Gammon Gold and Capital Gold Sign Definitive Merger Agreement

TORONTO and NEW YORK, October 1, 2010 - Gammon Gold Inc. ("Gammon Gold") (NYSE: GRS, TSX: GAM) and Capital Gold
Corporation ("Capital Gold") (TSX and NYSE AMEX: CGC) have entered into a
definitive merger agreement pursuant to which Gammon Gold will offer to
acquire all of the issued and outstanding common shares of Capital Gold in a
cash and share transaction (the "Acquisition"). The total consideration for
the purchase of 100% of the fully diluted in-the-money shares of Capital Gold
is approximately US$288 million or US$4.57 per Capital Gold share based on
Gammon Gold's closing price on September 24, 2010 on the NYSE.

The Acquisition has the unanimous support of both companies' Boards of
Directors and Officers and strengthens Gammon's position as a leading Mexico
focused, growing gold producer.

Under the terms of the Acquisition, each common share of Capital Gold
will be exchanged for 0.5209 common shares of Gammon Gold and a cash payment
in the amount of US$0.79 per share. Based on the September 24, 2010 closing
price of Capital Gold's shares on the NYSE AMEX, the acquisition price
represents a 20% premium to the close on September 24th and a 30% premium to
the 20-day volume weighted average price on the NYSE AMEX ending on that
date.

Capital Gold owns and operates the El Chanate gold mine located in
Sonora, Mexico as well as the Orion development project in Nayarit, Mexico.

Commenting on behalf of Capital Gold, Stephen Cooper, Chairman of the
Board of Directors stated; "The Capital Gold team should be congratulated for
their many achievements. They have transformed the El Chanate gold mine from
a small exploration property to a low cost, quality asset with tremendous
upside potential. They have increased reserves at El Chanate by 1.3 million
gold ounces (535%) since 2002, and there is additional potential yet to be
realized." He continued, "This is an exciting value-add transaction that
allows Capital Gold shareholders to participate in both the future success of
El Chanate and Gammon's well established portfolio of gold assets. Both
Gammon Gold and Capital Gold have operating teams that possess extensive
experience in Mexico, which supported by Gammon Gold's strong financial
foundation will allow El Chanate and Orion's potential to be fully realized.
The Capital Gold Board of Directors is confident that the shareholders of
both companies will benefit from this business combination and we look
forward to the continued success of the combined companies."

Commenting on behalf of Gammon Gold, Rene Marion, President and CEO,
stated; "We anticipate that this transaction will transform Gammon Gold into
a well diversified Mexican gold producer with an attractive suite of
operating assets and an enhanced pipeline of development and exploration
stage projects that will increase our exposure to gold in a positive gold
price environment. Following the transaction, we anticipate Gammon Gold will
be among the lowest cost producers in the industry with an exciting organic
growth profile." He continued, "We believe that our offer to Capital Gold
shareholders is highly compelling as it offers an attractive opportunity and
provides ongoing participation in a large, well-funded, liquid, producing
company focused on Mexico. Both sets of shareholders will also be able to
participate in the substantial operating and financial synergies we expect to
derive from this transaction. This transaction positions Gammon to become a
leading consolidator in the attractive but fragmented Mexican gold sector."

Stifel, Nicolaus & Company, Incorporated has provided a fairness opinion
to the Board of Directors of Capital Gold that the consideration offered
pursuant to the Acquisition is fair, from a financial point of view, to the
shareholders of Capital Gold. The Board of Capital Gold unanimously
recommends that holders of Capital Gold shares vote in favour of the
Acquisition. The senior officers and directors of Capital Gold have agreed to
vote in favour of the Acquisition.

