Welcome to the Gran Colombia Gold Fourth Quarter 2019 and Year End Results Webcast. My name is Hilda and I will be your operator for today. 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 Mr. Mike Davies. Mr. Davies, you may begin.

Great. Thank you, Hilda. Good morning and thank you for joining us today for our 2019 fourth quarter and year end results webcast. With me on the webcast this morning hopefully will be our CEO, Lombardo Paredes. They are having some tower outages this morning and I understand he is having some difficulty connecting. But as is customary, I will first go through our prepared remarks regarding our performance in 2019and if Lombardo is able to connect, he will join us for the Q&A session when we open things up. Before we proceed with the presentation, I would first like to draw your attention to our legal disclaimer regarding forward-looking statements that maybe made by us this morning during the webcast. So last night we released our operating and financial results for 2019’s fourth quarter and full year. We are very pleased to once again be able to report another solid quarter consistent with our expectations. In the fourth quarter, record gold production coupled with strong gold prices propelled our adjusted EBITDA, adjusted net income and cash flow metrics in the right direction. For the full year, we have set new highs across the board. Over the next few slides – good morning, Lombardo.

Yes, good morning Mike. Sorry.

Yes, it’s okay. We have just got started. Alright. So as I was saying, over the next few slides, we will take a closer look at the results we reported last night. One of the items we reported last night was the impairment charge taken in the fourth quarter. We completed the spin-out of Zona Baja mining assets at Marmato into its new public vehicle, Caldas Gold Corp. in February. So we can proceed to develop the underground mine expansion in the deep mineralization without impacting Gran Colombia’s capital structure or its balance sheet. We think this is going to be a fantastic project and our initial investment is valued at $44 million. With the spin-out, we had to assess the carrying value of the Zona Alta mining title that remained behind with Gran Colombia. Prior to 2013, this area was a key focal point in the open pit strategy and a lot of investment, including values assigned back in the 2011 merger with Medoro, remained attached to the upper portion of the mountain. However, with the continuing presence of legal miners in Zona Alta, we aren’t able to do any exploration nor can we establish any mining operations in Zona Alta at this time. As we stated in the last night’s press release, this is one of the reasons we commenced the free trade arbitration to Colombian government back in May of 2018. And after considering the various alternatives and recognizing nothing has changed since we launched the arbitration, we do not believe the carrying values recoverable at this time and so we took the opportunity to write the carrying value down in the fourth quarter. With this slide, I want to highlight that the carrying values on our December balance sheet reflect the core strategic assets in our…

Yes. Well, one of the advantages of Colombia is that Colombia took the measure to isolate people early in the process. It was not like Spain or Italy for example. And in our case, especially, Segovia, for example, that Segovia and enabling municipalities are free of coronavirus and [indiscernible] which is 2.5 hour by road like car carrying on road, which is we have only one case. So in our – from the point of view of isolation, Segovia is in a very good position. Segovia-Remedios, they do not have any cases of coronavirus and the town which has only one person with symptom is 2.5 hours far from Segovia by car. So we are – and the municipalities, Segovia-Remedios, are isolated. So no one can cross the border. Our people who are working there are isolated within the mine facilities. So we are cooperating hand-to-hand with the authorities, sanitary authorities. So we are confident that we have handled the situation of emergency properly.

Great. Thank you. So with that, Hilda, we would now like to open up the lines for the Q&A session.

Thank you. [Operator Instructions] We have a question from Sid Rajeev from Fundamental Research Corp.

Gentlemen, congratulations on the strong results. Maybe some more color on COVID-19 and the impact, are you revising your production guidance that was provided few weeks ago?

Lombardo do you want to answer

Yes please for example the production of March and also their first quarter we have almost no impact at all the isolation was started in March 23 so for our whole promotion will be on about 92% to 94% of our target April is going to be a little bit more challenging we are monitoring the situation we depending on how challenging is April or if situation is extended beyond April we already have to revise our guidance.

How easy or challenging is it to turn off production and resume production at both the mines?

This type of situation varies and that kind of thing is not it's not unusual for us. Our – for example, our last similar strike was in 2017 and last 42 days and we have to implement strict measures and an effective, by the way, unaffected emergency plan, continue with the plan. This time, it’s a little bit different because the authorities are limited the mobility of the people but for example we have around 800 people, 550 people for our own people and the rest are contractors. They are working in all the mines. They are working in the plant we have to drill So – and probably – probably is in a saying that for 50% probability is that the measures, knowing how we are we are handling the situation and cooperation that we are having with authorities will allow us to have more people working so I am optimistic with that situation. I am saying that we challenge it because you never know how that [indiscernible] situation evolve, but taking the proper measure we believe that we will be able to handle the situation in our regional manner and purely my expectation for April is going to be around probably around from 10,000 15000 ounces of gold remain as it is

Okay. And how about CapEx so last year the CapEx is about $43 million do you have any are you starting to do you have any guidance for that?

So we were going to provide guidance on CapEx. We do have programs that are underway as you have seen in our press release we have taken some precautionary measures in light of the situation to slow down some discretionary CapEx so at this point we would have seen CapEx probably similar level this year to last year in normal times, we are going to wait and update guidance on where we think CapEx will be once we get on the situation of a better sense of just what the numbers will look like for the year.

Okay, gentlemen. Thank you so much. Hope this COVID-19 does not cause any disruptions. All the best. Thank you.

Great. Thanks, Sid.

The next question comes from Derek Macpherson from Red Cloud Securities.

