Gran Colombia Gold's Segovia: The Calandra Report Lays Out Mine Plan

Type:  Thom  


TCR Continues Link To Segovia ... & El Marmato

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SEGOVIA,  Colombia -- Every so often, a picture captures Almost Everything About A Gold Project.

Gran Colombia Gold's Segovia operation is averaging 8,000 ounces of gold each month, with silver. The metal, says Colombian exploration pioneer Vicente Mendoza Sanchez, "has been there for centuries for miners."

"She is taking out maybe at around 5 million ounces in more than 120 years," says Dr. Mendoza, an author, an eminent geologist and originally from Venezuela. I first met Vicente four years ago at El Marmato, that other pile of Colombia gold that sits amidst a scrum of invading wildcat miners and mills.

But first, for our TCR family, the takeaway: I intend to purchase as many Gran Colombia shares (GCM in Canada and  TPRFF in USA), below the price of 40 cents, as my portfolio and chief banker will allow. GCM sister-company executives already have shown they can engineer $500 million-plus transactions, including the one today (Monday). More on that below.

Dr. Mendoza, an author and the original head of exploration for Gran Colombia Gold and its predecessor, Medoro Resources, I met some four years ago. It was at El Marmato. At the time, landslides were the pox of El Marmato. One had just killed five residents. Mercury use was at the advanced stage of deforming limbs, toes and brains in new-borns. The mountain, which Gran Colombia also controls, was streaked Persian blue from the blend of toxics with incessant water runoff and cascading mudslides.

All that has changed, is changing and will still be changing, for the better, I hope. Because of that lady in the attached photo below. (Photo credit: Thom Calandra)

Yet this report, delayed for those reading it here, is not even about GCM's El Marmato, which will have a new hospital in three months, along with schools and new homes. It is about the promise of Segovia, a place just as wild, just as rich as El Marmato and just as tortured against a landscape of the greenest hills and bluest skies this side of Tuscany in Italia.

This weekend, as we surfaced from Segovia's Sandra K adit, soaked after climbing 75 meters of stairs, workers greeted us. Icy bottles of water. Gatordade. Apples and oranges for the thirsty and hungry mine visitors. 

This is the usual treatment for a group that included three writers, four equity analysts of interest, two large shareholders and a small team of geologists and execs.

Gran Colombia's operations -- at a series of 29 veins and an adjacent mill -- are ant farm busy. Crazy busy. Security comes in the form of National Police. Miners, geologists, drivers, drillers, most of them bearing a Gran Colombia Gold logo, are everywhere. Guard dogs patrol. 

Maria Consuelo Araujo, a Colombia government minister turned mining CEO, shakes several hands. This is just Saturday. A worker,  shirt wrapped around an arm, approaches her and asks about new uniforms. Co-workers nearby stop and watch. He is getting something off his chest.

The 42-year-old Conchi, as she goes by with friends, studied diplomacy in Italy and served terms as foreign affairs minister and culture minister for the booming nation that borders Panama and Venezuela. She attends as many of the workers' weekly mesas, or table discussions, as she can.

Gran Colombia, with Ms. Araujo at the helm for 27 months now, is as familiar a face at the historic and rough-and-tumble Frontino Gold Mine as her company's chief operating officer, Donald East, or its VP of Exploration, Alessandro Cecchi. The last time I was at a company that had performed  social relations so well, and had turned manager-worker relations into an art form, the property was sold eight or nine months later. That was in Peru: Antares Minerals.

This time, Segovia, I pray, never leaves the hands of its gardeners. That would be a capital sin, capital as in money-honey. (Note: I see a separate Gran Colombia Gold property sparking a $500 million-plus transaction for a mid-tier or major gold-silver producer looking for an entry into Colombia: El Marmato, and again, that is not a story for now.)

Segovia and the surrounding area is one of the few places in Colombia's department of Antioquia where a stroll down the street at night was not advised as recently as two years ago. I know because I was here then. I am here now. Lots more gold. Thousands of new bank accounts. Contracted miners organized profitably and without mercury by longtime industrialists I have known for four or five years, including Carla Resources' Jaime Gutierrez of Medellin.

