Serafino Iacono, Chairman and Interim CEO of Caldas Gold, commenting on Caldas Gold’s latest results, said, “We are very pleased that Caldas Gold is up and running now. Drilling results from the Deep Zone at Marmato continue to be impressive, setting us up to have a meaningful reserve to build our prefeasibility study for the expansion of the mining operations into the Deep Zone. Drilling has also discovered a new zone which opens up the possibility for further mineral resource expansion. The PFS remains on track to be finalized mid-year. I am also very proud of what our Company has been able to do during COVID-19 to help out the communities in which we live and work. These are definitely unprecedented times and our people have done a tremendous job keeping our operations going while ensuring we all do the right thing to keep our workers safe.”

First Quarter 2020 Highlights

• Caldas Gold and Gran Colombia Gold Corp, (TSX: GCM; OTCQX: TPRFF) successfully completed their reverse takeover transaction on February 24, 2020 creating a new Canadian-listed public company focused on building Colombia’s next major gold and silver mine.
• The Marmato mine is continuing to operate in April and May, but at a reduced rate, during the COVID-19 national quarantine implemented by the Colombian government at the end of March. The quarantine has limited the number of workers who are able to travel to the mine site from the surrounding communities. April’s gold production amounted to 1,202 ounces, about 50% of normal. Caldas Gold is continuing its business continuity program focused on the safety and wellbeing of its workers during the quarantine and is working with the local municipality to find solutions that increase the number of workers allowed to enter the mining operation.
• During the COVID-19 quarantine, Caldas Gold has stepped up its efforts to support the local community, providing medical equipment, supplies and sanitation kits to the local hospitals and groceries to families who have been economically affected by the COVID-19 crisis.
• Production totaled 5,901 ounces of gold and 9,012 ounces of silver in the first quarter of 2020 compared with 6,215 ounces of gold and 9,839 ounces of silver in the first quarter of 2019.
• Revenue amounted to $10.5 million in the first quarter of 2020, up 48% over the first quarter last year, getting a boost from the 21% increase in spot gold prices which increased Caldas Gold’s realized gold price to an average of $1,587 per ounce sold compared with $1,296 per ounce sold in the first quarter last year. The volume of gold sales in the first quarter of 2020 was also up 21% over the first quarter last year, benefitting from a reduction in mineral inventories following a build up during the refinery shutdown in the holiday period at the end of 2019.
• Total cash costs ⁽¹⁾ per ounce averaged $1,219 per ounce in the first quarter of 2020, up compared with $1,133 per ounce in the first quarter last year, and included approximately $70 per ounce of additional costs related to the optimization program commenced in the existing mining operation at Marmato that is expected to lead to an increase in future production and a reduction in cash costs. The impact on production in early 2020 caused by the temporary explosives shortfall also had an adverse effect on total cash costs per ounce in the first quarter of 2020.
• All-in sustaining costs (“AISC”) ⁽¹⁾ of $1,371 per ounce in the first quarter of 2020, up from $1,189 per ounce in the first quarter last year, reflected the increase in total cash costs and an increased level of sustaining capital expenditures for mining equipment associated with the extension of operations into the transitional zone.
• Caldas Gold reported adjusted EBITDA ⁽¹⁾ of $2.1 million for the first quarter of 2020, more than double compared with the first quarter last year, largely attributed to the higher realized gold prices this year.
• Caldas Gold reported a net loss for the first quarter of $17.6 million, or $0.47 per share, compared with net income of $0.3 million, or $0.01 per share, in the first quarter last year. The largest item affecting the net loss in the first quarter of 2020 was a $16.7 million charge related to the RTO Transaction. After adjustments for this charge and certain other items as set out in the reconciliation in our MD&A, the adjusted net loss was $1.3 million, or $0.03 per share, in the first quarter of 2020 compared with adjusted net income of $0.4 million, or $0.01 per share, in the first quarter last year. The first quarter 2020 adjusted net loss reflects a $2.2 million charge for share-based compensation related to the initial grant of long-term incentives to Caldas Gold’s directors, executive officers and management following completion of the RTO Transaction.
• Caldas Gold successfully completed Phase 2 of its 2019 infill drilling program which focused above the 600 meter level and was designed to provide enough tonnage and grade in the Measured and Indicated mineral resource categories within the Main Zone to support the prefeasibility study which is currently being carried out and is expected to be finalized by mid-2020. Caldas Gold’s exploration program was also successful in extending the recently discovered New Zone along strike to more than 400 meters, opening up an opportunity for further mineral resource expansion.

