f e d 31, 2011 dated m 28,...
TRANSCRIPT
GRAN COLOMBIA GOLD CORP.
ANNUAL INFORMATION FORM
FOR THE YEAR ENDED DECEMBER 31, 2011
DATED: MARCH 28, 2012
TABLE OF CONTENTS
1 GLOSSARY OF TERMS ............................................................................................................... 3
2 GENERAL MATTERS ................................................................................................................ 12
3 INFORMATION CONCERNING THE COMPANY .................................................................. 14
4 GENERAL DEVELOPMENT OF THE BUSINESS ................................................................... 16
5 DESCRIPTION OF THE BUSINESS .......................................................................................... 25
6 RISK FACTORS .......................................................................................................................... 30
7 PROPERTIES ............................................................................................................................... 42
8 DIVIDENDS AND DISTRIBUTIONS ........................................................................................ 62
9 DESCRIPTION OF CAPITAL STRUCTURE ............................................................................ 62
10 MARKET FOR SECURITIES ..................................................................................................... 65
11 ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL
RESTRICTION ON TRANSFER ................................................................................................ 67
12 DIRECTORS AND OFFICERS ................................................................................................... 67
13 CORPORATE CEASE TRADE ORDERS .................................................................................. 73
14 CORPORATE BANKRUPTCIES ................................................................................................ 73
15 PENALTIES OR SANCTIONS ................................................................................................... 73
16 PERSONAL BANKRUPTCIES ................................................................................................... 74
17 CONFLICTS OF INTEREST ....................................................................................................... 74
18 LEGAL PROCEEDINGS ............................................................................................................. 74
19 REGULATORY ACTIONS ......................................................................................................... 75
20 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ........... 75
21 TRANSFER AGENT AND REGISTRAR ................................................................................... 75
22 MATERIAL CONTRACTS ......................................................................................................... 76
23 INTERESTS OF EXPERTS ......................................................................................................... 76
24 AUDIT COMMITTEE INFORMATION .................................................................................... 77
25 ADDITIONAL INFORMATION ................................................................................................. 79
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1 GLOSSARY OF TERMS
Except as otherwise defined herein, the following terms used but not otherwise defined in this Annual
Information Form have the meanings set out below. Words importing the singular, where the context
requires, include the plural and vice versa and words importing any gender include all genders.
“Affiliate” of any Person means, at the time such determination is being made, any other Person
controlling, controlled by or under common control with such first Person, in each case, whether directly
or indirectly, and “control” and any derivation thereof means the possession, directly or indirectly, of the
power to direct or significantly influence the management and policies, business or affairs of a Person
whether through the ownership of voting securities or otherwise.
“Ag” means silver.
“Agent” means GMP Securities L.P.
“Annual Information Form” means this Annual Information Form dated March 28, 2012 in respect of
the fiscal year ended December 31, 2011.
“Associate” when used to indicate a relationship with a Person, means: (a) an issuer of which the Person
beneficially owns or controls, directly or indirectly, voting securities entitling him to more than 10% of
the voting rights attached to all outstanding voting securities of such issuer; (b) any partner of the Person;
(c) any trust or estate in which the Person has a substantial beneficial interest or in respect of which the
Person serves as trustee or in a similar capacity; or (d) in the case of a Person who is an individual, (i) that
Person’s spouse or child, or (ii) any relative of that Person or of his spouse who has the same residence as
that Person.
“Au” means gold.
“BCBCA” means the British Columbia Business Corporations Act.
“Blue Pacific” means Blue Pacific Assets Corp.
“Board” means the board of directors of the Company.
“BSD” means BSD Consultants.
“Carla” means Carla Resources, S.A.
“Carla Project” means the gold exploration project comprised of 16 gold concession contracts and
applications comprising an area of approximately 6,000 ha located in the municipalities of Remedios and
Segovia at approximately 7°04’ N, 74°43’ W in the Department of Antioquia, Colombia as more fully
described in the Carla Project Technical Report.
“Carla Project Technical Report” means the NI 43-101 compliant technical report relating to the Carla
Project titled “NI 43-101 Compliant Technical Report on the Carla Resources Gold Exploration Licences,
Antioquia, Colombia”, prepared by James Gilbertson and Colin Rawbone of SRK ES, dated July 30,
2010.
“CBSR” means Canadian Business for Social Responsibility.
“CDI” means Consorcio de Inversionistas CDI, S.A.
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“CIIGSA” means Comercializadora Internacional de Metales Preciosos y Metales Comunes Inversiones
Generales S.A. CIIGSA.
“CIM” means the Canadian Institute of Mining, Metallurgy and Petroleum.
“Colombia Goldfields” means Colombia Goldfields Ltd.
“Colombia Goldfields Warrants” means the June Colombia Goldfields Warrants and the December
Colombia Goldfields Warrants.
“Colombia Goldfields Transaction” means the transaction whereby Medoro acquired all of the issued
and outstanding securities of Colombia Goldfields in exchange for common shares and common share
purchase warrants of Medoro pursuant to an arrangement agreement dated June 5, 2009, as amended on
July 2, 2009 and as further amended on August 10, 2009, entered into by Medoro and Colombia
Goldfields, and pursuant to a statutory plan of arrangement pursuant to section 195 of the YBCA.
“Common Shares” means the common shares in the capital of the Company.
“Common Share Consolidation” means the consolidation of the Common Shares on a one-for-four basis
effective November 11, 2010.
“Company” or “Gran Colombia” means Gran Colombia Gold Corp.
“Compensation Options” means the First Gran Colombia Private Placement Options and the Second
Gran Colombia Private Placement Options.
“Concepción Project” means the exploration project comprised of four mining concession contracts and
applications with a total area of 3,534.694 ha or 35.3 km2 located in the Municipalities of Concepción,
San Vicente, El Peñol and Barbosa, Department of Antioquia, Republic of Colombia at approximately 6°
21’N, 75° 16’ W as more fully described in the Concepción Technical Report.
“Concepción Technical Report” means the NI 43-101 compliant technical report relating to the
Concepción Project titled “NI 43-101 Technical Report for the Concepción Project, Department of
Antioquia, Republic of Colombia”, prepared by Stewart D. Redwood, dated May 31, 2010.
“COP” means Colombian pesos.
“CRA” means Canada Revenue Agency.
“CVG Contract” means the Lo Increíble 4A and 4B exploitation contract entered into by Medoro with
the Corporacion Venezolana de Guyana, a Venezuelan state-owned entity, dated August 28, 1992 and
amended on January 26, 1994.
“December Colombia Goldfields Warrants” means the warrants issued by Colombia Goldfields to
shareholders thereof and assumed by Medoro (and now the Company) in connection with the Colombia
Goldfields Transaction, and which expire on December 28, 2012.
“Delegated Authority” has the meaning given to such term under the heading entitled “Audit Committee
Information – Pre-Approval Policies and Procedures”.
“deposit” means a mineralized body which has been physically delineated by sufficient drilling,
trenching, and/or underground work, and found to contain a sufficient average grade of metal or metals to
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warrant further exploration and/or development expenditures. Such a deposit does not qualify as mineral
resources, a commercially mineable ore body or as containing mineral reserves, until final legal,
technical, and economic factors have been resolved.
“Echandia Property” means the Echandia exploration property at Marmato, Colombia, acquired by the
Company in connection with the Medoro Merger.
“El Zancudo Project” means the exploration project located in the Municipalities of Titiribi, Angelopolis
and Armenia, Department of Antioquia, Republic of Colombia at 6° 04’ 30” N – 75° 47’ 26” W as more
particularly described in the El Zancudo Technical Report.
“El Zancudo Technical Report” means the NI 43-101 compliant technical report with respect to the El
Zancudo Project titled “NI 43-101 Technical Report for the El Zancudo Project, Department of Antiquia,
Republic of Colombia”, prepared for the Company by Stewart D. Redwood, dated April 6, 2010.
“Equity” means Equity Financial Trust Company.
“Facility” means the proposed US$100 million senior secured term loan facility to be provided by
Standard and in conjunction with Pareto Commodities LLC.
“FGM” means Frontino Gold Mines Ltd.
“First Gran Colombia Private Placement” means the brokered private placement financing of Gran
Colombia Panama completed on April 27, 2010 pursuant to which 22,500,000 Gran Colombia Panama
Shares were issued at a purchase price of $1.00 per share for gross proceeds of $22,500,000.
“First Gran Colombia Private Placement Compensation Options” means the 1,350,000 options
granted to the Agent in connection with the First Gran Colombia Private Placement, each such option
being exercisable to acquire one Common Share until April 27, 2012, at a price of $1.00 per Common
Share.
“Frontino Acquisition” means the acquisition whereby Gran Colombia Panama, through Zandor,
Colombian branch, acquired all of the assets of FGM.
“Frontino Acquisition Agreement” means the acquisition agreement entered into between Gran
Colombia Panama, Medoro and Zandor dated March 29, 2010 in connection with the Frontino
Acquisition.
“g/t” means grams per metric tonne.
“Gran Colombia Amalgamation” means the three-cornered amalgamation under the Panamanian Law
of Corporations, pursuant to which Gran Colombia Panama amalgamated with Panama Newco to form
Panama Amalco, resulting in Panama Amalco being a wholly-owned subsidiary of Old GCM.
“Gran Colombia Consideration Warrants” means a Warrant issued under the Gran Colombia Warrant
Indenture and in connection with the Medoro Merger, having an exercise price of $2.60 per Gran
Colombia Share per whole Warrant exercised and expiring on August 24, 2015.
“Gran Colombia Panama” means Gran Colombia Gold, S.A., a wholly-owned subsidiary of the
Company.
“Gran Colombia Panama Shares” means common shares in the capital of Gran Colombia Panama.
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“Gran Colombia Transaction” means the RTO pursuant to which Old GCM acquired all of the issued
and outstanding securities of Gran Colombia Panama by way of a three-cornered amalgamation in
exchange for the issuance of common shares in the capital of Old GCM.
“Gran Colombia Unit” means a unit issued in connection with the Second Gran Colombia Private
Placement in exchange for a subscription receipt of Gran Colombia Panama, each such unit being
comprised of one whole Common Share and one half of one Warrant.
“ha” means hectares.
“HMZ Metals” means HMZ Metals Inc.
“Indicated Mineral Resource” means that part of a mineral resource for which quantity, grade or
quality, densities, shape and physical characteristics, can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic parameters, to support mine
planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and
reliable exploration and testing information gathered through appropriate techniques from locations such
as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and
grade continuity to be reasonably assumed.
“Inferred Mineral Resource” means that part of a mineral resource for which quantity and grade or
quality can be estimated on the basis of geological evidence and limited sampling and reasonably
assumed, but not verified, geological and grade continuity. The estimate is based on limited information
and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes.
“ISS” means the Colombian Social Security Institute.
“June Colombia Goldfields Warrants” means the warrants issued by Colombia Goldfields to
shareholders thereof and assumed by Medoro (and now the Company) in connection with the Colombia
Goldfields Transaction, and which expire on June 18, 2013.
“LGGC” means Lions Gate Geological Consulting Inc.
“Lo Increíble Properties” means the Lo Increíble 4A and 4B mining contracts in the El Callao
municipality of the State of Bolivar in Venezuela, as more particularly described in the Lo Increíble
Technical Report.
“Lo Increíble Technical Report” means the NI 43-101 compliant technical report relating to the Lo
Increíble Properties titled “Updated Independent Technical Review of the Lo Increíble Gold Prospect,
Bolivar State, Venezuela”, prepared for the Company by Dr. Mike Armitage and Dr. Lucy Roberts of
SRK, dated April 27, 2009.
“LOMEC” means Los Mineros de El Callao, S.A.
“Mandate Letter” means the exclusive mandate letter dated December 20, 2011 (as amended on January
31, 2011), entered into between the Company and Standard Bank in connection with the Facility.
“Marmato Project” means the Company’s gold-silver project at Marmato, Caldas Department,
Colombia, comprising of three contiguous properties: Zona Alta Property, Zona Baja Property and
Echandia Property, as more particularly described in the Marmato Technical Report.
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“Marmato Technical Report” means the NI 43-101 compliant technical report relating to the Marmato
Project titled “A NI 43-101 Mineral Resource Estimate on the Marmato Project, Colombia”, prepared by
Mike Armitage and Ben Parsons of SRK, dated September 4, 2011.
“Mazamorras Project” means the exploration project located at 1.49oN and 77.15
oW southwest of the
Republic of Colombia, some 32 km (straight line) north-northwest from San Juan de Pasto, the capital
city of the Department of Nariño, and some 488 km (straight line) south-southeast from Bogotá consisting
of four concession areas comprising a total area of 3293.60 ha, as more fully described in the Mazamorras
Technical Report.
“Mazamorras Technical Report” means the NI 43-101 compliant technical report relating to the
Mazamorras Project titled “The Mazamorras Cu-Au-Mo-Porphyry Project, Colombia – Report prepared
under the Guidelines of National Instrument 43-101”, prepared by Karen Volp Company of SRK ES,
dated July 2010.
“MCTO” means management cease trade order.
“Measured Mineral Resource” means that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, and physical characteristics are so well established that they can be estimated
with confidence sufficient to allow the appropriate application of technical and economic parameters, to
support production planning and evaluation of the economic viability of the deposit. The estimate is based
on detailed and reliable exploration, sampling and testing information gathered through appropriate
techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely
enough to confirm both geological and grade continuity.
“Medoro” means Medoro Resources Ltd., the predecessor of Medoro Yukon that existed under the
YBCA.
“Medoro Arrangement Agreement” means the arrangement agreement entered into by the Company
and Medoro, dated April 13, 2011 (as amended and restated as of May 4, 2011) in connection with the
Medoro Merger.
“Medoro Merger” means the acquisition of the all of the issued and outstanding securities of Medoro by
the Company in connection with the Medoro Arrangement Agreement and the Medoro Plan of
Arrangement.
“Medoro Plan of Arrangement” means the statutory plan of arrangement pursuant to section 195 of the
YBCA in connection with the Medoro Merger.
“Medoro Yukon” means Medoro Resources (Yukon) Inc., a corporation formed in connection with the
Medoro Merger and existing under the laws of the Yukon Territory.
“MIBAM” means the Ministry of Basic Industry and Mining.
“mineral resource/Mineral Resource” means a concentration or occurrence of diamonds, natural, solid
inorganic material, or natural fossilized organic material including base and precious metals, coal and
industrial minerals, in or on the Earth’s crust in such form and quantity and of such a grade or quality that
it has reasonable prospects for economic extraction. The location, quantity, grade, geological
characteristics and continuity of a mineral resource are known, estimated or interpreted from specific
geological evidence and knowledge. The terms “Mineral Resource”, “Measured Mineral Resource”,
“Indicated Mineral Resource”, “Inferred Mineral Resource” used in this Annual Information Form are
Canadian mining terms as defined in accordance with NI 43-101 under the guidelines set out in the CIM
Standards on Mineral Resource and Mineral Reserves Definitions and guidelines adopted by the CIM
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Council on December 11, 2005. While the terms “Mineral Resource”, “Indicated Mineral Resource”, and
“Inferred Mineral Resource” are recognized and required by Canadian regulations, they are not defined
terms under standards in the United States.
“Mineros Nacionales” means Mineros Nacionales, S.A.
“Mineros Nacionales Mine” means the Company’s underground producing mine located at the Zona
Baja Property in Marmato.
“m” means metres.
“mm” means millimeters.
“Moz” means million ounces.
“NEX” means the NEX trading board of the TSXV.
“NI 43-101” means National Instrument 43-101 – Standards of Disclosure for Mineral Projects issued by
the Canadian Securities Administrators.
“NI 43-101 CP” means Companion Policy 43-101CP – To National Instrument 43-101 Standards of
Disclosure for Mineral Properties.
“NI 43-101 F1” means Form 43-101F1 – Technical Report.
“NI 52-110” means National Instrument 52-110 – Audit Committees issued by the Canadian Securities
Administrators.
“Notes” means the US$80,000,000 aggregate senior unsecured silver-linked notes with a price of
US$1,000 principal amount per Note, issued on August 11, 2011, by way of short form prospectus. The
Notes are listed for trading on the TSX under the symbol “GCM.NT.U”.
“Old GCM” means Tapestry Resource Corp., a predecessor corporation to Gran Colombia that existed
under the BCBCA.
“Old GCM Shares” means common shares in the capital of Old GCM.
“Old GCM Warrants” means warrants issued by Old GCM on March 19, 2010 in connection with a
non-brokered private placement of 5,000,000 units at a price of $0.30 each for gross proceeds of
$1,500,000. For further information see the heading entitled “General Development of the Business – Old
GCM Warrants.”
“Option” means an option granted by the Company to purchase Common Shares pursuant to the
Company’s Option Plan.
“Option Plan” means the option plan of the Company dated August 6, 2010.
“ordinary kriging” means a geostatistical approach to modeling. Instead of weighting nearby data points
by some power of their inverted distance, ordinary kriging relies on the spatial correlation of the data to
determine the weighting values. This is a more rigorous approach to modeling, as correlation between
data points determines the estimated value at an unsampled point.
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“Panama Amalco” means the corporation resulting from the amalgamation of Gran Colombia Panama
and Panama Newco pursuant to the Gran Colombia Amalgamation.
“Panama Newco” means Masteri Inc., the wholly-owned subsidiary of Old GCM incorporated under the
Panamanian Law of Corporations for the purposes of completing the Gran Colombia Amalgamation.
“PDVSA” means Petróleos de Venezuela.
“Person” means any individual, sole proprietorship, partnership, firm, entity, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate, governmental authority, and
where the context requires any of the foregoing when they are acting as trustee, executor, administrator or
other legal representative.
“Preliminary Feasibility Study” means a comprehensive study of the viability of a mineral project that
has advanced to a stage where the mining method, in the case of underground mining, or the pit
configuration, in the case of an open pit, has been established and an effective method of mineral
processing has been determined, and includes a financial analysis based on reasonable assumptions of
technical, engineering, legal, operating, economic, social, and environmental factors and the evaluation of
other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or
part of the Mineral Resource may be classified as a Mineral Reserve.
“Preferred Shares” means the preferred shares in the capital of the Company.
“Projects” means the Segovia Operations, the Marmato Project, the El Zancudo Project, the Mazamorras
Project, the Concepción Project, and the Lo Increíble Properties.
“Probable Mineral Reserve” means the economically mineable part of an Indicated and, in some
circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study.
This study must include adequate information on mining, processing, metallurgical, economic, and other
relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
“Providencia” means Compañía de Minas Providencia, S.A.
“QA/QC” means quality assurance/quality control.
“Qualified Person” has the meaning given to such term under NI 43-101, section 1.1 – Definitions and
Interpretations.
“Royalty Agreement” means the royalty agreement between Medoro and Corporacion Vengroup, S.A
and Socobal Corporation dated July 10, 2006, entered into in connection with Medoro’s acquisition of all
of the issued and outstanding securities of Panwest Seas Corporation Ltd. on same date, holding the rights
to the Lo Increíble Properties.
“RTO” means the arm’s length reverse takeover as more particularly described under the heading entitled
“General Development of the Business – August 2010 – December 31, 2011 - RTO”.
“Sabaletas” has the meaning given to such term under the heading entitled “Properties – El Zancudo
Project”.
“Second Gran Colombia Private Placement” means the $275,000,000 brokered private placement
financing of Gran Colombia Panama by way of subscription receipts sold at a price of $1.60 per
subscription receipt, pursuant to which each subscription receipt will be exchanged, for no additional
consideration and without any further action by the holder thereof, into one Gran Colombia Unit
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immediately prior to the completion of the Frontino Acquisition, comprised of one Common Share and
one-half of one Warrant.
“Second Gran Colombia Private Placement Compensation Options” means the 10,312,500 non-
transferrable options granted to the Agent in connection with the Second Gran Colombia Private
Placement, with each such option being exercisable to acquire one Gran Colombia Unit at any time prior
to 5:00 p.m. (Toronto time) on the earlier of the date that is: (i) immediately prior to the date each such
option is exchanged for an Old GCM option in connection with the Gran Colombia Amalgamation; and
(ii) August 24, 2012 at a price of $1.60 per Gran Colombia Unit.
“SEDAR” means the System for Electronic Document Analysis and Retrieval.
“Segovia Operations” means the Segovia Project and the Carla Project.
“Segovia Project” means the mining rights comprised of one private mining property and two
exploration licenses (El Silencio, Providencia and Sandra K) with a total area of 2,907 ha, located in the
municipalities of Segovia and Remedios, Department of Antioquia as more fully described in the Segovia
Project Technical Report.
“Segovia Project Technical Report” means the NI 43-101 compliant technical report relating to the
Segovia Project titled “NI 43-101 Technical Report Frontino Gold Mines Ltd., Antiquia, Colombia”,
prepared by Scott E. Wilson of SEWC and Stewart D. Redwood, dated June 9, 2010.
“SEWC” means Scott E. Wilson Consulting Inc.
“SGS” means SGS del Perú S.A.C.
SRK ES” means SRK Exploration Services Ltd.
“SRK UK” means SRK Consulting (UK) Ltd.
“Standard Bank” means Standard Bank Plc.
“Technical Reports” means, collectively, the El Zancudo Technical Report, the Segovia Project
Technical Report, the Marmato Technical Report, the Lo Increíble Technical Report, the Mazamorras
Technical Report, the Concepción Technical Report, and the Carla Project Technical Report.
“tpd” means tonnes per day.
“TSX” means the Toronto Stock Exchange.
“TSXV” means the TSX Venture Exchange.
“ValGold Resources” means ValGold Resources Ltd.
“Warrant” means a warrant of the Company issued pursuant to the Warrant Indenture listed for trading
on the TSX under the symbol “GCM.WT” providing for the holder thereof to acquire one Common Share
at an an exercise price of $2.60 per Common Share and expiring on August 24, 2015.
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“Warrant Consolidation” means consolidation of the Warrants on a one-for-four basis effective
December 1, 2010.
“Warrant Indenture” means the warrant indenture dated August 20, 2010, entered into between the
Company and Equity pursuant to which the Warrants were issued.
“YBCA” means the Business Corporations Act of the Yukon Territory.
“Zandor” means Zandor Capital S.A., the Panamanian joint venture company used by Gran Colombia
and Medoro as a vehicle for completing the Frontino Acquisition.
“Zona Alta Property” means the property located in the Zona Alta at Marmato, Colombia acquired by
the Company in connection with the Medoro Merger.
“Zona Baja Property” means the property in the Zona Baja in Marmato, Colombia acquired by the
Company in connection with the Medoro Merger. The Mineros Nacionales Mine is located at the Zona
Baja Property.
1.1 Forward-Looking Information
All statements, other than statements of historical fact, contained or incorporated by reference in this
Annual Information Form including, but not limited to, any information as to the future financial or
operating performance of Gran Colombia, constitute “forward-looking information” or “forward-looking
statements” within the meaning of certain securities laws, including the provisions of the Securities Act
(Ontario) and are based on expectations, estimates and projections as of the date of this Annual
Information Form. Forward-looking statements include, without limitation, possible events, statements
with respect to possible events, the future price of gold and silver, the estimation of mineral reserves and
resources, the realization of mineral reserve and resource estimates, the timing and amount of estimated
future production, costs of production, expected capital expenditures, costs and timing of the development
of new deposits, success of exploration, development and mining activities, permitting time lines,
currency fluctuations, requirements for additional capital, government regulation of mining operations,
environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on
insurance coverage. The words “plans”, “expects” or “does not expect”, “is expected”, “budget”,
“scheduled”, “estimates”, “targets”, “forecasts”, “intends”, “anticipates”, or “does not anticipate”, or
“believes”, or variations of such words and phrases or statements that certain actions, events or results
“may”, “could”, “would”, “should”, “might”, or “will be taken”, “occur” or “be achieved” and similar
expressions identify forward-looking statements.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that,
while considered reasonable by the Company as of the date of such statements, are inherently subject to
significant business, economic and competitive uncertainties and contingencies. The estimates and
assumptions of Gran Colombia contained or incorporated by reference in this Annual Information Form,
which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein
and in the Company’s most recently filed Management’s Discussion and Analysis, or as otherwise
expressly incorporated herein by reference as well as: (1) there being no significant disruptions affecting
operations, whether due to labour disruptions, supply disruptions, power disruptions, damage to
equipment or otherwise; (2) permitting, development, operations, expansion at the Projects (including,
without limitation, land acquisitions for and permitting and construction of the new tailings facility) being
consistent with our current expectations; (3) political developments in any jurisdiction in which the
Company operates being consistent with its current expectations; (4) the viability, permitting and
development of the Segovia Operations and the Marmato Project, including, without limitation, the
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metallurgy and processing of its ore being consistent with our current expectations; (5) the exchange rate
between the Canadian dollar, COP and the U.S. dollar being approximately consistent with current levels;
(6) certain price assumptions for gold and silver; (7) prices for natural gas, fuel oil, electricity and other
key supplies remaining consistent with current levels; (8) production and cost of sales forecasts meeting
expectations; (9) the accuracy of our current mineral reserve and mineral resource estimates; and (10)
labour and materials costs increasing on a basis consistent with the Company’s current expectations.
Known and unknown factors could cause actual results to differ materially from those projected in the
forward-looking statements. Such factors include, but are not limited to: fluctuations in the currency
markets; fluctuations in the spot and forward price of gold or certain other commodities (such as diesel
fuel and electricity); changes in interest rates or gold or silver lease rates that could impact the mark-to-
market value of outstanding derivative instruments and ongoing payments/receipts under any interest rate
swaps and variable rate debt obligations; risks arising from holding derivative instruments (such as credit
risk, market liquidity risk and mark-to-market risk); changes in national and local government legislation,
taxation, controls, regulations and political or economic developments in Canada, Colombia, Venezuela
the United States, or other countries in which we do business or may carry on business in the future;
business opportunities that may be presented to, or pursued by, us; our ability to successfully integrate
acquisitions; operating or technical difficulties in connection with mining or development activities;
employee relations; the speculative nature of gold exploration and development, including the risks of
obtaining necessary licenses and permits; diminishing quantities or grades of reserves; adverse changes in
our credit rating; and contests over title to properties, particularly title to undeveloped properties. In
addition, there are risks and hazards associated with the business of gold exploration, development and
mining, including environmental hazards, industrial accidents, unusual or unexpected formations,
pressures, cave-ins, flooding and gold bullion losses (and the risk of inadequate insurance, or the inability
to obtain insurance, to cover these risks). Many of these uncertainties and contingencies can affect the
Company’s actual results and could cause actual results to differ materially from those expressed or
implied in any forward-looking statements made by, or on behalf of, the Company. 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. Forward-looking statements are
provided for the purpose of providing information about management’s expectations and plans relating to
the future. All of the forward-looking statements made in this Annual Information Form are qualified by
these cautionary statements and those made in our other filings with the securities regulators of Canada
including, but not limited to, the cautionary statements made in the “Risks and Uncertainties” section of
the Company’s most recently filed Management’s Discussion and Analysis. These factors are not
intended to represent a complete list of the factors that could affect the Company. The Company
disclaims any intention or obligation to update or revise any forward-looking statements or to explain any
material difference between subsequent actual events and such forward-looking statements, except to the
extent required by applicable law.
2 GENERAL MATTERS
This Annual Information Form is for the year ended December 31, 2011. All information in this Annual
Information Form is as of December 31, 2011, unless otherwise indicated.
In this Annual Information Form, unless otherwise indicated, all dollar amounts are expressed in
Canadian dollars and references to “$” are to Canadian dollars.
All financial information in this Annual Information Form has been prepared in accordance with
International Financial Reporting Standards unless otherwise expressly indicated.
The industry and other statistical data presented in this Annual Information Form, except where otherwise
noted, have been compiled from sources and participants which, although not independently verified by
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the Company, are considered by the Company to be reliable sources of information. References in this
Annual Information Form to research reports or articles should not be construed as depicting the complete
findings of the entire referenced report or article and such report or article is expressly not incorporated
by reference into this Annual Information Form.
