Gran Colombia Gold (GCM.TO) is a core investment in my precious metals portfolio. Caiman Valores provides an excellent update on recent developments at the company. You’ll find the summary below but I’d recommend to read the entire article.

Opportunities for investors

Already after announcing record production at its Segovia operations Gran Colombia’s share price spiked by just over 9% on the 24th June 2013 and I would expect to see Gran Colombia’s share price continuing to rise on the back of the mine development operations at Segovia reaching completion in mid 2014. This will boost production and reduce costs, in particular the average cash cost per ounce to under $1,000, boosting Gran Colombia’s profitability. Furthermore, the release of official reserve assessments later in 2013 should also boost the company’s share price as its measured and indicated reserves will increase as a result of the exploration and mine development work at both Segovia and Marmato.

Bottom line

As this article illustrates, Gran Colombia continues to remain significantly under-valued by the market, offering investors potential upside of just over 100%. A key driver of Gran Colombia’s sell-down has been the increasing antipathy of investors towards small-cap gold miners operating in what are perceived to be high risk geo-political and economic environments such as Colombia. This has seen many investors move to reduce their exposure to economic and political risk in their portfolios.

In addition, while Gran Colombia remains significantly undervalued by the market, it is still a speculative high risk play for investors. This is because of the company’s volatile cost and production history, combined with the risks that a high average cash cost per ounce producer presents in a macro-environment where the outlook for gold remains volatile and uncertain. All of which, has worked to push down Gran Colombia’s share price to compelling levels, creating a speculative deep value investment opportunity for patient risk tolerant investors.

But this is reliant on the company being able to maintain its average total cash cost per ounce at under $1,170, along with Gran Colombia receiving an average price per ounce of $1,429. Should any of those change, then this indicative valuation will change markedly. But at this time with Gran Colombia trading at a price that gives investors potential upside of just over 100% there is a significant margin of error. This despite the speculative nature of the company’s operations at this time, makes Gran Colombia’s current trading price a compelling entry point for speculative risk tolerant investors.

Source: Caiman Valores

Today was another big down day in gold shares creating an even better buying opportunity. The current share price is only $1.81.

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