Welcome to the Gran Colombia Gold Third Quarter 2019 Results Webcast. My name is Sylvia, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mike Davies. Mr. Davies you may begin.

Yeah, thank you. And good morning and I thank all of you for joining us today for our 2019 third quarter results webcast. With me on the webcast this morning is our CEO Lombardo Paredes. I will first go through our prepared remarks regarding our performance in the third quarter and the first nine months, and then Lombardo will be available as we open things up for the Q&A session. Before we proceed, I would first like to draw your attention to our legal disclaimer regarding forward-looking statements that may be made by us this morning during the webcast. Last night, we released our operating and financial results for the third quarter and first nine months of 2019. We're very pleased to be able to report another solid quarter consistent with our expectations. In the third quarter, almost all of our operating and financial metrics as highlighted on this slide showed improvement compared with the third quarter last year. For the first nine months of this year production growth, the higher spot gold prices in the third quarter and lower cash costs have all been catalysts to our improved adjusted EBITDA earnings and cash flow results, which in turn are helping us to strengthen our balance sheet. Over the next few slides, we'll take a closer look at the results we reported last night. We had another solid quarter at Segovia in Q3 bringing our total gold production for the first nine months of 2019 to about 175,000 ounces, up 7% from the first nine months last year. We followed it up with another 21,000 ounces of gold production in October, bringing our trailing 12 months total gold production at the end of October to about 233,000 ounces, up almost 7% over 2018's annual gold production. Based on our performance…

Thank you. We will now begin the question-and-answer session [Operator Instructions]. And the first question comes from Mike Shao [ph] from [indiscernible].

Good morning.

Good morning.

Now, Gran Colombia is the central service for the Sandspring. So can you estimate when Sandspring is able to complete its full finance for the construction? Looks it has a challenge for it to finance.

Lombardo, would you like to answer that?

Yeah. In Sandspring, we are just -- we'll start the feasibility study here for the whole for the company. So the -- and that feasibility study will be ready by mid next year. With that the result of that feasibility study is that we’ve been is -- producing good result with -- according with the PEA, the prefeasibility study we will produce good result. Segovia is already a partner which is committed to finance part of the capital investment of the project which is around $360 million subject to the result of the feasibility study. So to answer your question, we will start to raise capital for the project by mid of next year.

Okay. Thank you. Appreciate it.

Thanks.

And the next question comes from Sid Rajeev from Fundamental Research.

Hi. Congratulations gentlemen on the strong results. I have a question regarding the grades at Segovia. It was mentioned that the grades were affected as the company was preparing new mining areas. Could you please provide some color on this? Do you have a number on what was the average grade excluding the stockpile processed?

Okay, go ahead. Mike if you like.

No, go ahead Lombardo. You're on top of that.

Yeah. We are -- now we have three mines in operation and -- which is El Silencio, Providencia and Sandra K. And also we are in another mine which is Carla. And we have potential -- according with the preliminary result of operation we have potential for the two new mines which are Cristales and Vera. And in El Silencio for example in the deep Silencio in which part we are executing a project, we are expecting to have very good result in relation with the grade. For example, in the initial phase we are attracting only something like 70 tonnes per week. In that portion, we are developing that project and the grade is around 35. And the -- in Providencia also we have another -- we have -- are advancing a project exploration in which there is the possibilities are great possibilities that we find another ore short, which will increase the life of the mine for another five years. In other words, we are not expecting to have lower grades in Segovia. Probably the next year the average grades are going to be around from 13 grams per tonne to 16 gram per tonne more or less the same grade that we have this year.

Got it. And then so when the resource/reserve upgrade comes up bid comes up, do you expect the numbers be -- the average grades to be slightly lower than last year?

No. You know…

No. Go ahead Mike.

No go ahead.

Okay. The thing is the following we are launching a new -- a complete new exploration program in Segovia, which comprised 70,000 meters of exploration. And we are using -- also for that exploration campaign we are using GoldSpot. It's a company we've used neural networks artificial intelligence to improve accuracy of our exploration program. At Segovia, if you look for the average of the grade of Segovia from -- around 15.6 something like that. So I do not expect that this year we are going to have grade much different from the grade that we have -- that we have had in 2018 and 2019.

Okay. Thank you. Just one more question. Any guidance on the CapEx for next year? I know you've not disclosed it, but some ballpark numbers would be really good for modeling.

I would say at this point, we're still working through our budgets and plans. But I would say for the moment, I would consider it to be similar to this year with the only caveat that we will be stepping up the exploration portion. So we will have more information probably in early in 2020 once we've worked through the specifics of the exact amount of drilling that we'll do next year and the cost increase coming with that.

Thank you, Mike and Lombardo. Appreciate it.

Thanks, Sid.

Okay.

Our next question comes from Mike Neti [ph] from Neti Asset Management [ph].

Hey, guys, couple of questions, primarily on the Marmato spinout. What's the -- what percentage will we own of Marmato once this is done? And then what's the valuation, the dollar amount on Marmato that we're applying?

Yeah. So going a little bit reverse order. The valuation that we've agreed to on the transfer over of the mining assets as a development stage asset is CAD57.5 million roughly US$43.5 million. Based on the shares that we'll receive plus the -- which is at the same $2 unit level as the equity offerings that are on there and the range of equity offering, I'd say right now we're probably something in the mid-60% position when we complete everything before the end of the year.