For ease of reference, the following factors for converting Imperial measurements into metric equivalents
are provided:
To Convert from Imperial To Metric Multiply by
Acres Hectares 0.404686
Feet Metres 0.30480
Miles Kilometres 1.609344
Tons Tonnes 0.907185
Ounces (troy)/ton Grams/tonne 34.2857
Ounces
Imperial Measurement
Grams
Metric
31.1035
1 mile = 1.609 kilometres
1 yard = 0.9144 metre
1 acre = 0.405 hectare
2,204 pounds = 1 tonne (metric)
2,000 pounds/1 short ton = 0.907 tonnes
2.1 Special Note to Reader
Please note that all references in this Annual Information Form to Common Shares, Options, Warrants
and other securities as applicable, even those that pre-date the Common Share Consolidation and Warrant
Consolidation, as applicable, are stated on a post-consolidation basis.
2.2 Incorporation by Reference
The Technical Reports, prepared and filed in accordance with NI 43-101, are incorporated by reference
into, and form part of, this Annual Information Form. These documents have been filed on, and may be
accessed under the Company’s profile on SEDAR at www.sedar.com.
2.3 Exchange Rate Information
United States Exchange Rate Information 2.3.1
The following table sets out: (1) the rate of exchange for one Canadian dollar in U.S. dollars in effect at
the end of each of the periods set out immediately below; (2) the high and low rate of exchange during
those periods; and (3) the average rate of exchange for those periods, each based on the noon spot rate as
published on the Bank of Canada’s website. On March 28, 2012, the noon nominal rate for one Canadian
dollar in U.S. dollars as published by the Bank of Canada was $1.00 = US$1.0016.
High Low Average End of Period
Years ended December 31
2011 1.0583 0.9430 1.0111 1.0170
2010 1.0745 0.9946 1.0303 1.0054
2009 0.9755 0.7653 0.8757 0.9555
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2.4 Colombia Exchange Rate Information
The following table sets out: (1) the rate of exchange for one Canadian dollar in COP in effect at the end
of each of the periods set out immediately below; (2) the high and low rate of exchange during those
periods; and (3) the average rate of exchange for those periods, each based on the noon spot rate as
published on the Bank of Canada’s website. On March 28, 2012, the noon nominal rate for one Canadian
dollar in COP as published by the Bank of Canada was $1.00 = COP1,776,1989.
High Low Average End of Period
Years ended December 31
2011 1,968.5039 1,792.1147 1,867.2044 1,904.7619
2010 1,960,7843 1,709.1017 1,840.5673 1,930.5019
2009 2,079.0021 1,763.6684 1,883.2392 1,956.9472
3 INFORMATION CONCERNING THE COMPANY
3.1 Name, Address and Incorporation
The full corporate name of the Company is Gran Colombia Gold Corp. The head office of the Company
is located at 333 Bay Street, Suite 1100, Toronto, Ontario M5H 2R2 and its registered office is located at
1188 West Georgia Street, Suite 650, Vancouver, British Columbia, V6E 4A2. The Company also has
offices in Bogotá and Medellin, Colombia, Venezuela and Mali.
The Company was incorporated pursuant to the provisions of the British Columbia Company Act on May
27, 1982 under the name “Impala Resources Ltd.” On August 26, 1987, Impala Resources Ltd. changed
its name to “International Impala Resources Ltd.” On November 13, 1992, International Impala
Resources Ltd. changed its name to “Tapestry Ventures Ltd.” On December 22, 2004, Tapestry Ventures
Ltd. changed its name to “Tapestry Resource Corp.” In connection with the RTO (described herein), on
August 13, 2010, the Company changed its name from “Tapestry Resource Corp.” to “Gran Colombia
Gold Corp.”
Effective June 10, 2011, Gran Colombia completed a merger with Medoro, a TSX listed company. The
combined company continues under the name “Gran Colombia Gold Corp.” See “General Development
of the Business – 2011 – Medoro Merger” and “General Development of the Business – Significant
Acquisitions and Dispositions – Medoro Merger”.
3.2 Intercorporate Relationships
The following chart illustrates the principal subsidiaries of the Company, together with the jurisdiction of
incorporation of each company and the percentage of voting securities beneficially owned or over which
control or direction is exercised, directly or indirectly, by the Company as at the date hereof:
Gran Colombia Gold Corp.(British Columbia)
Gran Colombia Gold, S.A.(Panama)
Mazamorras Gold Corp.
(Panama)
Remedios Gold, S.A.
(Panama)
Segovia Gold, S.A.(Panama)
Nova Partners International Corp.
(Panama)
Providencia Gold Corp.
(Panama)
Zandor Capital, S.A.
(Panama)
Zancudo Gold Corp.(Panama)
Medoro Resources (Yukon) Inc.
4,760 Shares = 0.1584%
Zancudo Gold Sucursal(Colombia)
100%
Providencia GoldSucursal
(Colombia)
100%
Segovia Gold, S.A. Sucursal
(Colombia)
100%
Mazamorras Gold Sucursal
(Colombia)
100%
Commercializadora Internacional de Metales
Preciosos y Metales Comunes Inversiones Generales S.A. CIIGSA
(Colombia)
60%
Zandor Capital, S.A. Sucursal(Colombia)
100%
100%
100% 80% 100% 100% 100% 100% 95%
100%
200 Shares = 5%
Medoro Resources Colombia Inc.
(Panama)
Medoro Andina Internacional S.A.
(Panama)
Colombia Gold Ltd.(UK)
Barona Cape Ltd.(BVI)
98,500,000 Shares = 100% 100 Shares = 100% 500 Shares = 100% 50,000 Shares = 100%
Colombia Gold AG(Switzerland)
47,854,676 Shares = 100%
Colombia Gold Ltd.(British Columbia)
Colombia Gold, S.A.S(Colombia)
1,438,384 Shares = 90.92%
2,997,880 Shares = 93.49%
Minera Croesus, S.A.S(Colombia)
Minera de Caldas, S.A.S(Colombia)
206,580 Shares = 6.44%
15,000 Shares = 1.50%
215,199 Shares = 100%
Mineros Nacionales S.A.(Colombia)
Medoro Resources Colombia Inc. Sucursal
Colombia
104,524,486 Shares = 100%1,000 Shares = 100%
Colombia Goldfields Ltd.
(Delaware)
RNC (Colombia) Ltd.(Belize)
Minerales Andinos de Occidente S.A.
(Colombia)
2,846,310 Shares = 94.7469%Gavilan Minerales, S.A.S
(Colombia)
149,498 Shares = 4.9764%
13,292 Shares = 8.86%
45,000 Shares – 4.5%
3,552 Shares = 0.1182%
1,000 Shares = 100%
97,114 Shares = 6.14%
Tolima Gold Corp.
(Colombia)
5,000,000 Shares = 4.26%
46,500 = 2.94%
94,000 = 94%
African Gold Resources Corp.
(Panama)
100%
Gold Resources du Mali SARL(Mali)
100%
Medoro Resources International Ltd.
(BVI)(Formerly Panwest)
100%
Mineria MH, CA.
(Venezuela)
Medoro de Venezuela, CA.
Lo Incredible Mining Company de
Venezuela CA.(Venezuela)
Los Mineros de El Callao, SA.
(Venezuela)
95%
100%
2,120 Shares = 0.07%
7.7%
Minority ShareholdersIndividuals - Shares
held on behalf of Company
Third Party Small Holders
138,908 Shares = 89.6%2,160 Shares = 1.39%
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Most of the Company’s subsidiaries in the above chart identified below Medoro Yukon were acquired by
Medoro (and effectively the Company as a result of the Medoro Merger) as a result of several acquisitions
of different mining projects from a series of vendors with the strategy of consolidating the Marmato
mining district in Caldas, Colombia. Some of such acquisitions, for different reasons, were structured as
amalgamations of companies or acquisitions of off-shore holding structures. Since the vendors of these
assets were based in different countries and had distinct corporate planning strategies, these purchases by
the Company resulted in a very intricate structure of off-shore holding companies for the Company,
including companies in the UK, Switzerland, Belize, British Virgin Islands, Delaware (U.S.A.), Yukon
Territory (Canada), British Columbia (Canada) and Colombia. These structures do not provide any
advantages to the Company and instead increase costs and effort related to accounting, reporting and
operational burden. As such, the Company has commenced a process to re-organize and streamline its
subsidiaries in order to simplify the off-shore holding structure of the Company’s Colombian assets.
The Company expects to commence the re-organization during the 2012 financial year.
4 GENERAL DEVELOPMENT OF THE BUSINESS
4.1 Inception to August 2010
Since the date the Old GCM Shares commenced trading on the Vancouver Stock Exchange, Old GCM
carried out the business of exploration of minerals until being deemed inactive on June 26, 2002. On
August 18, 2003, the Old GCM Shares were transferred to the NEX.
On June 30, 2010, Old GCM announced that it had entered into an agreement to complete the RTO
pursuant to the Gran Colombia Transaction. The RTO closed on August 19, 2010, and trading of the
Common Shares and Warrants on the TSXV commenced on August 24, 2010 under the symbols “GCM”
and “GCM.WT”, respectively.
Old GCM Warrants
On March 19, 2010, Old GCM completed a non-brokered private placement of units that included non-
transferable warrants of Old GCM. Each such warrant entitled the holder to purchase one-quarter of a
Common Share at an exercise price of $0.10 until March 19, 2011. Upon completion of the Gran
Colombia Transaction, there were 22,000,000 Old GCM warrants issued and outstanding. As of the date
hereof, all Old GCM warrants have been exercised and there are no Old GCM warrants outstanding.
Previous Financings
Effective April 27, 2010, Gran Colombia Panama completed the First Gran Colombia Private Placement.
In connection with the First Gran Colombia Private Placement, Gran Colombia Panama granted the First
Gran Colombia Private Placement Compensation Options to the Agent.
On July 27, 2010, Gran Colombia Panama completed the Second Gran Colombia Private Placement.
Gran Colombia Panama paid to the Agent a cash commission equal to 6% of the gross proceeds raised in
connection therewith upon release of the proceeds from escrow. In addition, as additional compensation
in connection with the Second Gran Colombia Private Placement, Gran Colombia Panama also granted
the Second Gran Colombia Private Placement Compensation Options to the Agent.
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4.2 August 2010 – December 31, 2011
RTO
On June 30, 2010, Old GCM announced that it had entered into an agreement to complete the RTO,
thereby effecting the Gran Colombia Transaction. Under the terms of the Gran Colombia Transaction,
each Gran Colombia Panama shareholder received one Common Share for every common share in the
capital of Gran Colombia Panama held, each holder of a warrant of Gran Colombia Panama received one
warrant of the Company for every Gran Colombia Panama warrant held, each holder of a First Gran
Colombia Private Placement Compensation Option received one Option for every First Gran Colombia
Private Placement Compensation Option held, and each holder of a Second Gran Colombia Private
Placement Compensation Option received Option for every Second Gran Colombia Private Placement
Compensation Option held.
After completion of the Gran Colombia Transaction, an aggregate of 211,187,634 Common Shares were
issued and outstanding, or 329,568,877 Common Shares on a fully-diluted basis. The former Old GCM
shareholders owned 8,062,629 Common Shares, or approximately 3.82% of the issued and outstanding
Common Shares at that time. Pursuant to the Gran Colombia Transaction, the Gran Colombia Panama
shareholders were issued 203,125,000 Common Shares or approximately 96.18% of the issued and
outstanding Common Shares.
On August 19, 2010, the Company completed the RTO.
Following the completion of the RTO, the Common Shares and Warrants were listed and began trading
on the TSXV under the symbol “GCM” and “GCM.WT”, respectively.
Acquisition of 100% Interest in Zandor
On August 17, 2010, Gran Colombia Panama loaned a principal amount of COP372,500,000,000 to
Zandor, then a wholly-owned Panamanian subsidiary of Medoro, pursuant to a convertible promissory
note. The principal amount comprised COP365,000,000,000 (approximately US$201.7 million) of cash
advanced on August 17, 2010 from the proceeds of the Second Gran Colombia Private Placement and
COP7,500,000,000 (approximately US$3.9 million) relating to half of the COP15,000,000,000 deposit
already paid by Medoro.
On August 18, 2010, Zandor used these funds to complete the Frontino Acquisition (being the Segovia
Project).
On August 19, 2010, the principal amount was converted into such number of shares in the capital of
Zandor that resulted in Gran Colombia Panama holding a 95% equity interest in Zandor with Medoro
retaining a 5% equity interest in Zandor. Concurrently with the conversion of the convertible promissory
note, on August 19, 2010, Gran Colombia Panama, Medoro and Zandor entered into an Exploration,
Development and Mine Operating Agreement and Shareholders’ Venture Agreement setting out the
parties’ rights and obligations with respect to their ownership in the shares in the capital of Zandor. The
joint venture agreement included, among other provisions, the back-in right pursuant to which Medoro
had the right to increase to a 50% equity interest in Zandor within one year by paying 50% of all costs,
including acquisition costs, capital costs and the $3 million success fee paid by Gran Colombia Panama,
from the date of closing of the acquisition up to the date of the exercise of such option, plus a premium of
25% of such costs. As a result of the Medoro Merger as described below, the Company acquired the
remaining 5% interest in Zandor and the back-in right was cancelled as of June 10, 2011. For further
information see the heading entitled “Interest of Management and Others in Material Transactions”.
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On September 7, 2010, the Company announced that it had completed all the steps required to take
management and operational control of the mining assets of FGM. This followed a two-week mine
transition period set out for the liquidation and payment of severance of all former employees of FGM,
for the training of personnel, and for handing over of the operations to the Company. During the mine
transition period, no mining operations took place and the Company incurred costs of approximately
US$1.2 million, including those incurred through a vision care program offered to employees during this
period as part of the Company’s commitment to social initiatives. Mining operations resumed on
September 6, 2010 in all three acquired underground mining areas (El Silencio, Providencia and Sandra
K) located within the Segovia Project.
On June 10, 2011, the Company acquired all of the issued and outstanding securities of Medoro pursuant
to the Medoro Merger (see “General Development of the Business – 2011 – Medoro Merger” and
“General Development of the Business – Significant Acquisitions or Dispositions – Medoro Merger”), the
effect of which resulted in the Company acquiring Medoro’s 5% interest in Zandor, thereby increasing the
Company’s interest in Zandor from 95% to 100%.
Pursuant to the terms of the Frontino Acquisition Agreement, the liquidator responsible for the sale of the
FGM assets was required to use the proceeds from the disposition of the FGM assets, which were held in
an interest-bearing trust account, to fund unpaid and accrued pension liabilities estimated to amount to
approximately COP380,000,000,000. The assignment of these pension obligations to the ISS, a
governmental entity responsible for the administration and payment of the pension obligations, was
completed on March 11, 2011. On that date, the trust agent transferred COP364,922,530,792 to the ISS
and the balance of the funds in the trust account will be used by the liquidator to settle other liabilities of
FGM incurred prior to the Frontino Acquisition. The ISS has assumed responsibility for the
administration and payment of all remaining pension obligations to the former employees of FGM, and
Zandor has no further obligations in respect of these pensions. According to an amendment of the
Frontino Acquisition Agreement, if the assignment of pension obligations to the ISS was not completed
by the second month after the closing date of such acquisition, Zandor would fund monthly pension
payments to pensioners of FGM, until the assignment of such pension obligations to the ISS. From
August 2010 through March 2011, Zandor advanced additional funds from its own cash in the amount of
approximately US$5.3 million to fund monthly pension payments while the assignment of the pensions to
the ISS was in process. These advances are being recovered by Zandor through a reduction of 70% in its
quarterly “social contribution payments”, an obligation arising under the Frontino Acquisition Agreement
until the advances are fully recovered.
In addition, pursuant to the Frontino Acquisition Agreement, Zandor is obligated to make monthly health
contribution payments to the pensioners of FGM. The Company is responsible for paying approximately
COP165,000,000, or approximately US$87,000 per month, in respect of these remaining obligations.
Common Share Consolidation
Effective November 11, 2010, the Company consolidated its issued and outstanding Common Shares on a
one-for-four basis after receiving the requisite Board, regulatory and shareholder approvals.
Warrant Consolidation
Effective December 1, 2010, the Company consolidated its issued and outstanding Warrants on a one-for-
four basis after receiving the requisite Board and regulatory approvals.
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CIIGSA
On December 2, 2010, Gran Colombia Panama signed an agreement to acquire all of the shares of Nova
Partners International Corp., a Panamanian company which owned a 60% equity interest in CIIGSA. This
acquisition, which was completed at the end of December 2010, provides the Company with a controlling
interest in a fully permitted precious metals refining and smelting facility in Medellin, Colombia.
TSX Graduation
On December 22, 2010, the Company announced it had received approval by the TSX to be delisted from
the TSXV and to list the Common Shares and Warrants on the TSX. Trading commenced as of the
opening of the TSX on December 22, 2010 under the symbols “GCM” and “GCM.WT”, respectively.
4.3 2011
Operational and Exploration Update and Drilling Success of New Veins – January
On January 13, 2011, the Company announced an operational and exploration update and announced drill
success at two new veins at the Segovia Operations.
Assignment of Frontino Pension Liability
On March 13, 2011, the Company announced the successful assignment by FGM, the previous operator
of the Segovia Project, of its pension liability for its former employees to ISS, a governmental entity
responsible for the administration and payment of pension obligations.
The assignment of the FGM pension obligations to the ISS had been a material term of the acquisition of
the mining assets of FGM by the Company. However, at the time of the closing of the acquisition, ISS
had not completed the necessary calculations it required in order to formally accept the assignment of the
pension obligations. Accordingly, the Company had placed COP380 billion or approximately US$203
million, in a trust account pending completion of the assignment of the pension obligations. On March 11,
2011, the Company transferred COP365 billion or approximately US$202 million, to ISS and the balance
of the funds in the trust account will be used by the liquidator to fund costs and other expenses related to
the liquidation of FGM.
The ISS has now assumed responsibility for the administration and payment of all remaining pension
obligations to the former employees of FGM and the Company has no further obligations in respect of
these pensions.
Medoro Merger
On June 10, 2011, the Company completed the Medoro Merger. See “General Development of the
Business – Significant Acquisitions or Dispositions – Medoro Merger”, “Description of Capital Structure
– Warrants”, and “Market for Securities – Prior Sales”.
Note Offering
On July 8, 2011, the Company filed with the Canadian Securities Regulators in each of the provinces of
Canada, except Quebec, a preliminary short form prospectus, and a final prospectus on August 4, 2011, in
connection with the public offering of the Notes. A receipt for the final prospectus was granted by the
Ontario Securities Commission on August 5, 2011, and the transaction closed on August 11, 2011.
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The Notes, due on August 11, 2018, bear interest at a rate of 5.0% per year, payable semi-annually in
arrears in equal installments on December 31 and June 30 of each year. The first interest payment date
was on December 31, 2011 and consisted of interest accrued from and including the closing date of the
Note Offering. Holders of Notes will be entitled to receive the greater of (i) the principal amount of the
Note held, or (ii) the U.S. dollar financial equivalent to approximately 66.7 ounces of silver per Note, as
determined using the average realized silver price by the Company over the 6 month period immediately
prior to any repayment or redemption of principal, representing the US dollar financial equivalent of an
aggregate of five million ounces of silver. The quantity of silver per Note was determined using a notional
price of US$15 per ounce of silver, providing holders with the opportunity to benefit from silver prices in
excess of US$15 per ounce. The Company is naturally hedged against the silver price through its current
and anticipated silver production as a by-product to its gold mining operations and the development of the
significant silver resources at its 100% controlled Marmato project located in Colombia.
The Company, shall repay, on a pro rata basis, (a) 10% of the total principal amount of the Notes
outstanding on August 11, 2013, with such principal amount being repaid on the basis of the greater of (i)
10% of the total principal amount, and (ii) the US dollar financial equivalent to 6.67 ounces of silver per
Note, (b) 20% of the total principal amount of the Notes outstanding on August 11, 2016, with such
principal amount being repaid on the basis of the greater of (i) 20% of the total principal amount, and (ii)
the US dollar financial equivalent to 13.34 ounces of silver per Note, (c) 30% of the total principal
amount of the Notes outstanding on August 11, 2017, with such principal amount being repaid on the
basis of the greater of (i) 30% of the total principal amount, and (ii) the US dollar financial equivalent to
20.00 ounces of silver per Note, and (d) the remaining principal amount of the Notes on August 11, 2018
(being the maturity date) with such principal amount being settled on the basis of the greater of (i) the
balance of the principal amount of the Notes outstanding, and (ii) the US dollar financial equivalent to
approximately 26.67 ounces of silver, together in each case with all accrued and unpaid interest thereon to
the date of repayment.
See “Description of Capital Structure – Notes”. For full particulars of the Note Indenture, please refer to
the Note Indenture which can be accessed under the Company’s SEDAR profile at www.sedar.com.
Normal Course Issuer Bid – Notes
On August 25, 2011, the Company filed a Notice of Intention to commence a normal course issuer bid
with the TSX for its Notes, and later filed a revised Notice of Intention with the TSX on September 7,
2011. The Company received TSX approval for the bid on August 25, 2011.
Under the terms of the bid, the Company has the right to purchase for cancellation up to a maximum of
US$7,672,500 aggregate principal amount of Notes (representing approximately 10% of the public float
of the Notes issued and outstanding as of August 24, 2011, determined in accordance with the applicable
rules of the TSX) on the open market at any price in accordance with the terms of the Note Indenture.
Management of the Company is responsible for determining the actual number of Notes that may be
purchased and the timing of any such purchases, subject to compliance with applicable TSX rules. Daily
purchases are limited to US$1,000 principal amount of Notes, other than block purchase exceptions.
Purchases made pursuant to the bid will be made in the open market through the facilities of the TSX and
the price that the Company will pay for any such Notes will be the market price at the time of the
acquisition. The Company will not purchase Notes when the market price per Note exceeds US$1,000.
The bid commenced on August 29, 2011, and remains open until the earlier of August 28, 2012 or the
date on which the Company has purchased the maximum number of Notes permitted under the bid.
The Company is funding the repurchase of the Notes with the proceeds from the sale of its silver
production in order to capitalize on the current high market prices for silver. Under the normal course
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issuer bid, to December 31, 2011, the Company has repurchased 1,368 Notes at an average purchase price
of US$953.38 per Note. There have been no Notes repurchased subsequent to December 31, 2011 to the
date of this Annual Information Form.
Additional Drilling Results and Increase in Measured and Indicated Gold Resources at the Marmato
Project
On September 4, 2011, the Company announced a new NI 43-101 mineral resource estimate for its
Marmato Project containing 10.0 million ounces of gold in the Measured and Indicated categories and an
additional 2.4 million ounces of gold in the Inferred category at a cut-off grade of 0.3 g/t. In addition,
there are an estimated 64 million ounces of silver in the Measured and Indicated categories and a further
11 million ounces of silver in the Inferred category. This new in-pit mineral resource represents a 51%
increase in measured and indicated gold ounces and a 73% increase in measured and indicated silver
ounces compared to the previous mineral resources dated January 6, 2011 (filed on SEDAR).
In addition to this in-pit resource, SRK UK, which performed the mineral resource estimate, also
identified an underground mining resource of 2.1 million tonnes at a gold grade of 1.8 grams per tonne
representing 120,000 ounces of Measured and Indicated gold resources plus 6.4 million tonnes grading
2.3 g/t gold or 500,000 ounces of gold in the Inferred resource category.
These results are included and discussed in the Marmato Technical Report, a copy of which can be
accessed under the Company’s profile on SEDAR at www.sedar.com. See “Properties – Marmato
Project”.
Board Changes
On September 21, 2011, the Company announced the appointment of Mario Pacheco as a member of the
Board of the Company. The Company also announced the resignations of Jorge Neher, Courtney Neeb
Brewer, J. Randall Martin and Maria Consuelo Araujo from the Board in an effort to reduce the size of
the Board. Maria Consuelo Araujo remained as Chief Executive Officer of the Company.
Normal Course Issuer Bid – Common Shares
On September 27, 2011, the Company filed a Notice of Intention to commence a normal course issuer bid
with the TSX for its Common Shares listed on the TSX. The Company received TSX approval for the
bid on September 28, 2011.
Under the terms of the bid, the Company has the right to purchase for cancellation up to a maximum of
37,993,493 Common Shares through the facilities of the TSX (representing approximately 10% of the
public float of the Common Shares issued and outstanding as of September 23, 2011, determined in
accordance with the applicable rules of the TSX). Management of the Company is responsible for
determining the actual number of Common Shares that may be purchased and the timing of any such
purchases, subject to compliance with applicable TSX rules. Daily purchases are limited to 188,842
Common Shares, other than block purchase exceptions. Purchases made pursuant to the bid will be made
in the open market through the facilities of the TSX and the price that the Company will pay for any such
Common Shares will be the market price at the time of the acquisition.
The bid commenced on September 30, 2011, and remains open until the earlier of September 29, 2012 or
the date on which the Company has purchased the maximum number of Common Shares permitted under
the bid.
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The Company is funding the repurchase of the Common Shares with available cash balances and cash
generated through operations. Under the normal course issuer bid, the Company has repurchased
7,703,000 Common Shares during the financial year ended December 31, 2011 at a cost of $0.65 per
share. There have been no common shares repurchased subsequent to December 31, 2011 to the date of
this Annual Information Form.
Marmato Technical Report
In October 19, 2011, the Company announced that it had filed the Marmato Technical Report on SEDAR.
See “Properties – Marmato Project”.
Expansion at Segovia Operations and Related Financing
On December 12, 2011, the Company announced that it had retained GMP Securities L.P. to assist the
Company in the evaluation of several debt financing alternatives for the Company to fund mine and mill
expansion plans at its Segovia Operations. The project financing is intended to fund the Corporation’s
plan to increase production at its Segovia Operations through the development of a new mechanized
mining operation and the acquisition of a new 2,500 tpd mill in addition to the expansion of the Maria
Dama mill. Development of the new mining area is planned for completion in 2013 and the new 2,500
tpd mill is expected to be commissioned by the beginning of 2013.
In connection with the proposed expansion, on December 20, 2011, the Company signed the Mandate
Letter with Standard Bank in connection with the arrangement of the Facility to provide the funding for
the acquisition and installation of the new mill and mining and other equipment for the new mechanized
mining operation. Although the Mandate Letter had initially contemplated a potential closing date for the
Facility at the end of January 2012, the technical, environmental and other due diligence studies and
evaluations, many of which are being prepared by third party consultants, required by Standard Bank
have taken longer than anticipated to be completed. The Company is continuing to work with Standard
Bank on these matters in order to close the Facility as expeditiously as possible in order to commence
with this expansion project. The production guidance for the Segovia Operations in 2012 is not contingent
on the completion of this expansion project.
The Facility will provide for, among other things: (i) a gold participation program during the five year
term of the Facility whereby Standard will purchase 2,500 ounces of gold per month and participate in the
proceeds of selling the gold above US$1,300 per ounce; (ii) the Company will pay interest only on the
Facility during the first 12 months and will begin paying principal on a monthly basis at the beginning of
the second year of the Facility; and (iii) the Company will provide for certain security in connection with
the Facility.
Concepción Project Update
During the year ended December 31, 2011, the Company continued with its exploration program at the
Concepcion Project. Based on its evaluation of the findings through this work program, the Company
concluded that it would discontinue its efforts with this property and recorded a US$2.4 million write-
down in its financial results for the 2011 financial year representing all costs capitalized to-date.
