Gammon Gold Releases Ocampo Key Operational Indicators for January 2008



    TSX: GAM / AMEX:   GRS / BSX: GL7

    One Of The Best Single Month Operating Cashflow And Total Cash Costs
    Performance Results In The History Of The Company; +$1.9M Operating
    Cashflow and a 14.3% Reduction In Consolidated January Total Cash Costs
    Per Ounce From Q4 and a 33.9% Reduction Over Q3 Cash Costs

    HALIFAX, Feb. 19 /CNW/ -

    
    Highlights

    - During January the Company announced the appointment of Scott Perry as
      Chief Financial Officer and Russell Tremayne as Chief Operating
      Officer. Both Mr. Perry and Mr. Tremayne had previously worked with
      Gammon's Chief Executive Officer, Rene Marion at Highland Gold where
      Mr. Marion and Mr. Perry were seconded from Barrick Gold. Their proven
      success as a team in turning around Highland's operations, as well as
      the recapitalization of Highland, will benefit Gammon tremendously.
      Gammon now has in place a proven senior management team that possesses
      the requisite mining experience needed to successfully execute the
      Company's growth strategy.
    - Ongoing operating improvement initiatives resulted in a significant
      positive operating cash flow contribution of $1.9 million which was
      further reflected in a 14.3% reduction in January consolidated total
      cash costs from Q4 and a 33.9% reduction over Q3. Ocampo posted a 7.4%
      total cash costs per ounce reduction in January from Q4 and a 39.5%
      reduction over Q3 Cash Costs.
    - The Company (inclusive of Gammon Gold's El Cubo mine) remains on target
      to produce at the low end of the target range of 56,000 to 62,000 gold
      equivalent ounces during Q1 at a total cash cost that is consistent
      with estimated cash costs for Q4 2007.
    - The Company strengthened its liquidity position when the Company's
      lenders, subject to the Company providing a satisfactory mine plan and
      updated reserve statements by March 31, 2008, agreed to remove all
      restrictions that limit access to the final $12.5 million portion of
      this facility such that the Company will now have access to the full
      $60 million facility. The ongoing operational improvements combined
      with the strong market prices for gold and silver are expected to
      underpin the Company's turnaround phase into the later part of 2008, at
      which point the Company's business model is anticipated to generate
      positive net cash flow. Gammon views the lender's willingness to lift
      these facility access restrictions as a vote of confidence in the
      group's assets and the strengthened management team.

    Consolidated Production & Cost Overview
    ---------------------------------------

    The Company, including both Ocampo and El Cubo, achieved production in
January as planned, similar to December. In January, the Company produced a
total of 9,246 ounces of gold and 400,075 ounces of silver or 16,429 gold
equivalent ounces. Of this production, El Cubo contributed 3,353 ounces of
gold and 155,889 ounces of silver or 6,150 gold equivalent ounces an increase
of 22% over December at a cash cost of $518.80 per ounce a 36% decrease over
December. During January, the Company sold a total of 9,173 ounces of gold and
393,417 ounces of silver or 16,236 gold equivalent ounces and realized an
average gold price of $873/oz and an average silver price of $15.63/oz. Of the
ounces sold, El Cubo contributed 3,353 ounces of gold and 155,889 ounces of
silver or 6,150 gold equivalent ounces, an increase of 22% over December.

                   Operating and Free Cash Flow (unaudited)
                 http://files.newswire.ca/258/Operating.doc

