SafetyinNumbers Posted December 21, 2017 Author Share Posted December 21, 2017 GCM reported production for November a few days ago and it was down small sequentially from October but they still look like they will come in at the high end of guidance for the year. What's really interesting right now, is that it appears someone is trying to build a position in the common through the GCM.DB.U. The current bid is US$84 which implies the common is C$1.99 bid but the current offer on the common is C$1.92. That's a pretty decent arb for someone who is long the GCM.DB.U to switch into the common and keep the same exposure. Also, the volume in the debs is much higher than the common. It's also possible the debenture buyer doesn't know those 2018 bonds are 81% mandatory convertible and thinks they will mature at par in August 2018. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted January 2, 2018 Author Share Posted January 2, 2018 Running the numbers on 2018 with $1315 gold and 190k oz of production (with 49k oz produced in the last three months, this seems conservative), I get EBITDA north of US$90m. Current EV is US$169m and they should be able to buy back US$20m of debt by August. That leaves significant upside for the market cap which is only US$34m right now. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted January 15, 2018 Author Share Posted January 15, 2018 http://www.grancolombiagold.com/news-and-investors/press-releases/press-release-details/2018/Gran-Colombia-Surpasses-2017-Annual-Gold-Production-Guidance-With-173821-Ounces-Up-16-Over-Previous-Year/default.aspx Tremendous year of production topped off by a tremendous December. Recall initial guidance for 2017 was 150-160k and despite a strike that crippled production for a month, they ended up producing ~174k oz. On top of that, they produced almost 52k oz in Q4 and almost 19k oz in December. I kind of expect low ball guidance again of say 170-185k oz for 2018 but they will likely beat again given the pace of Q4 production. Just fun with numbers, at current gold price and 195k oz of production (well below Q4 annualized) I get US$100m in EBITDA. The current EV is US$170m and debt buybacks are on the way. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted February 5, 2018 Author Share Posted February 5, 2018 New proposal from GCM has me scratching my head. http://globenewswire.com/news-release/2018/02/05/1332755/0/en/Gran-Colombia-Announces-Proposed-Issuance-of-Up-to-US-152-Million-of-Units-to-Improve-Its-Capital-Structure-and-Reduce-Potential-Dilution-of-Common-Shares.html Basically they want to issue a bunch of debt and warrants to pay off the convertibles. This will reduce dilution significantly depending on the amount of warrants. There are ~21m shares outstanding and fully diluted there are 93m shares outstanding. But we don’t know the terms of the debt and warrants yet. I really have no idea how the stock will react. There will be a lot of new eyes on the story which might take the common over the conversion price which might make the whole thing moot as debenture holders would convert. Link to comment Share on other sites More sharing options...
Cardboard Posted February 5, 2018 Share Posted February 5, 2018 IMO, large holders (insiders) of the convertible are using that liquidity event to mostly get out: Serafino, Lloyd Miller, 683 Capital Management. Some will still own some shares but, that is not the big portion of how they held a stake in the company. So your thesis made a lot of sense assuming that these people believe in the story and undervaluation: eliminate the convertible over time through repurchase/conversion. Why they want out now? The strike this Summer was serious enough for me to start looking for an exit. Cardboard Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted February 5, 2018 Author Share Posted February 5, 2018 IMO, large holders (insiders) of the convertible are using that liquidity event to mostly get out: Serafino, Lloyd Miller, 683 Capital Management. Some will still own some shares but, that is not the big portion of how they held a stake in the company. So your thesis made a lot of sense assuming that these people believe in the story and undervaluation: eliminate the convertible over time through repurchase/conversion. Why they want out now? The strike this Summer was serious enough for me to start looking for an exit. Cardboard Lloyd Miller unfortunately passed away a few weeks ago so perhaps his estate is trying to liquidate. Maybe that prompted this effort. We also don’t know how many of these holders may have agreed to roll over to the new notes. I think they are truly trying to reduce dilution and trying to get rid of the sinking fund so they have more flexibility to fund Marmato development. Analyzing the shareholder base, they own about 20% of the common and on a fully diluted basis so if they can get all of their bonds out and still own 20% of the equity, that’s pretty accretive but of course we don’t know the terms of the warrants. I’m not including Miller’s position in that analysis. Link to comment Share on other sites More sharing options...
Cardboard Posted February 5, 2018 Share Posted February 5, 2018 My money is on Teranga right now. It is cheap, in "safer" jurisdictions, more diversified, pristine balance sheet and they have an interesting development coming up. And I have a large holder (20%+) who is buying everything under $3 CAD. Cardboard Link to comment Share on other sites More sharing options...