4.4 Subsequent Developments
Update on Marmato Resettlement Progress
On January 9, 2012, the Company provided an update on the progress of the Marmato resettlement,
including the engagement of Social Capital Group, BSD Consultants and Replan (see “Description of the
Business – Social or Environmental Policies”). In order for the Company to build the open pit operation
- 23 -
at Marmato, the existing town of Marmato will need to be moved and the existing residents re-settled to
nearby areas including the town of El Llano, approximately 1.5 km away. The exact number of people to
be resettled will be included in the Resettlement Action Plan, which was completed by Social Capital
Group in first quarter 2012. The Company regards the Marmato resettlement as an opportunity to
improve the livelihoods and the future development of the Marmato community and such planning is
being undertaken by the Company in strict accordance with international standards for resettlement as
recommended by the World Bank in their International Financing Corporation guidelines.
Miners’ Negotiations at the Marmato
On January 9, 2012, the Company announced that on November 28, 2011, the Secretary of the
Department of Caldas, Fernando Alvarez Hely Mejía, confirmed the Department’s commitment to assist
the Company in reaching an agreement with artisanal mines within the Company’s concession at the
Marmato Project, which negotiations are well underway.
At the Marmato Project, there are a few formal mining titles still to be acquired, as well as certain
artisanal miners which need to move their operations. The Company has entered into, has renegotiated,
and is in the process of, negotiating agreements with several artisanal miners at Alto El Burro,
Chaburquia, Echandia and Cieno Pesos. Under these agreements, the artisanal mines will continue to
operate for up to two years, at which time the Company anticipates commencing large scale mining at the
Marmato Project. The Company has also implemented an environmental and safety training program for
the artisanal miners, which will not only serve to immediately improve environmental and safety
conditions at Marmato, but will lay the groundwork for these artisanal miners to be available for
employment by the Company at its open-pit mine at Marmato once constructed.
The Company still has to negotiate with the remaining artisanal mines at Chaburquia, Echandia and Cien
Pesos, as well as with the remaining title-holders at Alto El Burro. The schedule for completion of this
work will largely depend on the recommended project layout and development timing presented in the
project’s pre-feasibility study.
Discovery of New, Deep Mineralization and Additional Drill Results at the Marmato Project
On January 9, 2012, the Company announced the discovery of a deep mineralization trend below the
current, preliminary pit outline at its Marmato Project, further highlighting the geological upside of this
project. Highlights from an additional 82 drill holes totalling 24,697 metres from the diamond drilling
program include hole MT-1455A which returned 1.4 grams per tonne (g/t) gold and 6.4 g/t silver over
357 metres and hole MT-1445, which returned 1.4 g/t gold and 2.3 g/t silver over 239 metres.
The current drilling has also produced a number of deep gold intersections, which include those
highlighted above, and which extend mineralization trends to approximately 300 metres below the limit
of the current preliminary pit outline. The deep mineralization is still open at depth and in all directions
except to the southwest. These deep intersections show that mineralization at the Marmato Project
extends for a vertical interval of more than 1,040 metres to the 560 metre level, and is open at depth.
Drilling on Las Aves Vein System at the Segovia Project
On January 24, 2012, the Company announced that it had completed a diamond drilling program
consisting of 86 diamond holes totaling 32,470 metres as of December 5, 2011, during the first phase of
exploration drilling at the Segovia Project. The first phase drilling campaign focused on defining new
resources by following the downward-plunge extension of the ore shoot in the Providencia Mine, and
tested a new vertical vein system which had never been drilled before, called the Las Aves Vein System,
on the western side of the property. Bonanza gold grades were intersected on both vein systems with
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maximum grades of 161 g/t Au and greater than 100 g/t Ag over 0.4 metres on the Providencia Vein, and
249 g/t Au with 162 g/t Ag over 0.4 metres on the Silencio Sur Vein, part of the Las Aves vein system.
Drilling on the Las Aves Vein System has confirmed a strike length of 3,500 metres and drilling was
carried out to 400 metres below surface. The vein is still open at depth. Some parallel veins such as Poma
Rosa were drilled, and in addition, there are a number of other veins parallel to the Las Aves Vein System
which have yet to be drilled. The southern continuation of the Silencio Vein was also drilled near its
intersection with Las Aves and returned grades up to 249.1 g/t Au over 0.4 metres.
New Mineral Resource Estimate – Segovia Operations
On March 5, 2012, the Company announced a new mineral resource estimate, prepared by SRK UK, for
its Segovia Operations containing 233,000 ounces of gold in the Measured and Indicated categories and
an additional 1.08 million ounces of gold in the Inferred category at a cut-off grade of 3.0 g/t Au. This
mineral resource represents a 76% increase in measured and indicated gold ounces compared to the
previous mineral resources dated June 9, 2010 (prepared by Scott E. Wilson, C.P.G., the Measured and
Indicated categories were calculated at a cut-off grade of 7.1 g/t Au), and includes an update of the
resource of the Providencia, El Silencio and Sandra K mines as well as initial resource estimates for the
Las Aves Vein System, which make up the Company’s Segovia Operations.
The estimate has been reported according to CIM Standards and will be supported by a NI 43-101
independent report which will be published and filed on the Company's website and SEDAR profile by
April 12, 2012.
4.5 2012 Outlook
The Company’s focus in 2012 will be to continue to: (i) increasing total annual gold production to a total
of approximately 155,000 ounces, which includes production growth to approximately 130,000 oz Au at
the Segovia Operations made possible by the completion of the expansion of the existing Maria Dama
Plant; (ii) continuing to take the actions necessary to reduce the cash production costs on a per ounce
basis at the Company’s operated mines in the Segovia Operations; (iii) completing the pre-feasibility
study with respect to the Marmato Project to determine the most suitable plan for the development and
financing of the new mine operations; (iv) obtaining the financing to fund the Company’s expansion plan
at its Segovia Operations through the development of a new mechanized mining operation and the
acquisition of a new 2,500 t/d mill; (v) commencing a 60,000m diamond drilling exploration program at
the Segovia Operations to upgrade and expand its resources; (vi) continuing with the evaluation of the
resettlement action plan in connection with the Marmato resettlement; and (vii) commencing the re-
organization of the Company’s subsidiaries as described herein.
On September 16, 2011, the Venezuelan government issued a Decree-Law nationalizing gold exploration
and mining operations in the Country, including a minimum state equity participation of 55% in gold
projects, a new 13% royalty, and the banning of export sales by producers. The Company has tried to
engage the Venezuelan Government with respect to negotiations for the Company’s properties in
Venezuela for pricing and transfer of ownership of the nationalized portion of the projects. As the
prescribed negotiations period has expired, the Company intends to pursue the remedies afforded to it by
the Agreement between Venezuela and Canada for the Promotion and Protection of Investments (which
has been in force since 1998), including, if warranted, seeking such compensation through international
arbitration. See “Risk Factors – Economical and Political Factors – Venezuela”.
The Company will also continue to seek interested parties to complete the disposition of its interests in
the Mali exploration properties or explore other alternative transactions.
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4.6 Significant Acquisitions or Dispositions
Except for the Medoro Merger described below and elsewhere herein, the Company has not completed
any significant acquisitions or dispositions during the financial year ended December 31, 2011 for which
disclosure is required under Part 8 of National Instrument 51-102 – Continuous Disclosure Obligations.
Medoro Merger
On April 13, 2011, the Company announced that it entered into the Medoro Arrangement Agreement in
connection with the Medoro Merger. Pursuant to the Medoro Merger, the Company and Medoro merged
to form a single corporation continuing under the name “Gran Colombia Gold Corp.” The arrangement
was effected pursuant to section 195 of the YBCA through the Medoro Arrangement Agreement and the
Medoro Plan of Arrangement involving a Yukon incorporated wholly-owned subsidiary of the Company
(the merged subsidiary being Medoro Yukon). The transaction was approved at meetings of the
securityholders of the Company and Medoro held on June 7, 2011, respectively, and the Company also
received the applicable approvals from the Supreme Court of Yukon and the TSX in connection with the
Medoro Merger which subsequently closed and took effect on June 10, 2011.
Under the terms of the Arrangement Agreement, each Medoro shareholder received 1.20 Common Shares
plus a Gran Colombia Consideration Warrant for each Medoro share held. Each Gran Colombia
Consideration Warrant was issued under the Warrant Indenture. Holders of Medoro options and Medoro
warrants had their securities converted into Gran Colombia securities and on exercise will obtain
Common Shares and warrants on an equivalent basis. No fractional Common Shares or Warrants were
issued and holders otherwise entitled to a fractional interest in a Common Share or Warrant received the
nearest whole number of Common Shares or Warrants with all such fractions being rounded down. See
“Description of Capital Structure – Warrants”, and “Market for Securities – Prior Sales”.
Upon completion of the merger, existing Gran Colombia and Medoro shareholders each owned
approximately 50% of the combined company, on a fully diluted basis. As at the date thereof, the
Company had 389,686,629 Common Shares, 194,438,146 Warrants and 27,744,591 Options (excluding
compensation options) issued and outstanding, of which former Medoro securityholders had received
172,886,495 Common Shares and 72,035,656 Warrants as consideration.
As a result of the Medoro Merger, the Company acquired 100% of Medoro’s interest in the Marmato
Project and Medoro’s 5% interest in Zandor.
The Company filed a Business Acquisition Report on SEDAR in connection with its acquisition of
Medoro on July 7, 2011.
5 DESCRIPTION OF THE BUSINESS
5.1 Summary
The Company is a Canadian-based gold and silver exploration and development company focused on
acquiring, developing and operating properties of merit to bring to production, with a primary emphasis
on Colombia. The Company holds 100% of the former FGM gold and silver assets, including the largest
underground gold and silver mining operation in Colombia, being the Segovia Operations. It also owns
the rights to interests in the Marmato Project, which it acquired in connection with the Medoro Merger,
which includes the Zona Alta Property, the Zona Baja Property and the Echandia Property, and operates
the producing Mineros Nacionales Mine located in Zona Baja in Marmato. These individual properties in
Marmato are held under different licenses but are contiguous and are all part of the same geological
system. It also owns several other exploration projects in Colombia. The Company is committed to
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implementing its exploration and development strategy with a comprehensive environment, safety and
community program, meeting international standards of best practice.
The Company also holds a 100% interest in the Lo Increíble Properties in Venezuela which it acquired in
connection with the Medoro Merger. Initial mineral resources based on limited diamond drilling have
identified 13.4 million tonnes grading 2.2 g/t, or 940,000 ounces of open pittable gold. On September 16,
2011, the Venezuelan government issued a Decree-Law nationalizing gold exploration and mining
operations in the Country, including a minimum state equity participation of 55% in gold projects, a new
13% royalty, and the banning of export sales by producers. The Company has tried to engage the
Venezuelan government with respect to negotiations for the Company’s properties in Venezuela for
pricing and transfer of ownership of the nationalized portion of the projects. As the prescribed
negotiation period has expired, the Company intends to pursue the remedies afforded to it by the
Agreement between Venezuela and Canada for the Promotion and Protection of Investments (which has
been in force since 1998), including, if warranted, seeking such compensation through international
arbitration. See “Risk Factors – Economical and Political Factors – Venezuela” and “Material Contracts”.
In Mali, the Company currently owns the rights to four gold exploration properties, Kangare, Samaya,
Batanko and Sindo, of which the Company is currently in the process of renewing the Sindo permit.
Three of the licenses are located in the gold-bearing Bougouni region in southern Mali, on the West
African craton. The licenses are Sindo, Kangare and Samaya, Naiouleni. The other license area,
Bantanko, is located in the west of Mali, in the Keneiba window portion of the West African craton. The
Company has ceased funding exploration activities on the Mali properties, while it seeks interested parties
to complete a disposition of its interests in these properties. These rights were acquired by the Company
in connection with the Medoro Merger.
The Company’s business activities are directed from its offices in Toronto, Ontario (333 Bay Street, Suite
1100), Bogota and Medellin, Colombia.
5.2 Production
The Company’s principal product is gold. In addition to gold, the Company also produces silver.
Although there exists worldwide gold and silver markets into which the Company can sell, the Company
is dependent on a particular purchaser located in Colombia with regard to the sale of minerals which it
produces at the Segovia Operations and the Mineros Nacionales Mine at Marmato. The Company sells its
gold and silver production through CIIGSA to international buyers. CIIGSA currently does not enter into
any derivative financial instruments in respect of these sales activities.
5.3 Segovia Operations
2010
For the period from incorporation on January 4, 2010 to December 31, 2010, the Company produced
14,509 ounces of gold, including 1,187 ounces produced by small (contract) miners at the Segovia
Operations. During the same period in 2010, the Company sold 14,071 ounces of gold at an average
realized price of US$1,385 per ounce. Total cash cost (on a by-product basis) averaged US$1,295 per
ounce of gold sold and total production cost, including depreciation and depletion, averaged US$1,537
per ounce of gold sold.
2011
For the year ended December 31, 2011, the Company produced 68,704 ounces of gold and 64,633 ounces
of silver, including 29,272 ounces of gold produced by artisanal (contract) miners at the Segovia
Operations. During the same period in 2011, the Company sold 69,115 ounces of gold and 60,836 ounces
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of silver at an average realized price of US$1,582 per ounce and US$US$31 per ounce, respectively.
Total cash cost (on a by-product basis) averaged US$1,288 per ounce of gold sold for the full year but
was lower in the fourth quarter at US$1,128 due to initiatives implemented in September.
2012
The Company expects its 2012 gold production from its Segovia Operations to be approximately 130,000
ounces and its silver production to be approximately 108,000 ounces. The Company expects that
increased productivity and tonnes mined in 2012 will reduce the cash cost at the Company-operated
mines below $1,000 per ounce of gold produced. The cash cost per ounce of gold produced by the
artisanal miners is tied to market prices for gold and is expected to be between US$1,100 and US$1,200
per ounce at current market prices of US$1,600 – US$1,700 per ounce. See “Forward-Looking
Information” and “Risk Factors”.
5.4 Marmato Operations
2010
For the year-ended December 31, 2010, the Company produced 20,426 and 32,556 ounces of silver at its
Mineros Nacionales Mine, at a weighted average price of US$1,244.90 per ounce of gold and weighted
average price of US$20.53 per ounce of silver. The average total cash costs were US$1,010.61 per ounce
of gold and silver combined. Total revenue from the sale of gold and silver combined in 2010 was
US$27,141,858.
2011
For the year ended December 31, 2011, the Company produced 22,715 ounces of gold and 35,117 ounces
of silver at its Mineros Nacionales Mine. During the same period in 2011, the Company sold 22,217
ounces of gold and 35,120 ounces of silver at an average realized price of US$1,481.53 per ounce and
US$33.06 per ounce, respectively. Total cash cost (on a by-product basis) averaged US$1,093.00 per
ounce of gold sold. Total revenue from the sale of gold from the Mineros Nacionales Mine in 2011 was
US$33,656,000, and US$1,161,000 from the sale of silver.
2012
The Company expects its 2012 gold production from its Mineros Nacionales Mine to be at approximately
25,000 ounces and its silver production to be approximately 36,000 ounces. It is expected that cash costs
of the gold produced will be similar to 2011. See “Forward-Looking Information” and “Risk Factors”.
5.5 Exploration
The Company has interests in several exploration properties in Colombia, being the El Zancudo Project,
the Segovia Operations, the Concepción Project and the Mazamorras Project (all of which were acquired
during 2010), and the Zona Alta and Echandia Property (which were acquired in October 2009 and
January 2010, respectively). In 2011, exploration activities continued at these properties; however
exploration ceased at the Concepción Project due to the lack of promissory drilling results. The
Company’s total exploration spending for these properties in 2011 was US$28 million.
The Company also has exploration properties in Venezuela and Mali. Exploration activities have been
suspended in Mali due to a change in focus of the Company. The Company has also suspended
exploration activities at the Lo Increíble Properties due to the Venezuelan government issuing a Decree-
Law nationalizing gold exploration and mining operations in the Country, including a minimum state
equity participation of 55% in gold projects, a new 13% royalty, and the banning of export sales by
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producers. See “Description of the Business – Summary” and “Risk Factors – Economical and Political
Factors – Venezuela”.
5.6 Specialized Skill and Knowledge
Operations in the gold exploration and development industry mean that the Company requires
professionals with skills and knowledge in diverse fields of expertise. In the course of its exploration,
development, and operations, the Company requires the expertise of drilling engineers, exploration
geophysicists and geologists and employs, directly and indirectly, such persons. To date, the Company
has not experienced any difficulties in hiring and retaining the professionals and experts it requires for its
operations and has found that it can locate and retain such employees and consultants and believes it will
continue to be able to do so. Further information is provided under the heading entitled “Risk Factors –
Shortage of Experienced Personnel and Equipment.”
5.7 Competitive Conditions
The precious metal mineral exploration and mining business is a competitive business. The Company
competes with numerous other companies and individuals in the search for and the acquisition of
attractive precious metal mineral properties. The ability of the Company to acquire precious metal
mineral properties in the future will depend not only on its ability to develop its present properties, but
also on its ability to select and acquire suitable producing properties or prospects for precious metal
development or mineral exploration. Although there is currently a high level of acquisition activity in
Colombia, the Company is well positioned in Colombia due to its successful acquisition of the Projects,
including the successful consolidation of the Marmato Project. Further information is provided under the
heading entitled “Risk Factors - Competition”.
5.8 Employees
As at the date hereof, the Company and its subsidiaries had seven employees at its head office in Toronto,
Canada, approximately 2,067 employees in Colombia, six employees in Venezuela and four employees in
Mali.
5.9 Foreign Operations
The Company’s material property interests are located in Colombia, and the Company also has property
interests in Venezuela and Mali. The Company’s activities in foreign jurisdictions may be affected by
possible political or economic instability and government regulations relating to the mining industry and
foreign investors therein. The risks created by this potential political and economic instability include, but
are not limited to: extreme fluctuations in currency exchange rates and high rates of inflation. Changes in
exploration or investment policies or shifts in political attitude in such jurisdictions may adversely affect
the Company’s business. Mineral exploration and mining activities may be affected in varying degrees by
government regulations with respect to restrictions on production, price controls, export controls, income
taxes, expropriation of property, maintenance of property, environmental legislation, land use, land claims
of local people, water use and property safety. The effect of these factors on the Company cannot be
accurately predicted. Further information is provided under the heading entitled “Risk Factors”.
5.10 Business Cycles
The mining business is subject to mineral price cycles. The marketability of minerals and mineral
concentrates is also affected by worldwide economic cycles. The Company’s operations are related and
sensitive to the market price of gold and, to a lesser degree, to other metal prices such as silver. Metal
prices fluctuate widely and are affected by numerous factors such as global supply, demand, inflation,
exchange rates, interest rates, forward selling by producers, central bank sales and purchases, production,
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global or regional political, economic or financial situations and other factors beyond the control of the
Company. Further information is provided under the heading entitled “Risk Factors – Metal Price
Volatility”.
5.11 Environmental Protection
The mining industry in Colombia is subject to environmental laws and regulations under varied
governmental legislation relating to the protection of the environment, including requirements for closure
and reclamation of mining properties. Compliance with such obligations and requirements can mean
significant expenditures and/or may constrain the Company’s operations in the country. Breach of
environmental obligations could lead to suspension or revocation of requisite environmental licenses and
permits, civil liability for damages caused and the possible fines and penalties, all of which may
significantly and negatively impact the Company’s position and competitiveness. Further information is
provided under the heading entitled “Risk Factors – Changes to Environmental Laws”.
As the many of the Company’s projects are currently in the exploration stage, the financial and
operational effects of environmental protection requirements are currently difficult to gauge. The
Company will have a better sense of these effects once it completes the revision of the Environmental
Management Plan at its Segovia Operations and the baseline environmental studies and Environmental
and Social Impact Assessment (ESIA) at its Marmato Project and once such plans have been submitted
and approved by the environmental authorities according to the applicable guidelines.
In addition, since the beginning of the Segovia Operations, the Company has promoted implemented
initiatives to improve the environmental performance of such operations. As part of this process, the
Company retained the Environmental Studies Institute for Development (IDEADE by its Spanish
acronym) of the Pontifical Javeriana University to update the current Environmental Management Plan.
The update seeks to address the need to improve the environmental performance of the exploitation and
supplementary activities at the Segovia Operations and was drafted in accordance with the General
Methodology for Submission of Environmental Studies, which is a guideline of The Ministry of
Environment, Housing and Territorial Development, and will be filed before the environmental authority
in April, 2012.
5.12 Social or Environmental Policies
The Company has established guidelines and management systems to comply with the laws and
regulations of Colombia, Venezuela, Mali and other countries in which it may operate. The Company has
dedicated employees responsible for all matters affecting the environment and local municipalities. While
the Company endeavours to meet all of its environmental obligations, it cannot guarantee that it has and
will be in compliance at all times. Nonetheless, management believes that operations are in substantial
compliance with all material Colombian, Venezuelan and Malian environmental laws and regulations;
however, it cannot assure that any artisanal miners operating on its properties are in compliance with such
laws and regulations.
In addition, the Company has recently instituted social awareness and responsibility programs, specific to
the areas in which it operates, which are carried out by employees in Colombia. The Company’s social
workers attend in the various municipalities where it operates to determine a community’s needs and
formulates the Company’s programs to the requirements of a particular area. The Company is
implementing human rights policies for the Marmato Project in accordance with the Free Trade
Agreement signed between Canada and Colombia.
In connection with the resettlement of the town of Marmato, Gran Colombia has hired Social Capital
Group to conduct a socio-economic analysis of the communities potentially affected by development of
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the Marmato Project, as well as a community census and to deliver a Resettlement Action Plan in
accordance with World Bank standards for involuntary resettlement. In addition, BSD, a Switzerland-
based consulting group with offices in Colombia, which has broad experience in implementing corporate
responsibility and sustainable development projects within Colombia, has been retained to advise the
Company on land purchases and the design, management and implementation of a sustainable urban
development plan for the resettlement of the Marmato community. The Company has also engaged
Replan, to perform an audit on all processes for the resettlement of Marmato and to provide
recommendations to the Company based on such audit.
Gran Colombia continually re-affirms its commitment to social responsibility initiatives in Marmato, and
in 2011 contributed approximately US$2 million to the town and its surrounding area, to be used to fund
Phase II construction of the El Llano Hospital, the construction of an administrative centre and other
community projects. Through its Mineros Nacionales Mine, Gran Colombia already pays royalties of
between 0.4% and 4% to the national government and a 6% special administrative fee for certain of its
mining titles payable to the local authorities in Marmato, totaling US$3,002,741 alone for the financial
year ended December 31, 2011. The Company, as it has done for the social development of the Segovia
district, also intends to establish a special purpose foundation, funded out of production from the
Marmato Project, the sole purpose of which will be the improvement of social conditions in the Marmato
district.
Finally, Gran Colombia has also become a member of CBSR, which is the Canadian representative in a
world-wide network committed to corporate social responsibility, and which will assist Gran Colombia
by providing key findings, opportunities and recommendations to our policies and programs, to ensure
that they are all to international standards and guidelines.
6 RISK FACTORS
The business and operations of the Company will be subject to a number of risks. The Company
considers the risks set out below to be the most significant to potential investors in the Company, but not
all of the risks associated with an investment in securities of the Company. If any of these risks
materialize into actual events or circumstances or other possible additional risks and uncertainties of
which the Company is currently unaware or which it considers to be material in relation to the Company’s
business actually occur, the Company’s assets, liabilities, financial condition, results of operations
(including future results of operations), business and business prospects, are likely to be materially and
adversely affected. In such circumstances, the price of the Company’s securities could decline and
investors may lose all or part of their investment.
Metal Price Volatility
The Company’s business is strongly affected by the world market price of gold and, to a lesser extent,
silver. If the world market price of gold or silver were to drop and the prices realized by the Company on
gold or silver sales were to decrease significantly and remain at such a level for any substantial period, the
Company’s profitability and cash flow would be negatively affected.
Gold and silver prices can be subject to volatile price movements, which can be material and can occur
over short periods of time and are affected by numerous factors, all of which are beyond the Company’s
control. Industry factors that may affect the price of gold include: industrial and jewellery demand; the
level of demand for gold as an investment; central bank lending, sales and purchases of gold; speculative
trading; and costs of and levels of global gold production by producers of gold. Gold prices may also be
affected by macroeconomic factors, including: expectations of the future rate of inflation; the strength of,
and confidence in, the U.S. dollar, the currency in which the price of gold is generally quoted, and other
currencies; interest rates; and global or regional, political or economic uncertainties.
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The effect of these factors on the price of precious metals, and therefore the economic viability of any of
the Company’s exploration and operation projects, cannot be accurately determined. As such, the
Company may determine that it is not economically feasible to continue commercial production at some
or all of its operations or the development of some or all of the Projects, as applicable, which could have
an adverse impact on the Company’s financial performance and results of operations. In such a
circumstance, the Company may also curtail or suspend some or all of its exploration activities, with the
result that depleted reserves are not replaced. In addition, the market value of the Company’s gold
inventory may be reduced and existing reserves may be reduced to the extent that ore cannot be mined
and processed economically at the prevailing prices.
Future Production Rates
The figures for the Company’s future production are estimates based on interpretation and assumptions
and actual production may be less than is currently estimated. The Company prepares estimates of future
gold and silver production for its operating mines. The Company cannot give any assurance that it will
achieve its production estimates. The failure of the Company to achieve its production estimates could
have a material and adverse effect on any or all of its future cash flows, profitability, results of operations
and financial condition. The Company’s mineral properties’ ability to demonstrate sufficient economic
returns will also affect the availability and cost of financing. These production estimates are dependent
on, among other things, the accuracy of mineral reserve estimates, the accuracy of assumptions regarding
ore grades and recovery rates, ground conditions, physical characteristics of ores, such as hardness and
the presence or absence of particular metallurgical characteristics and the accuracy of estimated rates and
costs of mining and processing.
The Company’s actual production may vary from its estimates for a variety of reasons, including: actual
ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics;
short-term operating factors such as the need for sequential development of ore bodies and the processing
of new or different ore grades from those planned; mine failures, slope failures or equipment failures;
industrial accidents; natural phenomena such as inclement weather conditions, floods, droughts, rock
slides and earthquakes; encountering unusual or unexpected geological conditions; changes in power
costs and potential power shortages; shortages of principal supplies needed for operation, including
explosives, fuels, chemical reagents, water, equipment parts and lubricants; labour shortages or strikes;
civil disobedience and protests; and restrictions or regulations imposed by government agencies or other
changes in the regulatory environments. Such occurrences could result in damage to mineral properties,
interruptions in production, injury or death to persons, damage to property of the Company or others,
monetary losses and legal liabilities. These factors may cause a mineral deposit that has been mined
profitably in the past to become unprofitable forcing the Company to cease production. It is not unusual in
new mining operations to experience unexpected problems during the start-up phase. Depending on the
price of gold, silver or other minerals, the Company may determine that it is impractical to commence or,
if commenced, to continue commercial production at a particular site.
There is no assurance that the mine will produce enough silver to cover the Company’s obligations under
the Notes. However, as the Notes are linked to, but not backed by silver, the failure to achieve production
of 5.3 million ounces of silver does not in and of itself mean that the Company will not have other sources
of cash, whether from gold production or otherwise, to make its required payments under the Notes;
however, there can be no assurance that the Company will have such alternative sources of cash. Failure
to generate sufficient cash could result in the Company’s payment obligations under the Notes not being
met.
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Financing Risks
Additional funding may be required to complete the funding of the proposed or future exploration and
operational programs on the interests in the Projects and to conduct any other exploration programs, as
well as to complete the Marmato Project and the proposed expansion of the Company’s Segovia
Operations. There is no assurance that any such funds will be available. Failure to obtain additional
financing, if required, on a timely basis or on favourable terms, could cause the Company to reduce or
delay its proposed operations.
While the Company has been successful in the past in obtaining equity financing to undertake its planned
exploration and development programs, there is no assurance that it will be able to obtain adequate
financing in the future or that such financing will be on terms advantageous to the Company. Also, any
additional equity financing might involve substantial dilution to existing shareholders.
The Company has outstanding indebtedness and may incur additional indebtedness in the future,
including by way of debentures, additional notes, and/or credit facilities. A portion of the cash flow
generated by properties owned by the Company will be devoted to servicing such debt and there can be
no assurance that the Company will continue to generate sufficient cash flow from operations to meet the
required interest and principal payments on the debt.