    Financial indicators clearly demonstrate that the Company is continuing to
advance its turnaround. Operating cash flow in January improved by
$2.2 million to $1.9 million or by 112% as compared to ($0.240 million) in Q4
and clearly shows that productivity efficiencies achieved at Ocampo, coupled
with aggressive cost management strategies, are continuing to positively
impact costs. Free cash flow improved to ($0.9 million) or by 94% in January
as compared to ($14.7 million) in Q4. As the Company completes its investment
in capital expansion projects, expected to be by mid-2008, the Company
anticipates being free cash flow positive in the later part of 2008.
    Additional improvements are anticipated in Q1 2008 as many production and
cost savings initiatives gain additional traction and we leverage strong metal
prices. Capital costs during January were in line with internal expansion
capital projections at $2.8 million. Consolidated cash costs for January
decreased by 14.3% to $505 per ounce (net of any year end adjustments) over Q4
cash costs and was a 33.9% reduction over Q3 cash costs. Continued
improvements in total cash costs will be driven by the Company's focus on
increased production and cost optimization efforts.
    The Company (inclusive of Gammon Gold's El Cubo mine) remains on target to
produce at the low end of the target range of 56,000 to 62,000 gold equivalent
ounces during Q1 at a total cash cost that is consistent with anticipated cash
costs for Q4 2007.
    Total capital expenditures at Ocampo and El Cubo in Q1 are anticipated to
range from $16 to $20 million in Q1 2008. As of February 1, the Company had
effectively drawn $31.4 million of its $60 million revolving facility which is
less than the budgeted amount anticipated for this time period with no further
facility draw downs taken to date in February.
    Mr. Scott Perry, CFO of Gammon Gold stated, "Our operating and cost
management initiatives are progressing well which should result in stronger
financial results. There is a clear turnaround in progress and momentum is
strong and positive. Our operating assets are steadily improving and together
with the Company's strengthened liquidity position we now have the financial
and operational base from which we can continue to grow our cornerstone
operations positioning Gammon for the value opportunities that lie ahead."
    Mr. Rene Marion, CEO of Gammon Gold stated, "There is a clear and positive
trend emerging from the key performance indicators that is very encouraging
and clearly underscores the significant advancement in our turnaround at
Ocampo since October. Overall productivity continues to improve throughout
Ocampo and there are many areas where we can expect to achieve ongoing
improvement in both productivity as well as costs. Russell Tremayne and his
entire operational team are doing a great job in implementing best mining
practices and creating a safe working environment. I am very pleased to have
both Russell Tremayne and Scott Perry back on my team so together we can
accelerate the turnaround at Ocampo. I am also encouraged by the improvement
in productivity that we have achieved at our El Cubo mine and anticipate
ongoing positive results to continue in the months ahead."
    Mr. Marion continued, "We are encouraged by significant improvements in
both operating and free cash flow as well as in overall productivity and
therefore, remain confident that we will continue to maintain this positive
momentum and achieve our Q1 2008 targets.  Additionally, with unrestricted
access to the full $60 million revolving line of credit that is anticipated,
the Company should have sufficient liquidity and funding to fully execute its
growth strategy through this turnaround period."

    Ocampo - January 2008
    ---------------------

    Gammon Gold is pleased to advise that overall improvements achieved at its
Ocampo mine are continuing into Q1 2008. January production at Ocampo was
5,893 ounces of gold and 244,188 ounces of silver for a gold equivalent
production of 10,279 ounces. A total of 5,820 ounces of gold and
237,528 ounces of silver were sold during the month or 10,086 gold equivalent
ounces. During January, the Company realized an average gold price of $886/oz
and an average silver price of $16.05/oz. The planned monthly production
contribution was lower than what we are planning in February and March which
is due to fewer tonnes being placed on the Heap Leach Pad during November and
December as well as areas of the pad that are currently not under leach due to
the expansion of the leach pad. As a result of these construction activities
that are expected to be completed in Q2, approximately 120,000 tonnes placed
on the pad are not currently under leach. Also impacting productivity was the
unavailability of open pit excavators due to a scheduled maintenance program.
Leased equipment is currently supplementing the fleet and the Open Pit is
expected to be fully operational in March.  For Ocampo, total cash costs
(prior to the recording of any potential quarter end adjustments occurring in
the normal course of events) for January was $498 per gold equivalent ounce, a
decrease of 7.4% over Q4 2007 and 39.5% decrease over Q3 2007 despite one-off
costs of $35 per ounce for severances, parts for the open pit excavators and
leasing costs for loaders while the excavators are down.

            Ocampo Average Monthly Au(e) Production vs Cash Costs
                   http://files.newswire.ca/258/Ocampo.doc

    - During January additional improvements in cash costs were clearly
      evident. These cost reduction efforts throughout the operation continue
      to gain traction and these incremental improvements will continue into
      2008. Capital expansionary project initiatives that will be implemented
      in 2008 will enhance productivity and reduce operating costs in all
      areas. Most particularly, the optimization of our processing
      facilities, access to 20 megawatts of grid power and the delivery of
      underground equipment will provide significant costs savings and
      enhance overall capacity.
    - An additional 5 megawatts of main grid power was operational in the
      last week of January and this has reduced both our reliance on diesel
      generated power and will positively impact costs going forward. The
      access to grid power also minimizes exposure to business interruption
      should there be problems with one of our generators. The additional 5
      megawatts will increase main grid power to a total of 7 megawatts. The
      Company anticipates access to 20 megawatts of main grid power in early
      2009 that will eliminate the reliance on the diesel generated power and
      provide additional costs savings of approximately $24/ounce.
    - We have recently recruited and continue to recruit for several key
      management positions. Most notably is Chris Campbell-Hicks as Process
      and Heap Leach Manager. Chris has worked with Rene for the past 3 years
      and was recently recruited from Highland Gold where he was instrumental
      in increasing processing performance by over 35% in 6 months at
      Highland's MNV operation.
    - The Santa Eduviges decline has intercepted the main mineralized
      structure and we have begun to deliver the development ore to the Mill
      for processing.
    - The Company has implemented a bonus incentive plan for exemplary
      performance for all operating departments at Ocampo. Early indicators
      are that this incentive program is resulting in increased productivity
      throughout the Ocampo operation, but in particular development, as
      indicated by the KPI charts in this press release. As the impact of the
      productivity bonuses begins to be internalized by the workforce we
      anticipate that there will be additional productivity gains achieved.
    - By month end in January stockpiles stood at 11,612 tonnes ahead of the
      mill and 136,968 tonnes ahead of the crushing plant. These will
      continue to serve the operation to minimize the possibility of
      production interruption due to possible feed variability from the
      underground or the open pit. The focus going forward will remain on
      maintaining stockpiles ahead of both processing facilities to ensure
      ongoing production during any period of downtime.