Artha158 Posted February 5, 2018 Share Posted February 5, 2018 Tablo? Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted March 26, 2018 Author Share Posted March 26, 2018 Haven't had an update in a while but I thought an update might be appreciated with the Q4 being reported tomorrow night after the close. They produced 51,699 oz in Q4 and I'm predicting they sold 3000 oz more because there inventory has built up in the last few quarters. That may prove optimistic. I also have EBITDA at US$27m and excess free cash flow of around US$10m (guidance is around US$8m). In the last few months the company has been negotiating a new note deal and it has been revised a few times. As it stands now, the expectation is the company will be successful in refinancing the 2020/24 debentures by raising US$95m in notes and warrants. The net effect of that with lots of assumptions, is that the company will end up with 54m shares (fully diluted including warrants) and US$95m in debt outstanding (not offsetting the cash from warrant exercise) which puts the enterprise value at US$200m. For 2018, I'm estimating US$100m in EBITDA on 200k of production on $1345 gold. The Company has produced 34k in the first two months of the year so they are on pace for north of 200k oz of production but there can always be work stoppages and other problems over the course of the year. This puts overall valuation at 2x EV/EBITDA. Each multiple point increase is worth C$2.38 to the share price which coincidentally is the current share price. It sure makes the math easy to figure out the upside at various target multiples. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted April 9, 2018 Author Share Posted April 9, 2018 Another month and another increase in monthly production. http://globenewswire.com/news-release/2018/04/09/1466839/0/en/Gran-Colombia-Gold-Continues-to-Report-Growth-in-Its-First-Quarter-2018-Production-Update.html?ev=1 If you are an accredited investor, it’s worthwhile taking a look at this note issue which is very attractive and being created at ~1x EV/EBITDA while being senior secured, 8.25% coupon, amortization of debt over 6 years linked to the gold price (you get back more than par if gold price is above US$1250), and a 6 year in the money warrant. Link to comment Share on other sites More sharing options...
tombgrt Posted May 12, 2018 Share Posted May 12, 2018 Thank you for the idea SafetyinNumbers. Late to the party but I bought a position last week. Saw it running up from C$1.9 but results keep improving so this still super super cheap it seems! Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 12, 2018 Author Share Posted May 12, 2018 Thanks Tom. I participated in the notes financing so my position is bigger than ever. The refinancing of the debs was effectively a share buyback of over a third of the fully diluted shares which should give the equity that much more upside. By my math, EPS in Q1 was about C$0.20 with the new capital structure (estimating 60m shares fully diluted) and we are trading at about 1.9x EV/EBITDA. By my math 4.5x EV/EBITDA would be C$8.00/share which is about 10x EPS. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 19, 2018 Author Share Posted May 19, 2018 Some insider buying by Director Hernan Martinez at GCM. He picked up 32K shares around current prices. https://www.canadianinsider.com/node/7?menu_tickersearch=GCM+%7C+Gran+Colombia+Gold The last time he started buying stock (September 2017), he took a month and bought ~460k shares (and the stock went from ~$1.60 to ~$2.00). I don't know if he has that much firepower this time! He also converted some bonds to stock at month end which added ~151k shares putting him at ~645k shares in total. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 23, 2018 Author Share Posted May 23, 2018 The new gold notes have an “amortization” feature which is effectively a sinking fund. I’m not sure if it’s fully appreciated that this is a quarterly amortization as opposed to an annual amortization. http://s21.q4cdn.com/834539576/files/FAQ/GCM-Gold-Linked-Notes-Debentures-FAQ-2018-04-30.pdf As a result, the net debt will fall by about ~US$5m a quarter for the next 8 quarters, almost eliminating the net debt of US$55m (based on the treasury method) while also reducing interest costs quite quickly. A ~US$5m payment is worth about C$0.10 to the share value every quarter so decent upside to the stock even if the EV/EBITDA multiple stays the same (under 2x). Link to comment Share on other sites More sharing options...
tombgrt Posted May 24, 2018 Share Posted May 24, 2018 Thanks SafetyinNumbers. Looks like the market took notice. Nicely above resistance. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 24, 2018 Author Share Posted May 24, 2018 Thanks SafetyinNumbers. Looks like the market took notice. Nicely above resistance. I’m not a technical investor but I would note that 3x EBITDA works out to about a C$5 share price vs the C$3 share price. That also would make it big enough for the GDXJ as long as it’s liquid as well. Link to comment Share on other sites More sharing options...