The Acquisition will be completed by way of a merger under the General
Corporation Law of the State of Delaware. After completion of the
Acquisition, it is expected that current Capital Gold shareholders will own
approximately 20% of Gammon Gold on a fully diluted basis. The transaction is
subject to receipt of approval of holders of at least 50% plus one of the
outstanding Capital Gold shares, and, if required by law, approval by
shareholders excluding directors and officers holding approximately 1.1
percent of Capital Gold shares who are entitled to change of control
payments, regulatory approvals, and the satisfaction of certain other
customary conditions.

The transaction is expected to close in late 2010.

If the transaction is not completed, Capital Gold has agreed to pay a
break fee of US$10.3 million to Gammon Gold under certain circumstances.
Capital Gold may also be entitled to a break fee of up to US$ 2.0 million
under certain circumstances. Capital Gold has, among other things, agreed to
provide Gammon Gold with certain other customary deal protections, including
a non-solicitation provision and a right to match.

Gammon Gold's lead financial advisor is Dundee Securities. UBS Canada
Securities Inc. has also been retained as an advisor. Its Canadian legal
counsel is Fasken Martineau DuMoulin LLP and its U.S. legal advisor is
Kirkland & Ellis LLP. Capital Gold's financial advisor is Cormark Securities
Inc., its Canadian legal counsel is Macleod Dixon LLP and its U.S. legal
advisor is Ellenoff Grossman & Schole LLP.

Conference Call and Webcast Details

A webcast and conference call will be held on Friday October 1, 2010
starting at 10:45 am Eastern Time (11:45 am Atlantic Time).

    Conference Call Access:
    - Toll Free: 1-888-231-8191

When the Operator answers please ask to be placed into the Gammon Gold
Conference Call.

Archive Call Access:

If you are unable to attend the conference call, a replay will be
available until midnight October 7, 2010 by dialing the appropriate number
below:

    - Local Toronto Participants: 1-416-849-0833 Passcode: 14967986

    - North America Toll Free: 1-800-642-1687 Passcode: 14967986

Live Webcast:

The event will be broadcast live on the internet via webcast. To access
the webcast please follow the link provided below:
www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)3243020

Archive Webcast:

The webcast will be archived for 90 days by following the link provided
below: www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal
sign)3243020 or via the Company's website at www.gammongold.com.

About Gammon Gold

Gammon Gold Inc. is a mid-tier gold and silver producer with properties
in Mexico. Gammon's flagship Ocampo Property in Chihuahua State achieved
commercial production in January 2007. Gammon also owns the suspended El Cubo
mine in Guanajuato State and has the promising Guadalupe y Calvo development
property in Chihuahua State. Gammon recently completed option purchase
agreements to acquire the Mezquite Project in Zacatecas State, Mexico and the
Venus project located north of the Ocampo mine. Gammon also recently signed a
definitive agreement to acquire the Los Jaros Project in Chihuahua State.
Since 2008, the Company has increased its Mexican land position by over 59%
and has made strategic investments in Golden Queen Mining Co. Ltd. and Corex
Gold Corporation. The Company's Executive Office is located in Toronto,
Ontario.

About Capital Gold

Capital Gold Corporation (CGC) is a gold production and exploration
company. Through its Mexican subsidiaries and affiliates, it owns 100% of the
"El Chanate" gold mine located near the town of Caborca in Sonora, Mexico. On
August 2, 2010, Capital Gold acquired Nayarit Gold Inc. Capital Gold is
focused on optimizing the El Chanate operations and advancing the Del Norte
deposit in the Orion District in the State of Nayarit, Mexico. Capital Gold
also owns and leases mineral concessions near the town of Saric, also located
in Sonora, that are undergoing exploration for gold and silver
mineralization. Additional information about Capital Gold and the El Chanate
Gold Mine is available on the company's website, www.capitalgoldcorp.com.

Important Additional Information Regarding the Acquisition will be filed
with the SEC.

