Gran Colombia Gold swallows poison pill

Gran Colombia Gold Corp. [GCM-TSX] said Thursday January 3 that it has adopted a shareholders rights plan agreement that is effective immediately.

Gran Colombia said the plan was not adopted in response to any specific proposal or intention to acquire control of Gran Colombia. However, the board considered a number of factors and believes that adopting the plan will protect Gran Colombia’s shareholders from unfair, abusive or coercive takeover strategies and to ensure that all shareholders have an equal opportunity to participate in any future takeover bid, and to receive full and fair value for their commons shares.

Under the terms of the plan, the rights issued will attach to and trade with the common shares of Gran Colombia and no separate certificates will be issued unless an event triggering the rights occurs.

On Thursday, Gran Colombia shares rose 4.75% or 14 cents to $3.09. The 52-week range is $3.45 and $1.96.

Gran Colombia is a Canadian-based gold and silver producer with a focus on Colombia, where it is currently the largest underground gold and silver producer in that country, with several underground mines in operation at its Segovia and Marmato operations. The majority of the company’s production comes from the Segovia Operations, which are located in the Segovia-Remedios mining district in Antioquia, roughly 180 km east of Medellin, northwest Colombia.

The company has said it was on track to produce up to 220,000 ounces of gold in 2018 at an all-in sustaining cost of US$950/oz.

In the first nine months of 2018, Segovia produced 144,241 ounces of gold, an increase of 40% compared to the same period last year. Marmato produced 18,500 ounces of gold in the first nine months of 2018, a 3% decrease from year earlier levels.

Marmato is situated in the Caldas Department in Middle Cauca gold district 80 km south of Medellin. The project is located in an area that has been in continuous production since Spanish colonists seized control of the Marmato mines in 1527. It benefits from its proximity to the Pan American Highway and easy access to both Medellin and the national electricity grid, which runs near the project. Marmato also boasts a permitted tailings storage facility.

In October, 2017, the company announced that the Marmato Project contains a measured and indicated resource of 3.9 million ounces of gold and 22.6 million ounces of silver. On top of that is an inferred resource of 4.2 million ounces gold and 15 million ounces of silver.

The estimate includes 2.2 million ounces of Deeps Zone mineralization. This is mineralization that was discovered by drilling in 2012, and extends vertically to at least 900 metres below the limit of the current underground operation. It is due to this latest find that the company is able to contemplate a change in strategy.

The Segovia Operations covers 9,000 hectares in the Segovia-Remedios mining district, and includes three high-grade gold mines that have been in production for over 150 years, yielding over 5 million ounces during that time.

They are the El Silencio, Providencia, and Sandra K underground mines in the Municipality of Segovia and the Carla underground mine in the Municipality of Remedios. Carla is an exploration project located about 10 km southeast of the other Segovia mines.

The Segovia operation includes areas that are operated by the company. It also features an artisanal miner model that contracts local third party miners to work on the company’s concessions and deliver ore to the 1,500 tonne-per-day Maria Dama processing plant.

In September, 2017, the company said a NI 43-101 Preliminary Economic Assessment for the Segovia Project contains an updated life-of-mine plan.

It estimates that 4.1 million tonnes of material with an average grade of 8.8 g/t gold will be processed over an extended mine life through to the end of 2026. That’s four years longer than the previous life of mine estimate.

The updated life-of-mine plan says a total of one million ounces of gold can be produced at an all-in sustaining cost of $896/oz. This estimate is based on an August 7, 2017 Technical Report prepared by SRK Consulting Inc.