Gammon Reports Best Ever Cost Margins and Continued Strengthening of Performance at Ocampo During the Fourth Quarter: Meets Operational Guidance for 2010
By Gammon Gold Inc, PRNESaturday, January 8, 2011
TSX: GAM / NYSE: GRS / BSX: GL7
TORONTO, January 9, 2011 - Gammon Gold Inc. ("Gammon") (TSX:GAM and NYSE:GRS): is pleased to provide
preliminary results from the Ocampo mine for the fourth quarter and 2010.
Operations at Ocampo continued to strengthen in the fourth quarter benefiting
from the strong performance of the North-East underground mine. All figures
reported are in U.S. dollars unless otherwise indicated.
During the fourth quarter, the Company reported production at Ocampo of
29,384 gold ounces and 1,199,829 silver ounces, or 51,199 gold equivalent(1)
ounces (realized(2) 53,030 ounces) at total cash costs of $426 per gold
equivalent(1) ounce (realized(2) $410). On a by-product basis, taking
Ocampo's silver production as a credit, total cash costs per ounce of gold
sold were negative $390. Ocampo achieved a record margin of $955 per gold
equivalent ounce(1) or 69%, and an operating cash flow for the period of
approximately $40.0 million.
For the year ended December 31, 2010, the Company reported production at
Ocampo of 103,220 gold ounces and 4,417,413 silver ounces, or 183,538 gold
equivalent(1) ounces at total cash costs of $422 per gold equivalent(1)
ounce, meeting the Company's guidance for 2010.
"Throughout 2010 we have reported significant quarter over quarter
improvements at Ocampo in virtually every key performance indicator. We have
met our 2010 production and cash cost guidance and attained a strong and
consistent production profile that leverages our record margins," said Rene
Marion, President and Chief Executive Officer. "Our strong cash flow profile
and robust financial position, including a cash balance of $113 million,
provides us with the flexibility to invest in our future, and fully fund our
growth strategy."
Recent Highlights ------------------------------------------------------------------------- - Development of the North-East and Santa Eduviges underground mines continue to benefit from having access to the additional workforce redeployed from the Company's El Cubo mine. More than 7,200 metres of development were completed in the fourth quarter - Commercial production at Santa Eduviges commenced in late December - On December 9, Gammon announced significant drill results for Reserve expansion and four new discoveries at Ocampo at Balvanera, El Rayo, Stockwork Hill and Polvorin - On December 16, 2010, the Company announced that it has entered into a binding Letter of Intent with Aurion Resources Ltd. 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 - The Preliminary Economic Assessment of the Guadalupe y Calvo development property is expected to be released later this month Ocampo Key Performance Metrics ------------------------------------------------------------------------- % Change Underground Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 (Q4 vs Q1) ------------------------------------------------------------------------- Average tpd 1,377 1,500 1,596 1,671 1,537 21% Head grade gold (g/t) 2.33 2.22 2.16 2.52 2.27 8% Head grade silver (g/t) 160.0 138.1 125.9 166.4 144.5 4% Total development 3,903 4,744 6,546 7,220 22,413 85% ------------------------------------------------------------------------- % Change Open Pits Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 (Q4 vs Q1) ------------------------------------------------------------------------- Average tpd 93,730 103,117 97,992 105,737 100,171 13% Head grade gold (g/t) 0.46 0.50 0.72 0.53 0.54 15% Head grade silver (g/t) 27.8 28.2 40.5 27.3 30.4 (2%) ------------------------------------------------------------------------- % Change Mill Facility Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 (Q4 vs Q1) ------------------------------------------------------------------------- Average tpd 2,920 3,182 3,113 3,161 3,095 8% Head grade gold (g/t) 1.62 1.71 1.88 2.02 1.81 25% Head grade silver (g/t) 105.4 98.6 109.3 115.7 107.3 10% ------------------------------------------------------------------------- Heap Leach % Change Facility Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 (Q4 vs Q1) ------------------------------------------------------------------------- Average tpd 7,328 10,017 6,830 9,553 8,434 30% Head grade gold (g/t) 0.34 0.40 0.46 0.39 0.39 16% Head grade silver (g/t) 20.8 22.6 26.5 22.8 23.1 9% ------------------------------------------------------------------------- % Change Production Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 (Q4 vs Q1) ------------------------------------------------------------------------- Gold Ounces Produced 21,855 24,963 27,018 29,384 103,220 34% Silver Ounces Produced 960,817 1,066,998 1,189,769 1,199,829 4,417,413 25% Gold eq.(1) Ounces Produced 39,325 44,363 48,650 51,199 183,538 30% Gold Equivalency Ratio(2) 66 65 64 50 60 (24%) Gold eq.(2) Ounces Produced (Realized) 36,546 41,362 45,520 53,030 176,458 45% ------------------------------------------------------------------------- Total Cash % Change Costs Q1 2010 Q2 2010 Q3 2010 Q4 2010 2010 (Q4 vs Q1) ------------------------------------------------------------------------- Total cash costs per gold eq. ounce (55:1) $423 $430 $411 $426 $422 1% Total cash costs per gold eq. ounce (Realized) $458 $461 $440 $410 $440 11% Total cash costs per gold ounce $8 ($33) ($121) ($390) ($146) (4975%)
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 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/A, 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, statements regarding 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 the development of new deposits, costs and
timing of construction, costs and timing of future exploration and
reclamation expenses including, anticipated 2010 and 2011 results, operating
performance projections for 2010 and 2011, our ability to fully fund our
future growth internally, our ability to expedite the development of the
Santa Eduviges underground, the continued positive results from our
exploration programs, our ability to complete the Preliminary Economic
Assessment of Guadalupe y Calvo in 4-6 weeks, 2010 and 2011 gold and silver
production and the cash and operating costs associated therewith, the ability
to achieve productivity and operational efficiencies, further improvements to
silver recoveries resulting from improvements to the Ocampo mill 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.
(1) Using the Company's long term gold equivalency ratio of 55:1
(2) Gold equivalent ounces include silver ounces produced and sold
converted to a gold equivalent based on the ratio of the actual
realized sales prices of the commodities
For further information: please visit the Gammon Gold website at
www.gammongold.com or contact: René Marion, Chief Executive Officer,
Gammon Gold Inc., +1-416-646-3825; Anne Day, Director of Investor Relations,
Gammon Gold Inc., +1-416-646-3825
For further information: please visit the Gammon Gold website at
www.gammongold.com or contact: Rene Marion, Chief Executive Officer,
Gammon Gold Inc., +1-416-646-3825; Anne Day, Director of Investor Relations,
Gammon Gold Inc., +1-416-646-3825
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