Even more motor bikes than last time, which is inconceivable if ever you have seen this place. Water tanks everywhere in town. Fewer gun shots in the middle of the night. Improved beer and vodka. A renovated restaurant, delightful swimming pool and recreation center at base camp. And so on.

"When we came here two years ago, and we had everyone meet in the club building, many people told us it was the first time the mine operators had opened it to workers in many years," Ms. Araujo says. 

I am not here to talk about the former operators, or the unions that controlled the mines. Or the way a New York operator badly mismanaged what was years ago, and decades ago, one of the highest-grade gold deposits in the world, then left a $200 million gap in pension funds for its workers. A gap that Gran Colombia filled two years ago, in the process replacing sloppy or misplaced organized labor, kick starting a new bank and more or less shutting up most of the folks in this country and in Toronto. Those DTs, or Doubting Thomases, insisted the $203 million handover of cash to eliminate the pension shortfall would never materialize.

The money did, thanks in part to Gran Colombia and its chairman, Serafino Iacono. Mr. Iacono already had made well connected Colombians and aggressive Canadian investors billions of dollars in the form of Pacific Rubiales Energy, formerly Pacific Stratus.  

I am here in Colombia for the 20th time in five years to prove once and for all that Segovia and surrounding properties controlled by Gran Colombia, and at least two other companies, Grupo de Bullet at Otu and tiny Tolima Gold (TOM in Canada), are producing gold and adding mineral to resources at an astounding pace.

"I would not believe it was possible myself if I did not see it for real," says Tomas Correa Restrepo, an analyst with Colombia brokerage Bolsa y Renta. Financial types such as Tomas Correa are right to doubt. Gran Colombia's time line after the pension payoffs was to accelerate gold output at Segovia and decrease costs so quickly, that the company would enjoy the same rapid, $5 billion-dollar success of sister company Pacific Rubiales Energy

Povresitos. That did not happen, and you know, investors easily become doubting Tomases (or even doubting Thoms), when equity-traded companies over-promise and under-deliver.

Most Colombians, when they think of mining in their democratic nation, see coal in open pits, or nickel, or cement. As for gold, the Colombian public sees photos and footage of communities, 10,000 people, 100,000, living almost entirely off the promise of underground veins or alluvial mom-pop shops. Both Segovia and the Caldas Department's El Marmato are first and foremost the images the media use.

"It is difficult to get the public to see anything other than that Wild Wild West image of Colombia when they are connected only through media," says American geologist Jeffrey Brooks, whose work from 2005 to 2008 or so at El Marmato defined much of the promise of that mountain of gold and silver. Mr. Brooks lives in Colombia full time and now runs the exploration shop at Solvista Gold (SVV), which is one of our core TCR holdings. 

The images -- like the ones I have painted myself in text and photographs at El Marmato since 2007-- make for drama and gutter prurience when there are land disputes, landslides, mercury use. (Early El Marmato coverage from Thom Calandra at

I dwell on this social aspect of mining: 1) because I care, as anyone who Internet-searches my work since 2007 in Colombia might see; and 2) because no company or government will thrive in Colombia until it repairs the rivers of toxic rhetoric and financial waste of Segovia and El Marmato.

In one way, the community healing process I see in Segovia is taking place at a national level. Peace talks in Havana between government types and FARC agrarian guerrillas are advancing as I write this Monday. The 48 years of Colombian turmoil has produced bloodshed, lost kidnap victims and political ruin in a nation whose economy is attracting record amounts of foreign investment. See the latest.

At Segovia, whose properties include the historic El Silencio, Carla, Sandra K and Providencia mines, all that is history with a lower-case h. I say that because I must go on the record and say it. Investors are, as Gene McBurney, the head of GMP Securities in Toronto and a banker to the company, says, "unwilling to accept promises without proof in this case."

Maria Consuelo Araujo, Vicente Mendoza, Alessandro Cecchi, Donald East and coal, energy and gold financier Serafino Iacono, among others, have been promising me for many years that this is so. 'Segovia is capable of change. We can buy it. We can fix the pension payments. We can cleanse the water. We can stop the fighting in the streets.' I am not paraphrasing. They all have used these words.

