Winston’s Growth Stock Report

Your Source for High Potential Stocks

Issue 16 April 20, 2011

Well it was only a matter of time but gold finally broke through another psychological milestone breaching $1500 and closing today at $1501. The best way to leverage your investments in gold is by way of junior gold companies who are working toward resource and production growth.

Today we’ll focus on one of our current favorites….

Gran Colombia Gold (GCM, TSX) Creation of a $1 Billion Cap –Colombian Focused Gold Co.

Speculation about a planned merger with Medoro Resources (MRS, TSXV) had been running rampant from the first day we started following GCM. Last week both companies announced that they were in fact combining operations to become a Colombian focused gold exploration and production company. According to Medoro’s interim CEO who is also the Chairman of GCM, Serafino Iacono, this combined company will be the largest gold producer in Colombia with a large portfolio of development projects.

Though the market at large seemed to indicate by its selloff of GCM shares that they paid too great a price, I don’t believe that’s the case. (See details below.)

I see this as having a win-win situation for all shareholders. The synergy and economies of scale which will result from this deal make sense. Both companies operate in the mid-Cauca gold belt which is located close to Medellin and both share a number of key management personnel. The combined company will have a billion dollar market cap and benefit from numerous operational cost savings.

According to analyst consensus production estimates for Gran Colombia and Medoro, gold production is estimated to grow from 109,000 ounces this year to over 630,000 ounces in 2016 from three flagship projects. That represents a compound annual growth rate of 42%.

The potential for developing significant compliant resources from the Medoro side seems quite impressive. Medoro’s lead Marmato project has compliant 43-101 resources of 9.8 million ounces already and an updated resource estimate should be coming out in Q2. Also in Q2 another drilling program will just have been completed and a Preliminary Economic Assessment will be finished.

Though Gran Colombia does have huge potential on paper, one thing they have lacked is hard resource numbers. With production growing on the Gran Colombia side and the potential of developing Marmato, the prospects for the new company look so much better.

Under the terms of the merger, each Medoro shareholder will receive 1.20 common shares of Gran Colombia, plus 0.50 of a Gran Colombia share purchase warrant for each of their Medoro shares.

Each warrant will entitle the holder to acquire one common share of Gran Colombia at an exercise price of $2.60 per Gran Colombia share. The warrants expire on August 24, 2015.

Upon completion of the merger, existing Gran Colombian and Medoro shareholders will each own approximately 50% of the combined company.

Highlights of the Merger:

• Complementary gold mining operations: There exists current gold production and cash flow from the high grade Gran Colombia gold mine with sustained long term production growth from the development of the large world-class gold resource at the Marmato gold project, both located on the mid-Cauca gold belt in the vicinity of Medellin, Colombia.
• Strong exploration and development pipeline: Significant prospective landholdings in multiple gold belts in Colombia covering a combined total of approximately 43,000 ha at varying stages of production, development and exploration.
• Increased scale and regional presence: Strengthened position in an attractive emerging gold district with opportunities to combine regional human resources, realize synergies and cost savings and execute on further plans for consolidation.
• Pro forma fully diluted market capitalization of over CAD$1 billion: Enhanced capital markets profile should promote liquidity and access to capital.
• Complementary management teams, boards of directors and geologists: Both companies have management teams, directors and geologists with extensive experience and backgrounds operating in Colombia. The pro forma company will have the benefit of selecting a very strong team of operators and developers capable of creating value for shareholders.
• Retained leverage to operational and development success: Each company's shareholders will retain meaningful equity interests in the pro forma company maintaining significant leverage to the company's future successes.

Colombia has become the investment community’s South American darling now that security concerns have eased and pro-Western politicians are in control of the country. Investor interest in Colombia started growing when our number one performing stock of 2009, Ventana Gold became a 10 bagger before being bought out by billionaire Eike Barista for $13.06 per share.

Stock List

AQM Copper (Apoquindo) (AQM) April 24, 2009 54 cents; holding Dec 9/10 sell $1.02 hold Free shares.

Catalyst Copper (CCY) Entered Jan 6/10 25 cents; accumulating

Donner (DON, TSXV) Dec 4/09 heads up alert 0.15 cents, Jan 17/10 doubles holding free shares

Edgewater Exploration (EDW, TSXV) Entered June 28/10 90 cents accumulating

Encanto Potash (EPO, TSXV) Entered July 31, 2009 .027 holding; Feb 11 2011 doubles Take Profits, holding free shares.

Endeavour Mining (EDV, TSX) Entered Feb 4/10 $1.73; Profits taken Ap 9@ $2.42 Holding Free Shares

Grand Colombia Gold Corp (GCM, TSX) accumulating Dec 3/10 $2.24

Hathor (HAT, TSXV) Top Uranium Pick Entered March 28, 2006 $1.32; Ap 21/08 sold $2.64, Oct 21/10 sold $2.33 holding free shares. Bottom Fishing March 17/11 @ $1.70

Nevsun (NSU, TSX) Feb 4/10 Buy Alert 2.19, profits Oct 20/10 $5.39 holding free shares

New Gold (NGD, TSXV) Dec 29/08 Best Speculative Pick $1.76; June 11/10 doubles holding free shares

Orsu Metals (OSU, TSXV) Bottom Fishing Pick July 23/10 @16 cents, Sell Oct 3 @32 cents and holding free shares

Petroamerica (PTA, TSXV) Nov 6, 2009 Speculative at 70 cents, Jan 8 new pick accumulate slowly 71 cents; Oct 16/10 buy @0. 405 cents; accumulating

Petromanas (PMI, TSXV) Feb 24/10 30 cents. Profits taken Apr 9/10 @ 72 cents; holding free shares; May 2/10 re-accumulating at 33 cents

Potash One (KCL, TSX) Top Potash Pick Entered May 14, 2008@ $3.19 holding Nov 22/10 buyout announced at $4.50 per share

Prima Colombia Hardwood (PCT, TSXV) Introduced March 7 @ 0.285 accumulating

Uracan (URC, TSXV) Speculative Uranium Pick Apr 30, 2010 Alert 18 cents; holding

Ventana Gold (VEN, TSXV) Entered Mar 18/09 $1.33, holding free shares. Buyout bid Nov 17/10 @ $12.6; Revised buyout price February 14/11 @ 13.06

Wildcat Silver (WS, TSXV) Entered July 10th, 2009 0.485 holding; Sell Alert February 14/11, Feb 15 close 88 cents. Holding