Gran Colombia Re-Starts Production Of Three Underground Mines Acquired From Frontino Gold Mines And Provides Operational Update

September 07, 2010

TORONTO, Sept. 7 /CNW/ - Gran Colombia Gold Corp. (TSXV: GCM) is pleased to announce that it has successfully completed all required steps to take management and operational control of the mining assets of Frontino Gold Mines Ltd ("Frontino"), including the RPP 140 mining property, plant and all equipment, through the Colombian branch of its 95% owned subsidiary Zandor Capital SA ("Zandor").

As previously announced on August 23, 2010, the Company had completed the acquisition of the Frontino mining assets located in the northeast of the Department of Antioquia, Colombia. Since then, the Company has successfully concluded the two week transition period set out for the liquidation and payment of severance of all former employees of Frontino, for the training of personnel and for handing over of the operations to the Company. The Company is in the process of formally hiring up to 1,600 former employees of Frontino. As a result, the Company re-started mining operations yesterday in all three acquired underground mines (El Silencio, Providencia and Sandra K) located within the RPP 140 mining title. Operations have started with three full daily shifts and the Company expects to reach current throughput capacity of the Maria Dama plant within 30 days.

"This is a very exciting start for our company" said Maria Consuelo Araujo, Chief Executive Officer of the Company. "Our mining assets are first class and we are committed to working with the people of Segovia and Remedios to develop these assets to their full potential while improving the living conditions of the communities. Gran Colombia as a company is fully committed to bringing all operations to international environmental and safety standards. Our goal is to increase production, improve efficiency, make our communities real stakeholders of our success and become a benchmark for mining projects in Colombia."

Jose R. Oro, Chief Operating Officer of the Company, added: "The geology of our assets is outstanding: high grade, non-refractory material with high recovery and low strip ratios, and plenty of exploration and production targets. In developing our properties we will focus on establishing a disciplined and effective mine plan and improving processing activities, while outsourcing operation of our ancillary assets, such as hydro power generation and land development."

In parallel with the existing mining operations, the Company is conducting the necessary works and investments to increase the throughput of the Maria Dama plant to 1,000 tonnes per day within the next 12 months. Current capacity of the mill is constrained at 450 tonnes per day. The Company will also be evaluating alternatives for further increases of processing capacity in the area.

As part of its current strategy and capital plan, Gran Colombia has an aggressive exploration program within the former Frontino properties and is scheduled to conduct an initial 10,000 meter drill program through the first half of January 2011 followed by a second phase of 30,000 meters of drilling during the balance of 2011. Drilling will begin with two drills and increase to six drills on surface and four drills underground by early 2011.

The Company expects to start producing 3,550 ounces of gold during the first month and thereafter gradually increase production from the current 55,000 ounces of gold per year to an annualized level of 100,000 ounces of gold by the end of the third quarter of 2011. Management believes the 2010 and 2011 drill program will result in other attractive targets enabling an increase in total production potential.

Production increases will require investments, fully funded from proceeds from the August 2010 financing and cash flow from operations, in infrastructure, tailings ponds and the construction of a 6-kilomteter tunnel to intercept at approximately 23 known veins. These investments will facilitate exploration, increased production and will lower the costs of dewatering, ventilation and other aspects of the operation. Construction of the tunnel has already been contracted and construction is expected to begin during the fourth quarter of 2010.

In addition to the Company's operations in its RPP 140 mining property, it has several medium to small scale contractors in the area producing, on a combined basis, approximately 23,000 ounces of gold per year. The Company plans to gradually take the ore produced by its contractors for processing to increase gold output and to ensure an environmentally compliant processing for such production.

The Company is working with the environmental authorities to devise an environmental management plan for the area, with the objective of bringing operations to required standards. It will also help to direct important resources to health and social investment in the Remedios and Segovia communities.

Other properties

Gran Colombia will also start aggressive exploration campaigns in its other recently acquired mining projects in the Departments of Antioquia and Narino of Colombia. Mining and processing facilities are already in place in El Zancudo, located in the Titiribi Municipality of Antioquia, and will start small scale production before the end of the year with expected first year gold production of around 25,000 ounces. Early production is also being evaluated at the Segovia project that could be processed at the nearby Maria Dama plant. Extensive exploration plans will be carried out at these properties starting by the end of September 2010 at El Zancudo. By the end of 2010, six to seven drills will be operating at the El Zancudo, Mazzamorras, Segovia and Concepcion mining projects.

The Company is also finalising the acquisition of a local refinery to vertically integrate its operations and to provide capabilities for custom refining for production from small miners in Antioquia and other areas of the country. This vertical integration strategy is key to Gran Colombia's strategy of becoming the pre-eminent gold producer in Colombia.

About Gran Colombia

Gran Colombia Gold Corp. is a Canadian-based gold and silver exploration and development company focused on acquiring, developing and operating properties of merit in Colombia. The Company holds 95% of the former Frontino gold and silver assets, including the largest underground gold and silver mining operation in Colombia. It also owns four more exploration projects in Colombia for a total exploration acreage of approximately 21,400 hectares. The Company is committed to implementing its exploration and development strategy with a comprehensive environment, safety and community program, meeting international standards of best practice.

Forward-Looking Information

This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Gran Colombia to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and Gran Colombia disclaim, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. 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. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

%SEDAR: 00003116E

For further information: Peter Volk, General Counsel & Corporate Secretary or Michael Davies, Chief Financial Officer, (416) 360-4653

Subscribe

Email Address *
Mailing Lists *




 
Enter the code shown above.

Contact Us

Head Office
401 Bay Street, Suite 2400, PO Box 15
Toronto, ON M5H 2Y4
Telephone: (416) 360-4653
Fax: (416) 603-4653

Colombia Operations Office
Calle 4 Sur No 43A-195 Centro Ejecutivo, oficina 230B Medellin, Colombia
Telephone: +57(4) 448 5220

Investor Relations
investorrelations@grancolombiagold.com

Resumes
talento.humano@grancolombiagold.com.co