History of Losses
The Company has a history of losses and there can be no assurance that it will ever be profitable.
Although the Segovia Operations and the Mineros Nacionales Mine are in operation, the Company
expects to continue to incur losses unless and until such time as it develops and commences larger scale
mining at the Segovia Operations or the Marmato Project or it develops and commences mining
operations at the other Projects. The development of the Projects will require the commitment of
substantial financial resources. The amount and timing of expenditures will depend on a number of
factors, some of which are beyond the Company’s control, including the progress of ongoing exploration,
studies and development, the results of consultant analysis and recommendations, the rate at which
operating losses are incurred and the execution of any joint venture agreements with any strategic
partners, if any. There can be no assurance that the Company will ever achieve profitability.
Going Concern
To continue as a going concern, the Company must generate profitable operations in the future through its
planned capital investments and expected resultant increase in mineral production and development or
continue to secure new funding. While the Company has cash balances and cash flow from production,
these may not be sufficient to fund the Company’s planned capital investment program and working
capital requirements. As such, it may need to pursue credit facilities or delay discretionary expenditures
which may have an impact on the rate of future growth in its expected mineral production. There can be
no assurance that these initiatives will be successful. These circumstances lend significant doubt as to the
ability of the Company to meet its business plan and obligations as they come due.
Current Global Markets and Economic Conditions
Current global financial conditions have been characterized by volatility and several financial institutions
have either gone into bankruptcy or have had to be rescued by governmental authorities. Access to
financing has been negatively impacted by many factors as a result of the global financial crisis. This
may impact the Company’s ability to obtain equity or debt financing in the future on terms favourable to
the Company. Additionally, global economic conditions may cause decreases in asset values that are
deemed to be other than temporary, which may result in impairment losses. If such volatility and market
turmoil continue, the Company’s operations and financial condition could be adversely impacted.
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To the extent the Company relies on the capital markets for necessary capital expenditures, the
businesses, financial condition and operations of the Company could be adversely affected by: (i)
continued disruption and volatility in financial markets; (ii) continued capital and liquidity concerns
regarding financial institutions generally and hindering the Company’s counterparties specifically; (iii)
limitations resulting from governmental action in an effort to stabilize or provide additional regulation of
the financial system; or (iv) recessionary conditions that are deeper or last longer than currently
anticipated.
Exploration, Development and Operations
Exploration and development of mineral deposits involves a high degree of risk which even a
combination of careful evaluation, experience and knowledge may not eliminate. Few properties which
are explored are ultimately developed into producing properties. Although the mineral resource figures
set out herein have been carefully prepared and reviewed or verified by an independent qualified person,
these amounts are estimates only and no assurance can be given that an identified mineral resource will
ever become a mineral reserve or in any way qualify as a commercially mineable (or viable) ore body
which can be legally and economically exploited. Estimates of mineral resources and any potential
determination as to whether a mineral deposit will be commercially viable can also be affected by such
factors as: deposit size, grade, unusual or unexpected geological formations and metallurgy; proximity to
infrastructure; metal prices which are highly cyclical; environmental factors; unforeseen technical
difficulties; work interruptions; and government regulations, including regulations relating to permitting,
prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately predicted.
The long term profitability of the Company’s operations will be in part directly related to the cost and
success of its exploration programs, which may be affected by a number of factors. Substantial
expenditures are required to establish reserves through drilling, to develop processes to extract the
resources and, in the case of new properties, to develop the extraction and processing facilities and
infrastructure at any site chosen for extraction. Although substantial benefits may be derived from the
discovery of a major deposit, no assurance can be given that any such deposit will be commercially viable
or that the funds required for development can be obtained on a timely basis.
Mining operations generally involve a high degree of risk. The Company’s operations are subject to all
the hazards and risks normally encountered in the exploration, development and production of gold and
silver, including unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins,
flooding and other conditions involved in the drilling and removal of material, any of which could result
in damage to, or destruction of, the mine and other producing facilities, damage to life or property,
environmental damage and possible legal liability. Although appropriate precautions to mitigate these
risks are taken, operations are subject to hazards such as equipment failure or failure of structures which
may result in environmental pollution and consequent liability. Even though the Company intends to
obtain liability insurance in an amount which it considers adequate, the nature of these risks is such that
liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or the Company
might not elect to insure itself against such liabilities due to high premium costs or other reasons, in
which event the Company could incur significant costs that could have a material adverse effect upon its
financial condition.
Risks with Title to Mineral Properties
The Company does not maintain insurance against title. Title on mineral properties and mining rights
involves certain inherent risks due to the difficulties of determining the validity of certain claims as well
as the potential for problems arising from the frequently ambiguous conveyance history of many mining
properties. The Company has diligently investigated and continues to diligently investigate and validate
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title to its mineral claims; however, this should not be construed as a guarantee of title. The Company is
continuously in the process of establishing the certainty of the title of mineral concessions which it holds
either directly or through its equity interest in its subsidiaries or will be seeking to consolidate those titles
through a government-sanctioned process. The Company cannot give any assurance that title to
properties it acquired individually or through historical share acquisitions will not be challenged or
impugned and cannot guarantee that the Company will have or acquire valid title to these mining
properties. For example, there is theoretically a risk that the Colombian government may, in the future,
grant additional titles in excess of the Company’s expectations to small miners currently illegally mining
on the Company’s properties or the Company may be unable to convince currently illegal miners to
vacate the Company’s properties. Mechanisms exist to integrate into the Marmato Project the titles of
legal mineral properties in the Zona Alta (at Marmato) currently not owned by the Company. However,
there is a risk that this process could be time-consuming and costly. As the Company begins the processes
of integration, the costs of acquiring the remaining properties and associated surface rights could rise
significantly or become cost-prohibitive. Furthermore, the risk exists that one or more of the remaining
titleholders could delay the integration process through administrative avenues. The possibility also exists
that title to existing properties or future prospective properties may be lost due to an omission in the claim
of title, or by the Company’s inability to honour its contractual purchase obligations. Most of the mining
titles have a remaining duration which is shorter than the term required to develop and execute the mining
project described in the Marmato Technical Report. Mining titles generally allow for renewals and the
Company has no reason to expect that renewals will not be granted in the normal course; however, the
Company cannot give assurances that title to its mining properties will be renewed, as required to
complete the Marmato Project.
On January 23, 2012, the Minister of Mines (Colombia) announced that it will commence a public tender
to commence the legal and technical audit all exploration and exploitation licenses in Colombia, with the
contract being awarded on April 17, 2012. The audit process will take approximately 30 months. As a
result of the auditing to be carried out by the successful contractor, the Minister of Mines (Colombia) has
stated that titles may be cancelled or fines may be imposed if the audit shows that the applicable law has
not been or is not being complied with by mining companies. Although the Company believes that it is in
substantial compliance in all material respects with applicable material laws and regulations in Colombia,
the Company cannot assure that the results of the audit will not result in further inquiry or actions taken
by the Minister of Mines (Colombia).
Resettlement of the Town of Marmato
The Company’s business plan includes an open pit mine at its Marmato Project. As such, the town of
Marmato must be relocated from its current location on the Marmato Mountain to a safer location. While
the Company is currently working with municipal, departmental (i.e., state), and federal governments to
facilitate this relocation, as well as engaging directly with the community, it is subject to the risk of
political, economic, or social circumstances that could delay the Company’s ability to complete the town
relocation. If the Company is unable to complete the town relocation, the Company’s plans for an open
pit mine at its Marmato Project could be affected and, if so, the Company may review other available
mining methods for its project.
Environmental Permits
The development, construction and operation of the Marmato Project will require the completion of a
detailed environmental impact study and subsequent environmental licensing and other environmental
permits or concessions by the competent environmental authorities. Due to the complexity of the project
and of its area of influence, required environmental permits, licenses or concessions may take time and/or
be difficult to obtain or to be issued on the terms required by the Company.
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Liquidity Risks
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall
due. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to
meet its liabilities when due. To the extent that the Company does not believe it will have sufficient
liquidity to meet these obligations, management will consider securing additional funds through equity or
debt transactions. The Company manages its liquidity risk by continuously monitoring forecast cash flow
requirements. The Company’s is currently funding the expansion of the existing Maria Dama mill and the
exploration program at the Segovia Operations, as well as the completion of the Marmato Project through
the pre-feasibility stage, from cash balances and cash generated by its producing mine operations. The
Company intends to secure funding through debt transactions for its planned expansion of the Segovia
Operations and the development of its Marmato Project, including completion of the feasibility stage,
design and construction, acquisition of mining, processing and other equipment and completion of its
obligations with respect to the acquisition of mining titles and other social programs.
Operating History in Colombia
Although the Company has a limited operating history in Colombia upon which an evaluation of its future
success or failure can be made, the Company retained most of the employees and management teams of
FGM and Medoro (including the subsidiaries acquired by Medoro in 2009 and 2010), and has hired
qualified consultants with extensive experience in mining operations, both in and outside of Colombia.
The Company has earned revenues from its current Colombian operations but there can be no guarantees
that revenues or profits will be earned from Colombian operations in the future.
Mining Risks and Insurance Risks
The mining industry is subject to significant risks and hazards, including environmental hazards,
industrial accidents, unusual or unexpected geological conditions, labour force disruptions, civil strife,
unavailability of materials and equipment, weather conditions, pit wall failures, rock bursts, cave-ins,
flooding, seismic activity, water conditions and gold bullion losses, most of which are beyond the
Company’s control. These risks and hazards could result in: (i) damage to, or destruction of, mineral
properties or producing facilities; personal injury or death; environmental damage; (ii) delays in mining;
and (iii) monetary losses and possible legal liability. As a result, production may fall below historic or
estimated levels and the Company may incur significant costs or experience significant delays that could
have a material adverse effect on the Company’s financial performance, liquidity and results of operation.
The Company maintains insurance to cover some of these risks and hazards. The insurance is maintained
in amounts that are believed to be reasonable depending on the circumstances surrounding each identified
risk. No assurance can be given that such insurance will continue to be available, or that it will be
available at economically feasible premiums, or that the Company will maintain such insurance. The
Company’s property, liability and other insurance may not provide sufficient coverage for losses related
to these or other risks or hazards. In addition, the Company does not have coverage for certain
environmental losses and other risks, as such coverage cannot be purchased at a commercially reasonable
cost. The lack of, or insufficiency of, insurance coverage could adversely affect the Company’s cash flow
and overall profitability.
Integration Risks
The success of the Company will depend in large part on the success of integrating the operations,
technologies and personnel of Medoro (which was acquired in 2011) with those of the Company. The
failure of the Company to achieve such integration could result in the failure of the Company to realize
any of the anticipated benefits of the acquisition and could impair the results of operations, profitability
and financial results of the Company. In addition, the overall integration of the operations, technologies
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and personnel of acquisitions into the Company may result in unanticipated operational problems,
expenses, liabilities and diversion of management’s attention.
In addition to the integration of acquisitions, the Company may make selected acquisitions in the future.
The Company may experience problems integrating new acquisitions into existing operations, which
could have a material adverse effect on the Company. The Company’s success at completing any
acquisitions will depend on a number of factors, including, but not limited to:
identifying acquisitions that fit the Company’s strategy;
negotiating acceptable terms with the seller of the business or property to be acquired; and
obtaining approval from regulatory authorities in the jurisdictions of the business or property to
be acquired.
If the Company does make further acquisitions, any positive effect on the Company’s results will depend
on a variety of factors, including, but not limited to:
assimilating the operations of an acquired business or property in a timely and efficient manner;
maintaining the Company’s financial and strategic focus while integrating the acquired business
or property;
implementing uniform standards, controls, procedures and policies at the acquired business, as
appropriate; and to the extent that the Company makes an acquisition outside of markets in which it has previously
operated, conducting and managing operations in a new operating environment.
Acquiring additional businesses or properties could place increased pressure on the Company’s cash flow
if such acquisitions involve cash considerations or the assumption of obligations requiring cash payments.
The integration of the Company’s existing operations with any acquired business will require significant
expenditures of time, attention and funds. Achievement of the benefits expected from consolidation
would require the Company to incur significant costs in connection with, among other things,
implementing financial and planning systems. The Company may not be able to integrate the operations
of a recently acquired business or restructure the Company’s previously existing business operations
without encountering difficulties and delays. In addition, this integration may require significant attention
from the Company’s management team, which may detract attention from the Company’s day-to-day
operations. Over the short-term, difficulties associated with integration could have a material adverse
effect on the Company’s business, operating results, financial condition and the price of the Company’s
Common Shares. In addition, the acquisition of mineral properties may subject the Company to
unforeseen liabilities, including environmental liabilities.
Regulatory Approvals
The operations of the Company and the exploration agreements into which it has entered require
approvals, licenses and permits from various regulatory authorities, governmental and otherwise
(including project specific governmental decrees) that are by no means guaranteed. The Company
believes that it holds or will obtain all necessary approvals, licenses and permits under applicable laws
and regulations in respect of its main projects and, to the extent that they have already been granted,
believes it is presently complying in all material respects with the terms of such approvals, licenses and
permits. However, such approvals, licenses and permits are subject to change in various circumstances
and further project-specific governmental decrees and/or legislative enactments may be required. There
can be no guarantee that the Company will be able to obtain or maintain all necessary approvals, licenses
and permits that may be required and/or that all project-specific governmental decrees and/or required
legislative enactments will be forthcoming to explore and develop the properties on which it has
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exploration rights, commence construction or operation of mining facilities or to maintain continued
operations that economically justify the costs involved.
Changes in Legislation
The mining industry in Colombia and Venezuela is subject to extensive controls and regulations imposed
by various levels of government. All current legislation is a matter of public record and the Company
will be unable to predict what additional legislation or amendments may be enacted. Amendments to
current laws, regulations and permits governing operations and activities of mining companies, including
environmental laws and regulations which are evolving in Colombia and Venezuela, or more stringent
implementation thereof, could have a material adverse impact on the Company and cause increases in
expenditures and costs, affect the Company’s ability to expand or transfer existing operations or require
the Company to abandon or delay the development of new properties.
Labour Matters and Employee Relations
To date, the Company has not experienced any material work stoppages at its facilities at any of the
Projects, nor has it experienced any disputes with unions that have had a material effect on the
Company’s operations. However, if future disputes with labour unions should arise, they may not be
resolved without significant work stoppages or delays, which could have an adverse effect on the
Company’s revenues and the output of each Project.
The Company’s ability to achieve its future goals and objectives is dependent, in part, on maintaining
good relations with its employees and minimizing employee turnover. A prolonged labour disruption at
any of its material properties could have a material adverse impact on its operations as a whole.
Economic and Political Factors
Colombia
Although Colombia has a long-standing tradition respecting the rule of law, which has been bolstered in
recent years by the present and former government’s policies and programs, no assurances can be given
that the Company’s plans and operations will not be adversely affected by future developments in
Colombia. The Company’s property interests and proposed exploration activities in Colombia are subject
to political, economic and other uncertainties, including the risk of expropriation, nationalization,
renegotiation or nullification of existing contracts, mining licenses and permits or other agreements,
changes in laws or taxation policies, currency exchange restrictions, and changing political conditions and
international monetary fluctuations. Future government actions concerning the economy, taxation, or the
operation and regulation of nationally important facilities such as mines, could have a significant effect on
the Company. Colombia is home to South America’s largest and longest running insurgency. While the
situation has improved dramatically in recent years, there can be no guarantee that the situation will not
again deteriorate. Any increase in kidnapping and/or terrorist activity in Colombia generally may disrupt
supply chains and discourage qualified individuals from being involved with the Company’s operations.
Additionally, the perception that matters have not improved in Colombia may hinder the Company’s
ability to access capital in a timely or cost effective manner. Any changes in regulations or shifts in
political attitudes are beyond the Company’s control and may adversely affect the Company’s
business. Exploration may be affected in varying degrees by government regulations with respect to
restrictions on future exploitation and production, price controls, export controls, foreign exchange
controls, income and/or mining taxes, expropriation of property, environmental legislation and permitting
and mine and/or site safety.
The government has recently announced its intent to introduce before Congress a bill to amend the current
mining law. Although changes to the law are expected to mostly deal with applications for concessions,
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which should not affect the Company, they could also include environmental, zoning and control issues,
which, together with any local zoning regulations, could have an impact on the Company’s activities.
Venezuela
Some of the Company’s assets are located in Venezuela. On September 16, 2011, the Venezuelan
government issued a Decree-Law nationalizing gold exploration and mining operations in the Country,
including a minimum state equity participation of 55% in gold projects, a new 13% royalty, and the
banning of export sales by producers. The Decree-Law established a three month period for negotiations
for pricing and transfer of ownership of the nationalized portion of projects, which was subsequently
extended for a further three months. The Company has repeatedly tried to engage the government in such
negotiations but its communications have so far gone unanswered. The Decree-Law called for the
automatic termination of gold mining concessions and contracts at the end of the negotiation period;
however, the Company has not been notified of any such termination, nor has it lost physical control of its
mining properties.
The Company has continued its efforts in engaging the Venezuelan government in negotiations on
compensation for the genuine value of its project. As the negotiation period has expired, the Company
intends to pursue the remedies afforded to it by the Agreement between Venezuela and Canada for the
Promotion and Protection of Investments (which has been in force since 1998), including, if warranted,
seeking such compensation through international arbitration.
Mali
Mineral exploration and mining activities may be affected in varying degrees by political or economic
instability and government regulations relating to the mining industry in Mali. Any changes in regulations
or shifts in political or economic conditions are beyond the control of the Company and may adversely
affect it. More particularly, there have been discussions recently of potential reform to the Mining Code in
Mali. It is unclear if and when such reform will be implemented or what impact, if any, such reform could
have on the Company’s properties in Mali. Accordingly, there exists some uncertainty regarding the
future regulation of the mining industry in Mali and there is a risk that reform to the Mining Code may
involve new restrictions or other requirements that could impact the Company’s properties and/or future
exploration activities, if any, in Mali.
The Company may also be affected by political or economic instability in Mali. The risks include, but are
not limited to, civil unrest, terrorism, poverty, corruption, extreme fluctuations in currency exchange rates
and high rates of inflation. While the political situation in Mali has generally been improving over the last
two decades with the first democratically-elected president taking power in 1992, Mali is still facing a
significant number of challenges including poverty, illiteracy, corruption, human rights violations,
insufficient democratic culture and climatic hazards. Mali’s northern regions are affected by armed
conflicts, kidnappings, armed robberies, and the presence of landmines. In particular, armed conflict and
massive civil unrest broke out in northern Mali in early 2012, resulting in the displacement of thousands
of Malians to neighbouring countries and, in March 2012, a military coup was declared against President
Amadou Toumani Toure causing an uprising in the capital, Bamako. The effect of this and any further
political or social instability cannot be accurately predicted and whether these, or future, events could
have an effect on the Company’s properties and/or future exploration activities, if any, in Mali is
unknown at this time.
Currency Risk
The Company reports its financial results and maintains its accounts in U.S. dollars and the markets for
gold and silver are principally denominated in U.S. dollars. The Company’s operations in Colombia and
Venezuela make it subject to foreign currency fluctuations and such fluctuations may materially affect the
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Company’s financial position and results. Colombia has a free and unrestricted supply and demand
market and Venezuela currently has an exchange control regime. The Company is exposed to foreign
exchange risk from the exchange rate of COP and Venezuelan Bolívar relative to the Canadian and U.S.
dollars. Foreign exchange risk is mainly derived from assets and liabilities stated in COP and Venezuelan
Bolívars. The Company limits its foreign exchange risk by the acquisition of short-term financial
instruments and, when possible, minimizes its COP and Venezuelan Bolívars monetary asset positions.
Changes to Environmental Laws
The Company’s operations are subject to the extensive environmental risks inherent in the gold and silver
mining industry. The current or future operations of the Company, including development activities,
commencement of production on its properties, potential mining and processing operations and
exploration activities require permits from various governmental authorities and such operations are and
will be governed by laws and regulations governing prospecting, development, mining, production,
exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use,
environmental protection, mine safety and other matters.
Companies engaged in the development and operation of mines and related facilities generally experience
increased costs, and delays in production and other schedules as a result of the need to comply with
applicable laws, regulations and permits. Existing and possible future environmental legislation,
regulations and actions could cause significant additional expense, capital expenditures, restrictions and
delays in the activities of the Company. Although the Company believes that it is in substantial
compliance in all material respects with applicable material environmental laws and regulations, there are
certain risks inherent in its activities such as accidental spills, leakages or other unforeseen circumstances,
which could subject the Company to extensive liability. In addition, the Company cannot assure that the
illegal miners operating on its properties are in compliance with applicable environmental laws and
regulations.
Failure to comply with applicable laws, regulations, and permitting requirements may result in
enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing
operations to cease or be curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions. Parties engaged in mining operations may be
required to compensate those suffering loss or damage by reason of the mining activities and may have
civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments
to current laws, regulations and permits governing operations and activities of mining companies, or more
stringent implementation thereof, could have a material adverse impact on the Company and cause
increases in capital expenditures or production costs or reduction in levels of production at producing
properties or require abandonment or delays in development of new mining properties.
Asset Retirement Obligation
Mining, processing, development and exploration activities are subject to various laws and regulations
governing the protection of the environment. The Canadian Institute of Chartered Accountants Handbook
Section 3110, Asset Retirement Obligations, addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and for the associated asset retirement costs. In
connection with the Frontino Acquisition, the Company is currently finalizing the requirements for an
environmental management and reclamation plan at the Segovia Project. At December 31, 2011, the costs
associated with this plan had not yet been determined and as such, an asset retirement obligation has not
yet been recorded. Once these costs are determinable, the Company will record the asset retirement
obligation. The Company has recorded a liability for future costs related to its legal obligation at the
Mineros Nacionales Mine site located on the Zona Baja Property with a corresponding adjustment to the
carrying amount of the related assets. Significant judgments and estimates are made when determining
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the nature and costs associated with asset retirement obligations. Changes in the underlying assumptions
used to estimate the obligation as well as changes to environmental laws and regulations could cause
material changes in the expected cost and fair value of asset retirement obligations.
Shortage of Experienced Personnel and Equipment
The ability to identify, negotiate and consummate transactions that will benefit the Company is dependent
upon the efforts of the Company’s management team. The loss of the services of any member of
management could have a material adverse effect on the Company. The Company’s future drilling
activities may require significant investment in additional personnel and capital equipment. Given the
current shortage of equipment and experienced personnel within the mining industry, there can be no
assurance that the Company will be able to acquire the necessary resources to successfully implement its
business plan.
Furthermore, while the Company has a full-time Chief Executive Officer, certain of the directors and
officers of the Company are directors and officers of other reporting issuers and, as such, will devote only
a portion of their time to the affairs of the Company.
Potential Conflicts of Interest
The Company’s directors and officers may serve as directors or officers of other companies or have
significant shareholdings in other resource companies and, to the extent that such other companies may
participate in ventures in which the Company may participate, the directors of the Company may have a
conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the
event that such a conflict of interest arises at a meeting of the Company’s directors, a director who has
such a conflict will abstain from voting for or against the approval of such participation or such terms. In
determining whether or not the Company will participate in a particular program and the interest therein
to be acquired by it, the directors will primarily consider the degree of risk to which the Company may be
exposed and its financial position at that time.
Possible Volatility of Stock Price
The market price of the Common Shares, Warrants and Notes can be subject to wide fluctuations in
response to factors such as actual or anticipated variations in the Company’s results of operations,
changes in financial estimates by securities analysts, general market conditions, the issuance of Common
Shares in connection with acquisitions made by the Company or otherwise, and other factors. Market
fluctuations, as well as general economic, political and market conditions such as recessions, interest rate
changes or international currency fluctuations may adversely affect the market price of the Common
Shares, Warrants and Notes.
Repatriation of Earnings Risk
There are currently no restrictions on the repatriation from Colombia of earnings to foreign entities.
However, there can be no assurance that restrictions on repatriations of earnings from Colombia will not
be imposed in the future.
Ranking of Notes
The Notes are direct, unsecured obligations of the Company and rank equally with one another and,
except as prescribed by law, will rank equally with all other unsecured indebtedness of the Company.
Moreover, since the Notes are unsecured obligations of the Company, they are effectively subordinate to
all of the Company’s existing and future secured indebtedness to the extent of the value of the assets
securing such indebtedness. Therefore, in the event of the insolvency, bankruptcy, liquidation,
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reorganization, dissolution or winding up of the Company, the Company’s assets will be available to pay
its obligations with respect to the Notes after it has paid all of its secured creditors and all holders of any
senior indebtedness. There may be insufficient assets remaining following such payments to pay amounts
due on any or all of the Notes then outstanding.
Absence of Covenant Protection
Other than as described therein, the Note Indenture does not limit the Company’s ability to incur
additional debt or liabilities (including senior ranking indebtedness). The Note Indenture will not contain
any provision specifically intended to protect holders of the Notes in the event of a future leveraged
transaction by the Company.
Market for the Notes
Although the Notes are listed for trading on the TSX, there can be no assurance that a secondary market
for trading in the Notes will develop or that any secondary market which does develop, will continue.
Also, there can be no assurances that any such secondary market will survive.
Taxation – CRA Review
The CRA is currently reviewing its administrative policies and assessing practices with regard to
obligations such as the Notes. This review may result in changes to or adoption of policies or practices
that may affect, among other things, the CRA’s views concerning (1) whether there is a deemed accrual
of any amount of interest, bonus or premium on such obligations, and (2) whether amounts received on
the disposition of such obligations prior to maturity are on capital account or income account. There can
be no assurance that the CRA’s administrative policies and assessing practices will not be subject to
adverse development, change or qualification with respect to these or other issues. Any change in or
development of new administrative policies and assessing practices respecting obligations such as the
Notes could result in the tax considerations relevant to acquiring, holding and disposing of the Notes
being materially different from as previously described by the Company. Investors should consult and
rely on their own tax advisor about their own tax situation.
Enforcement of Civil Liabilities
Substantially all of the Company’s assets are located outside of Canada and certain of the directors and
officers of the Company are resident outside of Canada. As a result, it may be difficult or impossible to
enforce judgments granted by a court in Canada against the assets of the Company or the Company’s
directors and officers residing outside of Canada.
Forward-Looking Information may Prove Inaccurate
Investors are cautioned not to place undue reliance on forward-looking information. By their nature,
forward-looking information involves numerous assumptions, known and unknown risks and
uncertainties, of both a general and specific nature, that could cause actual results to differ materially
from those suggested by forward-looking statements or contribute to the possibility that predictions,
forecasts or projections will prove to be materially inaccurate.
Additional information on the risks, assumptions and uncertainties are found under the heading “Forward-
Looking Information”.
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Infrastructure
Mining, processing, development and exploration activities depend, to one degree or another, on adequate
infrastructure. Reliable roads, bridges, power sources and water supply are important determinants,
which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage,
community, government or other interference in the maintenance or provision of such infrastructure could
adversely affect the Company’s operations, financial condition and results of operations.
Joint Ventures
The Company may enter into joint ventures in the future. Any failure of a joint venture partner to meet its
obligations to the Company or third parties, or any disputes with respect to the parties’ respective rights
and obligations could have a material adverse effect on such joint ventures. In addition, the Company
may be unable to exert influence over strategic decisions made in respect of properties that are the subject
of such joint ventures.
Competition
The mineral exploration and mining business is competitive in all of its phases. The Company competes
with numerous other companies and individuals, including competitors with greater financial, technical
and other resources than the Company, in the search for and acquisition of exploration and development
rights on attractive mineral properties. The Company’s ability to acquire exploration and development
rights on properties in the future will depend not only on its ability to develop the properties on which it
currently has exploration and development rights, but also on its ability to select and acquire exploration
and development rights on suitable properties for exploration and development. There is no assurance
that the Company will continue to be able to compete successfully with its competitors in acquiring
exploration and development rights on such properties.