Selected Financial Information

(1)     Refer to “Non-IFRS Measures” in Caldas Gold’s MD&A.

Commenting on the closing of the RTO transaction, Executive Chairman of Gran Colombia, Serafino Iacono stated, “We are very pleased to complete the spin-out of our Marmato Mining Assets. With total proceeds from the equity financing of approximately $21.6 million CAD, Caldas Gold is well capitalized to take the Marmato Project forward as it completes the prefeasibility study for the underground mine expansion in the first half of 2020 and continues drilling the deep zone mineralization. The recently released 2019 Phase 2 drilling results have further increased our confidence in the geological model and continue to demonstrate an improvement of grades in the deep zone below the 900 meter level versus the mineral resource block model associated with the preliminary economic assessment. In addition, the discovery of a possible new high-grade zone in the Deeps mineralization opens a new scenario for potential resource growth. Today begins a new chapter in the future of the Marmato Project.”

The Marmato Mining assets principally comprise the existing producing underground gold mine (including the right to mine in the lower portion of the Echandia license area), the existing 1,200 tons per day processing plant and the area encompassing the Deeps mineralization, all located within the mining license area referred to as Zona Baja. The existing underground mine at Marmato produced 25,750 ounces of gold in 2019, representing a 3% increase over 2018, and Caldas Gold expects to produce between 32,000 and 37,000 ounces of gold in 2020.

Through completion of a private placement on February 7, 2020 and the RTO transaction, Gran Colombia acquired an aggregate of 36,250,100 common shares and 7,500,000 share purchase warrants of Caldas Gold with an exercise price of $3.00 CAD expiring December 19, 2024.  With the common shares controlled by Gran Colombia representing approximately 71.8% of the outstanding common shares of Caldas Gold, Gran Colombia is a “control person” of Caldas Gold.  Assuming exercise of the share purchase warrants, Gran Colombia would have control and direction over 43,750,100 common shares representing approximately 75.4% of the then outstanding common shares of Caldas Gold, after giving effect to the exercise of Gran Colombia’s warrants but assuming no exercise of any other outstanding warrants or options of Caldas Gold. Prior to the RTO transaction, Gran Colombia did not hold any securities of Bluenose.

Lombardo Paredes, Chief Executive Officer of Gran Colombia, commenting on the company’s latest production results, said, “We are on track to finish the year in the upper end of our production guidance range of 225,000 to 240,000 ounces of gold. Our mining operations at Segovia continue to deliver on expectations and, for the second consecutive month, we have realized an improvement in the head grades at Marmato, setting us up nicely as we proceed with the spin out of the mine to Caldas Gold as part of our initiative to unlock value in our Zona Baja mining assets at Marmato.”

The company’s Segovia Operations produced a new monthly record total of 19,447 ounces of gold in November bringing the total for the first 11 months of 2019 to 194,108 ounces, up 10% over the first 11 months of 2018. Gran Colombia processed an average of 1,347 tons per day (“tpd”) in November with an average head grade of 16.6 g/t, benefitting from an improvement in head grades at its Providencia and El Silencio mines compared with the last couple of months. Segovia, with head grades averaging 16.4 g/t through the first 11 months of 2019, continues to rank among the top underground gold mines globally by grade. Segovia’s trailing 12 months’ total gold production at the end of November 2019 increased to 211,036 ounces, up 9% over 2018’s annual production of 193,050 ounces. The company expects that its annual gold production at its Segovia Operations for 2019 will finish the year at the top end of its guidance range of between 201,000 and 214,000 ounces.

At the Marmato Operations, November’s gold production of 2,388 ounces benefitted from an improvement in its head grade to 3.0 g/t while processing an average of 941 tpd in the month. This brings the total production for the first 11 months of 2019 to 23,492 ounces, up almost 3% over the first 11 months of 2018. Marmato’s trailing 12 months’ total gold production at the end of November 2019 totaled 25,566 ounces, up more than 2% over 2018’s annual production of 24,951 ounces and within the company’s annual guidance range for 2019 of between 24,000 and 26,000 ounces of gold.

Serafino Iacono, Executive Chairman of Gran Colombia, commenting on the preliminary results of the Marmato technical study, said, “We are very pleased to have reached the point at which we can see a path forward to significantly expand production from our Marmato Project and, through the recently announced spin out, create value for our shareholders while protecting our capital structure and balance sheet. The PEA charts a course whereby the immediate implementation of an optimized mine plan in the upper existing mine at Marmato, much like we did a few years ago at Segovia, will increase production and free cash flow starting in 2020. Concurrently, we will commence the development and construction activities in the new Deep Zone, which should come on stream in 2023, further increasing total gold production which reaches more than 150,000 ounces annually from 2024 through 2027 and then averages more than 100,000 ounces annually over the next nine years of operation. We expect to complete the transaction with Bluenose and the equity private placement in December and we are proceeding with the prefeasibility study to be finalized by mid-2020.”