For our interests as investors, there is another less melodramatic promise, one that hits the purse strings that must be knotted and bowed correctly if any transformation of this scale is to take place: 'We can increase output at Segovia. We can decrease costs. We can boost recoveries by 20 percent. We can increase employment. We can consolidate this district and operate as one unit.'

As one unit; not as 10,000 wildcat miners polluting rivers and streams. Remember that for later reports this week, this year and probably through the sale of the El Marmato part of the company.

Entonces, the social healing reminds me of the swimming pool that enlivens the libidos and bloodstreams of those Florida residents in the 1980s-era film "Cocoon." Segovia appears to be thriving.

In one Segovia cooperative alone, the one run by Medellin businessman Jaime Gutierrez, 1,400 workers pull ore from the ultra-rich veins of El Silencio, crush it, bring it to the rehabilated Maria Dama mill nearby, then watch as the gold and silver-laden dirt is measured and processed into 60-40 gold-silver dore bars. Those workers are one of about 25 contracted groups that toll-mine several of the richest veins on the vast property holdings of Gran Colombia, known here by some as Zandor Capital.

"The split is 50-50," says Mr. Cecchi, a longtime geologist who worked for Mr. Iacono, chairman of Gran Colombia, at Venezuela's Bolivar Goldfields in the 1990s and other Iacono enterprises. One of the sister companies in the Gran Colombia group, Pacific Rubiales Energy, on Monday said it would purchase another Colombia oil company for consideration of about $500 million. See report. (TCR family members will attest that we zeroed in on Pacific Rubiales' energy appetite in reports last week and in early November, in our coverage of  the speculations of fund manager Frank Holmes at a New Orleans conferenc.)

On the financial side, let us acknowledge, GCM has much to do to erase the doubts of investors who bought in at higher prices. In addition, it faces the challenge of hiring technical staff, such as metallurgists, modern mill operators and mine developers, in a region that has gotten by for centuries on basic tools.


"There is a high probability our next wave of engineers here will be from Peru, or Argentina, or Brazil," says Donald East, who who is associated in 4 decades of work as managing projects at Yanacocha in Peru, Cerro Corona, La Granja and others across Latin America.

I will cut through the poetry here and continue the fiscal chapter of this narrative later in the week.  

If you want the GCM company line, the history and the forecasts, the Segovia grades (in some cases 30 grams per tonne just in gold) and the plans for the new mill and its already financed silver and gold denominated notes, see the web site:

No reason to repeat what the company's investor relations team, led by Nortel refugee Roy MacDonald from Toronto, says with maps and graphics.

The takeaway: Segovia's inanely rich historic grades (average 13 gram-gold/tonne) will see new fiscal light in this year's fourth quarter and in coming years. Operating costs for an ounce of gold will drop quickly from here on out: from $1,200+ an ounce to below $1,000 an ounce. Cash flow from all of the Segovia operation will skyrocket as more of the 20-plus veins come on line. When a second mill is completed by late 2013 or early 2014, a total of 3,800 tonnes of ore per day will run. Total ounce-costs, including the 50-50 split on toll miners, theoretically could drop below $900 an ounce.

That accomplishment alone is probably enough -- sans Marmato -- to quintuple the stock price to $2 a share Canadian by June 2013. 

Yet amidst all this buzz, Mr. Cecchi, Mr. East, whose contract expires in January, Ms. Araujo (seen here in photo) and their team are in the midst of a 2-year, 24-month drilling plan that will cover 75,000 meters across Segovia alone. Dr. Mendoza laid this all out for me on a weathered laptop more than 3 years ago at El Marmato. Nearly everything he said is taking place, and has taken place, at Segovia. 

The veins here I witnessed with my own eyes, including Chumeca at Sandra K. These veins are a meter or more thicker in many places. It reminds me of Kirkland Lake in terms of grade.

The core is gorgeous with visible gold and telltale signs of silver.

For my California, USA, conscience, workers such as that fellow in the attached photo will multiply, build bank accounts, stop using mercury and shut down the three or four wildcat mills that still exist in town of Segovia. And let's hope, multiply.

