15. I expect weíll see another tender announcement on the GCM.DB.V as they should have decent excess cash flow this quarter.

Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on November 03, 2017, 05:30:44 AM
The GCM.DB.X has traded up to 97 so I have taken the opportunity to sell some bonds and buy the common at C$1.85 as the risk reward has become pretty compelling into Q3 results in a few weeks.

The earnings on Nov 15 will coincide with the Colombian Gold Symposium in Medellin where GCM will present on their Marmato project.

Personally, I find it a bit odd when companies advertise but in GCMís case, I share their frustration about getting their story out there. I donít think they hit on the salient points of valuation which I think are interesting but most gold investors just want a good story!

This is a feature on the BTV TV show running on BNN this weekend.

 http://www.b-tv.com/gran-colombia-gold-btv-321-feature/
Title: Re: GCM.TO - Gran Colombia Gold Corp
Post by: SafetyinNumbers on November 13, 2017, 04:26:11 PM
GCM reported Q3. The details are in the press release below. The EBITDA number was a few million below my own estimate but it appears it's because the sold 3k oz less than they produced during the quarter (my estimate was based on them being equal). The excess cash flow was also below my estimate for the same reason. The important thing is that they kept full year free cash flow guidance at US$16m (implies US$8m in Q4).

Also, super important is that they produced 17k oz in October and raised overall guidance for 2017 to 165-170k oz. With 139k oz produced in the first 10 months of the year, if they maintain the October production rate, they will beat the high end of guidance.

They also signed up 7 mining collectives up as contract producers since the agreement signed in September. It's not clear what impact that will have on total production going forward.

http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Reports-Third-Quarter-2017-Results-Raises-2017-Production-Guidance/default.aspx