This press release is not, and is not intended to be, a solicitation of
proxies or an offer of securities. The parties will file a joint proxy
statement/prospectus with the Securities and Exchange Commission (the "SEC")
and Gammon Gold will file a management information circular with Canadian
Securities regulatory authorities. INVESTORS AND SECURITY HOLDERS ARE ADVISED
TO READ THESE SEC AND CANADIAN SECURITIES REGULATORY FILINGS WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
ACQUISITION AND THE PARTIES TO THE ACQUISITION. Investors and security
holders may obtain a free copy of these SEC and Canadian securities
regulatory filings (when available) and other documents filed by Capital Gold
or Gammon Gold at the SEC Web site www.sec.gov or
www.SEDAR.com, as applicable. These SEC and Canadian securities
regulatory filings and other documents also may be obtained for free, as
applicable, from Capital Gold by directing such request to Capital Gold
Corporation, Investor Relations, 76 Beaver Street, 14th floor, New York,
New York 10005 or at Capital Gold's Web site at
www.capitalgoldcorp.com or from Gammon Gold by directing such request
to Gammon Gold, Inc., Investor Relations, 1701 Hollis Street, Suite 400,
Founders Square, PO Box 2067, Halifax, Nova Scotia, B3J 2Z1, Canada or at
Gammon Gold's Web site at www.gammongold.com.

Forward Looking Statements

This press release contains forward-looking statements and
forward-looking information within the meaning of applicable securities laws.
The use of any of the words "plans", "expects", or "does not expect", "is
expected", "budget", "scheduled", "anticipates", or "does not anticipate",
"continue", "estimates", "forecasts", "objective", "ongoing", "may", "will",
"project", "should", "believe", "intends" or variations of such words and
phrases or statements are intended to identify forward-looking information or
statements. Forward-looking information is based on the opinions and
estimates of management at the date the information is made, and is based on
a number of assumptions and subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to differ
materially from those projected in the forward-looking information. More
particularly and without limitation, this press release contains
forward-looking statements and information concerning the Acquisition and
definitive agreement. The forward-looking statements and information are
based on certain key expectations and assumptions made by Gammon Gold and
Capital Gold. Although Gammon Gold and Capital Gold believe that the
expectations and assumptions on which such forward-looking statements and
information are based are reasonable, undue reliance should not be placed on
the forward-looking statements and information because neither of them can
give any assurance that it will prove to be correct. Since forward-looking
statements and information address future events and conditions, by their
very nature they involve inherent risks and uncertainties. There are risks
also inherent in the nature of the Acquisition, including whether the
completion of the Acquisition will ultimately occur, whether the anticipated
synergies of the acquisition will occur, incorrect assessment of the value of
the respective properties of each of Gammon Gold and Capital Gold, and
failure to obtain the required security holder, regulatory, third party and
other approvals. Readers are cautioned that the foregoing list of factors is
not exhaustive. There may be other factors that cause actions, events or
results not to be anticipated, estimated or intended. The forward-looking
statements and information contained in this press release are made as of the
date hereof. There can be no assurance that forward-looking information will
prove to be accurate, as actual results and future events could differ
materially from those anticipated in such information. Neither Gammon Gold
nor Capital Gold undertake any obligation to update publicly or revise any
forward-looking statements or information, whether as a result of new
information, future events or otherwise, except in accordance with applicable
securities laws.

For further information: Rene Marion, Chief Executive Officer, Gammon
Gold Inc., +1-416-646-3825; Christopher Chipman, Chief Financial Officer,
+1-212-344-2785; Kelly Cody, Investor Relations Manager, Capital Gold
Corporation, +1-212-344-2785; Anne Day, Director of Investor Relations,
Gammon Gold Inc., +1-902-468-0614

For further information: Rene Marion, Chief Executive Officer, Gammon Gold Inc., +1-416-646-3825; Christopher Chipman, Chief Financial Officer, +1-212-344-2785; Kelly Cody, Investor Relations Manager, Capital Gold Corporation, +1-212-344-2785; Anne Day, Director of Investor Relations, Gammon Gold Inc., +1-902-468-0614