RC

Gran Colombia Gold Corp.

Gran Colombia is a Canadian-based mid-tier gold producer with its primary focus in Colombia where it is currently the largest underground gold and silver producer with several mines in operation at its Segovia and Marmato Operations. Gran Colombia is continuing to focus on exploration, expansion and modernization activities at its high-grade Segovia Operations.

Gran Colombia Gold (TSX:GCM) – Strong Q2 Production; Guidance Increased

Impact: Positive

Gran Colombia has delivered another strong operating quarter and has increased its annual guidance to 225-240koz Au for the 2019. We expect the Q2/19 operating results to translate positively into financials for the quarter when released in early August. We believe the market has not fully priced in the company’s turnaround and we expect operating, financial and exploration success to act as positive catalysts for the stock.

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Q2 Reporting Preview – Gold & PGM Miners Poised to Shine

Second quarter reporting begins on July 24 and the recent gold rally is likely to have a muted impact on Q2/19 financial results. However, companies with solid operating performance should generate additional share price momentum as the market starts to project the full impact of the increase in the commodity prices and operating performance (Figure 2). We believe that two companies poised to deliver strong operating performance, into the improving commodity price environment are Gran Colombia (TSX:GCM, FV est. C$6.00) and North American Palladium (TSX:PDL, FV est. C$25.00).

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Gran Colombia Gold (TSX:GCM) – QTD Results Push Estimates Higher

Impact: Positive

Gran Colombia has released May 2019 operating results which were ahead of our expectations and have caused us to increase our Q2 production estimate to 58koz (was 55koz). In our view, this puts the company on-track to beat annual guidance and we now model Gran Colombia producing 232koz (was 227koz) in 2019. We maintain our fair value estimate of C$6.00/sh and expect operating execution, exploration updates from Segovia and the Marmato PEA to drive a progressive re-rating towards our fair value estimate.

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Precious Metals – Looking for Leverage to the Gold Price Rally

Gold is on the move, looking for the companies we expect to be the big winners. Recent events have been very constructive for the gold price and point to it having the potential to move higher in the near-term. Taking this into account we have evaluated the leverage our current coverage universe has to the gold price (Figure 1). The companies with the highest leverage to gold in our coverage universe are: Gran Colombia Gold (TSX:GCM, FV est. C$6.00), De Grey (ASX:DEG, FV est. A$0.35) and Lion One (TSX:LIO, FV est. C$1.35). We note that while Seabridge (TSX:SEA, FV est. C$29.00) does not have the highest financial leverage to the gold price, it could be a go-to name because of its higher market cap and better liquidity. As well, while we do not have a NAVPS estimate on, Minera Alamos (TSXV:MAI) and RNC Minerals (TSX:RNX, FV est. C$1.00) both should also react favourably to a rising gold price.

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Gran Colombia Gold Corp. (TSX:GCM) – Record Q1 Reflected in Financial Results

Impact: Positive

Gran Colombia has released positive Q1/19 financial results, which highlight record quarterly gold production and revenue. We believe the company is positioned to meet and potentially exceed 2019E guidance. We maintain our fair value estimate of C$6.00/sh and expect operating execution, exploration updates from Segovia and the Marmato PEA to drive a progressive re-rating towards our fair value estimate.

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Gran Colombia Gold Corp. (TSX:GCM) – Going Deep at Marmato

Impact: Mildly Positive

Drill results from Gran Colombia’s Marmato operation align with our view that this project could represent a longer-term step change in production profile, from the Deeps Zone. We maintain our fair value estimate of C$6.00/sh and expect operating execution, exploration updates from Segovia and the Marmato PEA to drive a progressive re-rating towards our estimates.

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Gran Colombia Gold Corp. (TSX:GCM) – Putting the Grand Back in Gran Colombia

Gran Colombia has been steadily improving its operations and balance sheet over the last 18 months, but the market does not yet appear to fully recognize what has been accomplished. Additionally, the company can deliver game-changing catalysts with the drill bit at Segovia and a new ore-body at Marmato. We expect Gran Colombia to progressively re-rate towards our fair value estimate of C$6.00/sh, with continued operating execution, along with near-term exploration and development catalysts that could drive our estimates higher.

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Gran Colombia Gold Corp. (TSX:GCM) -Record Q1 Production Delivered

Impact: Positive

As expected, Gran Colombia delivered record quarterly production in Q1, driven by higher than expected grades. We expect this success to translate into strong financial results when the company report in May. We believe the market has not priced in the company’s financial and operational turnaround and we expect ongoing operating and financial success to act as a positive catalyst for the stock.

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Gran Colombia Gold Corp. (TSX:GCM) – Record Q1 Production Expected

Impact: Mildly Positive

With strong operating results already reported for January and February, Gran Colombia is likely to deliver record production in Q1 2019, allowing them to start the year well ahead of guidance. With this production increase being driven by better than expected grades, we also expect better than guided costs and strong financial results in the quarter. We believe the market has not priced in the company’s financial and operational turnaround and we expect Q1 operating results to provide a positive catalyst to re-rate it towards peers.

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