Welcome to the Gran Colombia Gold Q2 2020 Results Webcast. My name is Richard, 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. Please note that this conference is being recorded. I will now turn the call over to Mike Davies. Mr. Davies, you may begin.

Great. Thank you, Richard. Good morning, and thank you for joining us today for the Gran Colombia Gold second quarter and first half 2020 results webcast. With me on the webcast this morning is our CEO, Lombardo Paredes. And as is customary, I'll first go through our prepared remarks regarding our performance in 2020 and then Lombardo will be available as we open things up for the Q&A session.

Thank you. We will now begin the question-and-answer session. Our first question on the line comes from Ashish Lavani . Please go ahead. Your line is open.

Hey, guys. Thank you for taking my question. I've been a GCM shareholder in one form or another – or I should say I've been long GCM one form or another since 2016, and I want to thank the team for their operational excellence. I do not consider production at these levels back then, and so I'm very impressed. I also didn't think we would still be trading under two times EBITDA and be fivefold in five years, but here we are. So sincerely thank you. With respect to this at least you start paying a dividend, I hope you're planning to adjust the one-strike price for every dividend payment or make an offer to buy out the warrants. I'm sure insiders can sell and exercise a bunch of warrants earlier in the year knowing that the Board of Directors was going to start accelerating the key event a few months later. Upon reading the press release last night, I consider these warrants have almost always stayed with zero vol, so they may have been anticipating dividends this whole time. Like I said, while I've been a debenture holder, a shareholder, a warrant holder in one form or another since 2016, I've never heard a serious dividend discussion. So I'm surprised, when the dividends were announced. And I note that, when the note buyers were negotiating the warrants there was no dividend protection negotiated for indicating that they probably didn't think that that was a possibility either. I remember being involved in that issue. And despite there being a terrific bargain and it has been, and I want to thank you for that, it was not an easy sell much like the stock today quite frankly. I do recall buybacks being discussed, and it's encouraging for me as a shareholder and warrant holder to see that the NCIB was announced. It's discouraging that – solo has been done in that regard. That being said, this dividend might make the stock depending on different types of shareholders. So I applaud the decision, because they may improve valuation but there definitely will be more holders after the sacrifice. I think the Board of Directors should consider making an offer for the warrants to compensate for the loss volatility. We have excess cash, and I'm sure the shareholders would also like to avoid the future dilution. Alternatively, the Board could also use a fixed-use stock at a fixed ratio. An idea, I shared with you Mike privately that would improve the stock's liquidity and make it more attractive to even more institutional and passive shareholders in the dividend introduction. It would also still significantly reduce dilution. As a warrant holder, myself I was offered a fraction of a share for each warrant I own. I would like to buy more shares so I could keep my same exposure to the upside given our low valuation and that sort of buying would also help the share price.

Well, thanks, Ashish. I'm not sure, I heard a question there. But –

Well, I'm giving you many ideas, I guess. It isn't really a question.

Yeah. No, and I appreciate the ideas, and certainly the ideas you've shared in the past. And we do take them seriously and evaluate them. I would like to mention the one thing with respect to the Gold Notes. There is dividend protection in the Gold Notes for the Gold Note holders. What has allowed us to commence paying the dividend now is the capacity that we've built up under our restricted payments basket through the very strong earnings we've had over the last couple of years which has enabled us to commence paying the dividend now.

Okay. I'm not concerned about the Gold Note holders. I'm just saying the warrants don't get adjusted is my issue.

Yeah. And the warrants are deep in the money. We've started seeing warrants being exercised. You did make a comment that insiders had exercised warrants earlier this year almost implying as if they knew this was coming. I can tell you that was not the case. We have very strict policies clearing people when it comes time for trading in the company's securities. So...

So I would say Michael with respect to that, I mean you indicated that you guys were thinking about dividend in March and I believe the Chairman sold his warrants in May. And he sold them actually a week before you guys announced a hostile takeover bid for Guyana Gold. So I don't know what the big ends are but not necessarily being used.

Yes. No, Ashish, I don't want to be confrontational. I just really would like to say we -- even those are in hindsight when you look at things coincidences. Certainly the bid for Guyana Goldfield came up very quickly and came up as a decision after the exercise of the warrants by our Chairman. So -- but in any event, I'll reflect on what you've suggested this morning. We continue to look at the opportunities for us to improve the capital structure and we'll take into consideration your comments this morning.

Can we agree to take it to the Board?

Absolutely. So the Board considers everything, so absolutely.

Thank you.

Thank you. Our next question on the line comes from Derek Macpherson. Please go ahead.

Hi Mike. Good morning everyone. Congrats on a solid quarter in a tough situation and on the dividend policy. Just on the dividend policy, obviously the $0.015 a share quarterly is a very sustainable number for Gran Colombia relative to your overall free cash flow. I guess, what was the -- what was sort of the thought process behind this sort of the $0.015? And then, what factors is the Board using when they're setting the dividend or when they might set future dividends?

