SafetyinNumbers Posted April 7, 2017 Author Share Posted April 7, 2017 The company just did its annual issuance of options and it set the strike price at 17 cents or almost double the close last night at 9 cents. 17 cents is effectively US$0.13 which is the conversion price of the convertible debt so it makes sense that they don't want any dilutive instruments to have strikes below the bonds but management teams rarely do what's right when it comes to options. The shareholder meeting to vote on consolidation and extension of the 2020 debentures is on April 24. I think it's possible the 15-1 consolidation could be a decent catalyst if only it makes the stock show up on some quant screens. Not many stocks trading at $1.35 with trailing TTM EBITDA of over US$3.25/share! Link to comment Share on other sites More sharing options...
Cardboard Posted April 11, 2017 Share Posted April 11, 2017 I was starting to warm-up to the idea of the GCM.DB.V with: near 10% interest yield post approval, conversion price 80% above current price or just under 50% if you take into account the discount to par to buy them, effectively the only debt of the company with the "U" forced to mostly convert into shares, a company that makes money and a gold price ready to move up. Now this: http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aGCM-2459925&symbol=GCM®ion=C Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 11, 2017 Author Share Posted April 11, 2017 Yeah that was out a few weeks ago. Marmato has a giant resource but they have only done small scale mining there because of the impediments. It's status quo in terms of current operations. Most of the cash flow and production comes from the Segovia mine while Marmato has been steady state and relatively higher cost. There is a potentially giant opportunity if they can get a resolution on Marmato for a large scale mine and seemingly this lawsuit is part of moving that process along. They would likely need a partner for the capital to develop. Current operations more than support the debenture value and a much higher stock price. Link to comment Share on other sites More sharing options...
Cardboard Posted April 13, 2017 Share Posted April 13, 2017 Was that disclosed in their last conference call? Unless I missed it, I did not see anything in their filings. Pretty solid update relative to their yearly guidance. I am surprised that the stock did not react positively along with the gold price moving up: http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aGCM-2460161&symbol=GCM®ion=C I definitely see potential here. Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 13, 2017 Author Share Posted April 13, 2017 It was in the Colombian press but I guess didn't get a lot of play in the Canadian press until the FP article. They didn't talk about it on the call. I assume its because it doesn't impact the current operations but I guess they probably should have. Here is a link from end of February: http://www.americaeconomia.com/negocios-industrias/gran-colombia-gold-anuncia-demanda-contra-el-estado-colombiano-por-us700m Someone on this site suggested that I post too much about the name and might be too close too it and they might be right. I saw the lawsuit as potentially long term positive as it potentially results in a long term plan to either develop Marmato or some financial compensation (they paid US$500m for it in 2011 so the US$700m seems reasonable in that context). It seems though that investors responded by selling the stock. I just don't see any value being ascribed to it in the stock right now as the cash flow from Segovia alone is enough to support the valuation. Shareholder meeting is on April 24 in Toronto and I will likely attend. Link to comment Share on other sites More sharing options...
Cardboard Posted April 13, 2017 Share Posted April 13, 2017 "Someone on this site suggested that I post too much about the name and might be too close too it and they might be right." LOL! Is that same person advising the ones posting endlessly about FNMA or SHLD the same thing? Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 13, 2017 Author Share Posted April 13, 2017 "Someone on this site suggested that I post too much about the name and might be too close too it and they might be right." LOL! Is that same person advising the ones posting endlessly about FNMA or SHLD the same thing? Cardboard That I don't know! Link to comment Share on other sites More sharing options...