Dividends
Any payments of dividends on the Common Shares will be dependent upon the financial requirements of
the Company to finance future growth, the financial condition of the Company and other factors which
the Board may consider appropriate in the circumstance. It is unlikely that the Company will pay
dividends in the immediate or foreseeable future.
Other Risks
Foreign investments involve unique risks in addition to those mentioned above, including those related to
integration of operations across different cultures and languages, currency risks and the particular
economic, political and regulatory risks associated with specific countries. The Company may be unable
to address these risks successfully, or at all, without incurring significant costs, delay or other operating
problems. The Company’s inability to resolve any of such risks could have a material adverse impact on
its business, consolidated financial condition and consolidated results of operations.
7 PROPERTIES
The following is an overview on the Projects as set out in the summary of each Technical Report, which
is incorporated by reference into this Annual Information Form. The Technical Reports may be accessed
through the Company’s website at www.grancolombiagold.com or through its profile on SEDAR at
www.sedar.com.
- 43 -
7.1 Segovia Operations
Segovia Project 7.1.1
Summary
SEWC was retained by Medoro, Gran Colombia Panama and Old GCM, to prepare the Segovia Project
Technical Report on FGM, which is located in Antioquia Colombia near the municipality of Segovia.
The Segovia Project Technical Report conforms to NI 43-101.
FGM
FGM owned a substantial land position which contained several underground mines that have been in
continuous production for more than 150 years. The major assets and facilities associated with FGM
were:
an Indicated Mineral Resource (including Probable Mineral Reserves) estimated to contain
315,000 tonnes grading 13.1 g/t Au and containing 132,000 ounces of gold at a cut‐off grade of
7.1 g/t Au;
an Inferred Mineral Resource estimated to contain 914,000 tonnes grading 15.4 g/t Au and
containing 453,000 ounces of gold at a cut‐off grade of 6.5 g/t Au;
Probable Mineral Reserves of 210,000 tonnes grading 13.3 g/t Au and containing 90,000 ounces
of gold at a cut‐off grade of 7.1 g/t Au;
three operating and producing underground mines;
an operating mill that is processing approximately 400 tonnes of ore per day;
a contiguous land position of 2,800 hectares;
8 farms and 165 other land lots; and
3 hydroelectric power generation plants.
FGM also benefited from easy access by paved roads and the availability of services and personnel in the
towns of Segovia and Remedios.
Interpretations and Conclusions
In SEWC’s opinion, the Company should continue work to advance the Segovia Project through
underground and surface drilling to better define the Mineral Resources at the Segovia Project. SEWC
considers the Segovia Project block model to be valid, reasonable, and appropriate for supporting the
Mineral Resource estimate. A main limitation to resource classification is the lack of closely spaced
drilling resulting in a lack of perceived continuity required for quantifying any more than approximately
one and one half years of production. Additional target drilling should allow the upgrade and expansion
of the Mineral Resources.
In SEWC’s opinion, the FGM sampling method and approach did not meet industry standards. The
channel sampling methods, sample sizes and inconsistent sampling techniques observed by the authors all
need improvement.
In SEWC’s opinion, due to observed QA/QC issues, the overall FGM sample preparation, analysis and
security protocols fall short of industry standards and recommendations have been made for
improvements.
- 44 -
In SEWC’s opinion, the grade estimation techniques used for this report, are sufficient to classify Mineral
Resources as Indicated Mineral Resources and Inferred Mineral Resources in compliance with NI43-101.
Due to the uncertainty with the FGM sampling methods and laboratory procedures, SEWC recommended
that no Mineral Resources be classified as Measured Mineral Resources until procedural improvements
are made with sampling methods and laboratory QA/QC procedures.
Geology and Mineralization
Gold mineralization is hosted by a series of quartz veins hosted by granodiorites of the Segovia Batholith.
The veins dip at about 30° to the east or north‐east. There are also a number of steeply dipping quartz
veins with a N40W trend in the west part of the concession.
The geological history is as follows:
1. Intrusion of granodiorite into older metamorphic units.
2. Development of low angle fault system.
3. Intrusion of basic porphyry dikes along the low angle faults.
4. Formation of quartz‐sulfide veins along the low angle faults.
5. Late stage high angle reverse fault movement causes off‐sets of the quartz veins.
The veins are formed of quartz with minor calcite with coarse grained sulfides comprising pyrite, galena
and sphalerite. There are 27 principal known veins with a total strike length of about 47.2 km, and the
Company currently operates mines on three of these veins at El Silencio, Providencia and Sandra K, with
a total strike length of 5.7 km. The most extensively developed vein is El Silencio, which has been mined
to a depth of 815 m vertically and 1,600 m inclined length at a 30° dip on 43 levels, over about 2,100 m
strike length. The average vein width is 0.95 m, with a maximum of 9.00 m.
Indicated Resources
The June 9, 2010 Indicated Mineral Resources (including reserves) is reported at a 7.1 g/t Au cut-off
grade (Table 1.1).
Table 1.1 Segovia Project Indicated Mineral Resource
June 9, 2010 Indicated Mineral Resources (inclusive of reserves)
Cut off
g/t
Type Tonnes
x 1,000
Grade
g/t
Ounces
x 1,000
7.1 Gold 315 13.1 132
Inferred Mineral Resources
The June 9, 2010 Inferred Mineral Resources is reported at a 6.5 g/t Au cut-off grade (Table 1.2).
- 45 -
Table 1.2 Segovia Project Inferred Mineral Resources
June 9, 2010 Indicated Inferred Resource
Cut off
g/t
Type Tonnes
x 1,000
Grade
g/t
Ounces
x 1,000
6.5 Gold 914 15.4 453
Probable Mineral Reserves
Probable Mineral Reserves represent a portion of the Indicated Mineral Resource that will be profitably
mined at the Segovia Project. The June 9, 2010 Probable Mineral Reserve is reported at a 7.1 g/t Au cut-
off grade (Table 1.3). Mineral Resources that are not Mineral Reserves do not have demonstrated
economic viability.
Table 1.3 Segovia Project Probable Mineral Reserves
June 9, 2010 Probable Mineral Reserves
Cut off
g/t
Type Tonnes
x 1,000
Grade
g/t
Ounces
x 1,000
7.1 Gold 210 13.3 90
Carla Project 7.1.2
The Carla Project comprises SRK ES independent technical report, written to be compliant with NI 43-
101, on the Gold exploration assets of Carla located in the municipalities of Remedios and Segovia at
approximately 7°04' N, 74°43' W some 200 km north east of Medellin, the Department capital of
Antioquia, Colombia. The assets comprise some 16 exploration or mining licences, Carla has options on
a further 3 licences.
SRK ES was commissioned by Old GCM, who had an option agreement in place with Carla for the
acquisition of the licences. The agreement is subject to a purchase price of US$15,000,000 payable over
18 months as follows:
US$1,000,000 which has already been paid, of which US$750,000 are refundable, upon
completion of due diligence;
US$4,000,000 by July 05, 2010, which has been paid;
US$5,000,000 by February 05, 2011, which has been paid; and
US$5,000,000 by October 05, 2011, which has been paid.
The assets are located in the foothills of the Cordillera Central of the Colombian Andes and the
topography is rugged, comprising a deeply dissected terrain with steep sided valleys. Access to individual
licences can be poor.
The climate of the area is humid tropical with an average temperature of 24ºC with wet and dry seasons,
the dry season lasting between December and April.
- 46 -
Geologically the assets are located, for the most part, within the Segovia Batholith, a Granodiorite massif
which is bounded by the north south trending Otu and Nus faults to the west and east respectively.
Diabasic and Andesitic dykes intrude the Granodiorite. Known mineralization is associated with quartz
veins which have two main preferred orientations.
The Segovia Remedios district has a long history of gold mining related to quartz vein mineralization, the
adjacent Segovia Project has been operational since 1852 to the current, during which time it has
produced in excess of 5 million ounces of gold.
A number of small scale or artisanal mining operations exist on, or adjacent to, the Carla assets, these are
in general poorly developed with adits and levels developed down dip or along the strike of individual
quartz veins. The mines have limited facilities for processing ore which range from hand selection to
gravity beneficiation. Further processing of selected or beneficiated ore is carried out by local third party
processors who charge at the equivalent of 3 g/t as a consequence mine operators are very selective and
lower grade ore is excluded.
Previous exploration on the assets has been limited to geological mapping, aerial photo and satellite
image interpretation, exploration tunnels, shafts and adits exploring for and following the strike of quartz
veins and SRK ES was able to observe evidence of many such workings during its visit. Previous
exploration, however, has not been systematic. Carla had also completed programmes of sampling and
chemical analyses. SRK ES was also able to take a number of samples for analysis including duplicates of
two Carla channel sample locations.
SRK ES considers that mineralization within the Carla licences comprises multiple stage mesothermal
quartz vein hosted gold silver occurrences and that the mesothermal system is controlled by regional
structural events.
The gold mineralization is hosted in quartz veins varying from a few centimetres to more than three
metres in thickness, with an average of one metre and with dips varying from 30° to vertical. The
currently active artisanal mines have targeted the mineralised structure both down dip and along strike
with an average down dip gradient of 35°. The host rock is largely unaltered coarse granodiorite with
occasional local variations of diorite, quartz diorite, and tonalite. The gangue material of the veins is
quartz with subordinate calcite recorded in a number of localities. Accessory minerals present are pyrite,
sphalerite, galena, chalcopyrite, bornite, magnetite, and traces of molybdenite. SRK ES concludes that
the Carla licences contain projects of merit. The projects themselves are however at a relatively early
stage. While the observed mineralised veins have not, to date, been demonstrated or sampled at depth and
the maximum depth of exposure across the Carla licences is currently only around 80 m (down dip), there
is geological evidence that the observed surface mineralization does continue at depth. The presence of an
epithermal system suggests that the present surface reflects the upper levels of an epithermal/
mesothermal system and current activity at the adjacent the Segovia Project suggests that economic
mineralization may continue to depth. SRK ES recommends a systematic exploration programme is
carried out to modern international standards in order to facilitate resource /reserve reporting at later stage
to include:
Phase 1a Geophysical surveys
Phase 1b Core drilling programme
A “gradient array” IP survey is recommended as the first phase of exploration. This would produce data
that shows variations in chargeability in plan view, which can then be interpreted and incorporated into a
GIS database and overlain onto site plans and other data. The distribution of sulphide-bearing materials,
potentially including the traces of sulphide-bearing veins, could be mapped and anomalous areas or
possible vein intersections may be identified. Anomalous areas should also be further investigated with IP
- 47 -
profiles with data acquired using the dipole-dipole array. These would provide cross-sectional images of
variations in chargeability and resistivity, and could therefore be used to obtain depth information for
target features. This would further aid the design of a trenching or drilling programme.
A ground-based magnetic survey should also be undertaken as part of the first phase. The data can be
acquired relatively quickly and can be presented in plan format overlain onto site plans and other data for
interpretation alongside the IP data. In this case, although mineralised areas may not be magnetically
anomalous themselves, the data may be of value in gaining a fuller understanding of the structural
geology and its control on mineralization. Indeed it may be that the host granitic rocks have a higher
magnetic signature.
Both types of geophysical survey are relatively inexpensive and can be performed quickly. If required, the
survey areas can be easily expanded beyond the main areas of interest in order to provide information on
a more regional scale.
As stated the aim of this proposed geophysical exploration is the production of a number of priority
surface drilling targets. SRK ES recommend that a minimum of 3000 m of drilling be completed over the
Gran Colombia Mine area as part of this core drilling phase and a cost estimate for this programme is
given in Table 1.4 below. SRK ES also suggest, as part of this initial phase, the construction of a cross-
cut, at Gran Colombia, into the footwall or hanging wall of the vein for the purpose of drilling a series of
underground core holes to assess the strike extent, but more importantly the down dip extension of the
vein and its grade variations.
Following completion of the initial drilling programme above and a period of review of its results a
further phase core drilling exploration, could be undertaken. SRK ES understand that the Company aims
to increase the rate of their exploration following this review and during this further phase. As this phase
will be contingent upon the results of the previous programme SRK ES has not given a cost estimate for
the work at this time.
The likely costs for these two phases of exploration are given in Table 1.4
Table 1.4 Provisional recommended exploration costs
Work
Phase Activity
Estimated Cost
(USD)
Phase Ia Ground Geophysics (IP + magnetics), trenching, surface assays
50,000 (~7 km combined total strike length of veins)
Phase Ib
Surface Drilling (including access, assays, etc.) minimum 3000 m 625,000
Underground development - Gran Colombia (500m) 350,000
Underground Drilling (NQ/BQ 1000m from 15 holes including logging
and assaying) 150,000
Subtotal: 1,175,000
Total including 15% contingency: 1,351,250
Ongoing development at the Segovia Project will provide partially or fully self funded exploration – but
attention must be paid to health and safety standards at mine and environmental standards particularly
water management and tailings disposal.
- 48 -
7.2 Marmato Operations
Marmato Project
SRK UK produced an updated Mineral Resource estimate for the Marmato Project dated 6 September
2011. The deposit has been modelled and is described herein using UTM coordinate grid system with a
rotated block model orientated to 305º, which is considered to be the principle strike of the main
structures.
The estimate is based on some 180,000 m of diamond drilling and cross-cut sampling (majority diamond
drilling), completed up to 30 June 2011. In comparison the January 2011 Mineral Resource estimate, an
additional 157 drillholes is now available, representing an additional 52,485 m of drilling, 732 m of cross-
cut samples and some 26,962 new assays, representing a 39% increase in the size of the assay database
(53% in the resultant number of desurveyed samples). The latest drilling has comprised partly infill
drilling to a spacing of 25 m and extensional drilling around the 2010 block model at depth and along
strike. The results of the drilling has validated aspects of the previous interpretation, but also provided
additional information to re-define the geological model during the 2011 modelling exercise. The drilling
programme has incorporated fan drilling at depth (from underground adits) and selective infill drilling
from surface in the targeting of the less well known areas of the deposit. While this drilling has verified
certain aspects of the previous interpretation, it has also caused SRK to reinterpret the grade shell domain
to create a model that better reflects the spatial grade distribution. Exploration is currently continuing and
it is estimated that a further model update will be required on compilation of the next round of infill
drilling.
During the initial phase of the 2011 infill drilling programme the Company intersected a number of
significant intersections at depth at the Marmato Project. SRK UK reviewed the drillcore for a number of
these intersections during the site visit. These intersections display continuous mineralisation within the
porphyry zones, with limited veinlet mineralisation as seen in other areas of the deposit typically
associated with higher grades. It is thought these consistent grades over a number of samples, suggest
maybe a transitional or feeder zone to the main mineralisation. SRK UK recommends further work be
undertaken by the Company to investigate the depth and strike continuity of these zones.
The Marmato deposit is hosted by a dacite and andesite porphyry stock which extends for some 18 km
long by 3 to 6 km wide, which is elongated north to south and is one of a number of porphyry stocks in
the district. The mineralization occurs in parallel, sheeted and anastomosing veins, following a regional
structural control, which intersect broader zones of intense veinlet mineralisation, hosted by a lower grade
mineralised porphyry. The mineralised corridor is some 0.5 to 1.5 km wide and has a drill defined strike
length of approximately 1.3 km.
Mineralisation is described as being of the epithermal intermediate sulphidation type. Gold-silver
mineralisation at Marmato is hosted by a sheeted pyrite veinlet system associated with intermediate
alteration within the porphyry. Gold is associated with sulphides and is mostly free gold. Current mining
in the area is via narrow underground stoping of the highgrade vein mineralisation.
The Company has determined that the mineralisation has potential to be amenable to bulk mining due to
the relatively high number of individual veins and also the presence of lower grade gold mineralisation
seen in sulphide veinlets which occur in between the veins throughout the hosting porphyry.
The updated drilling database indicates that the vein mineralisation typically ranges between 0.5 metres
and 5 metres wide and extends for 250 metres to 1000 metres along strike and 150 metres to 750 metres
down dip. Current underground mining confirms that the vein structures have good geological continuity
and can extend for 100 to 300m along strike and 100 to at least 300m down dip. The broad zones of
veinlet mineralisation (“grade shells”) modelled during the 2011 update vary from 10 metres to 230
- 49 -
metres wide and extend with good geological continuity for 240 metres to 1300 metres along strike and
150 metres to 900 metres down dip.
The 2010/2011 drilling programme has significantly increased the size of the geological database and
therefore (in addition to increasing the confidence in the geological modelling of the vein), highlighted
that the previous interpretation of the model could be improved. The 2010 model suggests the veins are
surrounded by a relatively narrow alteration halo grade shell, whereas (in light of a larger database) it is
evident that there is material of a similar grade and geological nature sub parallel to the veins that forms
structural trends on a much larger scale through the porphyry, which could be domained to better reflect
the gold grade distribution.
Drillholes, where regularly spaced, are orientated -60 and -75 degrees predominantly to the south west,
with occasional scissor holes towards the north east. Fan drilling has been utilised both at surface and
from underground adits, which are also typically orientated towards the south west, with a small number
of less extensive fans orientated towards the north east. SRK UK completed a review of the latest
drillcore during the site visit and noted a clear distinction between the mineralised porphyry and the low-
grade unmineralised porphyry material, namely by the presence of vienlet mineralisation, or more
competent material with more predominate epidote. It is SRK UK’s opinion there appears to be some
relationship between an increase in the veinlet density and areas of improved mineralisation, which
occurred over a broader scale than previously modelled and was not limited to a halo around the main
vein mineralisation.
The estimate is based on a combination of diamond core and underground cross-cut samples which were
sent for sample preparation to ACME laboratories sample preparation facility in Medellin and fire
assayed for gold by ACME in Chile. Comprehensive QAQC has demonstrated that sample preparation
and laboratory performance for both drilling campaigns provided assays which are fit for the purpose of
this estimate. Density determinations by have been provided from the previous model and made on a
combination of the vein proportion and the country rock types based on the assessment of density by rock
type.
Interpretation for the vein zone was undertaken by geologists of the Company, and was based on
structural logging, a gold cut-off grade of 1.0 g/t, and the location of planned and depleted stopes within
the Mineros Nacionales Mine, in the Zona Baja portion of the deposit.
The interpolation of the sample data was undertaken by SRK UK, guided through the application of
Leapfrog grade shells, created using a 0.1 g/t Au cut-off. The orientation of the identified structures was
confirmed using an initial spherical grade search, allowing a visual analysis of gold grade continuity.
Further analysis into the orientation of grade continuity was applied to the subsequent grade searches,
resulting in the final Leapfrog grade shell. The final Leapfrog shell was imported into Datamine and used
as a guideline, in conjunction with the updated vein interpretations to model the grade shell domain. The
initial interpretations were sent to the project geologist for review and approved as improving the
representation of the mineralisation illustrates (Figure 1-1) a typical cross section, through the deposit.
- 50 -
Figure 1-1: Cross section showing comparison between grade domain wireframes in current and
previous model (August 2011).
The updated block model comprise three grade domains which comprise of the vein, sub parallel broad
grade shell structures which have been wireframed approximating a 0.1 g/t cutoff grade and the remaining
porphyry material. SRK UK has completed a statistical and geostatistical review of the updated domained
data, with the primary focus on the re-modelled grade shell which provides the majority of the tonnage
within the deposit. Although not directly comparable, the modified grade domain interpretation based on
the Leapfrog grade shells has slightly reduced the mean grade of the domain from 0.48 g/t to 0.41 g/t as a
result of incorporating lower grade samples within the broad grade shells, however the volume of material
incorporated within the domain has significantly increased, and thus resulting in an overall increase in
contained metal.
In the previous model this mineralisation was estimated in the porphyry domain which lacked any
constraints, and contained additional dilution of the low grade material.
SRK UK has produced a block model with block dimensions of 10 x 20 x 10m, which has been sub-
blocked, to appropriate levels to honour the geology. Sample composites of 5m have been selected based
on the results of statistical analysis, with composites in the veins typically composited across the
thickness of the vein (typically 1-2m). Gold and Silver grades have been estimated using a minimum of 6
composites per block in the primary search using an ordinary kriging routine. Within the vein domain
estimates have been completed using variable oriented search ellipse to follow the true dip and dip
directions of the mineralised veins (this is to account for the two principle directions and dips seen in the
veins). SRK UK undertook a sensitivity analysis (QKNA) on the estimation and found that the global
grade and tonnage of the deposit is in general not sensitive to minor changes in the estimation parameters.
The resultant block grade distribution reflects the mineralisation style which the Company and SRK UK
consider to be an important feature of the deposit Figure 1-2 and Figure 1-3.
SRK UK has treated all domains as hard boundaries in terms of the estimation process. SRK UK has
limited the influence of grades in the grade shell and porphyry domains to appropriate levels by limiting
the confidence levels to maximum search ranges of 120 x 70 x 30m and 70 x 100 x 100 m respectively,
based on the results of the semi-variogram defined ranges.
SRK UK understands the deposit to be bound to the northwest as a result of a NE-SW trending fault zone,
as suggested in geological sections provided by Mineros Nacionales. The 3D fault surface was not
- 51 -
available in digital format and thus further investigation is required in this regard. SRK UK have limited
the current strike extents to 25 m beyond the limit of the drilling but further strike extents to the south east
of known mineralisation may represent some upside.
SRK UK has considered sampling density and distance from samples in order to classify the Mineral
Resource according to the terminology, definitions and guidelines given in the CIM Standards on Mineral
Resources and Mineral Reserves (December 2005) as required by NI 43-101 and has also undertaken
work to confirm that the Mineral Resource as reported has reasonable prospects for economic extraction
either by Open Pit or underground.
Figure 1-2: Example Cross Section through the Marmato Deposit (looking northwest).
Figure1-3: Example Level Plan through Marmato Deposit (1200 RL).
Table 1-1 give SRK UK’s Mineral Resource Statement. SRK has applied a cut off grade of 0.3 g/t gold
for this Mineral Resource Statement. In addition to the Open Pit Mineral Resource SRK UK has
considered there to be potential to mine the veins only via underground methodologies as is the current
practice at Mineros Nacionales. SRK UK has applied a cut-off grade to 1.2 g/t to this material.
- 52 -
Data quality, drillhole spacing and the interpreted continuity of grades controlled by the banding have
allowed SRK UK to classify the over 80 % of the deposit as either Measured or Indicated within the
current pit shell. The remainder of the Mineral Resource has been classified as Inferred.
Table 1-1: Open Pit and Underground Mineral Resource Statement*, Marmato Project, Colombia,
SRK Consulting (UK) Ltd, effective date, 4 September, 2011.
Grade Metal
Quantity Au Ag Au Ag
Category Mt gpt gpt 000’oz 000’oz
Open Pit Vein** Measured
Indicated
Measured and Indicated
Inferred
7.0
38.4
45.4
8.7
2.6
2.03
2.12
1.8
17.42
11.14
12.11
8.3
590
2,500
3,090
500
3,920
13,770
17,690
2,300
Open Pit Porphyry** Measured
Indicated
Measured and Indicated
Inferred
45.6
215.6
261.3
59.5
0.86
0.82
0.82
1.0
8.49
4.87
5.5
4.6
1,270
5,660
6,930
1,900
12,460
33,760
46,220
8,800
Open Pit Combined Measured
Indicated
Measured and Indicated
Inferred
52.6
254.1
306.7
68.3
1.09
1.0
1.02
1.1
9.68
5.82
6.48
5.1
1,860
8,160
10,020
2,400
16,380
47,530
63,910
11,150
Grade Metal
Quantity Au Ag Au Ag
Category Mt gpt gpt 000’ oz 000’oz
Underground Vein*** Measured
Indicated
Measured and Indicated
Inferred
1.5
1.5
3.4
1.95
1.95
2.0
11.58
11.58
11.3
90
90
200
550
550
1,200
Underground
Prophyry***
Measured
Indicated
Measured and Indicated
Inferred
0.7
0.7
3.1
1.51
1.51
2.74
4.98
4.98
3.5
30
30
300
110
110
300
Underground Combined Measured
Indicated
Measured and Indicated
Inferred
2.1
2.1
6.4
1.82
1.82
2.3
9.54
9.54
7.6
120
120
500
660
660
1,569 * Mineral resources are reported in relation to a conceptual pit shell. Mineral resources are not mineral reserves and do not have
demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate. All composites have
been capped where appropriate.
** Open pit mineral resources are reported at a cut-off grade of 0.3 g/t . Cut-off grades are based on a price of US$1200 per
ounce of gold and gold recoveries of 88 percent for open pit and underground resources, without considering revenues from other
metal within a limiting pitshell.
*** Underground mineral resources are reported at a cut-off grade of 1.5 g/t and below the material considered potentially
mineable via open pit methods. Cut-off grades are based on a price of US$1200 per ounce of gold and gold recoveries of 88
percent for underground resources, without considering revenues from other metals.
- 53 -
In comparison to the previous Mineral Resource estimate the new model represents an increase of 2.6
Moz of gold within the open pit portion of the deposit (approximately 25% increase). The main increases
have been due to an increase in the mean grade of the deposit above a cut-off grade of 0.3 g/t from 0.9 g/t
to 1.0 g/t, with the tonnage increasing from 342 Mt to 374 Mt, which has been attributed to the results
from infill drilling and intersection of higher grades at depth.
The primary focus of the 2011 infill drilling programme has been to increase the confidence in the
Mineral Resource in the upper portions of the deposit, and to infill areas with limited sample coverage in
the Mineral Resource at depth (previously defined as Inferred). The results of the current study show the
company has successfully converted a large portion of material previously categorised as Inferred into the
Indicated category. In comparison the Measured and Indicated portion of the deposit has increased from
226 Mt at 0.9 g/t producing 6.6 Moz to 307 Mt at 1.0 g/t producing 10.0 Moz.
The influence of the deeper drilling on the increase can be seen by the significant increase of the Indicated
and Inferred portions. The results are mainly responsible for the increase in the mean grades, with a
number of significant intersections within the core of the deposit, which have driven the updated limiting
surface deeper along strike (Figure 1-4). The strike extent has shifted in the order of 200m to the
northwest compared to the previous limits.
The other significant changes in the model has been the remodelling of the grade domains, which were
previously modelled as halos around each of the main vein structures, based on SRK UK’s statistical
review, analysis of the drill core and cross-cut sampling.
Figure 1-4: Influence of High-grade intersections on the resultant whittle shell (August 2011).
SRK UK notes that this updated Mineral Resource differs from the previous estimate on the project. The
main reason for differences can be summarised as follows:
Drilling of the deposit at depth has intersected a number of significant intersections, displaying
high grades, including MT-1386 which returned 4.8 g/t over 95 m in the deepest portion of the
deposit.
Reinterpretation of the grade (0.1g/t) boundary, which was limited in the previous model to halo’s
around each of the main veins. Review of drill core, visual inspection of the model and a
statistical review has led SRK UK to expand these zones into broader areas.
- 54 -
Leapfrog software has been used to aid in the interpretation.
Use of direction anisotropy to improve the search orientation based on the true dip and dip
directions limited to the vein wireframes.
Increase in Block Size from 10x 10x10m to 10x20x10 m, and the introduction of sub-block modelling compared to a diluted regularised block model.
SRK UK recommends the company focus on the following areas during the next phase of the project:
Completion of the current Infill Drilling Programme to upgrade classification particularly at
depth.
Infill drilling and along strike of the high-grade zones at depth to improve the understanding and
confidence of high-grades at the base of the new whittle shell.
Improving the optimum estimation parameters utilised within each domain, particularly within
the grade shell zone. Although there is shown to be only limited difference in global grade
tonnage when applying minor changes to these parameters, the local estimates within in the grade
shells are indicated to be sensitive, this will become of more importance to improve the
confidence in scheduling during the first few years of production. A series of shallower closer
spaced drilling within areas defined during the pre-feasibility study as the starter pit should be
targeted.
