Gammon Gold Announces the Strategic Option of the La Bandera Project Located in Durango Mexico

TORONTO, December 16, 2010 - Gammon Gold Inc. ("Gammon") (TSX:GAM and NYSE:GRS): Gammon is pleased to
announce that the Company has entered into binding Letter of Intent ("LOI")
with Aurion Resources Ltd. wherein both parties agree to negotiate a
definitive agreement that will provide Gammon with an option to earn up to a
70% joint venture interest in the 12,985 hectare La Bandera Project located
in Durango, Mexico. Under the terms defined in the Letter of Intent, Gammon
will have the option to earn its interest through a $250,000 private
placement in Aurion and a series of escalating work commitments.

The La Bandera project is a low-sulphidation, epithermal gold-silver
system located approximately 120 kilometres north-northwest of Durango City,
in Durango State. Exploration targets are primarily high grade gold-silver
veins, stockwork and breccias associated with favourable structural sites
along the regionally extensive La Bandera fault system. La Bandera is host to
a more than 20 kilometre long, 40 to 150 metre-wide, epithermal gold vein
system that is believed to cover the uppermost portions of the system.
Despite this high-level expression, of 2,245 rock samples collected by Aurion
and predecessors, 19% of the samples have more than 0.10 grams per tonne gold
and 3% contain more than 1.0 grams per tonne gold.

"We are pleased to enter into this agreement with Aurion as the La
Bandera Project is a highly prospective epithermal project where we can
leverage our team's expertise in epithermal veins and potentially our
experience in mining underground vein systems in Mexico." stated Peter
Drobeck, Senior Vice President of Exploration and Business Development. He
continued, "This option agreement is another step in expanding our land
package in Mexico and we look forward to launching a strategic exploration
program at La Bandera in the coming months."

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. In 2010 Gammon completed option purchase
agreements to acquire the Mezquite Project in Zacatecas State, Mexico, the
Venus project located north of the Ocampo mine, and the Los Jarros 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.

Cautionary Statement

Cautionary Note to US Investors - The United States Securities and
Exchange Commission permits US mining companies, in their filings with the
SEC, to disclose only those mineral deposits that a company can economically
and legally extract or produce. This press release uses certain terms, such
as "measured," "indicated," and "inferred" "resources," that the SEC
guidelines strictly prohibit US registered companies from including in their
filings with the SEC. US Investors are urged to consider closely the
disclosure in Gammon gold's Annual Report on Form 40-F, which may be secured
from Gammon gold, or from the SEC's website at
www.sec.gov/edgar.shtml.

No stock exchange, securities commission or other regulatory authority
has approved or disapproved the information contained herein.

Certain statements included herein, including information as to the
future financial or operating performance of the Company, its subsidiaries
and its projects, constitute forward-looking statements. The words "believe",
"expect", "anticipate", "contemplate", "target", "plan", "intends",
"continue", "budget", "estimate", "forecast", "may", "will", "schedule" and
similar expressions identify forward-looking statements. Forward-looking
statements include, among other things, future exploration results of its
development program, the Company's ability to delineate additional resources
and reserves as a result of such program, and the company's ability to mine
such targets by mid-2011, statements regarding its financial exposure to
litigation, targets, estimates and assumptions in respect of gold and silver
production and prices, operating costs, results and capital expenditures,
mineral reserves and mineral resources and anticipated grades, recovery
rates, future financial or operating performance, margins, operating and
exploration expenditures, costs and timing of completion of the Ocampo
expansion program and improvements to the heap leach pad, costs and timing of
the development and commencement of production of new deposits, costs and
timing of construction, costs and timing of future exploration and
reclamation expenses including, anticipated 2010 results, operating
performance projections for 2010 and 2011, our ability to fully fund our
business model internally, 2010 gold and silver production and the cash and
operating costs associated therewith, the ability to achieve productivity and
operational efficiencies, the ability to access grid power at Ocampo, further
reduction in the open pit stripping ratio and the timing of each thereof.
Forward-looking statements are necessarily based upon a number of estimates
and assumptions that, while considered reasonable by the Company, are
inherently subject to significant business, economic, competitive, political
and social uncertainties and contingencies. Many factors could cause the
Company's actual results to differ materially from those expressed or implied
in any forward-looking statements made by, or on behalf of, the Company. Such
factors include, among others, known and unknown uncertainties and risks
relating to additional funding requirements, reserve and resource estimates,
commodity prices, hedging activities, exploration, development and operating
risks, illegal miners, political and foreign risk, uninsurable risks,
competition, limited mining operations, production risks, environmental
regulation and liability, government regulation, currency fluctuations,
recent losses and write-downs, restrictions in the Company's loan facility,
dependence on key employees, possible variations of ore grade or recovery
rates, failure of plant, equipment or process to operate as anticipated,
accidents and labour disputes. Investors are cautioned that forward-looking
statements are not guarantees of future performance and, accordingly,
investors are cautioned not to put undue reliance on forward-looking
statements due to the inherent uncertainty therein.

For further information: For further information: please visit the Gammon
gold website at www.gammongold.com or contact: Peter Drobeck, Sr. VP
Exploration & Business Development, Gammon Gold Inc., +1-416-646-3825; Anne
Day, Director of Investor Relations, Gammon Gold Inc., +1-902-468-0614.

For further information: For further information: please visit the Gammon gold website at www.gammongold.com or contact: Peter Drobeck, Sr. VP Exploration & Business Development, Gammon Gold Inc., +1-416-646-3825; Anne Day, Director of Investor Relations, Gammon Gold Inc., +1-902-468-0614.