moustachio Posted April 14, 2017 Share Posted April 14, 2017 "Someone on this site suggested that I post too much about the name and might be too close too it and they might be right" Please ignore them. A lot of people like me read these threads, but don't necessarily post. Its also not like there is so much posting in the investments section that it is hard to follow. This is an interesting company. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 20, 2017 Author Share Posted April 20, 2017 GCM released new reserve numbers for Segovia. http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Announces-Update-of-Segovias-High-Grade-Mineral-Resources-With-a-174-Increase-in-Total-Measured--Indicated-Gold-Resources-to-11-Million-Ounces/default.aspx Overall, seems very constructive as M&I reserves were increased substantially from the last update in 2013 and shows a mine life that likely extends beyond 2022 they had disclosed previously. They are continuing to drill this year and reserves will likely continue higher for those concerned about mine life. Segovia, is the cash cow. Last year it produced 126k oz at cash costs under US$700 and it will likely grow a bit this year based on guidance. Last year EBITDA for GCM was US$66m in total and this year based on the current gold price it should north of US$70m. Current EV with 2018 debt 81% converted to stock is ~US$150m. I own a decent amount of equity on top of the GCM.DB.V as I think both are very compelling now. Special shareholder meeting to vote on consolidation and extension of the V converts is this Monday (April 24) in Toronto if anyone is interested in attending. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 24, 2017 Author Share Posted April 24, 2017 Went to the meeting today. Shareholders passed both resolutions for the consolidation of the shares and extension of the 2020 debentures to 2024. A majority of debentureholders now have to consent to the extension of the debentures by May 11. You can consent to the extension and choose not to extend but they need a majority to chose to allow the extension (not necessarily to extend). Does that make sense? Allowed me to confirm that at these gold prices, free cash flow to the sinking fund, should be around US$15m. The sinking fund won't be replenished again until they report Q1 about a month away. The tax rate is dropping in 2018 and again in 2019 which should enhance FCF next year and the year after, all else being equal. We should be getting a resource update on Marmato soon. I thought the most interesting thing that is not in guidance is any resolution with some of the illegal mining at Segovia that could bring those mines into GCM's numbers. While they would have higher cash costs than the current cash costs, the AISC would be lower so should be very FCF positive. This could add 1-2k oz per month to current production at Segovia and the mill has plenty of capacity to take on this material. Apparently, some new laws around mercury handling may persuade the illegal miners to come on board. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 26, 2017 Author Share Posted April 26, 2017 Share consolidation will be effective on Thursday, April 27, 2017 (link below) ahead of going to the Mines and Money Conference (May 3-4) next week in NY. Other upcoming potential catalysts are: May 11 expiry of Debenture extension proposal May 16 Q1 results ~May 19, replenishment of sinking fund to buy back of convertible debentures By end of Q2 - Marmato resource update http://web.tmxmoney.com/article.php?newsid=7734448240638792&qm_symbol=GCM Link to comment Share on other sites More sharing options...
Cardboard Posted May 1, 2017 Share Posted May 1, 2017 What happens if you consent to amend the terms of the indenture but, not to the extension? Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 1, 2017 Author Share Posted May 1, 2017 You keep the GCM.DB.V bonds with a 6% coupon that mature in 2020. If you choose to consent and extend you will get an adjusted bond GCM.DB.X with an 8% coupon and a 2024 maturity. They need 50% to consent to the extension but not necessarily to extend. I think it's fair to assume the BOD will agree to extend the bonds they own but otherwise, it's a bit of an open question. I'm struggling with the decision to extend or not. It's easy to agree to consent to amend the debenture because even if you keep the shorter maturity, you improve your chances of getting paid if the stock still isn't above US$0.13 by then. The shorter maturity has a higher YTM all else being equal despite the lower coupon. What do you think? Link to comment Share on other sites More sharing options...
Cardboard Posted May 1, 2017 Share Posted May 1, 2017 Ok, I get it now. Thanks. IMO, you go for the GCM.DB.X with the 8% coupon. The point of these convertible debentures is to get paid while you wait for good things to happen. Yield to maturity is misleading in my view since if they don't have the cash on hand by 2020, they will propose again another extension with improved terms for those remaining debentures and "trapped" debentureholders will be forced to accept. Once this is approved, I suspect that one could see a market loss on the 6% bonds and a gain on the 8%. If things get too much out of whack, then you can sell the 8% and buy the 6%. Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 1, 2017 Author Share Posted May 1, 2017 Good points! The counter point to that is the debenture buyback will be focused on the GCM.DB.V as long as they are trading under par. Link to comment Share on other sites More sharing options...