A more detailed investigation into the geological controls between the mineralised and
unmineralised portions of the porphyry. SRK UK hypothesizes there to be relationship between
areas on increased structures (more intense strain), and the veinlet density.
Construction of a structural model could assist in updating the grade domain in future models.
7.3 Other Projects
El Zancudo Project 7.3.1
Property Description and Location
The El Zancudo Project is located in the Municipalities of Titiribi, Angelopolis and Armenia, Department
of Antioquia, Republic of Colombia at 6° 04’ 30” N – 75° 47’ 26” W. Gran Colombia Panama agreed to
the assignment and sale-purchase of the mining concessions comprising the El Zancudo Project through
an agreement signed with CDI, a privately-owned Colombian company, dated January 29, 2010, whereby
CDI assigned the mining concession contracts, exploration license, requests for mining concessions and
all assets associated with these to Gran Colombia Panama or an affiliate or subsidiary of Gran Colombia
Panama. The closing date of the agreement was April 30, 2010. The purchase price was US$15 million,
payable in four tranches.
CDI owns or controls, directly or indirectly, eight adjoining mining concession contracts and applications
at El Zancudo with a total area of 6,001.595 hectares (ha), or 60.0 square kilometers. Six of the
concessions have contracts which are registered in the National Mining Registry, with a total area of
2,619.4450 ha. Another concession, mining concession No. 5849, has a signed contract and is at the
National Mining Registry awaiting registration. The eighth, Exploration License No. 4985, is an expired
exploration license for which application for a concession contract has been submitted and awaits
approval.
CDI has a contract with Sabaletas granting Sabaletas the right to recover gold and silver from scoria at the
locality of Sitio Viejo, located on mining concession contract No. 5521. The scoria is glassy slag in
dumps from historical roasting operations carried out to recover gold and silver. As consideration for the
rights granted by CDI to Sabaletas, CDI is entitled to a monthly payment in cash equal to a percentage of
the value of the sales of the marketable minerals in the relevant month. The percentages 6.5% when the
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tenor of the gold in the reprocessed scoria is less that 6.5 g/t, and 7.0% when the tenor of the gold in the
reprocessed scoria is equal to or greater than 6.5 g/t. Sabaletas made an advance payment to CDI of COP
900,000,000, equivalent to about US$ 465,838, from which there is a schedule of deductions from the
monthly payments.
History
Mining has been carried out in the El Zancudo Project since 1793. The most important companies were
the Sociedad de El Zancudo, formed in 1848, and the Sociedad de Otra-Mina. The peak production
period was from 1885 to 1930. Gold was recovered from the ore by roasters from 1851. The El Zancudo
Project was closed in 1945 and subsequent production has been on a small scale. The Sociedad de El
Zancudo reported production of 4,157.89 kg (129,325 ounces) of gold and 30,818.81 kg (958,570 ounces)
of silver from 284,370 tonnes of ore in the 11 year period between 1912 and 1922. Total production from
the Titiribi district has been estimated at between 48,230 kg and 64,300 kg (1.5 to 2.0 Moz) of gold
equivalent.
Since 1985, several studies have been made to extract gold and silver from the slag dumps at Sitio Viejo.
These have historical proven and probable reserve of 574,000 tonnes grading 4.40 g/t gold and 222.25 g/t
silver (Flores, 1991). These reserves should be considered as historical data only and are not compliant
with the current CIM standards and definitions required by the NI 43-101.
CDI acquired the El Zancudo Project in 1993 with the objective of producing gold and silver from the
scoria and from underground vein mining. CDI built a pilot plant at Sitio Viejo to treat the scoria in 1994.
They have rehabilitated the Independencia Mine, La Matilde Mine, and El Castaño Mine, and built a
treatment plant at the Independencia Mine with capacity of 120 tpd to concentrate ore by gravimetry and
flotation. Concentrates were roasted and trucked to the pilot plant at Sitio Viejo for cyanidation. CDI state
that the plant was never fully operational due to low metal prices and debt problems. The mine and two
plants are kept on care and maintenance by CDI.
Sabaletas started operation of a plant to recover gold and silver from the re-treatment of scoria in August
2009 under contract from CDI. The plant has a capacity to treat 6,000 tonnes per month by crushing and
grinding followed by agitated cyanide leach and Merrill Crowe precipitation using zinc powder. In
January 2010, the plant processed 5,600 tonnes of scoria and recovered 17,600 grams (about 565.8
ounces) of gold with a recovery of 65% gold, and 388 kg (about 12,474 ounces) of silver with a recovery
of 51% silver. The head grade is stated by Sabaletas to be 4 to 5 g/t gold.
Geology and Mineralization
The El Zancudo deposit is located on the western side of the Central Cordillera of the Colombian Andes
which is separated from the Western Cordillera to the west by the River Cauca. The El Zancudo deposit
lies within the Romeral terrane, an oceanic terrane comprising metamorphosed mafic to ultramafic
complexes, ophiolite sequences and oceanic sediments of probable Late Jurassic to Early Cretaceous age.
The Romeral terrane is partially covered by continental sediments of the Oligocene to Lower Miocene
age Amagá Formation, comprising gray to green colored conglomerates, sandstones, shales and coal
seams. The Titiribi-El Zancudo porphyry of Late Miocene age intrudes the Arquia Complex schists and
Amagá Formation sedimentary rocks. Gold mineralization is related to the emplacement of the porphyry
stocks.
The host rocks to gold mineralization are schists of the Arquia Complex, sedimentary rocks of the Amagá
Formation, and the Late Miocene andesite porphyry intrusions. The sediments have been folded into
several synclines cut by high angle reverse faults with strike of N10W to N20W, and a steep dip of 50 to
70° east. Veining in the Independencia Mine is also controlled by the reverse faults.
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The known mineralization is gold-silver veins of the epithermal to mesothermal, intermediate sulfidation
type. Mineralization occurs in multiple veins which have been exploited over a strike length of more than
3,500 m. The average vein width is 0.35 m, and varies up to 0.50 to 0.80 m. The known vertical extent of
mineralization is at least 900 m. Gold mineralization occurs in two zones at El Zancudo Project, the
Upper Zone and the Lower Zone. Mineralization in the Upper Zone occurs in flat-lying veins and
disseminations in conglomerates and sandstones at or near the base of the sediment sequence at and above
the unconformity with the underlying schists. Mineralization in the Lower Zone is hosted by N-S
striking, steeply-dipping veins in green schists and accessed by several long cross-cuts.
The minerals, in order of abundance, are pyrite, galena, arsenopyrite, sphalerite, silver-sulfosalts,
bournonite, boulangerite and jamesonite, with minor chalcopyrite, pyrrhotite, native gold or electrum, and
native silver. The gangue minerals are quartz, calcite and clay minerals. The clay minerals identified are
kaolinite, muscovite and sericite. Wall rock alteration is sericite, carbonate and disseminated sulfides.
Exploration, Drilling and Sampling
Despite a long history of gold and silver mining, the El Zancudo Project deposit has not been
systematically explored. CDI’s focus was to develop gold and silver production from the scoria dumps
and from the Independencia Mine. As a consequence, very little exploration was carried out by CDI. The
limited programs of exploration carried out by CDI were mainly surface geological mapping, and also
surveying and channel sampling of veins in the Independencia Mine workings. CDI carried out programs
of diamond drilling at the Independencia Mine in 1999 and 2002-03 for a total of 998.2 m in 6 holes.
CDI assayed samples from veins for gold and silver at a local laboratory understood to be in Medellin and
to be uncertified. The sample preparation and analysis methods are not known, and no QA/QC program
was carried out.
Data Verification
The author of the El Zancudo Technical Report verified the data used upon in the El Zancudo Technical
Report by visiting the property and confirming the geology and mineralization, and by carrying out
independent check sampling. Nine check samples were taken and analyzed at SGS Peru. The results the
presence of high grades of gold and silver in the veins at the Independencia Mine and in the slag at Sitio
Viejo, with gold grades up to 36.0 g/t over 0.25 m and grades up to 2,147 g/t over 0.25 m.
Mineral Processing and Metallurgical Testing
The gold in the sulfide ore at the El Zancudo Project is refractory due to the very fine grained gold size
and encapsulation in pyrite, arsenopyrite and other sulfides. There are three ore treatment plants on the
project, two of which are owned by CDI and are inactive, and the third is owned by Sabaletas and is
actively re-processing scoria to recover gold and silver. CDI has a 20 tpd pilot plant at Sitio Viejo with
agitated cyanide leach tanks. CDI also has 120 tpd plant at the Independencia Mine which has crushing,
milling and flotation to produce a sulfide concentrate, which was then processed at the Sitio Viejo pilot
plant to extract gold and silver by re-grinding, agitated cyanide leach, and Merrill Crowe precipitation
with zinc. CDI state that neither of these plants has ever operated on a commercial basis.
The Sabaletas plant is located at Sitio Viejo and recovers gold and silver from the re-treatment of scoria
under contract from CDI. It has been in operation since August 2009. The plant has a capacity to treat
6,000 tonnes per month by crushing, grinding, agitated cyanide tanks and Merrill Crowe precipitation.
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Mineral Resource and Mineral Reserve Estimates
There are no mineral resource and mineral reserve estimates for the property that are compliant with the
current CIM standards and definitions required by the NI 43-101.
Mazamorras Project 7.3.2
Old GCM commissioned SRK ES to review the Mazamorras Cu-Au-Mo project in the Department of
Nariño, Republic of Colombia. Old GCM had an agreement in place with the licence holders for the
100% transfer of title on May 20, 2010 supported by a payment schedule to November 20, 2012. The
review of the Mazamorras Project was in support of fund raising for exploration work and formed part of
a listing application on the TSX.
The Mazamorras Technical Report serves to document, summarise and comment upon the historical
exploration at the Mazmaorras Project, Old GCM’s exploration, as well as SRK ES’ own sampling
programme and results. It also includes SRK ES' interpretation and recommendations for future
exploration work.
Property Description and Location
The Mazamorras Project is located at 1.49o
N and 77.15o
W in a small rural area in the southwest of
Colombia, some 32 km (straight line) north-northwest from San Juan de Pasto, the capital city of the
Department of Nariño, and some 488 km (straight line) south-southeast from the Colombian capital
Bogotá. The Mazamorras Project is readily accessible via road for about 50 km from San Juan de Pasto
to "El Empate" and then via local dry weather roads some 8.6 km to the concession boundary for a total
of about two hours drive.
History
There are limited historical artisanal workings in the area for both gold and copper. Gold production is
predominantly alluvial. No production records are available.
Historical exploration work at the Mazamorras Project commenced in 1998 comprising rock chip
sampling, limited soil sampling, and mapping at a scale of 1:10000.
Geology and Mineralization
Old GCM’s exploration work at the Mazamorras Project comprises limited surficial rock chip sampling in
February 2010.
The Mazamorras Project is situated in the convergence zone of the three Cordilleras of the Colombian
Andes, known as the Colombian Massif. The concession area contains a propylitic-phyllic-potassic-
silicic 8 x 2.5 km alteration belt localised along the Mazamorras fault oriented north-northwest to south-
southeast. At least three mineralised porphyry bodies of the Tertiary Igneous Complex have been
identified within the belt. Two of these bodies in the north and the centre of the Mazamorras Project,
with outcropping areas of approximately 2 km2 and 1 km
2 respectively have been sampled. Sampling has
been restricted to available exposures, predominantly along stream beds. Potential epithermal-related
mineralization styles remain largely unstudied.
Mineralization occurs as disseminations and disseminated aggregates with fine discontinuous pyrite
stockworks and rare quartz-pyrite veinlets. Vein systems appear controlled by the predominant north-
northwest to south-southeast trending Mazamorras fault zone and epithermal-style mineralization is
interpreted as hosted by parallel to subparallel shear zones. Predominant copper-bearing minerals
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include, in decreasing order: chalcocite, bornite, covellite, trace chalcopyrite and cuprite. Sulphides are
dominantly pyrite, and rare sphalerite and molybdenite have been observed independently in quartz
veinlets in association with pyrite.
SRK ES’ work presented was conducted by Karen Volp MAusIMM (110234) who completed a site visit
to the project between the March 9th and 11th March 2010 and is the Qualified Person for the
Mazamorras Technical Report. During the site visit, SRK ES undertook verification sampling of
historical rock chip sampling in addition to new independent sampling of the main mineralised trends.
Exploration, Drilling and Sampling
SRK ES considers that the Mazamorras Project is a very early stage exploration project that contains at
least two Cu-Au-Mo mineralised porphyry systems and several Au-Ag occurrences to which limited
modern surface exploration and techniques have been applied. There is therefore potential for the
discovery of economic Cu-Au±Mo porphyry-style and Au-Ag epithermal-style mineralization.
Copper, Au and Mo grades for all Tertiary Igneous Complex rock chip samples provide average Cu
grades of 0.11%, average Au grades of 0.09 ppm and average Mo grades of 0.003%. The SRK ES
geochemical study suggests that the mineralising porphyry may lie at depth.
On the basis of the data available to SRK ES at the time the Mazamorras Technical Report was drafted,
SRK ES considered the Mazamorras Project may be characterized as a porphyry-epithermal system
comprising porphyry Cu-Au mineralization overlain by low-sulphidation epithermal mineralization and
may be similar in deposit style to the Porgera deposit, Papua New Guinea. At the time of the Mazamorras
Technical Report, there was insufficient data upon which to make any comment with respect to tonnage
or grade.
SRK ES considers that a focussed exploration programme based on the acquisition and interpretation of
airborne geophysical and ground geophysical data and satellite imagery followed by pioneer drilling is
appropriate and justified by the exploration results to date. SRK ES has proposed an exploration
programme and schedule for the next phase of exploration work with an estimated completion in
approximately 12-15 months with a budget (excluding administration, consumables, and social and
environmental studies) of at least approximately US$640,000 and an expected budget of approximately
US$1,050,000.
SRK ES concluded that further exploration is warranted at the Mazamorras Project, particularly to
determine the potential for economic gold mineralization and for economic supergene copper
mineralization.
Concepción Project 7.3.3
Property Description and Location
The Concepción Project is located in the Municipalities of Concepción, San Vicente, El Peñol and
Barbosa, Department of Antioquia (Antioquia), Republic of Colombia. It is approximately 36 km NE of
the city of Medellin, the capital of Antioquia. The latitude and longitude of the property is approximately
6° 21’N, 75° 16’ W and the altitude is between 1,950 and 2,350 m.
The Concepción Project comprises four mining concession contracts and applications with a total area of
3,534.694 ha or 35.3 km2. One concession has a signed contract (No. 6352, area 1,309.38 ha), one has a
concession contract awaiting signature by the mining authority (area 26.414 ha), and the others are
mining requests.
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History
Placer and vein gold mining has taken place in the Concepción Project area since the mid 17th century
and was significant in the 18th century, leading to the Spanish settlement of the area. Over 33 old gold
mines are listed in a recent inventory of the Concepción district. Mining declined in importance in the
late 19th century, but has continued on a small scale up to the present day. The San Pedro, or Los
Churumbelos Mine, was mined until 1997, and the Criaderos mine until recently, both located in the
Concepción Project. The San Pedro mine is reported to have mined a head grade of 16 g/t gold for twenty
years. There is no record of the historical production from this mine or the Concepción district.
Providencia has explored the Concepción Project since 2005. All of the exploration work has been
carried out on Concession Contract No. 6352. The exploration has been reconnaissance in nature. No
exploration work has been carried out on Mining Request No. 6628. Mineros drilled 9 holes totaling
1,087.76 m at the San Pedro mine in 2006-07 for due diligence for a possible acquisition.
Geology and Mineralization
The Concepción Project is located in the Central Cordillera of the Colombian Andes. The regional
geology comprises metamorphic rocks of the Cajamarca Complex of Paleozoic age, intruded by the
Antioquia Batholith of Upper Cretaceous age. Concession Contract No. 6352 is mostly underlain by
schists which are mainly graphitic schists and also include a sequence of mineralized calc-silicate schists
at the San Pedro. A single dike of hornblende andesite has been observed.
The main deposit types present in the Concepción Project are mesothermal quartz veins with gold that are
related to oxidized intrusions, and are described by the oxidized intrusion-related gold vein model
(Sillitoe, 1991). The mineralization formed from hydrothermal fluids related to the Antioquia Batholith,
and forms veins in the batholith and surrounding schists. The quartz veins are sulfide-poor. In contrast,
sulfide-rich quartz veins are present at the San Pedro mine and adjacent areas, which are hosted by calc-
silicate schists. The calc-silicate schist wall rocks also have sulfides and contain lower grade gold
mineralization. These veins are also considered to be mesothermal veins related to oxidized intrusions.
Small deposits of placer gold derived from the quartz veins are also present.
The Company’s target is veins with high grade gold mineralization suitable for small, high grade
underground mine operations. The project also has potential for bulk mineable, low grade gold deposits,
similar to the Gramalote deposit located 42 km NE of Concepción, which has 2.4 Moz of gold grading 1.0
g/t.
There are two types of gold mineralization in concession contract No. 6352 hosted by quartz veins and by
calc-silicate-hosted quartz-sulfide veins. Quartz veins are widespread in the southern part of concession
contract no. 6352 which was visited by the author. Gold can be panned from some of the veins and check
sampling by the author returned up to 22.38 g/t Au in a quartz vein. Gold mineralization in quartz-sulfide
veins in calc-silicate schists at the San Pedro mine has grades in check samples up to 74.25 g/t Au and 55
g/t Ag. The wall rock calc-silicate schist is also mineralized.
Exploration, Drilling and Sampling
Providencia carried out reconnaissance exploration work on concession contract no. 6352 since 2005. The
exploration work has included literature search; photo-interpretation and structural analysis; geological
field reconnaissance; petrography; analysis of vein samples (110 total from two sampling programs). The
exploration work has identified structural and vein targets and made recommendations for follow up
exploration.
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Providencia is currently carrying out a program of underground exploration with excavation of a winze or
inclined shaft in the district of San Pedro Alto planned to intersect a quartz vein. It was at 72 m depth by 1
May 2010 but had not cut a vein yet. Providencia is also currently carrying out a program of prospection
and trenching in the southern part of concession contract no. 6352 which has identified numerous quartz
veins in outcrop and in overgrown small mine workings, some of which have shown with visible gold by
panning and up to 22.38 g/t Au in check sampling.
Mineros Nacionales drilled 9 diamond holes for 1,087.76 m at the San Pedro Mine in 2006-07. Three
assays are reported of 11.33 g/t, 11.38 g/t and 33.00 g/t gold but it appears that samples were only taken
of veins or visible mineralization and the whole core length was not analyzed. No other information has
been supplied about the drilling.
The Providencia and Mineros Nacionales drilling samples were assayed for Au and Ag at the Mineros
Nacionales Mine laboratory at the Marmato Mine, Caldas. Later samples were analyzed by SGS in El
Callao, Peru. Providencia did not carry out any QA-QC for the sampling programs.
The exploration work carried out by Providencia has not been carried out to CIM standards. It is
recommended that future exploration work including sample collection, QA-QC, assaying and
certification of assays be carried out in accordance with currently accepted best practice standards of the
mining industry.
Data Verification
The author of the Concepción Project has verified the data used in this report by visiting the property and
confirming the geology and mineralization, and by carrying out independent check sampling. The check
samples were analyzed by SGS in Peru. The check samples report grades up to 74.25 g/t gold, 55.0 g/t
silver, 8,903 ppm (0.89%) arsenic, and 1,793 ppm (0.18%) lead. The check samples indicate the presence
of high grades of gold and silver in some samples from quartz veins and mineralized calc-silicate schist
on concession contract no. 6352 and mining request no. LC1-08031.
Mineral Resource and Mineral Reserve Estimates
There are no mineral resource and mineral reserve estimates for the property that are compliant with the
current CIM standards and definitions required by the NI 43-101.
The Lo Increíble Properties 7.3.4
The Company’s indirect wholly-owned subsidiary, Lo Increíble Mining Company de Venezuela C.A.,
through its 92.3% interest in LOMEC and two sub-leases held by its two 100% owned subsidiaries
Mineria MH C.A. and Lo Increíble Mining Company de Venezuela C.A., holds an overall 100% indirect
interest in the mining rights for the Lo Increíble Properties.
Dr. Mike Armitage of SRK UK is an independent qualified person as defined by NI 43-101 and has
prepared or reviewed the preparation of the scientific and technical information in this Annual
Information Form in respect of the Lo Increíble Properties. Dr. Armitage is a Chartered Geologist and a
Charted Engineer and a Fellow of the Geological Society and Member of the Institute of Materials,
Minerals and Mining both of which are professional associations recognized by the Canadian regulatory
authorities. Dr Armitage’s verification included a review and validation of the applicable assay databases,
reviews of assay certificates and a review of check and replicate assays.
The Lo Increíble Technical Report
The Lo Increíble Properties are located in the El Callao area of the State of Bolivar, Venezuela and
- 61 -
comprise two adjacent areas covering a total of 2,216 hectares which lie 3 km north of the town of El
Callao.
Exploration for gold in Bolivar State dates back to before Venezuelan independence in 1811 and most
likely prior to the Spanish occupation. The El Callao mining district itself is historically the most prolific
gold producing region in Venezuela, with a recorded output of 6 million ounces since 1870.
Despite the El Callao district’s impressive production history and Lo Increíble’s numerous artisanal
workings, little modern exploration had taken place on the Lo Increíble Properties until Bema Gold Ltd.
commenced work in late 1993. This work included line cutting, soil and panel sampling, trenching,
airborne magnetic and radiometric surveying, underground mapping and sampling, assaying, and limited
metallurgical studies, structural studies and finally reverse circulation and diamond drilling.
The exploration carried out by the Company at the Lo Increíble Properties has largely comprised further
mainly infill drilling at the three key prospects of La Cruz, La Sofia and El Tapon. In total, the database
used by LGGC comprised information from some 581 drillholes representing some 90,000 metres of
drilling in total.
The stratigraphy around the Lo Increíble Properties comprises a single volcano-sedimentary cycle of the
Pastora Botanamo Province. Sub-aqueous extrusion of mafic volcanics appears to have been followed by
intermediate and felsic volcanism, and eventually by the deposition of clastic sedimentary formations.
This package of rocks was then intruded by mafic and felsic dykes and sills, and late granitoid stocks and
plutons.
The gold mineralization at the Lo Increíble Properties occurs in association with the Lo Increíble Shear
which is comprised of a complex system of splays and bifurcating faults which strikes northeast-
southwest and extends for at least 15 km along strike, some 7 km of which is through the Lo Increíble
Properties where it is up to 1.5 km wide in outcrop.
The orebodies themselves comprise shallow to steeply dipping zones of quartz-carbonate veining and
disseminated sulphide mineralization containing gold which are typically continuous for hundreds of
metres along strike and down dip and which vary up to tens of metres in thickness.
LGGC’s resulting mineral resource estimates are given in the table below. This has been reported at a
0.5g/t Au block cut-off, apart from a deep high grade zone at La Cruz, which LGGC considers has the
potential to be exploited by underground mining, and which has been reported using a 4.0g/t Au cut-off.
Measured Mineral Resource
Deposit
Tonnes
(Mt) Grade
(g/t Au) Gold Content
(Ounces x1000)
La Cruz-OP 3.08 2.4 240
La Cruz-UG - - -
El Tapon - - -
La Sofia 1.11 2.2 80
TOTAL 4.19 2.3 310
Indicated Mineral Resource
Deposit
Tonnes
(Mt) Grade
(g/t Au) Gold Content
(Ounces x1000)
La Cruz-OP 3.18 1.6 160
La Cruz-UG - - -
El Tapon 4.76 2.6 400
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Deposit
Tonnes
(Mt) Grade
(g/t Au) Gold Content
(Ounces x1000)
La Sofia 1.28 1.6 70
TOTAL 9.22 2.1 630
Inferred Mineral Resource
Deposit
Tonnes
(Mt) Grade
(g/t Au) Gold Content
(Ounces x1000)
La Cruz-OP 0.26 1.1 10
La Cruz-UG 0.28 5.4 50
El Tapon 0.30 3.2 30
La Sofia - - -
TOTAL 0.84 3.3 90
At the Lo Increíble Properties, gold mineralization occurs as lode-gold shear-hosted quartz-carbonate
veins. Mineralization is associated with the east-northeast to east trending Lo Increíble shear, and is
hosted by similar lithologies and structural features to the nearby Choco 10 mine.
Medoro has used Actlabs Laboratories in Venezuela as the primary laboratory. Split HQ core samples of
4 to 5 kilograms were crushed and pulverized to 150 mesh. A 50 gram sample was split for Fire Assay
analysis using AAS finish, and gravimetric finish if Au was greater than 2.0 grams per tonne. A
comprehensive quality control program, which includes blanks, standards, field duplicates and cross
checks was employed. This quality control program included the use of certified standard reference
samples.
8 DIVIDENDS AND DISTRIBUTIONS
Since the completion of the RTO on August 19, 2010, the Company has not paid any dividends or
distributions. Other than pursuant to the TSX’s policies and the BCBCA, there are no restrictions on the
Company that would prevent it from paying a dividend or distribution. However, the Company does not
currently have a dividend or distribution policy in place.
9 DESCRIPTION OF CAPITAL STRUCTURE
9.1 Authorized Share Capital
The authorized capital of the Company consists of an unlimited number of Common Shares without par
value and an unlimited number of Preferred Shares without par value. As at March 28, 2012, there were
381,984,479 Common Shares issued and outstanding as fully paid and non-assessable, and no Preferred
Shares of the Company were outstanding or have been issued.
The following is a summary of the material provisions attaching to the Common Shares, Preferred Shares,
Warrants, Gran Colombia Consideration Warrants, Colombia Goldfields Warrants, and the Notes.
9.2 Common Shares
The holders of Common shares are entitled to receive notice of and to attend all meetings of the
shareholders of the Company and to one vote per Common Share held at meetings of the Shareholders.
Subject to the rights of the holders of Preferred Shares, the holders of Common Shares are entitled to
dividends if, as and when declared by the Board, and upon liquidation, dissolution or winding-up, to share
equally in such assets of the Company as are distributable to the holders of Common Shares.
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9.3 Preferred Shares
The Preferred Shares may be issued in one or more series and, with respect to the payment of dividends and
the distribution of assets in the event that the Company is liquidated, dissolved or wound-up, rank prior to
the Common Shares. The Preferred Shares of each series shall rank on parity with the Preferred Shares of
every other series. The Board has the authority to issue Preferred Shares in series and determine the price,
number, designation, rights, privileges, restrictions and conditions, including dividend rights, redemption
rights, conversion rights and voting rights, of each series without any further vote or action by shareholders.
The holders of Preferred Shares do not have pre-emptive rights to subscribe for any issue of securities of the
Company. At this time, the Company has no plans to issue any Preferred Shares.
9.4 Warrants
The following table describes the outstanding Warrants of the Company as at March 28, 2012:
Number of Warrants
Outstanding and Exercisable
as at March 28, 2011 Exercise Price Expiry Date
157,973,489 (1)
$2.60(2)
August 24, 2015
1,527,537(3)
$6.00(3)
December 28, 2012
3,722,333(3)
US$4.50(3)
June 18, 2013
______________________________
Notes:
(1) The Warrants were issued in respect of the private placement of 171,875,000 subscription receipts on July 27, 2010, which were
automatically exchanged into Gran Colombia Units consisting of one Common Share and one-half of one Warrant upon the closing of the
RTO. This number also includes the Gran Colombia Consideration Warrants that were issued in connection with the Medoro Merger. See
“General Development of the Business – 2011 – Medoro Merger” and “General Development of the Business – Significant Acquisitions or
Dispositions”.
(2) Effective December 1, 2010, and in conjunction with the Common Share Consolidation, the Company consolidated the Warrants on a one-for-four basis, with the result that each consolidated Warrant now entitles its holder to acquire one Common Share at a price of $2.60.