Okay. And what's our cost on the portion of Marmato that we're getting -- we're selling 40% up or 35% up?

It's pretty close to the same. We're working through the -- Marmato has always been carried as a single property on our books. We've gone through the exercise and it's about the same as what we're selling it for.

Okay. And so it looks like on a per M&I ounce is about $15 per ounce for the reserves we're giving up that we know about and call it a quarter of the NPV at 1,300 roughly. What -- why -- just generally why -- what's the main driver for this? Where gold's been depressed. Our balance sheet is in a lot better shape now. Why do we want to sell off our 40% of our development asset now?

The challenge that we've had in the market, we've got -- I've had a tremendous success story going with the turnaround over the last three years. Investors placing a high value on the high grade Segovia project. We have a lot of investors that also are attracted to the very high free cash flow yield that we've had in Gran Colombia. The concerns that we've been hearing and that we've reacted to and the way we structured this deal with the fact that holders do not want to see us and do an equity financing of any consequence inside Gran Colombia that would massively dilute the Gran Colombia shareholders in order to fund the $269 million of CapEx required to build Marmato. On the same token having cleaned up the balance sheet and having gotten out from underneath the debt that we have there was a strong sense of not wanting to overburden and over lever the financial balance sheet with $269 million of project debt. And the third thing we've been hearing is a concern about if we keep Marmato inside naturally all of our free cash flow is going to go towards the Marmato project and the work that needs to continue to be done as we've outlined at Segovia to expand resource and reserve life and bring on some more high grade will not get the attention. So by spinning it out, I think that probably the two biggest advantages we get is we compartmentalize the financing and project risk into a separate vehicle that Gran Colombia shareholders will be able to share in the value appreciation by us maintaining a control position and we can use the separate vehicle for financing the growth path there without impacting Gran Colombia's current situation.

Okay. So I look at Gran Colombia's balance sheet now and we're at 0.2 times debt-to-EBITDA, which is about the best in the sector I look at every company. And I'm showing free cash flow next year of US$70 million after all of our debt paydowns that we can make even if we allow a little bit of exploration let's say extra $5 million in Segovia. It seems to me like we'd have plenty of room to self finance this and take on a little bit of debt to do Marmato if we wanted to. What else are we going to do with their cash in the meantime, since we're not going to be spending it on Marmato? What are we going to do with that $60 million or $70 million of free cash flow?

Well, we do have an aggressive plan in Segovia. One of the things that keeping that cash in hand is going to help us do is potentially fund the expansion of any new mining areas that come that aren't currently in our capital program and we'll wait and see. Maybe there will be other opportunities for us to take a look at.

Excuse me, Mike in fact, if we will meet our expectation with the exploration programs, we are going to need money to make development in our infrastructure. That will consume a lot of money.

Yes. There's -- I guess, it's safe to say there's no harm in having cash. We just want to make sure that we do have it, so that the opportunities that come out of our programs we'll be able to fund without having to go. And either risk that we have to slow down or do something differently at Marmato, while at the same time trying to make sure that Segovia gets the attention it deserves.

Okay. And this broad investment that -- I think that helps with the company that looks fantastic. What are -- are they going to put anyone on the Board or any discussions on that?

No, they're less than 10% and there's been no discussions.

Okay. Well I think one issue Gran Colombia's had when I talk to other investors is there's -- we're one of the cheapest stocks in the market. And I think it'd be helpful to the extent we can add outsiders to the Board. Potentially if they were to recommend someone that might be helpful for the perception in the market. People that aren't affiliated with the current Board or the -- any of the individuals we do some of these deals with historically that'd be -- I think that'd be helpful. Just thinking out loud. Okay. Thanks very much.

Appreciate that. Thanks.

Thank you.

[Operator Instructions] And we have no more questions.

Okay.

All right. I've got quite a couple of questions that have come in on the web. From Nicholas [ph] he says good morning, congrats on the strong quarter. October production numbers were very strong which is encouraging. Was this due to anything in particular? And can we expect to continue at this rate for the rest of the quarter? I think as Lombardo said and as we've guided, we're expecting numbers between 14 and 15. We've come in a bit better and stronger than that in October. I think we'll continue to be in that range in around the 15 grams for the next couple of months. So we're happy with where we're at. The other two questions both from Paul Harris [ph] and from Nicholas deal with the funds we've now received from Sprott. What are we going to use them for? Will Sprott be investing in Marmato? And will we -- what we'll use the cash for? We are taking a look at potentially using a little bit more of the money that we've now received in Gran Colombia to potentially increase the Gran Colombia $5 million contribution using some of that extra money we've now got from Sprott, but we're waiting to see how things progress over the next few weeks. And the equity offering that Scotia is working on is going quite well right now. So we'll let the dust settle when we close the financing and we'll decide if Gran Colombia puts in a little extra to ensure that the company is strongly capitalized when it starts. All right. Are there any other questions on the line?

No questions on audio.

All right. Well we'd like to thank you all for joining us this morning. Appreciate the time that you spent with us. We have lots of exciting things we're working forward and we'll continue to have news releases coming out over the next few weeks on progress with Marmato and other matters so -- related to Segovia. So stay tuned and thank you.

Thank you, ladies and gentlemen.

Thank you.

This concludes today's conference. Thank you for participating. You may now disconnect.