Welcome to the Gran Colombia Gold Third Quarter 2018 Results Webcast. My name is Hilda, and I will be your operator for today. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Mr. Mike Davies. Sir, you may begin.

Great. Thank you, Hilda. Good morning, and thank you for joining us again today for our 2018 third quarter and first nine months results webcast. With me on the webcast this morning is our CEO, Lombardo Paredes. And I'll first go through our prepared remarks regarding our performance in the first nine months of this year, and then Lombardo will be available as we open things up for the Q&A session. Before we proceed with the presentation, I would first like to draw your attention to our legal disclaimer regarding forward-looking statements that will be made by us during the webcast this morning. Each quarter this year, I've been providing you with an update on our progress against our stated objectives to execute our strategy in 2018. As we reported last quarter, we settled our 2018 debentures at maturity in August with shares. Our total issued and outstanding shares now stands at 48.2 million. And if you include the in-the-money 2024 warrants plus our stock options, our fully diluted share count would increase to about 63 million shares. We're happy to report that we've successfully completed our objective in 2018 to improve our capital structure, which has reduced the more significant dilution exposure to our shareholders that existed under the previous convertible debentures structure. And we've strengthened our balance sheet by reducing debt, increasing cash and turning our working capital positive at the end of September. We have made commitments to investors when we marketed the offering earlier this year that we would apply for listings for the new Gold Notes and the warrants. We've since been successful on both accounts with the 2024 warrants commencing trading in September and the Gold Notes in October. We also upgraded our listing in the U.S. from the pink sheets to the OTCQX…

[Operator Instructions]

All right. Well, if we have no questions, we appreciate you joining us this morning. Sorry, Hilda.

Yes, we do have some questions now. I apologize. The first question comes from Ashif Lalani [ph], who is a Private Investor.

Just had a question about Segovia and the mill capacity you have there. What potential production, obviously, we see under optimal conditions? And how much CapEx will be required to get there?

Lombardo, would you like to handle that, please?

Yes, yes. Could you repeat the question, please?

Yes. I was wondering about the mill capacity at Segovia? And what would be the potential production that you would see at Segovia under optimal conditions? And how much capital is required to get there?

All right. Yes, the mill capacity in Segovia now is around 1,300. In first quarter next year, the mill capacity will increase to 1,500. So under ideal condition, no problems, we -- next year we can -- we will be able to produce around the same amount of gold that we will produce this year. Next year, we will maintain the one month [indiscernible]. And also we are working to increase the capacity of the mill to 2,000 tonnes per day. The idea is just to continue increasing the production in Segovia. So we are confident that in the next three years, we will be in a much better position than we are right now. Probably, we can be around 250, 250 or something like that.

The next question comes from [indiscernible].

I've got two questions. The first one is, when we look at this, like $23 million CapEx spend that you guys have had year-to-date, do you guys measure an ROIC or how do you think about new CapEx spend versus other uses of the capital like delevering?

I think the answer to that is rooted in the fact that our capital spend is looking at the optimized life of mine plan that we began developing back in 2015, essentially focused on bringing the 2 million ounces of resource we have at Segovia ultimately into production. As you see in the first nine months results, about half of that spending is on exploration and development, and it's about $4 million in exploration and the balance on development. Development for us is a key capital requirement for us on an ongoing basis to bring the new areas in the mines into operations. And the exploration for us, I think, hard to measure on an initial ROI basis. But it's certainly an important element both in infill drilling to support our mine plants. But as we're starting to see now, it's important part of us unlocking the blue sky potential as we step out to the other 24 known veins in Segovia. So the remainder of the CapEx that we look at, we basically are prioritizing it based on its ability to support production, to improve the infrastructure, to move material out of the mines in a more efficient basis, health and safety and environment, and in some ways as we've seen with ventilation and other things, the working conditions for miners. Some of those things are hard to measure on an ROI basis. But I think when we compare that, we've always balanced the use of our cash flow the last couple of years, split between debt reduction, which I think we've been very successful at in terms of reducing debt to less than half of where it was in early 2016 and building our assets so that, as Lombardo said, we can take this model up to 250,000-plus ounces at Segovia in a couple of years' time.

I'm sorry. I'll take you back to the other slide. Of that $23 million, what's the breakdown between just maintenance spend and what is the new blue sky exploration spend?

We didn't provide it on that slide . Of the exploration spend this year, I'd say about more than 3/4 of that is still on infill drilling, the existing resources to support the mine plants of the three mines. And about 1/4 of it starting to handle the step-out drilling. Is that what you're looking for?

Yes. Okay. One last point, and I'll get off. So looks like in Q3, you guys averaged about 19,000 ounces a month. And in October that's down to 18,000. Is there just something anomalous there, what's causing that?

I think the answer to that is -- go ahead, Lombardo.

Okay. Don't worry about that. Okay. The 19,000 ounces was a record. A solid production in Segovia, as it is now, is around 18,000-plus. So with 18,000 -- and this year, in fact, the average will be around that. That's the reason because we are projecting 250,000 ounces for the year, taking into consideration the production in Marmato, which is going to be stable around 25,000 ounces. We have three smeltings, for example, in [indiscernible] in Segovia. And with this smelting, we are producing 5,000-plus ounces. So the solid production in Segovia is around 18,300, 18,400, something like that. I repeat, the 19,000 was a record for the year, but not only for the year, for the life of Gran Colombia whole as a company.