Good morning, guys and thanks for hosting the call and congratulations on a solid quarter. Just looking at the – looking back here when the sort of the exploration program picked off, the 2019 exploration program or the mine that was raised with the convert – design was that it would be sort of 2020 loaded on the exploration side. If you do 36,000 or – yes, 36,000 meters last year, what’s the plan, I mean obviously COVID-19 could be an issue there, but what’s the plan to drill or what was the plan to drill in 2020?

Well, as we announced about a month ago and it was in our MD&A last night, we’ve – we do have a plan this year at Segovia for about 45,000 meters of drilling and we are leveraging – we extended the 36,000 meters last year was already increased relative to what we have initially set out to do in the year. The 45,000 meters this year is going to include about 30% of those meters on the regional program stepping out now into some of those veins where we are not currently mining and looking at high priority targets for expansion into new mining areas in the title. So we will see an increase this year, but obviously, we have got to color that comment at the moment given the slowdown of some things that are happening as a result of COVID-19.

Just, Mike, let me add something new.

Sure.

For exploration, we are using a Peruvian company the name is [indiscernible]. Out of the 6 drilling rigs that we had in Segovia, we have 3 in operation, especially 2 in El Silencio, 1 in Sandra K. So those 3 rigs are working on the high priority targets.

Okay, alright. So that’s why the drilling guidance might be a little bit – drilling results might differ from the 45 kilometers up. And then just on the accounting side, typically, with Gran Colombia cash, you guys pay your incurred taxes or your taxes are paid in the first half. Mike, can you give us a little bit of color as to what sort of cash taxes payable are in half one this year, I think last year it’s around $30 million?

Yes. And certainly with the increased profitability last year, our cash taxes are higher obviously this year to pay. We have about $45 million of cash taxes that we expensed last year. So our cash tax payments in the first half of this year will be about $35 million or so. The primary payments come forward in later in April and in June. I think you know one of the things that I am happy about despite everything that’s going on is that we have been very prudent in the last year and a half to take the opportunity to invest wisely in the assets, but at the same time put cash on the balance sheet. So as we go through this situation, we are obviously taking some steps to lessen some of the liquidity issue with slowdown in some of the discretionary OpEx and CapEx items, but we do feel that the cash balance that we have will give us the necessary funding that we will need to keep everything moving along and as typical later in the second half of the year to hopefully when everything is back to normal, that’s the period again which we start stocking up on cash on the balance sheet.

Okay. And then maybe you can provide a little bit of color on how March – how March production – March production has been going?

March production, you say?

Yes, please.

Well, in Segovia, it’s going to be around 17,000 ounces of gold you know and the target was 18,000 and in Marmato it’s going to be – in Caldas, it’s going to be 2,000 ounces of gold, the target was 2,500. So, we are going to be a little bit – we are going to be about 94%, 92% debt in relation with the target. So the gold production for Segovia for the first quarter is going to be around 50,000 ounces of gold.

Okay, thank you.

Okay. Thanks Dered.

The next question comes from Mike Nery from Nery Asset Management.

Thanks. Hey, guys. Just a follow-up question on CapEx, so if base case CapEx was similar to last year, what’s the minimum level that we should look at assuming we are operating for the whole year and like I think that’s as I said little hard to predict at the moment not knowing exactly how long this situation may go on and what the impact is going to be?

So we are prioritizing the CapEx sales within the mines certainly we are focused in all the maintenance CapEx about current time but some of the expansion or growth CapEx is going to be delayed at least for a few months while we get through the situation. So I wouldn't venture, I guess, on what the minimum would be this year until we know a little more about the situation/

Okay. And then in terms we are doing this debt buyback here in the first quarter can we do another one of those year from now or is that the only one we can do until those mature?

Now, there is no restriction in the number of partial redemptions we can do early so we could do them again if we can build up some additional cash that we feel we got an opportunity to use that cash to take out some more of the gold notes early obviously you have abide by the agreements and pay the make whole premium as to find them with the agreement to the holders to make sure this payment was about 10% to a $1.9 million but with that $1.9 million of make whole premium that we are paying today we will generate about $6 million or so of savings this year between the gold note repayments the interest and if gold stays where it is about 1550 the gold premium certainly we will save on that. So it's a function ultimately of determining that we have some surplus cash that we feel best to use for type of endeavor.

Okay. And then how do you look at your overall cash position and I understand is lot of moving parts right now but what are after we do this debt pay down what are your priorities in terms of how you look at what you do with additional cash?

Well, we did raise $30 million in the first quarter so we added net of the repayment that we have made this morning on the debt additional $8 million so we are currently sitting with still after suspending $11 million in the first quarter as our follow-up private placement that was promised into Caldas Gold. So we so we are currently sitting at a cash balance this morning after the redemption is about $80 million I think as we go forward our priority has obviously leading our financial obligations as they come due over the next number of months while this situation moves forward as Lombardo said the operations are continuing to operate so we will continue to be generating cash flow from the mines perhaps not quite at the rate that we typically do but we feel comfortable that between the cash balances and continuing cash flow from operations much like beside 2017 we won't miss a beat in terms of carrying forward on the agenda we are just prioritize how we spend the money at the projects in the meantime.

Okay. And so given the savings on the return on debt buyback would you consider doing another one of those this year?

As I said it will really come down to an assessment of surplus cash. I cannot make that assessment right now in the current situation, but definitely that remains one of the levers that we have at our disposal as we get further in the year and we can see where we are.

Okay, great. Thanks very much.

You are welcome.

[Operator Instructions]

Alright. Well it sounds as if there is no more questions at this point. So with that, we would like to thank you for taking the time to join us this morning. Stay safe. And if you have any follow-up questions afterwards, please reach out to us. Thanks.

Thank you. Ladies and gentlemen, this concludes today’s conference call. We thank you for participating. You may now disconnect.