(3) In connection with the Colombia Goldfields Transaction, the Company assumed the Colombia Goldfields Warrants, whereby each December Colombia Goldfields Warrant was exercisable at an exercise price of $6.00, and whereby each June Colombia Goldfields Warrant was
exercisable at a price of US$4.50, to acquire 0.336 of a Common Share and 0.0108 of a Common Share purchase warrant of the Company,
whereby each whole warrant of the Company was exercisable into one Common Share at an exercise price of $1.50 per Common Share for a term of two years. As a result of the Medoro Merger, each December Colombia Goldfields Warrant is now exercisable at an exercise price
of $5.00, and each June Colombia Goldfields Warrants is exercisable at an exercise price of US$3.75, to acquire 0.4032 (being 0.336 of a
share multiplied by 1.2) of a Common Share for each Colombia Goldfields Warrant held, 0.0168 of a Gran Colombia Consideration Warrant for every Colombia Goldfields Warrant held, 0.0108 of an underlying warrant for every Colombia Goldfields Warrant held (where each
whole warrant is exercisable to purchase 1.2 Common Shares for at an exercise price of $1.25), and a further 0.0054 of a Gran Colombia
Consideration Warrant for every Colombia Goldfields Warrant held. See “General Development of the Business – 2011 – Medoro Merger” and “General Development of the Business – Significant Acquisitions or Dispositions – Medoro Merger”.
Warrants and Gran Colombia Consideration Warrants 9.4.1
The Warrants and the Gran Colombia Consideration Warrants were issued pursuant to the Warrant
Indenture and rank pari passu, whatever may be the actual dates of issue of the certificates representing
the warrants. The Warrant Indenture provides for and contains provisions for adjustments to the exercise
price and the number of Common Shares issuable upon the exercise of the warrants, including the amount
and kind of securities or other property issuable upon exercise, upon the occurrence of certain stated
events, including any subdivision or consolidation of the Common Shares, certain distributions of the
Common Shares or securities exchangeable for or convertible into Common Shares, certain offerings of
rights, options or warrants and certain capital reorganizations. The adjustments provided for in the
Warrant Indenture are cumulative and shall be made successively whenever an event that triggers such
adjustments occurs, subject to certain conditions. See “General Development of the Business – August
- 64 -
2010 – Present – RTO” and “General Development of the Business – 2011 – Medoro Offering”. Please
refer to the Warrant Indenture, a copy of which can be accessed on the Company’s profile on SEDAR at
www.sedar.com.
9.5 Colombia Goldfield Warrants
The Colombia Goldfields Warrants were originally issued by Colombia Goldfields and assumed by
Medoro (and now the Company) in connection with the Colombia Goldfields Transaction. Each
Colombia Goldfields Warrant is evidenced by a warrant certificate. Each warrant certificate provides for
and contains provisions for adjustments to the exercise price and the number of Common Shares issuable
upon the exercise of the warrants, including the amount and kind of securities issuable upon exercise,
upon the occurrence of certain stated events, including any subdivision or consolidation of the Common
Shares, or certain distributions of the Common Shares, or the reorganization, reclassification, merger,
consolidation or disposition of assets. The adjustments provided for in the certificates are cumulative and
shall be made successively whenever an event that triggers such adjustments occurs, subject to certain
conditions.
9.6 Compensation Options
The following table summarizes information concerning outstanding and exercisable Compensation
Options of the Company as at March 28, 2012:
Number of
Compensation Options
Outstanding and Exercisable Exercise Price Expiry Date
1,350,000 (1)
$1.00 (2)
April 27, 2012
10,312,500(1)
$1.60(2)
August 24, 2012
Notes:
(1) The Compensation Options were issued to the Agent as partial consideration for its services in connection with the First Gran Colombia
Private Placement and the Second Gran Colombia Private Placement. See the heading entitled “General Development of the Business –
August 2010 - Present – Common Share Consolidation.”
(2) As a result of the Common Share Consolidation, the exercise price of the both the First and Second Gran Colombia Private Placement
Compensation Options were automatically adjusted to reflect the one-for-four consolidation.
9.7 Notes
As at March 28, 2012, there was US$78,632,000 principal amount of Notes issued and outstanding.
The Notes were issued under and are subject to the Note Indenture which provides that the Notes are
direct unsecured obligations of the Company and rank pari passu in right of payment with each other and
with all other unsecured indebtedness of the Company (subject to certain terms and conditions as set forth
in the Note Indenture). The designation of the Notes as senior notes applies to the priority in right of
payment of the Notes to certain indebtedness as more particularly described in the Note Indenture. If a
change of control (as defined in the Note Indenture) occurs at any time during which any Notes remain
outstanding, a holder of the Notes shall be entitled to require the Company to purchase and repay all or
less than all of such holder’s Notes, and the Company shall be required to purchase and repay the Notes
designated for purchase by the holder, for a purchase price equal to the applicable percentage of the
outstanding principal amount of each such Note to be purchased and repaid (as set forth therein), together
with any accrued and unpaid interest (as set forth therein). See “General Development of the Business –
2011 – Note Offering”. Please refer to the Note Indenture, a copy of which can be accessed on the
Company’s profile on SEDAR at www.sedar.com.
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10 MARKET FOR SECURITIES
10.1 Trading Price and Volume
Common Shares 10.1.1
The Common Shares are listed on the TSX under the trading symbol “GCM”. The closing price of the
Common Shares on the TSX on March 28, 2012 was $0.42.
The following table sets out the high and low trading of the Common Shares for the periods indicated, as
reported by the TSX.
Period High Low Trading Volume
March 1-28, 2012 $0.55 $0.40 10,059,353
February 2012 $0.60 $0.48 7,235,543
January 2012 $0.63 $0.39 17,955,937
December 2011 $0.60 $0.34 36,290,950
November 2011 $0.73 $0.485 11,463,130
October 2011 $0.74 $0.57 14,930,736
September 2011
$0.81 $0.51 20,853,764
August 2011 $0.97 $0.70 19,995,657
July 2011
$0.96 $0.75 16,078,166
June 2011 $1.14 $0.75 8,436,357
May 2011 $1.37 $0.85 12,467,407
April 2011 $1.88 $1.12 21,322,921
March 2011 $2.09 $1.64 18,386,418
February 2011 $2.00 $1.62 5,568,378
January 2011
$2.19 $1.61 10,237,292
Warrants 10.1.2
The Warrants are listed on the TSX under the trading symbol “GCM.WT”. The closing price of the
Warrants on the TSX on March 28, 2012 was $0.145.
The following table sets out the high and low trading of the Warrants for the periods indicated, as
reported by the TSX.
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Period High Low Trading Volume
March 1-28, 2012 $0.20 $0.14 2,345,776
February 2012 $0.215 $0.145 1,394,855
January 2012 $0.19 $0.135 1,513,713
December 2011 $0.175 $0.075 8,802,543
November 2011 $0.175 $0.115 11,779,690
October 2011 $0.18 $0.105 1,236,855
September 2011
$0.23 $0.12 25,713,013
August 2011 $0.30 $0.20 1,538,605
July 2011 $0.33 $0.23 1,236,810
June 2011 $0.60 $0.25 8,411,955
May 2011 $0.79 $0.51 560,061
April 2011 $0.89 $0.61 976,875
March 2011 $0.95 $0.75 431,312
February 2011 $0.83 $0.70 1,190,224
January 2011 $0.98 $0.72 8,415,997
Notes 10.1.3
The Notes are listed on the TSX under the trading symbol “GCM.WT.U”. The closing price of the Notes
on the TSX on March 28, 2012 was $87.00
The following table sets out the high and low trading of the Notes for the periods indicated, as reported by
the TSX. The Notes commenced trading on the TSX on August 11, 2011 and as a result there is no
trading history prior to such period.
Period High Low Trading Volume
March 1-28, 2012 $95.00 $86.00 557,000
February 2012 $92.00 $81.99 3,413,000
January 2012 $95.00 $79.99 365,000
December 2011 $89.00 $80.00 1,573,000
November 2011 $94.00 $87.00 295,000
October 2011 $94.49 $85.00 449,000
September 2011
$102.01 $85.00 2,752,000
August 2011 $101.50 $96.00 3,021,000
10.2 Prior Sales
There are no securities of the Company that were issued but not listed on a marketplace during the most
recently completed financial year of the Company and up to the date hereof, other than the following:
- 67 -
Date of Grant Type of
Security
Number of
Securities
Exercise/Conversion
Price Expiry Date
January 12, 2012 Options 175,000 $0.425 January 12, 2017
October 24, 2011 Options 65,000 $0.62 October 24, 2016
September 29, 2011 Options 200,000 $0.54 September 29, 2016
September 21, 2011 Options 100,000 $0.73 September 21, 2016
September 12, 2011 Options 13,221,424 $0.73 September 12, 2016
June 7, 2011 Options(1)
300,000(1)
$1.59(1)
June 7, 2016
May 11, 2011 Options(1)
50,000(1)
$1.62(1)
May 11, 2016
May 11, 2011 Options 50,000 $1.60 May 11, 2016
January 27, 2011 Options(1)
350,000(1)
$2.20(1)
January 27, 2016
January 27, 2011 Options 350,000 $1.76 January 27, 2016
January 19, 2011 Options 150,000 $1.83 January 19, 2016
______________________________
Notes:
(1) These Options were issued by Medoro and assumed by the Company in connection with the Medoro Merger. As a result of the Medoro Merger, each Option exercisable to purchase 1.2 Common Shares at the original exercise price divided by 1.2, plus the holder of the Options
will receive upon exercise thereof, of half of one Gran Colombia Consideration Warrant.
11 ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL
RESTRICTION ON TRANSFER
To the Company’s knowledge, there are no securities of the Company which are subject to escrow or to
contractual restriction on transfer as at March 28, 2012.
On completion of the RTO an aggregate of 6,469,165 Common Shares held by principals of the
Company and certain other shareholders were deposited into escrow with Equity, as escrow agent,
pursuant to a Tier 1 Value Security Escrow Agreement as required by Policy 5.4 of the TSXV.
Pursuant to the terms of the escrow agreement, 1,617,291 Common Shares were released from
escrow on October 22, 2010, 1,617,291 Common Shares were released from escrow on February 23,
2011, August 23, 2011, and the remaining 1,617,291 Common Shares were released from escrow on
February 23, 2012.
On completion of the RTO, 2,770,835 Common Shares were made subject to a TSXV hold period of one
year, with such hold period expiring with respect to 20% of such Common Shares on receipt of the final
exchange bulletin in respect of the RTO and expiring in respect of a further 20% of such Common Shares
every three months thereafter. As of the date hereof, the hold period has expired and there are no further
Common Shares subject to such hold period.
12 DIRECTORS AND OFFICERS
As of March 28, 2012, the directors and executive officers of the Company (as a group) owned, or exerted
direction or control over, directly or indirectly, a total of 11,726,226 Common Shares, representing
approximately 3.07% of the Company’s total issued and outstanding Common Shares on a non-fully
diluted basis.
The following table sets forth, as of the date hereof, the name, municipality of residence of each director,
whose directorship will expire (subject to being re-elected) at the 2012 annual meeting of the Shareholders
of the Company, and executive officer of the Company, as well as such individual’s position within the
Company, principal occupation within the five preceding years and number of Common Shares
- 68 -
beneficially owned by each such director or executive officer. Information as to residence, principal
occupation and Common shares owned is based upon information furnished by the person concerned and
is as at the date of this Annual Information Form.
Name, Municipality of
Residence and Current
Position with the
Company
Director Since
Present Principal Occupation or Employment
(including all officer position currently held with the
Company), Principal Occupation or Employment for
the Past Five Years or more, and Other Current
Public Directorships(1)
Number of
Common Shares
Beneficially
Owned, Directly or
Indirectly, or Over
Which Control or
Direction is
Exercised
(2)
Percentage of
Common
Shares Held
Serafino Iacono(3)
Caracas, Venezuela
Executive Co-Chairman,
Director
August 6, 2010
Executive Co-Chairman of the Board to the Company
since August 20, 2010; Co-Chairman of the board of
Pacific Rubiales Energy Corp. since January 23, 2008;
Interim Chief Executive Officer and President of Medoro
from September 2010 to June 10, 2011; Co-Chairman of
the board of Pacific Stratus Energy Corp. from August 21,
2006 to January 23, 2008; Chief Executive Officer of
Bolivar Gold Ltd., a gold producer, from February 2003 to
February 2006. Mr. Iacono is also a director of Pacific
Rubiales Energy Corp. and Pacific Coal Resources Ltd.
5,233,526 1.370%
Miguel de la Campa(3)
Caracas, Venezuela
Executive Co-Chairman,
Director
August 6, 2010 Executive Co-Chairman of the Board to the Company
since August 20, 2010; Co-Chairman of the board of
Pacific Rubiales Energy Corp. since January 23, 2008; Co-
Chairman of the board of Pacific Stratus Energy Corp.
from August 21, 2006 to January 23, 2008; President and
Chief Operating Officer of Bolivar Gold Ltd., a gold
producer, from February 2003 to February 2006. Mr. de la
Campa is also a director of Pacific Rubiales Energy Corp.,
Medoro Resources Ltd. and Pacific Coal Resources Ltd.
2,904,894 0.760%
Maria Consuelo
Araujo(3)
Bogota, Colombia
Chief Executive Officer
August 6, 2010 Chief Executive Officer of the Company since August 20,
2010; Minister of Foreign Affairs in Colombia from
August 2006 to February 2007; Minister of Culture in
Colombia from August 2002 to February 2006; and
General Manager of MCA Consulting since February
2007.
51,250 0.013%
Ronald Pantin Caracas, Venezuela
Director
August 6, 2010 Chief Executive Officer of Pacific Rubiales Energy Corp.
since May 2007; and President of Enron Venezuela from
May 2000 to March 2002. Mr. Pantin is also a director of
Pacific Rubiales Energy Corp. and Pacific Coal Resources
Ltd.
212,499 0.055%
José Francisco Arata(3)
(5)
Caracas, Venezuela
Director
August 6, 2010 President of Pacific Rubiales Energy Corp. since January
23, 2008; Chief Executive Officer and director of Pacific
Stratus from August 21, 2006 to January 23, 2008; and
Executive Vice President, Exploration of Bolivar Gold
Ltd. from July 1997 to February 2006. Mr. Arata is also a
director of Pacific Rubiales Energy Corp. and Pacific Coal
Resources Ltd.
965,723 0.252%
- 69 -
Name, Municipality of
Residence and Current
Position with the
Company
Director Since
Present Principal Occupation or Employment
(including all officer position currently held with the
Company), Principal Occupation or Employment for
the Past Five Years or more, and Other Current
Public Directorships(1)
Number of
Common Shares
Beneficially
Owned, Directly or
Indirectly, or Over
Which Control or
Direction is
Exercised
(2)
Percentage of
Common
Shares Held
Ricardo Lozano(6)
Bogota, Colombia
Director
August 6, 2010 Managing Director of Dominion Estrategia Empresarial in
Bogota since September 2008; President of Asociacion
Nacional de Agencias de Viajes y Turismo ANATO from
April 2008 to September 2008; Director for the Madrid
and Ecuador offices of Proexport Colombia from April
2000 to February 2008, a former partner with the law firm
Lozano Lozano & Abogados Asociados; a former deputy
minister of the Colombian Ministry of the Interior and
Justice, and the former First Secretary in charge of
consular functions of Colombia to the Canadian
Government. He is a member of the board of directors of
Empresa de Acueducto y Alcantarillado de Bogota, and
alternate board member for Empresa de Energia de
Cundinamarca and a former board member of the District
Institute of Tourism. Mr. Lozano is a Public Law
Administrative Specialist and an Attorney from the
Colegio Mayor de Nuestra Senora del Rosario in Bogota.
Nil N/A
Stephen Wilkinson(4)
Vancouver, British
Columbia
Canada
Director
August 6, 2010 Mr. Wilkinson is a mining executive, corporate director
and business consultant based in North Vancouver, British
Columbia. Since September 2002, he has served as
President, Chief Executive Officer and Director of
ValGold Resources Ltd., an international mining
development company. Mr. Wilkinson was President,
Chief Executive Officer and Director of Northern Orion
Explorations Ltd. for the period of 1999 to 2002. From
1996 to 1999, he was the Vancouver-based mining analyst
for RBC Dominion Securities Inc. responsible for small
capitalization gold and base metal companies.
10,000 0.002%
Robert Hines(5)
Toronto, Ontario
Canada
Director
August 6, 2010 Mr. Hines has been the Managing Partner, Canada with
CTPartners, an executive search firm since March 2010.
Mr. Hines joined CTPartners from Heidrick & Struggles
where he held a number of senior leadership roles from
July 2004 to March 2010, most recently as Managing
Partner, Global Operations where he was responsible for
oversight of regional operations in Asia Pacific, Europe,
the Middle East, Latin America and North America.
Before joining the executive search industry; Mr. Hines
held a number of senior positions in investment banking
including: Managing Director, Co-Head of Mergers &
Acquisitions, CIBC World Markets; President & Chief
Executive Officer, Credit Suisse Canada; Executive Vice
President, Head of Investment Banking, Midland Walwyn
Inc.; and Vice-Chairman, Merrill Lynch Canada. Mr.
Hines is a member of the Independent Review Committee
of the Mackenzie Financial Corporation mutual funds; the
International Advisory Council of The Schulich School of
Business at York University and the Advisory Board of
True Blue Connect Inc.
25,000 0.006%
- 70 -
Name, Municipality of
Residence and Current
Position with the
Company
Director Since
Present Principal Occupation or Employment
(including all officer position currently held with the
Company), Principal Occupation or Employment for
the Past Five Years or more, and Other Current
Public Directorships(1)
Number of
Common Shares
Beneficially
Owned, Directly or
Indirectly, or Over
Which Control or
Direction is
Exercised
(2)
Percentage of
Common
Shares Held
Augusto Lopez(6)
Bogota, Colombia
Director
June 10, 2011 Mr. Lopez is an electrical engineer, a designation obtained
through the Sociedad Antioqueña de Ingenieros in
Colombia, and holds an Electrical Engineering Degree
from Universidad Pontificia Bolivariana. Mr. Lopez is a
director of Pacific Rubiales Energy Corp. and has held the
position since April 2008. Mr. Lopez has worked for over
40 years in various capacities and in various industries in
South America and Europe, during 15 years as President
of Bavaria, S.A., Colombia’s largest beverage company.
Mr. Lopez also held senior positions at Inversiones
Bavaria S.A., an investment company. Mr. Lopez is the
managing partner of Prospectiva Financiera, a consulting
firm specializing in investment banking. Mr. Lopez is a
director of Petroamerica Oil Corp., of Tolima Gold Corp.,
and of Sportsat a firm operator of a national T.V channel
and producers of contents for television. Mr. Lopez also
participates on the boards of other public and private
companies in South America and Europe.
503,750 0.131%
Robert Doyle(4)
Toronto, Ontario
Canada
Director
June 10, 2011 Chief Executive Officer of Medoro from January 2008 to
October 2009; Chief Financial Officer of Coalcorp Mining
Inc., a coal producer, from November 2005 to May 2007;
Chief Financial Officer of Pacific Stratus Energy Ltd.
from October 2006 to May 2007 and Executive Vice
President from March 2006 to May 2007; and Chief
Financial Officer of Bolivar Gold Corp., a gold producer,
from January 2003 to February 2006.
42,856 0.011%
Hernan Juan Jose
Martinez Torres(6)
Barranquilla, Colombia
Director
June 10, 2011 Minister of Ministry of Mines (Colombia) from July 2006
to August 2010; President of Atunec S.A. from August
2002 to July 2006; and President and Chief Executive
Officer of Exxon Mobil Colombia S.A. from January 1964
to August 2002.
360,000 0.094%
Jaime Pèrez Branger(4)
Bogota, Colombia
Director
June 10, 2011 Managing Director of Next Ventures since 2006;
Executive Chairman of PetroMagdalena Energy Corp.
since June 2011; and President of C.A. Agropecuaria, ,
from May 2003 to October 2011.
148,874 0.038%
Robert Metcalfe(5)
Toronto, Ontario
Canada
Director
June 10, 2011 Counsel to Metcalfe, Blainey & Burns LLP since January
2001 and corporate director of numerous private and
publicly listed corporations.
73,000 0.019%
- 71 -
Name, Municipality of
Residence and Current
Position with the
Company
Director Since
Present Principal Occupation or Employment
(including all officer position currently held with the
Company), Principal Occupation or Employment for
the Past Five Years or more, and Other Current
Public Directorships(1)
Number of
Common Shares
Beneficially
Owned, Directly or
Indirectly, or Over
Which Control or
Direction is
Exercised
(2)
Percentage of
Common
Shares Held
Mario Pacheco Bogota, Colombia
Director
September 21,
2011
Senior Vice President, Planning of Pacific Rubiales
Energy Corp. since 2008. Dr. Pacheco has over 27 years of
experience in the energy industry, including 17 years in
the Venezuelan oil industry. While in PDVSA, he held a
number of senior positions including Managing Director
of BITOR and Executive Director for Corporate Planning.
He holds a Ph.D. degree in Mechanical Engineering from
the Imperial College, University of London (1981). Prior
to joining Pacific Rubiales Energy Corp., he was special
advisor on strategy and energy to the Presidency of
CANTV (2005-2007). For a number of years Dr. Pacheco
lectured at Universidad Simon Bolivar and he is presently
Visiting Lecturer at the Instituto de Estudios Superiores de
Administracion (IESA) and UNIANDES.
325,000 0.085
José Oro
Bogota, Colombia
Vice President,
Production and Corporate
Development
N/A Vice-President, Production and Corporate Development of
the Company since June 10, 2011. Mr. Oro served as
Chief Operating Officer of the Company from August 20,
2010 to June 10, 2011. Mr. Oro was the Country Manager,
Colombia for Galway Resources Inc. from March 2006 to
April 2010. Prior to this position, he was a Vice President
of Kirkland Lake Gold, Inc. from February 2000 to March
2006. Mr. Oro has over 35 years working in several
different continents across the metal and mineral spectrum.
Mr. Oro is the former Director of the Mining and Geology
Department of Cuba. In addition to working with junior
and senior mining companies, Mr. Oro worked in the Latin
American Resource Sector for Coopers and Lybrand LLC.
Mr. Oro received post graduate degrees in Remote Sensing
and Geological Exploration in the Netherlands and Russia.
230,000 0.060%
Donald East Lima, Peru
Chief Operating Officer
N/A Chief Operating Officer of the Company since June 10,
2011; Chief Operating Officer of Medoro from January
2011 to June 10, 2011; Project Development Manager of
Anglo American Michiquillay from 2009-2010; Chief
Advisor of Rio Tinto Minera Peru from 2006-2009;
Director of Mining of Knight Piesold Consultores S.A.,
Lima from 2005-2006; Project Manager of Minera Gold
Fields S.A. from 2001-2005; and Project Manager of
Knight Piesold Consultants from 2003-2004.
258,000 0.067%
- 72 -
Name, Municipality of
Residence and Current
Position with the
Company
Director Since
Present Principal Occupation or Employment
(including all officer position currently held with the
Company), Principal Occupation or Employment for
the Past Five Years or more, and Other Current
Public Directorships(1)
Number of
Common Shares
Beneficially
Owned, Directly or
Indirectly, or Over
Which Control or
Direction is
Exercised
(2)
Percentage of
Common
Shares Held
Michael Davies
Burlington, Ontario,
Canada
Chief Financial Officer
N/A Chief Financial Officer of the Company since August 20,
2010. Mr. Davies is a Chartered Accountant (Ontario) and
has a Bachelor of Commerce degree from the University
of Toronto. Over the last twenty years he has gained
extensive international and public company experience in
financial management, strategic planning and external
reporting. Mr. Davies has been the Chief Financial
Officer of Alange Energy Corp. (now PeteroMagdalena
Energy Corp.) since July 13, 2009, and from September
2004 to April 2007, Mr. Davies served as the Vice
President, Finance for The Clorox Company of Canada.
His diverse background also includes senior finance roles
with several public companies, including LAC Minerals,
IMAX Corporation, Amtelecom Communications,
Energentia Resources, Pamour Inc. and Giant Yellowknife
Mines.
361,873 0.094%
Peter Volk
Toronto, Ontario
Canada
General Counsel and
Secretary
N/A General Counsel and Secretary of the Company since
August 20, 2010; Vice President and General Counsel of
Medoro from January 19, 2010 to June 10, 2011; General
Counsel and Secretary of Medoro from June 2005 to
January 2010; General Counsel and Secretary of Alanage
Energy Corp. (now PetroMagdalena Energy Corp.) since
July 13, 2009; and General Counsel of Pacific Rubiales
Energy Corp. since January 23, 2008.
19,981 0.005%
Vicente Mendoza Bogota, Colombia
Vice President,
Exploration
N/A VP of the Company since June 10, 2011; VP, Exploration
of Medoro from November 2009 to June 10, 211; Vice
President, Explorations of Coalcorp Mining Inc. from June
2006 to November 2009; Vice President, Exploration of
Blue Pacific Assets Corp. from March 2009 – November
2009; and Vice President of Hecla Mining Company from
January 2000 to May 2006.
Nil N/A
Roy MacDonald Toronto, Ontario
Canada
VP, Investor Relations
N/A VP, Investor Relations of the Company since March 1,
2012; Investor Relations Consultant from 2011-2012 for a
global oil and gas company; Chief Financial Officer of
Multi-Service Switching – Nortel from 2010-2011;
Director of Mergers and Acquisitions – Nortel from 2009-
2010; and Director of Investor Relations – Nortel from
2005-2009.
Nil N/A
______________________________ Notes:
(1) This information as to principal occupation, not being within the knowledge of the Company, has been furnished by the respective directors
individually. (2) Common Shares beneficially owned, or controlled or directed, directly or indirectly, or over which control or direction is exercised.
(3) Member of the Executive Committee. Messrs. Iacono and de la Campa each serve as Co-Chair of the Executive Committee and Mr. Arata
serves as Advisor to the Executive Committee. (4) Member of the Audit Committee. Mr. Branger serves as Chair of the Audit Committee.
(5) Member of the Compensation, Corporate Governance and Nominating Committee. Mr. Arata serves as Chair of this Committee.
(6) Member of the Safety and Environmental Committee. Mr. Martinez serves as the Chair of the Safety and Environmental Committee. (7) The Board, after each annual meeting of the Shareholders of the Company, appoints the Company’s officers and committees for the ensuing
year.
- 73 -
13 CORPORATE CEASE TRADE ORDERS
Except as disclosed immediately below, no director or executive officer of the Company, is, or within the
ten years prior to the date hereof, has been a director, chief executive officer or chief financial officer of
any company (including Gran Colombia) that was the subject of a cease trade order or similar order or an
order that denied the relevant company access to any exemptions under securities legislation for a period
of more than 30 consecutive days, while such director or executive officer was acting in the capacity as
director, chief executive officer or chief financial officer of the company being the subject of such order,
or that was issued after the director or executive officer ceased to be a director, chief executive officer or
chief financial officer in the company being the subject of such order and which resulted from an event
that occurred while that person was acting in the capacity as director, chief executive officer or chief
financial officer of the subject company.
Stephen Wilkinson is a director of HMZ Metals, which applied for and was granted a MCTO in
connection with the late filing of interim financial statements for the period ended June 30, 2005. The
MCTO was put into effect August 24, 2005 and revoked pursuant to a revocation order dated October 21,
2005. An MCTO was again invoked on April 9, 2008 and remained in force until May 30, 2008. HMZ
received a general cease trade order from the Ontario Securities Commission effective May 1, 2009 for
failure to file the audited annual financial statements for the year ended December 31, 2008 and the
management’s discussion and analysis relating to these audited financial statements.
Mr. Wilkinson is also an officer and director of ValGold Resources, which applied for and was granted a
MCTO in connection with the late filing of audited financial statements for the period ended July 30, 2008.