And the last question comes from [indiscernible].

I've two questions. What do you see for Marmato going forward into 2020 and 2021?

I think at this point it's still early to say. Our focus right now is on the 8,500-meter drilling program that's in process and the studies that we're working on with JDS that are going to gain more momentum towards the end of the year as the results of this round of drilling take place. So I'd like to think that by 2020, if we are able to complete the PEA next year as planned, we've moved it forward to the next level of prefeasibility or feasibility study. But I think that's probably as much as we can plan for at this point.

Okay. And currently at Segovia, what are you doing as far as the tonnes per day through the mill?

Could you repeat the question, please?

So for this third quarter at Segovia, the average tonnes per day going through the mill?

Okay. Well, now our average tonnes per day going to the mill is around 1,200.

Okay. 1,200. Okay. And you said that you could possibly work towards 2,000 tonnes a day based on how you project on underground stope development?

Yes. Our projection for the mill capacities, the first quarter next year we are going to be around 1,500. And then for 2020, we are planning to be in 2,000 hundreds -- excuse me, 2,000 tonnes per day. And that -- remember that we are focusing on 3 or 4 things in Segovia. One thing is, mainly is cost reduction, cost optimization. Second thing is exploration, to develop the most extensive veins of resources that we have in Segovia. There are 24, 25 veins, and we did touch only seven. So it's a lot of veins that we didn't touch already. And the third thing is infrastructure. We have to put more mineral on the surface. So that's the reason because our priorities are exploration, cost and infrastructure of the mines in order to produce more and being able to put more tonnes in the mill.

Okay. Now have you guys got any plans for stockpiling ore?

Yes. We are -- well, in fact, we are. Based on the experience that we have out in the past, now we have on a stockpile of 15,000 tonnes of ore, and we are building -- we are start -- we will start to build another stock jar. And that stock jar -- that jar will be ready probably by mid next year. And with that new jar, we are going to be much better positioned to stock better.

Okay. And do the know the grams per tonne on the 15,000 tonnes you have right now?

Excuse me. Can you repeat the question, please?

What's the grade on the tonne, the 15,000?

No, no. Well, we have jar for that. We have more jars. We don't have a single -- excuse me, go ahead.

The 15,000 tonnes, Lombardo, he is asking what's the average head grade in the 15,000 tonne stockpile.

Well, it will be not different for the average grade that we have nowadays, which is around 17.

Okay. And then my last question is. I'm not going to hold you to this, but what do you think approximately would be the CapEx spend to get to 2,000 tonnes per day?

Well to get the 2,000 tonnes per day, well, I don't have a precise number now. But to that, I have -- I can give you a number, which is off the top of my head, but it has to be above $40 million.

$40 million. And does that include...

It has to be above $40 million.

Okay. Is that the mill -- is that including the underground development or is it just the mill?

Yes. Basically, as I said before, our investment will be basically concentrated in development -- exploration, development and infrastructure. And the infrastructure includes the expansion of the mill. It will be the expansion of the mill. It will be ventilation because we need -- as we -- if we are going into the depths of El Silencio mine, for example, we have to do more ventilation and also hoisting system. So in order to be either -- again, to put much more mineral on the mill.

Okay. Totally understood, it takes time.

Yes. So Lombardo, the -- just the mill portion of the CapEx to take it from 1,500 to 2,000. What's that amount of CapEx?

Not too much. It will be around $3.5 million. No more than that.

Okay, got it. So I do understand that it takes time to put the shafts and so forth. Now I also am an investor in Torex Gold. And they recently went through all the stuff they did, the last few months with the mine being shut down and safety problems. So what are you guys doing differently to address social values in your part of the world? Are you doing anything differently today to address the communities need, so that you don't see another problem going forward?

In my opinion and according with the media and the government in Colombia, we are doing a very good -- a very nice job in Segovia, for example. We are mainly concentrated in education and infrastructure. And the third point is to formalize some illegal miners, which we still have in our title. And well, in my opinion, we have been quite successful doing that. We have -- now we have a very tight -- very good relation with the community because we are investing in education and roads and that kind of things. And also with the mine, to give you an idea, for example, we have been able to formalize around 3,000 miners, which were illegal, to say so illegal miners in the past. So the social impact of that is huge because 3,000 persons work and you're not receiving good salaries and social security and health and safety implements under our supervision. That is around probably 20% of the workforce in Segovia and -- Segovia and Remedios, which are the communities around our title in that area.

Okay. I've one more question. Just to confirm, fully diluted shares as of today is 63 million shares plus you got your Gold Notes, which are $98 million. Is it $98 million?

$88 million at this point.

$88 million. So if I add the two of those up, I get your market cap?

Enterprise value.

Yes, enterprise value. Okay, correct. Now are there any plans to hedge the floor price of your gold into 2020 and 2021?

It depends on the nature of how we can do that. Right now, it's not commercially feasible to go beyond about six months with the types of hedging we've looked at. So for that reason, right now, we are covered to the second payment next year of April. But we'll continue as we roll out each quarter to look ahead. And to the extent it's commercially reasonable, we'll continue to have hedging in place to protect that floor price.

We show no other questions at this time.

All right. Well, we appreciate you attending this morning and the questions. And if you have any further things, please contact us. But otherwise, look forward to catching up with you at our next webcast. Thank you.