On October 7, 2019, Gran Colombia announced that it had entered into a letter of intent with Bluenose Gold Corp. (TSX-V: BN.H) in respect of the proposed acquisition by Bluenose of certain mining assets at Gran Colombia’s Marmato Project located in the Department of Caldas, Colombia. The mining assets principally comprise the existing producing underground gold mine, including the right to mine in the lower portion of the Echandia license area, the existing 1,200 tons per day (“tpd”) processing plant and the area encompassing the Deep Zone mineralization, all located within the mining license area referred to as Zona Baja. Gran Colombia will retain its existing ownership of the mining licenses in the areas known as Zona Alta and Echandia.

Mineral Resource Estimate (“MRE”) Update Effective July 31, 2019

The table below summarizes the updated MRE effective as of July 31, 2019 (the “2019 MRE”) for each of Zona Alta and Zona Baja at Marmato:

Highlights of July 31, 2019 MRE

• Total Measured Resources in Zona Baja of 2.1 million tons at a grade of 4.9 g/t totaling 0.3 million ounces of gold are limited to vein material within the current levels being mined by Gran Colombia.
• Total Indicated Resources in Zona Baja of 15.2 million tons at a grade of 3.5 g/t totaling 1.7 million ounces of gold have been delineated primarily between Levels 16 and 21 in the existing mine, including areas in the lower portion of the Echandia license accessible from the current mining operation, and includes 0.5 million ounces of gold in the new Deep Zone, reflecting the exploration drilling completed to the end of July 2019.
• Total Inferred Resources in Zona Baja of 44.9 million tons at a grade of 2.3 g/t totaling 3.3 million ounces of gold have been delineated primarily in the Deep Zone and will be the subject of further drilling to upgrade Inferred to Indicated Resources for the prefeasibility study (“PFS”) expected to be completed by mid-2020.
• The 2019 MRE incorporates an additional 12,765 channel samples since the last MRE in 2017 (the “2017 MRE”) as part of the ongoing validation and capture of historical sampling and current grade control practices. In addition, there has been an increase in the drilling database of 152 additional holes since the 2017 MRE, which is split between 35 exploration holes (16,076 m) and 117 mine holes (9,172 m) inclusive of grade control sampling.
• The 2019 MRE reflects a reduction in material from the porphyry domain as gold cut-off grades used to report the porphyry domain increased from 1.2 g/t in the 2017 MRE to 1.9 g/t in the 2019 MRE, which is in line with the current cut-off grades used for the veins within the same areas.
• Additional Deep Zone mineralization has been defined in the 2019 MRE as a result of infill drilling.
• The Deep Zone is continuous along strike for approximately 500 m and has a confirmed down dip extent that reaches up to 800 m with a thickness that varies between 35 m and 150 m. The Deep Zone remains open at depth and to the east.

The following table provides further detail regarding the Mineral Resource estimate for gold in the Marmato Project as of July 31, 2019:

• Mineral resources are not mineral reserves and do not have demonstrated economic viability.
• All figures are rounded to reflect relative accuracy of the estimate. All composites have been capped where appropriate.
• Zona Alta includes mineral resources from the Echandia license above 1,340 masl.
• Zona Baja includes mineral resources from the Echandia license below 1,340 masl and above 1,025 masl and are accessible from the current mining operation.
• Vein and Porphyry mineral resources are reported at a cut-off grade of 1.9 g/t. Cut-off grades have been based on a price of US$1,500 per ounce of gold, suitable benchmarked technical and economic parameters and gold recoveries of 95% for underground resources, without considering revenues from other metal.
• Deep Zone mineral resources are reported at a cut-off grade of 1.3 g/t. Cut-off grades have been based on a price of US$1,500 per ounce of gold, suitable benchmarked technical and economic parameters and gold recoveries of 95% for underground resources, without considering revenues from other metal within a limiting pit shell. The Deep Zone includes mineral resources an elevation of 1,025 masl.

