RE:RE:RE:GCM DebtLower grade doesn't always mean higher cost. Marmato PEA was $500/oz cash cost. Segovia Q1 2017 cash cost was $690/oz (this will drop in Q2). Things like strip ratio, amount of waste mined has a large effect on the cost. Marmato has huge 600 meter drill holes of mineralization which means it has a low strip ratio, making it low cost. A huge 14m+ oz all in one place and long mine life spreads the initial capex over more oz, making the cost lower per oz. Plus use of electric power line as stated in the PEA reduces the cost. It is "possible" that Marmato will eventually be more profitable than Segovia. The $1.6 Billion NPV given by the PEA certainly indicates this. GCM hinted on underground bulk mining which can avoid disturbing villagers.
The market is currently valuing Marmato at zero. If it wasn't, then it would be adding closer to $500m to GCM market cap, the value of the company that held Marmato when GCM merged with it. The market is valuing GCM based on Segovia alone and ignoring Marmato, so i don't think Marmato is holding GCM back.
I think the biggest reason GCM isn't higher is because the market is waiting to see more FCF which affects their ability to pay down the debt that the market fears. Up till now, GCM has been hiding cash by paying down payables, and the most it has shown is a non-consecutive $3m FCF quarter which the market believes is not enough to offset the risk. When GCM starts showing consecutive $6m-$8m FCF quarters (over $20m FCF per year) which GCM should be capable of doing and rapidly pay down debt, the market should take notice. The soon to be converted 2018 debentures will help to optically reduce the debt by a large amount. I think profitability trumps country risk because other companies in high risk countries are given good valuation when they are very profitable.
I'm not worried if the market does not buy. The company itself is buying, and the buying should jump up with the upcoming Q2. As a long term holder, it won't matter if the share price goes up this year or next year. For short term traders it may matter.
Method wrote: Is Marmato really a problem? The cash flow is all from Segovia.
Marmato is lower grade and higher cost. I think the underground opportunity at Marmato could be the thing that changes sentiment but the stock should trade higher on Segovia alone, shouldn't it?