Well, I think the -- having looked at the comparison to peers and seeing the average quite simply around 1%, we started -- we took that as our entry point. $0.015 rounds out nicely on a quarterly basis and $0.06 a year. I think as we move forward, we'll continue to look at obviously the re-rating of our stock. We stay at 1% should cause us to improve the dividend as we go forward. We wanted to set that $0.015 a quarter, looking at as you said a starting point that is sustainable regardless of what happens in future gold prices. So, if gold goes down for whatever reason in the future, we don't want to suddenly have to react and reduce the dividend. So, we've entered into the dividend-paying program cautiously. We'll continue to monitor as we go forward. And we recognize that announcing an increase in dividend is always a nice thing to happen announcing a decrease in the dividend isn't and we prefer to be on the first case rather than the second case. So, it's just -- it's getting our feet in the water and starting to move forward.

Yes. Okay. And that makes good sense. I mean, it is a very small part of your overall free cash flow, so it's there is room to expand I guess in the future which is as you said the favorable way to go.

Correct.

The -- you mentioned it briefly in your prepared comments on costs and capital spending. Obviously, you've updated your guidance for the balance of the year on production-wise. Can you give us a little bit of color on where you expect to see sort of capital spending and sort of cash costs come in half 2?

Yes. And the second -- as I said, our trailing 12-months cash cost is around $684 an ounce. That's up from the $661 an ounce we had in 2019. I think, we'll end up in the second half of the year somewhere between those two as the impact of April's production shortfall on certainly on Segovia, gets watered down by steady performance in the second half of the year. And we do remain cautious on guidance as we always do. Certainly, this COVID situation is still an ongoing daily challenge at the operational level. So we don't want to get too far ahead of ourselves, but we certainly are seeing a nice steady progression right now at both operations and especially at Marmato, starting to see a bit more of a pickup in the second half of the year as the access to workers there grows. From a capital standpoint, we recently updated our comments on exploration. We expect to do our full exploration at the mine site this year. On the regional program we're probably only going to be doing about 50% of the meters that we had planned. We've been doing a lot of due diligence in the first half of the year to identify the targets we're going to go after in Segovia. So, we're excited to get on to that in the second half. From a capital spending standpoint, I think the run rate is going to continue to be about the same as we've seen in the first half of the year. We still have a number of projects we're working on, including the work that we're doing to bring the Carla mine, our fourth mine onto production for later this year. And that will give us now four different mines in the Segovia and Remedios area in operation which again is exciting. We've been working on Carla for the last 10 years. It's been in our portfolio and very pleased to see that come on. So, I think our second half sort of capital spending will be much like the front half. It's just that we'll be shifting a little bit more to some newer development projects.

And then with respect to Marmato, obviously, there was plans for some significant operating improvements of capital spending at Marmato this year. And based on your guidance that seems to be a little bit -- your adjusted guidance that seems to be perhaps delayed. Is the same capital going to be spent there and just be a little bit more back-end loaded?

It's going to be more back-end loaded. I think if you look at the PFS, you can -- we'll certainly be getting on to the initiatives that were outlined there. And the key things in the second half of this year and they'll continue on into 2021 will center on the upper existing mine. The expansion of the plant from 1,200 to 1,500 tonnes a day the development of Level 21 in the transition zone also going over and starting to develop in Echandia and bringing in some new equipment to help us mine more effectively and reduce dilution are all key pillars in the expansion plan in the second half of the year in the upper mine. In the Deeps Zone a large part of the work in the second half of this year is going to focus around establishing the EPCM contractor and process and more detailed schedules. There are some additional upgrades to some of the work almost the feasibility level that we'll be doing as part of the design and planning stage. So things will start to take shape quickly and then we'll get into more of the capital spending on the Deeps Zone in 2021 once the design and planning phases are out of the way.

Okay. Thank you. That's all my questions.

Great. Thanks, Derek.

Thank you. Our next question on the line comes from Sid Rajeev.

Hey, Mike and Lombardo, pleased to see the results despite the drop in production. It definitely seems like you have been able to ramp up production. That said, the rising number of COVID cases in Colombia and also Peru, Venezuela, it's all a little bit concerning. How does this impact the development time lines of Marmato? I know you just talked about Marmato a little bit, but do you mind giving us some time lines on it on your expansion plans there?

Sure. Lombardo?

