I want to point out that the formula I used in 2 posts earlier is a very rough estimate with many assumptions. There are many items that do not figure in that formula including debt servicing, political risk, recovery rates, market risks, price of gold risk, human resource risk, mineral rights risk, company failing to deliver risk and probably many others that I cannot think of.

However, IF and that is a big IF the company delivers their target of 170k ounces at $900 (I thought I had seen $900 for 2012 but after looking at everything, cannot find this number anywhere and believe $1050 may be a more likely goal for 2012) during 2012 and 510k ounces at $652 as per their investor presentation of November page 9, then I believe those share prices are possible.

Progress is being made in the last few months. During the 3rd quarter, they produced:

21,990 ounces at $1536, sold for $1684 for gross profit of $3.255M

This averages out to 1.085M per month during the 3rd quarter.

During October, as per their 3rd quarter financials they produced:

9445 ounces at $1118. Average gold price during October was $1650 for gross profit of 5.025M, a 460% increase in gross profit!

From the NR of December 12th:

At the Segovia operations, cost reductions implemented in September, 2011, have brought the cash cost per gold ounce for October and November down under $1,100 per ounce, and the operations are now cash flow positive.

Considering that October had costs of $1118 per ounce, then costs for November must of been below $1082 for them to average under $1100 for both months. Also, in November the price of gold had a rebound and averaged about $1725. If their production was still 9445 ounces, then their gross profit should be around $6.07M. So with those numbers in, if they have the same production in December and cost averaged $1100 while gold prices averaged about $1620, the company would have a month gross profit of $4.9M for a quarterly gross profit of $16M.

Now, during the 3rd quarter, they had a gross profit of $3.253M and a net loss of $3.881M. The difference here was 7.134M which I need to discuss with the company. I have a conference call at 10am on Thursday to discuss a few things and this will be one of them. If these corporate expenses that are not part of the cash cost of production are stable, then we would be looking at a net profit of just under 9M for the 4th quarter. That is a substantial change that should make the market reprice this company higher.

They will also be adding the Zancudo underground mine during 2012 where they expect long term production of 20k ounces at $600. The Marmato underground will be discontinued and will result in 25k ounces at $1150 lost but this is not supposed to happen till 2015. Both these changes will work to decrease the cost per ounce.

Conference call:

A conference call will be held on Wednesday, Jan. 11, 2012, at 11 a.m. ET to discuss the progress at Marmato. The call-in details are as follows:

Toronto and international: 647-427-7452

North America toll-free: 888-231-8191

Colombia toll-free: 01-800-518-0661

Conference ID: 40640037

A playback of this conference call will be available by dialling 416-849-0833 or 855-859-2056 with the above conference ID number until Jan. 25, 2012.

Glorieux