clutch Posted May 1, 2017 Share Posted May 1, 2017 (Sorry for the dumb question) How would I convert debentures into shares with a discount brokerage? Do I just call them up to exercise conversion? What is the typical fee associated with this? Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 1, 2017 Author Share Posted May 1, 2017 I would call your broker. I think fees if any vary. Why would you want to convert your debs to shares? Link to comment Share on other sites More sharing options...
clutch Posted May 1, 2017 Share Posted May 1, 2017 I would call your broker. I think fees if any vary. Why would you want to convert your debs to shares? Just wanted to know how it would work before I buy the debentures. Thanks. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 1, 2017 Author Share Posted May 1, 2017 Generally, if the market is being somewhat efficient you should be able to sell the debentures at the equivalent of the share price or higher so you don't have to worry about converting. Personally, I would stay away from GCM.DB.U as they are trading above intrinsic value, are mandatory convertible (81%) and have only a 1% coupon. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 3, 2017 Author Share Posted May 3, 2017 More bonds bought back and quarterly results conference calls details http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2017/Gran-Colombia-Gold-Continues-to-Repurchase-2020-Debentures-and-Provides-Details-for-Its-First-Quarter-2017-Results-Webcast/default.aspx Its interesting to note, that with that purchase last week, they exhausted the sinking fund that was available at end of December 31, 2016. Granted, it wasn't much but the sinking fund will replenish a few days after they report Q1 so that will be a number to look for when they report. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 8, 2017 Author Share Posted May 8, 2017 In case anyone owns the GCM.DB.V bonds, the deadline for the consent solicitation is May 11 but my broker set a deadline of May 9 at 5pm so maybe yours did too! Whether you wish to extend your bonds or not, it's likely providing the consent (Option 1) is in your best interest as it moves out some of the liability 4 years. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 12, 2017 Author Share Posted May 12, 2017 The consent solicitation was successful and about half of the bonds were extended to 2024. I think this is a good result and also reflects it was a tough decision to extend or not which makes it a good offer. Based on the current gold price and the FCF forecast for this year, they should be able to buyback all or almost all the 2020 bonds by maturity if the stock doesn't head north of US$1.95. Next catalyst is results for Q1 which are out Monday night with the conference call on Tuesday morning. It's the only company, I know, that takes questions via the webcast. http://www.marketwired.com/press-release/gran-colombia-gold-receives-consent-extend-maturity-us47-million-senior-secured-convertible-tsx-gcm-2216002.htm Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 16, 2017 Author Share Posted May 16, 2017 Q1 results are out. http://www.marketwired.com/press-release/gran-colombia-gold-announces-first-quarter-2017-results-tsx-gcm-2216505.htm EBITDA was US$13.6m which is a bit lower than I expected based on slightly higher than expected cash costs. Overall, they kept their cash cost guidance for the year so I still think EBITDA north of US$60m is reasonable with current gold prices. April production was very strong at 14.4k oz, which puts them at 53.3koz for the year to date. This puts them in a very good spot to meet and maybe even beat their guidance of 150-160k oz for the year. Adjusted EPS for the quarter was US$0.16 which looks good versus the stock price of C$1.52. Maybe some quant fund will notice. Finally, the sinking fund to buy back the GCM.DB.V grew by US$2.3m versus the outlook of ~US$15m they expect to contribute this year. Link to comment Share on other sites More sharing options...
Cardboard Posted May 16, 2017 Share Posted May 16, 2017 http://www.kitco.com/news/2017-05-16/Colombia-apos-s-mining-sector-could-receive-1-5-bln-annually-over-5-years.html Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 16, 2017 Author Share Posted May 16, 2017 Thanks Cardboard! Interesting article. Perhaps on a related note, on the call today, it sounded like GCM might be close to terms with one of the larger illegal mines. My math suggests this could add $5-10m of EBITDA/year but probably more importantly it could change the psychology on the name. After all, an additional US$5m in EBITDA would take pro forma EV/EBITDA from 2.2x to 2.1x. Link to comment Share on other sites More sharing options...
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