Yes. Well, Marmato as you know we have two mines there really. The upper mine which may be -- we are doing a revamping of the upper mine. We have to optimize the mining method. We have to attack with Echandia and the transition zone. We are improving the capability of the labor force. And also the lab -- the quality of the lab a lot of operational improvement that we have to do in the upper mine in order that the next year we can fulfill what is in the PFS, which is a production around from 35,000 to 40,000 ounces of gold per year. In the lower mine, there is a lot of work which is preparation. For example, the main contractor -- engineering procurement construction management contractor will be -- that contract will be awarded in late September. The idea is to start to mobilize the contractor in November and put in place all the labor force. Mobilizing a contractor for an EPCM job is a little bit complex, especially taking into consideration that we do not believe that the situation with the COVID will be normalized for that date. Another thing that we are doing in the lower mine is the tailing aspect of a lower mine. Tailing is always a complex aspect of any project. So at Marmato, it's a very mountainous area. So we have to be careful to comply with all the requirements of the environmental health authority plus international requirements. So, we are going to hire an IP or a QA/QC for the tailing development. The other thing which we are developing in Marmato, is just to start devising what kind of contractors are we going to use there, because this -- there are some limitations in Colombia in the capability of some contractors. So, first of all, we have to be careful in doing that. And the other thing which is the people who are going to come form the project management team have to be a very well-trained group of people. Not all of them we are going to find in Colombia, so we have to have some expat working in that team. The integration with the project management team and the EPCM contractors and other tasks that we have to do very well with many, many projects fail or have overhead cost or break the schedule, because that kind of interface does not work properly. I don't know if you would like to have more information about that.

No, that's good. That's very good. Thank you so much, Lombardo. Just maybe one more question. Obviously, on the Juby Project, it's an advanced-stage asset. It's a new asset for you. How do you plan to -- how do you foresee development of this project?

Well…

Well, initially -- yeah, Lombardo, do you want…

…go ahead, Mike.

Yes I was going to say.

No, no go ahead.

Yeah. I was going to say initially, we are working right now with the consultants to upgrade the mineral resource statement to align with the current 43-101 rules. We should have that soon to be able to publish. With COVID and various other things we've been working on, we haven't had a lot of time yet to get up to the community. That's in our near-term plans to start to engage. Again we want to -- we basically are assembling our Canadian team, if you will, to be able to start working on the review of all the technical data, that comes with Juby. There is an enormous amount of data. We're looking at various means of, how we're going to analyze that data. And really this year used the money that came with Juby was about $300,000 to carry out those studies. And then, that will put us in a position where next year, we'll be much more informed about the size, the scale, and the scope of a drilling program that we'll want to take there. There are a couple of known pits that already have significant amount of resources. During our due diligence, we started doing some initial work, trying to get more understanding of what those pits could look like down the road. It's given us some objectives for our drilling programs that, we want to try and achieve. And there's a couple of additional areas along the trend that, haven't really been explored that have some really nice potential for some higher-grade material as well. So we're really going to use this next six months to fully digest, before we start drilling. And then, get into the drilling part of the project next year.

Okay. So I guess it's fair to say that, the spending is going to be minimal in Juby. How about 2021, do you have some budget for Juby there? Is this, just for -- to get an idea of the free cash flows of Caldas, just to see how…

Yeah. That one…

… that fares with Juby.

Well. We -- I think it's premature for us to sort of come up with how much, we'll spend on drilling. It will depend obviously on, what we see. I think we like to think of something in around, the $5 million level. But we've also been looking at a couple of opportunities for us in terms of, how we'll fund that. For the first time ever, we've got even an opportunity for flow-through financing, with a Canadian project. That might be something that we'll consider as well, when the time comes. But we'll make that decision after we get through the data. And see what we want to accomplish next year.

Okay Thank you so much. I appreciate the time. I appreciate this update that you provide.

Great. Thanks, Sid.

Bye-bye.

All right. We will…

I'm showing no further questions.

Yeah. Lombardo, I have one question from Nick Pickard coming in through the web portal, that maybe you can help with. Looking at Carla, what's the expectation of production that we think we'll get out of Carla? And will it help fill the capacity, at Maria Dama? And maybe, I'd add to that, is just maybe more generally we are processing right now around 1,200 tonnes a day. What will we do to be able to get up to the 1,500 tonnes a day capacity at Maria Dama?

All the element to start to put Maria Dama on a stable processing capacity of 1,500 is in place. So you will see starting in this month Maria Dama, we are going to process in a stable way 1,500 tonnes per day. Carla is going to start in November, second part of November. At the beginning, it's going to be 50,000 tonnes per day with a grade from five to seven grams per tonne. And we are doing -- we still are doing some drilling in Carla. And also we are doing some development. So Carla is going to help. There's no question about that. And Maria Dama is not going to be a problem. To expand Maria Dama for 1,500 to 2,000 is not a big deal. There's not a lot of capital expenses related with that. The mill is in place. Probably you can add some thickener. Probably you can add some -- we don't have to add anything about crushing. So it's not a big deal, in other words.

All right. Thank you. So Richard any other questions, on the phone?

I'm showing no questions at this time.

All right. Well, we'd like to thank all of you for joining us this morning. Appreciate your interest in the Gran Colombia, story. We'll keep you posted. We have more news coming out about drilling, over the next several weeks to a month. And obviously developments in the Caldas Gold story is it's rounding out its financing and turning the corner into the expansion project. So exciting time is ahead and a great gold market to do this. And so thank you very much for joining us this morning.

And thank you ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.