Value Microcaps Junior Miners

[Bobwins]

gcm.to/tprff C$.365 Reviewed Gran Colombia Gold prior to the upcoming Resource Conference.

I think GCM.to is due for a rerating. I think Q4 will be a break thru for the company.

They have been undergoing a constant upgrading of the Segovia plant from 500tpd in 2010 to the current capacity of 1300tpd. Gran Colombia recently closed a loan to build a new 2500tpd mill. Gold production has been climbing each year. The company produced 21K oz at Segovia in Q3 and are guiding for production of 25 to 30,000 oz in Q4.

This increase in production should raise total company production to 30 to 35,000 oz in q4 as the Marmoto underground has been producing a relatively constant 5,000oz per qtr.

So with the mill upgrade, Gran Colombia is on pace for annual production of 120 to 140,000oz. After the new mill is built, GCM is projecting production of 200,000oz in 2014.

Looming in the future is the Marmoto open pit project. GCM is hoping the project could produce 340,000 oz/yr by itself, transforming GCM into a good sized producer at 500,000+oz.

Q3 GCM had total revs of $47million and cashflow of 10 million.

Based on projections of 30 to 35,000 oz, I estimate gross revs for Q4 of 51 million to 60million at gold prices for Q4 estimated at $1700. Assuming cash costs of 1200, GCM should have cashflow of $500/oz or 15million to 17.5million. Divided by 382 million shares, that's .04 .045 cashflow for Q4. Multiply by 4 qtrs and you have .16 to .18 annualized fwd cashflow. Bigger producers are priced at 13X fwd cashflow. Let's cut that in half and multiply .16X 6 or .96.

This is based on mainly Segovia with 1.6 million oz in reserves and includes no value for the 12 million oz resource at Marmoto.

GCM is projecting 200K production and $800 cash costs after the new mill is built. $900 margin X 200K = 180 million cashflow or potential fwd cashflow in 2014 of .47. 6X .47 = 2.82 projected share price. Again this includes nothing for 12+million oz at Marmoto.

Admittedly, Marmoto is a low grade project at .91 gm/tonne. With rising cash costs, many large projects are being put on hold. However with the very high grades of Segovia, Gran Colombia should have good margins and growing cash to help finance this big project. The pre feasibility study was due at yearend so should be forthcoming soon.

Growing production and cashflow should give us profits while we wait for the big potential of Marmoto.