frommi Posted May 24, 2018 Share Posted May 24, 2018 I also have to say thank you, at least for now 8). Have you looked at CMCL? I am sure it has less upside, but i think its still a good opportunity in the gold mining sector. I am new to this sector, but this stock has popped up in two of my high performing quant screens. But i didn`t dive deep into it, so it would be nice to hear an opinion from an expert. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 24, 2018 Author Share Posted May 24, 2018 I also have to say thank you, at least for now 8). Have you looked at CMCL? I am sure it has less upside, but i think its still a good opportunity in the gold mining sector. I am new to this sector, but this stock has popped up in two of my high performing quant screens. But i didn't dive deep into it, so it would be nice to hear an opinion from an expert. I wish I could predict stock prices! Sell whenever you want. I used to know CMCL but haven't looked in a while. Africa is a tricky place to do business. I do own some Golden Star (GSS.N) though. I also see Jaguar Mining (JAG.TO) as very cheap and very close to breaking out. I'm definitely not an expert, especially, on gold stocks. I'm more of a value/special situations investor and I wouldn't claim to be an expert in that either! Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted May 29, 2018 Author Share Posted May 29, 2018 The first round of the Colombian election was held on Sunday. The right wing candidate, Duque, locked up about 40% of the vote, and a runoff will be held on June 17. It seems likely now that the market friendly candidate will win and part of his campaign is reducing the tax rate to below 30%. Under the December 2016 tax reform, the corporate tax rate (including surcharge) in Colombia was 40% in 2017, 37% in 2018 and 33% thereafter. Any further reduction in tax rates to below 30% will obviously be good for free cash flow. The risk on the other side is that Duque promises to be tougher on FARC which could spark other problems. Election recap: http://www.americasquarterly.org/content/five-takeaways-colombias-may-27-presidential-election Tax rate discussion: https://www.financecolombia.com/ivan-duque-colombias-front-runner-for-president-wants-to-get-back-to-5-gdp-growth-and-cut-the-corporate-tax-rate-below-30/ Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted June 11, 2018 Author Share Posted June 11, 2018 Solid May production numbers from GCM this morning. They discuss 200k oz in 2018 for the first time. My own estimates have them above that for this year given the pace they are on (17.5k oz/month). I suspect if they raise guidance it will be around the the time of Q2 results which is when the 2018 debs will also convert to stock. http://globenewswire.com/news-release/2018/06/11/1519510/0/en/Gran-Colombia-Gold-s-Trailing-12-Months-Gold-Production-Tops-192-000-Ounces-at-the-End-of-May-2018.html?ev=1 Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted June 14, 2018 Author Share Posted June 14, 2018 Went to the AGM today. My confidence they will raise guidance to 200k or above is increased. I assume they will do this when they release Q2 in August which will coincide with the conversion of the 2018 debentures to shares. There is also an analyst/investors trip being arranged for September so ideally there will be some analyst coverage at some point soon. The stock continues to sit around 2.1x EBITDA and each multiple point increase is worth north of C$2/share vs the current price ~C$3.17. A small increase in valuation combined with the share count increase expected in August along with higher liquidity will make the company eligible for GDXJ. Nothing like indiscriminate buying to make a stock go higher quickly. Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted June 18, 2018 Author Share Posted June 18, 2018 Duque wins the Colombian election. The centre-right candidate campaigned on reducing corporate taxes below 30%. Currently, Colombia is already in the process of big tax decreases from 40% last year to 37% this year and 33% next year. Obviously, a reduction below 30% will further increase free cash flow for GCM. https://www.theguardian.com/world/2018/jun/18/ivan-duque-wins-election-to-become-colombias-president Link to comment Share on other sites More sharing options...
Lakesider Posted July 12, 2018 Share Posted July 12, 2018 My confidence they will raise guidance to 200k or above is increased. Good call, https://www.bloomberg.com/press-releases/2018-07-11/gran-colombia-gold-reports-first-half-2018-gold-production-expects-to-surpass-200-000-ounces-for-the-full-year Link to comment Share on other sites More sharing options...
SafetyinNumbers Posted July 12, 2018 Author Share Posted July 12, 2018 My confidence they will raise guidance to 200k or above is increased. Good call, https://www.bloomberg.com/press-releases/2018-07-11/gran-colombia-gold-reports-first-half-2018-gold-production-expects-to-surpass-200-000-ounces-for-the-full-year Thanks, but with the gold price acting poorly, we’ll see if anyone cares. The company was marketing in Toronto yesterday and the feedback I received was very constructive. Link to comment Share on other sites More sharing options...
tombgrt Posted July 19, 2018 Share Posted July 19, 2018 Ah, the joy of investing in a commodity that is impossible to value that drops like a rock! ;) Link to comment Share on other sites More sharing options...
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