The MCTO was put into effect December 9, 2008 and revoked on January 26, 2009. In connection with the
late filing of audited financial statements for the period ended July 30, 2009, ValGold Resources applied for
but was not granted a MCTO on November 30, 2009. Cease trade orders were issued by the British
Columbia and Ontario Securities Commissions on December 7, 2009 and December 9, 2009, respectively.
ValGold Resources reported that the cease trade orders were fully revoked by December 23, 2009.
Robert J. Metcalfe, a director and Chairman of the Board, was a judge-affirmed independent director of
Hollinger Inc. from September 28, 2004 to July 21, 2005, in which capacity he was the subject of a
management and insider cease trade order (since lifted) which existed prior to his appointment to the board
of directors of Hollinger Inc., due to the inability of Hollinger Inc. to file financial statements resulting from
the non-filing of financial statements by Hollinger Inc.’s US subsidiary, Hollinger International Inc.
14 CORPORATE BANKRUPTCIES
No director or executive officer, or a shareholder holding a sufficient number of securities in the capital of
the Company to affect materially the control of the Company, is or within ten years prior to the date
hereof, has been a director or executive officer of any company (including Gran Colombia), that while
that person was acting in that capacity or within a year of that person ceasing to act in that capacity,
became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was
subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver,
receiver manager or trustee appointed to hold its assets.
15 PENALTIES OR SANCTIONS
No director or executive officer of the Company, and no shareholder holding a sufficient number of
securities of the Company to affect materially the control of the Company, has been subject to any
penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory
authority or has entered into a settlement agreement with a securities regulatory authority, or any other
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penalties or sanctions imposed by a court or regulatory body that would be likely to be considered
important to a reasonable investor making an investment decision.
16 PERSONAL BANKRUPTCIES
No director or executive officer of the Company, or a shareholder holding a sufficient number of
securities of the Company to affect materially the control of the Company, nor any personal holding
company of any such person, has, during the ten years prior to the date hereof, become bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency, or has been subject to or instituted
any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or
trustee appointed to hold his, her or its assets.
The information in the foregoing sections entitled “Cease Trade Orders”, “Corporate Bankruptcies”,
“Penalties or Sanctions” and “Personal Bankruptcies”, has been furnished by the respective directors
and/or officers of the Company individually, and are not within the knowledge of the Company.
17 CONFLICTS OF INTEREST
There are potential conflicts of interest to which the directors or officers of the Company or its
subsidiaries may be subject to in connection with the operations of the Company. All of the directors and
officers are engaged in and will continue to be engaged in corporations or businesses which may be in
competition with the business of the Company. Accordingly, situations may arise where the directors and
officers will be in direct competition with the Company. Conflicts, if any, will be subject to the
procedures and remedies as provided under the BCBCA. As of the date of this Annual Information Form,
the directors and officers of the Company are not currently aware of the existence of any such conflicts of
interest.
The Company’s directors and officers may serve as directors or officers of other companies or have
significant shareholdings in other resource companies and, to the extent that such other companies may
participate in ventures in which the Company may participate, the directors of the Company may have a
conflict of interest in negotiating and concluding terms respecting the extent of such participation. If such
conflict of interest arises at a meeting of the Company’s directors, a director who has such a conflict will
abstain from voting for or against the approval of such participation or such terms. From time to time,
several companies may participate in the acquisition, exploration and development of natural resource
properties thereby allowing for the participation in larger programs, permitting involvement in a greater
number of programs and reducing financial exposure in respect of any one program. It may also occur
that a particular company will assign all or a portion of its interest in a particular program to another of
these companies due to the financial position of the Company making the assignment. In accordance with
the laws of the Province of British Columbia, the directors of the Company are required to act honestly, in
good faith and in the best interests of the Company. In determining whether or not the Company will
participate in a particular program and the interest therein to be acquired by it, the directors will primarily
consider the degree of risk to which the Company may be exposed and its financial position at that time.
18 LEGAL PROCEEDINGS
Except as disclosed below, management is not aware of any current or contemplated material legal
proceedings to which the Company is a party or which any of its property is the subject. From time to
time, the Company is the subject of litigation arising out of the Company’s operations. Damages claimed
under such litigation may be material or may be indeterminate and the outcome of such litigation may
materially impact the Company’s financial condition or results of operations. While the Company
assesses the merits of each lawsuit and defends itself accordingly, the Company may be required to incur
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significant expenses or devote significant resources to defend itself against such litigation. These claims
(if any) are not currently expected to have a material impact on the Company’s financial position.
The Company has tried to engage the Venezuelan Government with respect to negotiations for the
Company’s properties in Venezuela for pricing and transfer of ownership the nationalized portion of the
projects. As the prescribed negotiation period has expired, the Company intends to pursue the remedies
afforded to it by the Agreement between Venezuela and Canada for the Promotion and Protection of
Investments (which has been in force since 1998), including, if warranted, seeking such compensation
through international arbitration. See “Risk Factors – Economical and Political Factors – Venezuela”.
19 REGULATORY ACTIONS
There have been no penalties or sanctions imposed against the Company by a court relating to provincial
and territorial securities legislation or by a securities regulatory authority during the most recently
completed financial year of the Company.
There have been no penalties or sanctions imposed by a court or regulatory body against the Company
that would likely be considered important to a reasonable investor making an investment decision.
The Company has not entered into any settlement agreements before a court relating to securities
legislation or with a securities regulatory during the most recent completed financial year of the
Company.
20 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Except as described below, no director or executive officer of the Company or any shareholder
beneficially owning or controlling, directly or indirectly, more than 10% of the issued and outstanding
Common Shares, or another of their respective associates or affiliates, has any material interest, direct or
indirect, in any transactions within the three most recently completed financial years or during the current
financial year or any proposed transactions which has materially affected or is reasonably expected to
materially affect the Company or any of its subsidiaries.
In February 2010, the Company received proceeds of US$1.0 million through two unsecured promissory
notes payable bearing interest at 12% per annum payable at maturity. A US$0.5 million promissory note
payable to Blue Pacific was immediately repaid following the completion of the First Gran Colombia
Private Placement. Three directors of the Company indirectly control, or provide investment advice to
the holders of, 67.2% of the shares of Blue Pacific. The second US$0.5 million promissory note payable
to Knottsville Capital, S.A., a shareholder of the Company, was repaid in November 2010.
In connection with the Frontino Acquisition, a success fee of US$3,000,000 was payable by Gran
Colombia to a company of which Messrs. Iacono and de la Campa are principals, in recognition of the
services rendered by Messrs. Iacono and de la Campa in negotiating and the Frontino Acquisition on
behalf of Gran Colombia.
21 TRANSFER AGENT AND REGISTRAR
Equity, 200 University Ave., Suite 400, Toronto, Ontario, M5H 4H1, is the transfer agent and registrar for
the Common Shares and Warrants, and the trustee for the Notes.
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22 MATERIAL CONTRACTS
The Company did not enter into any material contracts during the most recently completed financial year,
and has not entered into any material contract since January 1, 2002 and before the most recently
completed financial year that is still in effect, other than material contracts entered into in the ordinary
course of business that are not required to be filed under National Instrument 51-102 – Continuous
Disclosure Obligations and the contracts set forth below:
(a) the Frontino Acquisition Agreement entered into between Gran Colombia Panama, Medoro and
Zandor dated March 29, 2010 in connection with the Frontino Acquisition. For further
information see the heading entitled “General Development of the Business – Acquisition of
100% Interest in Zandor”;
(b) the acquisition agreement entered into between Old GCM and Gran Colombia Panama effective
July 26, 2010 in connection with the RTO whereby Old GCM acquired all of the issued and
outstanding securities in the capital of Gran Colombia Panama pursuant to the Gran Colombia
Amalgamation;
(c) the amalgamation agreement entered into between Panama Newco and Gran Colombia Panama
dated August 19, 2010 in connection with the Gran Colombia Amalgamation. For further
information see the heading entitled “Information Concerning the Company – Name, Address and
Incorporation”;
(d) The Royalty Agreement. In connection with the acquisition of all of the issued and outstanding
shares of Panwest Seas Corporation Ltd. on July 10, 2006, the Company is obligated to pay the
Panwest shareholders (being Corporacion Vengroup, S.A and Socobal Corporation) a royalty
equal to US$15 per each ounce of gold on all production from the Lo Increíble Properties. For
further information see the heading entitled “Properties – Other Projects – Lo Increíble
Properties”;
(e) The Warrant Indenture. For further information see the heading entitled “Description of Capital
Structure – Warrants”;
(f) The Arrangement Agreement. For further information see the heading entitled “General
Development of the Business – 2011 – Medero Merger” and “General Development of the
Business – Significant Acquisitions or Dispositions – Medoro Merger”;
(g) The Plan of Arrangement. For further information see the heading entitled “General Development
of the Business – 2011 – Medero Merger” and “General Development of the Business –
Significant Acquisitions or Dispositions – Medoro Merger”; and
(h) The Note Indenture. For further information see the heading entitled “General Development of
the Business – 2011– Note Offering” and “Market for Securities – Notes”.
The material contracts described above may be inspected at the head office of the Company at 333 Bay
Street, Suite 1100, Toronto, Ontario, M5H 2R2 during normal business hours.
23 INTERESTS OF EXPERTS
The auditors of the Company are KPMG LLP, Chartered Accountants, Toronto, Ontario, Canada. KPMG
LLP are independent within the meaning of the Rules of Professional Conduct of the Institute of
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Chartered Accountants of Ontario. KPMG LLP were first appointed auditors of the Company on August
20, 2010.
Karen Volp of SRK ES prepared the Mazamorras Technical Report, and James Gilbertson and Colin
Rawbone of SRK ES authored the Carla Project Technical Report. Scott E. Wilson of SEWC and Stewart
D. Redwood authored the Segovia Operations Technical Report. Stewart D. Redwood authored the El
Zancudo Technical Report and the Concepción Technical Report. Mike Armitage and Ben Parsons of
SRK UK authored the Marmato Technical Report. Mike Armitage and Lucy Roberts of SRK authored
the Lo Increíble Technical Report. To management’s knowledge, as of the date hereof, the authors of the
Technical Reports do not have any registered or beneficial interests, direct or indirect, in any securities or
other property of the Company, except for Scott Wilson and Stewart Redwood, who each beneficially
own, directly or indirectly, less than 1% of the outstanding securities of the Company. The Company has
determined that a reasonable person would not consider such interests to interfere with the respective
author’s judgment regarding the preparation of the respective technical reports. No director, officer, or
employee of the authors or their respective companies is expected to be elected, appointed or employed as
a director, officer or employee of the Company or of any Associate or Affiliate of the Company.
24 AUDIT COMMITTEE INFORMATION
24.1 The Audit Committee’s Charter
The full text of the Company’s Audit Committee Charter is appended hereto as Appendix “A”.
24.2 Composition of the Audit Committee and Relevant Education and Experience
The Audit Committee is comprised of three directors of the Company, Jaime Perez Branger (Chair) (who
replaced Ronald Pantin as a member of the Audit Committee effective June 10, 2011), Robert Doyle (who
replaced Robert Hines as a member of the Audit Committee effective June 10, 2011), and Stephen
Wilkinson. All of the members of the audit committee are independent and financially literate for purposes
of NI 52-110. Each has numerous years’ business experience and each has held or currently holds executive
positions that required oversight and understanding of the accounting principles underlying the preparation of
the Company’s financial statements and is aware of the internal controls and other procedures necessary for
financial control and reporting.
Jaime Perez Branger (Chair)
Mr. Perez Branger has a Master’s degree in economics from the London School of Economics and has
more than 20 years of experience in the financial and industrial sector. He is a director and member of the
audit committee of each of Pacific Coal Resources Ltd. and PetroMagdalena Energy Corp., and is the
Executive Chairman of PetroMagdalena Energy Corp. Currently, he is a member of the board of directors
of a number of companies inside and outside Venezuela related to the financial, agricultural, commercial,
and tourism sectors as well as a director of several business guild organizations. Previously, he was a
founding partner of Andino Capital Markets, a Latin American investment bank where he was directly
responsible for corporate finance and private equity investments. From 1991 to 1992, Mr. Perez Branger
managed the Corporate Finance Department at Vestcorpartners a regional investment bank. Prior to this,
he was Vice-President in charge of capital markets and corporate finance at Citibank, Caracas.
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Robert Doyle
From January 2008 to October 2009, Mr. Doyle was the Chief Executive Officer of Medoro, and from
2005 through 2006, was with Pacific Stratus Energy as Executive Vice President, Chief Financial Officer
from October 2006 to May 2007, and Vice President from March 2006 to May 2007. He also was Chief
Financial Officer of Coalcorp Mining Inc. from November 2005 to May 2007, and Chief Financial
Officer of Bolivar Gold Corp. from January 2003 to February 2006. Mr. Doyle, a chartered accountant
and a chartered director, has over 30 years’ experience in all facets of international resource exploration,
development and production. Mr. Doyle brings a broad skill set to the Board, including a thorough
understanding of operations and financial strategy of international mining companies, and has experience
in analyzing and evaluating financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the Company’s financial statements, or experience actively
supervising one or more individuals engaged in such activities. Through his experience as being the
Chief Financial Officer for numerous public companies, Mr. Doyle also has an understanding of internal
controls and procedures for financial reporting.
Stephen Wilkinson
Mr. Wilkinson is a mining executive, corporate director and business consultant based in North
Vancouver, British Columbia. Since September 2002, he has served as President, Chief Executive Officer
and director of ValGold Resources, an international mining development company. Mr. Wilkinson was
President, Chief Executive Officer and Director of Northern Orion Explorations Ltd. for the period of
1999 to 2002. In his capacity as Chief Executive officer of such companies, Mr. Wilkinson developed an
understanding of interal controls and procedures for financial reporting. From 1996 to 1999, he was the
Vancouver-based mining analyst for RBC Dominion Securities Inc. responsible for small capitalization
gold and base metal companies. Mr. Wilkinson has extensive experience in the mining and finance
industries having served as an officer and director of several private and public companies, supplemented
over the past three decades by experience working for mining companies and government agencies. He
has also been a member of audit committees for several small to medium cap mining companies. Mr.
Wilkinson has a Bachelor of Science from the University of Western Ontario (Geology, 1976), a Master
of Science from Carleton University in Ottawa, Ontario (Geology, 1983) and an M.B.A. from Clarkson
University in Potsdam, New York (1995), where he studied management and financial accounting. He has
also taken instruction by accounting firms respecting the general principles and applications of IFRS.
24.3 Reliance on Certain Exemptions
At no time since the commencement of the Company’s most recently completed financial year has the
Company relied on exemptions in relation to section 2.4 of NI 52-110 (De Minimis Non-Audit Services),
section 3.2 of NI 52-110 (Initial Public Offerings), section 3.4 of NI 52-110 (Events Outside Control of
Member), section 3.5 of NI 52-110 (Death, Disability or Resignation of Audit Committee Member)
section 3.2(2) of NI 52-110 (Controlled Companies) or section 3.6 of NI 52-110 (Temporary Exemption
for Limited and Exceptional Services), section 3.9 of NI 52-110 (Acquisition of Financial Literacy) or
any exemption provided by Part 8 of NI 52-110 (Exemptions).
24.4 Audit Committee Oversight
The Audit Committee is mandated to monitor audit functions, the preparation of financial statements,
review press releases on financial results, review other regulatory documents as required, and meet with
outside auditors independently of management.
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At no time since the commencement of the Company’s most recently completed financial year was a
recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by
the Board.
24.5 Pre-Approval Policies and Procedures
The Company has adopted policies and procedures with respect to the pre-approval of audit and permitted
non-audit services by KPMG LLP. The Audit Committee has established a budget for the provision of a
specified list of audit and permitted non-audit services that the Audit Committee believes to be typical,
recurring or otherwise likely to be provided by KPMG LLP. The budget generally covers the period
between the adoption of the budget and the next meeting of the Audit Committee, but at the option of the
Audit Committee it may cover a longer or shorter period. The list of services is sufficiently detailed as to
the particular services to be provided to ensure that: (i) the Audit Committee knows precisely what
services it is being asked to pre-approve; and (ii) it is not necessary for any member of management to
make a judgment as to whether a proposed service fits within the pre-approved services.
Subject to the next paragraph, the Audit Committee has delegated authority to the Chair of the Audit
Committee (or if the Chair is unavailable, any other member of the Audit Committee) to pre-approve the
provision of permitted services by KPMG LLP which have not otherwise been pre-approved by the Audit
Committee, including the fees and terms of the proposed services (“Delegated Authority”). All pre-
approvals granted pursuant to Delegated Authority must be presented by the member(s) who granted the
pre-approvals to the full Audit Committee at its next meeting.
All proposed services, or the fees payable in connection with such services, that have not already been
pre-approved must be pre-approved by either the Audit Committee or pursuant to Delegated Authority.
Prohibited services may not be pre-approved by the Audit Committee or pursuant to Delegated Authority.
24.6 External Auditor Service Fees (By Category)
The following are the aggregate fees incurred by the Company for services provided by its external
auditors during fiscal 2011 and 2010:
2011 2010
(1)
1. Audit Fees(2)
US$453,912 US$264,745
2. Audit Related Fees US$125,750(3)
US$86,750(4)
3. Tax Fees(5)
US$24,096 -
4. All Other Fees - -
Total US$603,758 US$351,495
______________________________
Note:
(1) Revised since the Company’s Annual Information Form for the December 31, 2010 year end. (2) Includes fees related to interim reviews and the annual audit.
(3) Includes fees related to services performed in connection with the Note Offering and Medoro Merger.
(4) Includes fees related to the Company’s filing statement. (5) Includes fees for services rendered from January through December of the fiscal year, notwithstanding when the fees were billed.
25 ADDITIONAL INFORMATION
Additional information about the Company, including, but not limited to, directors’ and officers’
remuneration and indebtedness, principal holders of the Company’s securities and securities authorized
for issuance under the Company’s stock option plan is contained in the management information circular
of the Company dated May 6, 2011. Additional financial information is provided in the Company’s
audited financial statements and Management’s Discussion & Analysis for the year ended December 31,
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2011 and the unaudited financial statements. This information and other pertinent information regarding
the Company can be found on SEDAR at www.sedar.com.
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APPENIDX “A”
AUDIT COMMITTEE CHARTER
(Initially adopted by the Board of Directors on September 23, 2010)
GRAN COLOMBIA GOLD CORP.
(the “Corporation”)
A. PURPOSE
The overall purpose of the Audit Committee (the “Committee”) is to ensure that the Corporation’s
management has designed and implemented an effective system of internal financial controls, to review
and report on the integrity of the consolidated financial statements of the Corporation and related
financial information, and to review the Corporation’s compliance with regulatory and statutory
requirements as they relate to financial statements, taxation matters and disclosure of financial
information. In performing its duties, the committee will maintain effective working relationships with
the board of directors of the Corporation (the “Board”), management, and the external auditors and
monitor the independence of those auditors. To perform his or her role effectively, each Committee
member will obtain an understanding of the responsibilities of committee membership as well as the
Corporation’s business, operations and risks.
B. COMPOSITION, PROCEDURES AND ORGANIZATION
1. The Committee shall consist of at least three members of the Board, each of which shall be an
independent director.
2. All of the members of the Committee shall be “financially literate”.
3. At least one member of the Committee shall have accounting or related financial management
experience.
4. The Board, at its organizational meeting held in conjunction with each annual general meeting of the
shareholders, shall appoint the members of the Committee for the ensuing year. Any member of the
Committee may be removed or replaced at any time by the Board and shall cease to be a member of
the Committee on ceasing to be a director. The Board may fill vacancies on the Committee by
election from among its number. If and whenever a vacancy shall exist on the Committee, the
remaining members may exercise all its powers so long as a quorum remains in office. Subject to
the above, each member of the Committee shall hold office as such until the next annual general
meeting of the shareholders after his/her election.
5. Unless the Board shall have appointed a chair of the Committee, the members of the Committee shall
elect a chair and a secretary from among their number.
6. The quorum for meetings shall be a majority of the members of the Committee, present in person or
by telephone or other telecommunication device that permits all persons participating in the meeting
to speak to and to hear each other. No business may be transacted by the Committee except at a
meeting of its members at which a quorum of the Committee is present.
7. The Committee shall have full and unrestricted access to such officers, employees and personnel of
the Corporation and to the Corporation’s external and internal auditors, and to such information,
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books, records and facilities of the Corporation, as it considers to be necessary or advisable in order
to perform its duties and responsibilities.
8. The Committee shall have the authority to:
a) engage independent counsel and other advisors as it determines necessary to carry out its duties
and to request any officer or employee of the Corporation or the Corporation’s external counsel
or auditors to attend a meeting of the Committee;
b) set and pay the compensation for any advisors employed by the Committee; and
c) designate members of the Committee the authority to grant appropriate pre-approvals required
in respect of non-audit services performed by the auditors and the decisions of any member to
whom authority is delegated to pre-approve an activity shall be presented to the Committee at
its first scheduled meeting following such pre-approval.
9. Meetings of the Committee shall be conducted as follows:
a) the Committee shall meet at least four times annually at such times and at such locations as may
be requested by the chair of the Committee. The external auditors or any member of the
Committee may request a meeting of the Committee;
b) the external auditors shall receive notice of and have the right to attend all meetings of the
Committee;
c) the Committee has the right to determine who shall and shall not be present at any time during a
meeting. Management representatives may be invited to attend meetings, provided that the
Committee shall hold separate, regularly scheduled meetings at which members of management
are not present; and
d) the proceedings of all meetings shall be minuted.
10. Each member of the Committee shall be entitled, to the fullest extent permitted by law, to rely on the
integrity of those persons and organizations within and outside the Corporation from whom he or she
receives information, and the accuracy of the information provided to the Corporation by such other
persons or organizations.
11. The internal auditors and the external auditors shall have a direct line of communication to the
Committee through its chair and may bypass management if deemed necessary. The Committee,
through its chair, may contact directly any employee in the Corporation as it deems necessary, and
any employee may bring before the Committee any matter involving questionable, illegal or
improper financial practices or transactions.
12. The members of the Committee shall be entitled to receive such remuneration for acting as members
of the Committee as the Board may from time to time determine.
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C. ROLES AND RESPONSIBILITIES
1. The overall duties and responsibilities of the Committee shall be as follows:
a) assist the Board in discharging its responsibilities relating to the Corporation’s accounting
principles, reporting practices and internal controls and its approval of the Corporation’s annual
and quarterly consolidated financial statements and related financial disclosure;
b) establish and maintain a direct line of communication with the Corporation’s internal and
external auditors and assess their performance;
c) ensure that the management of the Corporation has designed, implemented and is maintaining
an effective system of internal financial controls; and
d) report its deliberations and discussions regularly to the Board, including reporting on the
fulfilment of its duties and responsibilities.
2. The duties and responsibilities of the Committee as they relate to the external auditors shall be as
follows:
a) review the independence and performance of the external auditors and annually recommend to
the Board a firm of external auditors to be nominated for the purpose of preparing or issuing an
auditors’ report or performing other audit, review or attest services for the Corporation;
b) review and approve the fee, scope and timing of the audit and other related services rendered by
the external auditors;
c) review the audit plan of the external auditors prior to the commencement of the audit;
d) approve in advance provision by the external auditors of services other than auditing to the
Corporation or any of its subsidiaries;
e) annually review and discuss all significant relationships the external auditors have with the
Corporation that could impair the external auditors’ independence;
f) review with the external auditors, upon completion of their audit:
i. contents of their report;
ii. scope and quality of the audit work performed;
iii. adequacy of the Corporation’s financial and auditing personnel;
iv. co-operation received from the Corporation’s personnel during the audit;
v. internal resources used;
vi. significant transactions outside of the normal business of the Corporation;
vii. significant proposed adjustments and recommendations for improving internal
accounting controls, accounting principles or management systems; and
viii. the non-audit services provided by the external auditors;
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g) discuss with the external auditors the quality and the acceptability of the Corporation’s
accounting principles;
h) implement structures and procedures to ensure that the Committee meets the external auditors
on a regular basis in the absence of management; and
i) oversee the work of the external auditors, including the resolution of disagreements between
management and the external auditor regarding financial reporting.
3. The duties and responsibilities of the Committee as they relate to the Corporation’s internal auditors
are to:
a) periodically review the internal audit function with respect to the organization, staffing and
effectiveness of the internal audit department;
b) review and discuss with the Chief Corporate Auditor (the “CCA”) the CCA’s annual risk
assessment of the adequacy and effectiveness of the Corporation’s internal control process, the
CCA’s report to the Committee on the results of the annual audit plan and the status of the audit
issues, and the CCA’s recommendations regarding improvements to the Corporation’s controls
and processes;
c) review and approve the internal audit plan;
d) review significant internal audit findings and recommendations, and management's response
thereto; and
e) annually review with the Corporation’s legal counsel any legal matters that could have a
significant impact on the Corporation’s financial statements, the Corporation’s compliance with
applicable laws and regulations, and inquiries received from regulators or governmental
agencies.
4. The duties and responsibilities of the Committee as they relate to the internal control procedures of
the Corporation are to:
a) review the appropriateness and effectiveness of the Corporation’s policies and business
practices which impact on the financial integrity of the Corporation, including those relating to
internal auditing, insurance, accounting, information services and systems and financial
controls, management reporting and risk management;
b) review any unresolved issues between management and the external auditors that could affect
the financial reporting or internal controls of the Corporation; and
c) periodically review the Corporation’s financial and auditing procedures and the extent to which
recommendations made by the internal audit staff or by the external auditors have been
implemented.
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5. The Committee is also charged with the responsibility to:
a) review the Corporation’s quarterly financial statements and related financial information,
including the impact of unusual items and changes in accounting principles and estimates and
report to the Board with respect thereto before such information is publicly disclosed;
b) review and approve the financial sections of:
i. the annual report to shareholders;
ii. the annual information form, if required;
iii. annual and interim management’s discussion and analysis;
iv. prospectuses;
v. news releases discussing financial results of the Corporation; and
vi. other public reports of a financial nature requiring approval by the Board,
and report to the Board with respect thereto before such information is publicly disclosed;
c) ensure that adequate procedures are in place for the review of the Corporation’s public
disclosure of financial information extracted or derived from the Corporation’s financial
statements, other than the public disclosure referred to in item 5(b) above, and periodically
assess the adequacy of such procedures;
d) review regulatory filings and decisions as they relate to the Corporation’s consolidated financial
statements;
e) review the appropriateness of the policies and procedures used in the preparation of the
Corporation’s consolidated financial statements and other required disclosure documents, and
consider recommendations for any material change to such policies;
f) review and report on the integrity of the Corporation’s consolidated financial statements;
g) establish procedures for:
i. the receipt, retention and treatment of complaints received by the Corporation regarding
accounting, internal accounting controls, or auditing matters; and
ii. the confidential, anonymous submission by employees of the Corporation of concerns
regarding questionable accounting or auditing matters;
h) review and approve the Corporation’s hiring policies regarding partners, employees and former
partners and employees of the present and former external auditors of the Corporation;
i) review with management, the external auditors and, if necessary, with legal counsel, any
litigation, claim or other contingency, including tax assessments that could have a material
effect upon the financial position or operating results of the Corporation and the manner in
which such matters have been disclosed in the consolidated financial statements;
j) review the Corporation’s compliance with regulatory and statutory requirements as they relate
to financial statements, tax matters and disclosure of financial information;
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k) review annually and recommend updates to this Charter of the Committee and receive approval
of changes from the Board;
l) review the minutes of any audit committee of subsidiary companies of the Corporation; and
m) perform other functions consistent with this Charter, the Corporation’s articles and governing
law, as the Committee or the Board deems necessary or appropriate.
6. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of
the Committee to plan or conduct audits or to determine that the Corporation’s financial statements
and disclosures are complete and accurate and in accordance with generally accepted accounting
principles and applicable rules and regulations, each of which is the responsibility of management
and the Corporation’s external auditors.
D. CURRENCY OF CHARTER
This charter was last revised and approved by the Board on September 23, 2010.