(An aside; At El Marmato, which is officially one of the 15 largest gold deposits in the world with a resource of about 14 million ounces, I expect a large transaction by February or March 2013 for the steadily producing lower half of the mountain and the rights to the problematic and even richer , some say, upper half. Whether the purchaser or joint venture partner is a South Africa major gold miner or a Canadian one or an American one, we shall see. When this occurs, Gran Colombia, already the country's largest independent producer of gold at approximately 26,000 ounces per quarter, will catapult from its $170 million or so fully diluted market capitalization.

(At gold and silver-laden El Marmato, there is aggressive drilling and community healing as well; once again, all of that, plus the new hospital, the new school, the new town, the hiring of both technical and blue-collar workers -- all of that not only under way but hurtling toward resolution -- is for later. We will let the images, as I snap them, speak for themselves. One day, the way I see it, El Marmato will be an underground gold and silver mine at three times its current production rate, plus a monstrous and environmentally sound open pit operation.) 

In the meantime, let us leave today with comments from Dr. Mendoza, whose GEOLOGIA DE VENEZUELA was just published in hard cover out of Bogota. (Earlier article:

"The old Frontino Gold Mine was the more important gold underground mine por many decades," he writes me Monday. Dr. Mendoza is consulting to Gran Colombia Gold and, now in his 70s, actively visiting gold and coal projects on behalf of the company and its sister units, which include Pacific Rubiales Energy and Pacific Coal. I will see him again in a month,

I continue here with his comments, largely unedited.

Dr. Vicente Mendoza:

"Segovia it is a differente deposit than Marmato. This deposit is meso-thermal or orogenic-type, but not very exactly or classical like those of the GSB (green stone belt). The main mine is El Silencio at least 3000 meters of length by more than maybe 2,000 m down the dip (now that it reach the 44 level, deeper than 800 m underground), and the three upper veins are joined in a single vein, the main vein ore deposit, with at about 1.5 to more than 2 m thick, and increasing importantly the grade down deeper. We need a big drilling campaign (already under way) for the evaluation of this big mine deposit.

"Other very important veins are Marmajito, Cascajo, Cristales, Cecilia, Las Aves, San Cristobal, between the more than 29 veins of the Zandor at Segovia property.

"When we drill properly in the amount of DDH and meters and the main 4 to 8 targets between those 29 or more historically producing veins, Zandor (Gran Colombia Gold) will have estimated for every 30.000 meters, properly located and drilled, 1 million ounces of gold with more than 6 g/t gold. If we drill 300.000 meter en 5 years under Alessandro's team ... at that time we will have at about 10 Millions ounces of gold. But the potential of this gold district has more than 30 M ounces of gold." 

Other notes of interest: Alessandro Cecchi, qualified person and active Panama and Colombia Stewart Redwood and several others from GCM will visit Solvista's Caramanta porphyry project on Wednesday. ... After seeing Jeffrey Brooks this weekend (I invited him to the GCM dinner at the new Brulee in Medellin), I am more confident than ever that Solvista's next round of assays at Caramanta will be off the charts, in the context of what already are about 2-gram/tonne levels. When that happens in two weeks or less, the shares easily shall have reached their $1.20 or so recent high and proceed to the next phase. SVV shares, which many of our TCR family own, including moi, also are in the GCM portfolio, albeit an amount fewer than 50,000 in number.  ... The next mid-tier merger or property acquisition in the mining sector for Colombia likely will come not from the California district of the nation, as brokers are speculating, but in the department of Antioquia -- either the Antioquia and Segovia Batholiths or the Middle Cauca Gold Belt. Possible beneficiaries on the acquisition or disposal side include Tolima Gold (TOM), Gran Colombia Gold, Seafield Resources (SFF) and Solvista. We'll see. Our TCR family is acquainted and following the GCM, SFF and SVV coverage here at TCR.

I intend to begin purchases of GCM this week. 

Your friendly neighbourhood, 

Thom Calandra

All About Gold: Read It


For the purposes of this specific report, Thom Calandra owns shares of SFF, SVV and PAK. This is a delayed publishing of The Calandra Report. Thom is a partner of Torrey Hills Capital. The views expressed in this report are most definitely the views of Thom Calandra.