Marmato PEA and Life-of-Mine (“LoM”) Plan

A mining study and schedule was prepared by both SRK’s and Gran Colombia’s technical professionals to create a LoM production schedule for the Mining Assets at Marmato. The Marmato mine in Zona Baja will ultimately comprise two distinct operations, the existing Upper Zone operation and a new Deep Zone operation which sits directly below the Upper Zone vein system. The Zona Baja contract was awarded to Gran Colombia’s wholly-owned subsidiary, Gran Colombia Gold Marmato S.A.S. (formerly Mineros Nacionales S.A.S.) in October 1991 and is valid for 30 years until October 2021. In October 2017, Gran Colombia commenced the process to renew the contract for another 30-year term, which is progressing well and is expected to be completed in 2020.

The PEA LoM production schedule foresees a total of 26.4 million tons of mineralized material being processed over a 19-year mine life resulting in a total of 2.2 million ounces of gold produced at an average LoM total cash cost of US$799 per ounce and an average LoM AISC of US$882 per ounce. The initial capital cost, to be incurred between 2020 and 2022, required for the Deep Zone mining operation is estimated to total US$269 million. At an expected long-term gold price of $1,300 per ounce, total LoM undiscounted after-tax free cash flow from mining operations amounts to US$448 million. At a 5% discount rate, the net present value of the total LoM after-tax free cash flow amounts US$207 million. Before financing, the project has a 20% internal rate of return and payback by 2026.

The annual production profile over the LoM in the PEA from both the Upper and Deep Zones is shown in the headline chart, above.

The Upper Zone is the existing operating gold and silver mine that extends from 1,350 m elevation down to 1,025 m elevation. The Upper Zone extends approximately 300 m vertically and approximately 900 m along the vein structure. The mine has been developed with level accesses proceeding horizontally from the main portal as the surface to horizontal cross cuts to provide access to the veins. There are currently six production levels, the highest being Level 16 and the lowest being Level 21. The mine uses the conventional cut and fill stope mining technique that supplies approximately 1,000 tpd of material to a 1,200 tpd capacity mill which uses a Merrill-Crowe process to produce gold/silver dore bars.

In the PEA, the Upper Zone is envisioned to produce 5.5 million tons of mineralized material, primarily from the vein system, over a 16-year life with an average LoM head grade of 3.8 g/t resulting in total gold production of 0.6 million ounces, or about 27% of total gold production from both the Upper and Deep Zones. This will be accomplished through the immediate implementation of an optimized mine plan, including the strict control of dilution and mine recovery, that will see annual production increase from the current approximately 25,000 ounces/year to a range between 35,000 and 40,000 ounces/year starting in 2020.

To accomplish the optimized mine plan, Gran Colombia will need to invest approximately US$12 million over the next two years in mine development and equipment. As a result of the implementation of the optimized mine plan, the PEA also envisions an approximately 25% reduction in total cash costs per ounce to a LoM average of $803 per ounce and a LoM AISC averaging US$872 per ounce of gold produced from the Upper Zone.

Deep Zone Mining Operation

The Deep Zone area is currently in the exploration phase and has not been developed. Mineralization is located approximately 600 to 1,200 m below surface (530 masl to 1,015 masl) and can be mined using an underground longhole stoping method. The stopes will be 10 m wide and stope length will vary based on mineralization grade. A spacing of 25 m between levels will be used. The deposit will be mined in blocks where mining within a block occurs from bottom to top with the use of paste backfill. Sill pillars are left in situ between bocks. The backfill will have sufficient strength to allow for mining adjacent to filled stopes. The mine will be accessed by a decline drift with mineralization transported from stopes to surface by underground trucks. Internal intake and exhaust raises will be developed using raisebore machines and air will flow into dedicated intake and exhaust ventilation drifts to surface.

A new 4,000 tpd plant facility using gravity concentration and cyanidation of the gravity tailing will be constructed to process material from the Deep Zone. In the PFS stage of the project, Gran Colombia will evaluate the potential to reduce capital costs by incorporating suitable elements into this new plant from the Pampa Verde processing plant currently in storage. In addition, a new “dry stack” tailings storage facility will be constructed to receive approximately 55% of the total LoM tailings from the plant. The other 45% of tailings will go back underground in cemented paste backfill into the mine.

In the PEA, the Deep Zone is envisioned to produce 20.8 million tons of mineralized material over a 16-year life commencing in 2023 with an average LoM head grade of 2.5 g/t resulting in total gold production of 1.6 million ounces, or about 73% of total gold production from both the Upper and Deep Zones.

The initial investment to be incurred in 2020 through 2022 totals approximately US$269 million comprising development of the Deep Zone (including the main decline drift and ventilation raises), mining and other equipment, construction of the new processing plant and the tailings storage facility. The PEA estimates the LOM total cash costs and AISC in the Deep Zone will average US$797 per ounce and US$885 per ounce, respectively.