Author Topic: GCM.TO - Gran Colombia Gold Corp  (Read 63679 times)


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Re: GCM.TO - Gran Colombia Gold Corp
« Reply #190 on: February 21, 2020, 10:55:11 AM »
Thanks Cardboard! It still looks cheap and so does DPM.

I had a chance to meet with SGI.V this week. It seems like all the bad news is priced in without any optionality for higher grades which would result in higher production and lower costs. Next update will be end of January and we will get Q4 production and the 2019 budget. I expect them to put up guidance they can beat.

Check out slide 15 in their deck for TD:

If they can get to 5g/t vs the reserve grade of 6g/t, they can produce over 125k oz at an AISC less than $900 and that would put the stock at less than 1x EV/EBITDA.

It also has no debt (net cash is about 30 cents of the 75 cent share price), high management ownership at 9% and operates in Australia. But itís too small for most hedge funds and long only funds to care about.

This post on SGI did not age well. That being said, gold is up a lot over the last year and the stock is still 75 cents. I see it about 1x 2021E EV/EBITDA based on guidance. I expect this year and especially the first half to be messy but they should be free cash flow positive this year too.

If there was a development play in Australia that was fully funded and guiding to 100k oz and AISC of $1100 with gold over $1600, I think it would have a market cap bigger than US$55m.

Obviously, there is a credibility issue and you can see it in street estimates which are way lower. Even they will have to up estimates based on the gold price alone.

I was expecting it to be down 30-50% after your initial ageing comment SIN. This does look like another interesting play particularly with gold continuing to move up.


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Re: GCM.TO - Gran Colombia Gold Corp
« Reply #191 on: February 21, 2020, 11:36:52 AM »
It was down a lot but the gold price helped it bounce back. I wore it the whole way but have been adding recently.

I tried to pitch it to some equity sales people this morning and the pushback reminded me of GCM in 2016. SGI is in the penalty box for sure but unlike GCM, there is some analyst coverage. Even though they donít believe management guidance yet, estimates have to go up because their gold price forecasts have to go up so it might be the quants that start the rerating.

No net debt, in Australia, with a boatload of catalysts, the risk/reward seems skewed for the longs.


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Re: GCM.TO - Gran Colombia Gold Corp
« Reply #192 on: February 23, 2020, 07:24:48 PM »
Superior Gold is at the BMO conference this week. The higher gold price might make some PMs who don't have a lot of gold exposure to reach for a high cost producer like SGI.

Also if anyone in Toronto is interested in free lunch, meeting management and getting a recap of the BMO conference SGI just started hosting regular individual investor lunches. There is one on February 27.

I thought the individual investor lunches at first were a bit promotional but it's probably more cost effective marketing than the alternatives. The free float is pretty small so it doesn't need a lot of buying likely for it to get some momentum. That being said, H1 costs are likely going to be above the high end of the AISC cost guidance so the catalysts outside of earnings are probably more important in the near term. Also that doesn't mean earnings estimates can't go higher.

I only have access to a couple of reports but BMO has their 2020E AISC estimate at $1277 and GMP has it at $1366. That's a stark contrast to the midpoint 2020E AISC guidance of $1125. Also, street gold price estimates haven't gone up at the same rate as gold. Moving the gold price from $1500 to $1665 can boost cash flows quite a bit when GMP is expecting cash costs of $1266. On top of that GMP has the gold price coming down next year to $1400. I'm not sure where street estimates for gold but I'm pretty sure no one is modelling higher than the current spot for 2020E and 2021E. That seems like a source of earnings estimates going higher on no news.

On that basis, maybe the quants will get it going if the other catalysts don't. It just seems too cheap on the optionality. We don't know what the open pit guidance is going to be when it comes out but it could be in the 30 oz/year range. If that's the case, next year production could easily be 100k oz. If costs for the underground are comparable to open pit then EBITDA will easily eclipse the current EV at current spot. I don't know if they will make their cost guidance. Maybe the analysts know they won't but even at $1366 AISC at 100k oz of production, that's still less than 2x EV/EBITDA at the current spot price.

Meanwhile they still have a lot of exploration potential. Every management team will tell you that so I take it with a grain of salt but the option seems cheap to me.

Obviously, this idea is for the gold bulls. The story gets better if gold keeps on moving higher but a lower gold price and higher than expected costs would be a painful result.

Potential non-earnings catalysts:

- Conferences (BMO & PDAC)
- New Life of Mine Plan for Open Pit Operations
- Year End 2019 Reserves and Resources Update
- Global Reserves and Resources Update