TORONTO, May 14, 2012 /CNW/ - Gran Colombia Gold Corp. (TSX: GCM) announced today the release of its unaudited interim consolidated financial results for the first quarter ended March 31, 2012 and related management's discussion and analysis, an update on the Maria Dama mill expansion, and the results of its ongoing exploration at its Marmato Project. All financial figures contained herein are expressed in U.S. dollars unless otherwise noted.

First Quarter 2012 Highlights

• Production of 26,260 ounces of gold in the first quarter of 2012, in line with the fourth quarter of 2011 and 76% higher than the first quarter a year ago. Gold production for the first quarter of 2012 was in line with management's expectations.
• Revenues of $42.7 million, more than double compared with the first quarter last year, and 15% lower than the fourth quarter of 2011 due to timing of gold sales.  The Company sold 24,814 ounces of gold in the first quarter of 2012 at an average realized gold price of $1,676 per ounce.
• The new mill in Maria Dama is currently being commissioned and on May 13^th, 2012 the ramped-up production was 800 tonnes per day. In addition to the daily mine production, the mine has stockpiled 20,000 tonnes of ore to meet the anticipated increase in production.
• Consolidated cash cost of $1,199 per ounce of gold sold, up $86 from $1,113 in the fourth quarter of 2011, primarily due to the strengthening of the Colombian peso relative to the U.S. dollar in the first quarter and the Company temporarily mining through some lower grade ore zones at the Segovia Operations in March 2012 due to capital development work being undertaken to improve mine access between levels at the Company-operated mines to support the ramp up of production in 2012.
• General and administrative costs of $3.5 million in the first quarter of 2012, a 35% reduction from the fourth quarter of 2011, were in line with management's expectations for a 2012 quarterly run rate.
• Net loss attributable to shareholders of $2.7 million, or $0.01 per share, in the first quarter of 2012, includes $4.6 million of mark-to-market losses on financial instruments. This compares to net income of $1.7 million or $0.00 per share in the fourth quarter of 2011 and a net loss for the first quarter of 2011 of $18.0 million, or $0.08 per share.
• The Marmato project, with previously announced total gold resources of 1.9 million ounces in the measured category, 8.1 million ounces in the indicated category and 2.4 million ounces in the inferred category, ranks in the top two percent of all gold projects in the world by gold resources.
• The Company is pleased to announce that the latest drill intersection in hole MT-1498 at Marmato has produced the Company's best results to date, with 739.5 meters grading 1.5 g/t gold and 1.1 g/t silver from 204.0 metres to the end of the hole at 943.5 metres.  Hole-1499A produced 67.0 metres grading 3.4 g/t gold between 325.0 and 392.0 metres and 410.0 metres grading 1.5 g/t between 406.0 and 816.0 metres. As a result of this newly discovered deep zone mineralization that is open at depth with increasing grades, the Company has decided that the current plan to complete the pre-feasibility study in the second quarter of 2012 will be delayed as the ongoing deep drilling continues.  Gran Colombia will further explore the significance of this high grade deep zone mineralization and its impact on the current work undertaken in the pre-feasibility study before determining the Company's options for the development of this world class ore body.
• The Company will work toward producing a new NI 43-101 resource estimate for Marmato later this year.

Commenting on the Company's performance in the first quarter of 2012, Maria Consuelo Araujo, Chief Executive Officer of the Company, said "I am pleased with our progress in the first quarter.  We are on track and remain focused on delivering significant growth and meeting our target of producing 155,000 ounces of gold in 2012.  I am very proud of the extra efforts that the team has put forth to overcome obstacles and get the new Maria Dama mill installed and ramping up to its new capacity.  Our team at Marmato continues to grow the value of this world class resource and we are very excited by the latest deep drilling results."

Financial and Operating Summary

A summary of the financial and operating results for the first quarter of 2012 is as follows:

Segovia Operations - Maria Dama Plant Expansion Update

Gran Colombia is in the process of expanding capacity and increasing production at its Segovia Operations. The new ball mill at the Maria Dama plant continues to be tested under increasing loads and after experiencing some delays related to power supply interruptions due to problems at EPM's La Cruzada substations together with the mill's motor bearings overheating due to misalignment problems, the Maria Dama plant just completed an eight hour test under a load of 800 tonnes per day (tpd).  The Segovia Operations team is now working on the completion of the commissioning tests and ramping throughput up to 1,000 tpd over the coming months. By late 2012, following improvements in other areas of the Maria Dama plant operations, the Company expects that it will further increase the mill's capacity to 1,500 tpd.  Based on first quarter production, the new milling capacity, approximately 20,000 tonnes of ore stockpiled from the Company operations and incremental production from both artisanal and company operations, the Company continues to expect to meet its production target at Segovia of 130,000 ounces of gold in 2012.

