Gran Colombia Gold Provides Business Update and 2013 Outlook

TORONTO, March 1, 2013 /CNW/ - Gran Colombia Gold Corp. (TSX: GCM) provides its 2013 outlook and a business update, including its progress on the development of a new mine and mill at its Pampa Verde Project in Colombia.

2013 Outlook

As announced on January 25, 2013, Gran Colombia's total gold production for 2012 was 100,895 ounces, a 10 percent increase over 2011.  Fourth quarter production at the company's Segovia Operations was primarily impacted by unexpected downtime caused by power disruptions on almost a daily basis over a 25-day period, beginning in mid-November, that reduced throughput by about 40% during that period. The power supply situation in Segovia has since returned to normal and there have been no recurrences since that time. The company has taken steps to resolve the issue, including establishing suitable notice periods with the local power supplier and signing a contract with Colombia based, Proelectrica & CIA S.C.A. ESP (Proelectrica) to provide backup diesel generating plants for the company's current Segovia Operations, which the company expects to be operational in the first half of 2013 

"We are focused on the profitability of our existing production at our Segovia and Marmato operations and we have set 2013 targets that deliver the cash flow required to meet our current development needs, while we bring our new Pampa Verde Project to completion on time and under budget", said Serafino Iacono, Executive Co-Chairman of Gran Colombia.  "The new processing plant and mechanized mining operation that are part of the Pampa Verde Project will be the foundation of our Segovia operations of the future".

In 2013, the Company will focus on cost reductions and limiting capital investments to support an expected production level of 110,000 ounces of gold.  Production at its Segovia Operations is expected to reach 90,000 ounces of gold in 2013 and production from the underground mine at Marmato is expected to total approximately 20,000 ounces of gold. In January 2013, management embarked on a comprehensive review of its operations to identify and implement US$12 million in annual cost savings.  To date, cost actions taken will realize approximately US$850,000 per month (US$10 million annualized) of savings starting by March 2013. Further reductions have been identified and are being evaluated. Management is confident it will reach its cost reductions target.

In 2013, the company is adopting an "all-in sustaining cash cost" measure that the company believes more fully defines the total costs associated with producing gold. All-in sustaining cash costs include cash costs (on a by-product credit basis), sustaining capital, corporate general and administrative expenses (G&A) and exploration expense. As the measure seeks to reflect the full cost of gold production from current operations, new project capital is not included in the calculation. For 2013, the company expects its all-in sustaining cash cost to be approximately US$1,380 per ounce of gold. This comprises cash operating cost of approximately US$1,170 per ounce, G&A of US$130 per ounce, sustaining capital of US$40 per ounce and Marmato Project ongoing costs of US$40 per ounce.

Sustaining capital expenditures for 2013 will total approximately US$4.5 million. These will be funded internally from unrestricted cash balances and operating cash flow and will focus on sustaining capex at our two operating mines, including the completion of Maria Dama mill upgrades, the environmental program at Segovia and a crusher upgrade at the Marmato underground mining operation.  An additional US$4.5 million is expected to be spent on social and other ongoing programs at the Marmato project site.

Capital expenditures and exploration in support of the Pampa Verde Project will be funded separately from the proceeds generated by the gold-linked notes (see October 30, 2012 press release) and are not included in all-in sustaining cash cost.

The company expects to provide its full 2012 results around the last week of March 2013.

Pampa Verde Project

As announced on October 30, 2012, Gran Colombia closed a US$100 million financing with the proceeds to be used for the Pampa Verde project at the Company's Segovia Operations in Colombia.  This new mechanized mining operation and plant is designed to significantly lower production costs and increase the production rate to 200,000 ounces of gold annually.  The project includes the construction of a 2,500 tpd mill and the development of a new, mechanized underground mine to access new vein deposits, as well as improve access to the existing mining operations.

The company's cross-functional project team is being lead by Vicente Mendoza, Chief Project Director at Gran Colombia Gold.  The 18-month project plan has been reviewed and optimized by the new project team to include new access roads and shaft compared to original ramp design, resulting in significant cost savings, reducing the estimated total cost of the project from $90 million to $84 million.

As announced on January 29, 2013, the company purchased some of the mineral processing equipment required for the new Pampa Verde mill for US$4.3 million. This purchase includes the semi-autogenous grinding (SAG) and ball mills, which are typically long lead time items.  The mills are reconditioned and have a capacity of 3,500 tpd.  The other equipment purchased includes crushing feeders, cyclones and pumps, flotation screens and pumps, regrind pumps, CIL loaded carbon screen and pumps, carbon regeneration furnace and screen and carbon destruct pumps and screens.  All of the aforementioned items are new and include many spare parts.  The company estimates that the value of the equipment, if purchased new, is approximately US$12 million.  The selection and procurement of the remaining processing equipment is ongoing with orders are expected to be placed in early March.

Gran Colombia is negotiating an agreement with Proelectrica to provide a fully operational, turn-key power plant power to meet the requirements of the new Pampa Verde plant and mine.

Marmato Project

Gran Colombia's near-term focus at the Marmato Project is to complete and publish the Prefeasibility Study for the upgrade of its current underground operation, which the company expects to complete by June 2013.

Webcast

As a reminder, the company will host a conference call and webcast on Friday, March 1, 2013 at 9:00 a.m. Eastern Time (9:00 a.m. Bogota time).

The presentation and a replay of the webcast will be available at www.grancolombiagold.com until Monday, April 1, 2013.

About Gran Colombia Gold

Gran Colombia is a Canadian-based gold and silver exploration, development and production company with its primary focus in Colombia. Gran Colombia is currently the largest underground gold and silver producer in Colombia with several underground mines in operation at its Segovia and Marmato Operations. In addition, Gran Colombia is advancing a project to develop a large-scale, gold and silver mine at its Marmato operations.

Additional information on Gran Colombia Gold can be found on the company's website at www.grancolombiagold.com and by reviewing the company's page on SEDAR at www.sedar.com.

This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects and, specifically, statements concerning anticipated growth in annual gold production and reduction of cash costs. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Gran Colombia to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements are described under the caption "Risk Factors" in the Company's Annual Information Form dated as of March 28, 2012 which is available for view on SEDAR at www.sedar.com. Forward-looking statements contained herein are made as of the date of this press release and Gran Colombia disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

SOURCE Gran Colombia Gold Corp.