Gran Colombia Announces Issuance Of Up To Us$75 Million In Senior Unsecured Silver-Linked Notes

July 08, 2011

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TORONTO, July 8, 2011 /CNW/ - Gran Colombia Gold Corp.(TSX: GCM) announced today the filing of a preliminary short form prospectus in all of the provinces of Canada, except Quebec, with respect to the issuance of up to US$75 million (the "Principal Amount") in senior unsecured silver-linked notes (the "Notes").

The offering will consist of up to 75,000 Notes of the Company at a price of US$1,000 principal amount per Note (the "Offering").  The Notes, due 2018, will 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 will be December 31, 2011 and will consist of interest accrued from and including the Closing Date (as defined below).  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 the date that is 48 months from the Closing Date, 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 the date that is 60 months from the Closing Date, 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 the date that is 72 months from the Closing Date, 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 maturity 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.

Serafino Iacono , Executive Co-Chairman of Gran Colombia, said "We are very pleased with the announcement of this financing, which enables our Company to unlock hidden value from Gran Colombia's substantial silver reserves and future silver production.  We feel this is a creative and innovative financial instrument that provides investors an attractive opportunity to benefit from the long-term cycle in silver prices and is a reflection of our view that precious metals prices will continue to increase in the long term.  This will be the first silver-linked note issued, which will offer investors a notional call on the US dollar financial equivalent of silver at US$15 per ounce for the next 7 years and a 5% coupon, offering a yield that is higher than any silver-related equity dividend yield.  With silver currently at over US$35 per ounce, this is a unique way to invest in silver at a substantial discount to current prices."

The net proceeds of the Offering will be used by the Company for the development of the Marmato Project, Colombia-based social programs related to the Marmato Project, the relocation of the Town of Marmato and for general corporate purposes including improvements to the Gran Colombia Mine.

The offering will be completed by a syndicate of agents, led by GMP Securities L.P. and including RBC Capital Markets, Fraser Mackenzie Limited, Raymond James Ltd. and TD Securities Inc. The offering of the Notes is expected to close on or about August 4, 2011 (the "Closing Date").

About Gran Colombia Gold Corp.:

Gran Colombia is a Canadian-based gold and silver exploration, development and production company with its primary focus in Colombia.  Gran Colombia is currently the largest underground gold and silver producer in Colombia with six underground mines in operation.  In addition, Gran Colombia is also developing a large-scale, open-pit gold and silver mine at Marmato.  The Company also has a highly-prospective land position in Colombia as well as an advanced stage property in Venezuela and earlier stage properties in Mali.

Additional information on Gran Colombia can be found on the Company's website at grancolombiagold.com and by reviewing the Company's profile on SEDAR at www.sedar.com.

Cautionary Statement on 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. Please see "Risk Factors" in the short form preliminary prospectus and in the most recently filed Annual Information Form of the Company (which is incorporated by reference into the short form prospectus) which can be found on the Company's SEDAR profile at www.sedar.com.  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.

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