Marmato Project - Exploration Update

Gran Colombia Gold is pleased to announce that the ongoing exploration program at the Marmato gold project in Colombia continues to deliver highly promising upside results in the newly discovered deep mineralized zone below the preliminary pit outline and operating underground mine.  Since the release of the last set of drill results on January 9, 2012, the highlights of an additional 12 drill holes totaling 5,531 metres are included herein, including the best ever drill intersection of 739.5 metres grading 1.5 g/t Au from 204.0 m to the end of the hole at 943.5 m. The deposit remains open at depth.  Another of the deep drill holes has intersected 410 metres grading 1.5 g/t Au and is also open at depth.  To date, the deeper zone has been tested with eight drill holes while one drill rig continues to investigate the depth and strike continuity of this mineralization.  This drilling confirms the presence of a deep mineralized zone which has a minimum block size of 200 m wide, that widens at depth, by 400 m long (open along strike in both directions) and 500 m deep with ore grade mineralization starting at 900 m elevation and open at depth.  Please refer to Attachment 1 to this press release (see URL at the end of this release) for an illustrative geological cross section, a copy of which is also available on Gran Colombia's website at www.grancolombiagold.com.

This new zone contains approximately 100 million tonnes of potential ore which, when added to the 42 million tonnes of ore in the underground mine identified in the Scoping Study (Reference; NI 43-101 Technical Report prepared by SRK Consulting, filed on SEDAR on October 19, 2011), could more than triple the total ore tonnage identified for underground mining. The zone remains open at depth and results indicate increasing mineralization with depth.  These findings are not currently represented in the current total resource estimate at Marmato.  The Company is refocusing its 2012 exploration plan to reassign planned drilling activities to further explore this zone and work toward a NI 43-101 technical report later this year.

Don East, Chief Operating Officer of the Company, commented: "These latest drill results continue to prove the existence of higher gold grades with depth and to expand our understanding of the much larger size and potential of this deep mineralized zone. Based on this new information, the Company will re-assess the existing pre-feasibility analysis to determine how to best develop our flagship project."

Significant results (greater than 20 gram-metres) are summarized below:

*denotes underground drill holes.  The surface drill hole was inclined at -60 degrees from horizontal and the underground holes were drilled at -24.5 to -74 degrees from the horizontal, and the intersection lengths do not represent true widths.  Sample lengths are normally 2.0 metres but may be varied for geological and recovery factors.  Intersections were calculated using a cut-off grade of 0.1 g/t gold and no more than 6.0 metres of internal dilution.  Gold grades were capped at 20.0 g/t and silver grades at 500 g/t.

Alessandro Cecchi, Director of Exploration, stated: "The deep gold mineralization is related to narrow veinlets of quartz-pyrrhotite with minor amounts of pyrite and chalcopyrite and a narrow halo of intermediate argillic alteration. These change upwards to pyrite veinlets with pervasive intermediate argillic alteration. They overprint earlier potassic alteration with porphyry-style quartz veinlets, overlain by propylitic alteration. The porphyry style alteration and veining does not carry mineralization."

Since January 2010, the total number of metres drilled is 120,638 m in 341 holes. Including all previous drilling, the total is 201,506 metres in 719 holes. The resource drilling program was completed in January 2012 and SRK Consulting (UK) Ltd. has been retained to prepare an updated mineral resource and reserve estimate, which is due before the end of May, 2012.  All of the results to date, together with a map showing the locations of the drill holes, are available on Gran Colombia's website at www.grancolombiagold.com.

Qualified Person

Stewart D. Redwood, Senior Consulting Geologist to Gran Colombia, is a Qualified Person as defined by National Instrument 43-101 and prepared or reviewed the preparation of the scientific and technical information in this press release in respect of the drilling results from the Marmato Project.  Dr. Redwood verified the data disclosed in this press release, including the sampling, analytical and test data underlying the information contained in this release.  Verification included a review of the quality assurance and quality control samples, and review of the applicable assay databases and assay certificates.

Quality Assurance and Quality Control

In the case of the drilling results referred to herein, the samples were prepared by Acme Analytical Laboratories Ltd (ISO 9001:2008) at their sample preparation facility in Medellin, Colombia, and were assayed at their laboratory in Santiago, Chile.  Gold was assayed by fire assay with atomic absorption spectrophotometer ("AAS") finish.  Samples over 10 g/t gold were assayed by fire assay with gravimetric finish.  Silver was assayed by aqua regia digestion and AAS finish.  Silver samples above 100 g/t were assayed by fire assay with gravimetric finish. Blank, standard and duplicate samples were routinely inserted for quality assurance and quality control.

Webcast

As a reminder, the Company will host a conference call and webcast on Tuesday, May 15, 2012 at 10:00 a.m. Eastern Time (9:00 a.m. Bogota time) to discuss the results and provide an operational update.

Webcast and call-in details are as follows:

A replay of the webcast will be available at www.grancolombiagold.com from May 15, 2012 until July 15, 2012.

Annual General Meeting

Gran Colombia will hold its Annual General Meeting of Shareholders on Friday, June 1, 2012 at 11:00 am Eastern Time at the Hilton Hotel in Toronto, Ontario. An archived video of the meeting will be available on our website at www.grancolombiagold.com two business days after the conclusion of the meeting and will remain on our website for six months.

About Gran Colombia Gold

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 several underground mines in operation at its Segovia and Marmato Operations. In addition, Gran Colombia is advancing a project to develop a large-scale, gold and silver mine at its Marmato operations.

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

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. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements are described under the caption "Risk Factors" in the Company's Annual Information Form dated as of March 28, 2012 which is available for view on SEDAR at www.sedar.com. Forward-looking statements contained herein are made as of the date of this press release and Gran Colombia disclaims, 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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