    Russell Tremayne, COO of Gammon Gold stated, "There are many initiatives
currently being implemented at Ocampo to increase productivity and I am
encouraged by the continued gains we are achieving in all areas of the mine.
The re-introduction of longhole mining and the appointment of 2 longhole
specialists will help continue to minimize dilution and improve productivity.
As well, we have continued our focus on introducing mining methods that will
enhance productivity, the deployment of equipment, as well as overall improved
mine planning and development and equipment availability. During the rest of
Q1 we will continue to work through outstanding maintenance and equipment
productivity issues particularly relating to open pit equipment. To supplement
the existing fleet while we undertake scheduled maintenance, we have leased
loaders to replace the excavators while they are rebuilt. We expect to have
one excavator commissioned in mid-February and the second in March at which
time the Open Pit will return to full production. We have accelerated
development in the underground to provide greater flexibility and enhanced
mine planning. Increased production in the underground has been achieved as a
result with continued benefits expected to be achieved through the balance of
the year. January's dilution underground remained consistent with December's
levels, and is an improvement of over 45% from November. In addition new
equipment for the underground operation is currently arriving with one jumbo
drill and front end loader already on site and additional loaders and trucks
scheduled to arrive in late Q1 or early Q2. We continue to focus on decreasing
dilution by providing additional training to our operators that will be
supported by the recent implementation of a Quality Assurance / Quality
Control program and an operating team that has the skills to execute the
strategy."
    Mr. Tremayne went on to say, "As the following KPI charts demonstrate,
there is a positive trend of ongoing productivity enhancements that are very
encouraging and demonstrate that the turnaround at Ocampo is advancing as
planned. Overall we are seeing productivity improvements in all areas of the
mine and we will continue to demonstrate ongoing improvements throughout the
first quarter. Particularly encouraging is the progress we are making in the
development of the underground mine."

                                 Underground
                                 -----------

    Meters Developed - Underground

    http://files.newswire.ca/258/Meters.doc


    Dilution - Underground

    http://files.newswire.ca/258/Dilution.doc


    Average Tonnes per Day - Underground

    http://files.newswire.ca/258/Average_tonnes.doc


    Average Au(e) Grade - Underground

    http://files.newswire.ca/258/Au(e).doc


    Cost per Tonne - Underground

    http://files.newswire.ca/258/Cost.doc



                             Open Pit Operations
                             -------------------

    Average Tonnes Per Day - Open Pit

    http://files.newswire.ca/258/Average.doc


    Tonnes per Month to the Mill - Open Pit

    http://files.newswire.ca/258/Tonnes_per_month.doc


    Average Tonnes per Day - Heap Leach

    http://files.newswire.ca/258/Heap_Leach.doc


    Strip Ratio

    http://files.newswire.ca/258/Strip_Ratio.doc


    Stock Pile - Heap Leach

    http://files.newswire.ca/258/Stock_Pile.doc


    Cost per Tonne - Open Pit

    http://files.newswire.ca/258/Open_Pit.doc



                                     Mill
                                     ----

    Tonnes per Day - Mill

    http://files.newswire.ca/258/Mill.doc


    Mill Availability

    http://files.newswire.ca/258/Mill_Availability.doc


    Average Grade Au(e) Open Pit & Underground

    http://files.newswire.ca/258/mill.graph.doc


    Cost per Tonne - Mill

    http://files.newswire.ca/258/Tonne_-_Mill.doc



                                 Heap Leach
                                 ----------

    Metal Recovery Life of Mine

    http://files.newswire.ca/258/Life_of_Mine.doc


    Head Grade - Heap Leach

    http://files.newswire.ca/258/Head_Grade.doc


    Cost per Tonne - Heap Leach

    http://files.newswire.ca/258/Cost_Heap_Leach.doc


    Mr. Marion stated, "In January we significantly strengthened our senior
management by appointing Scott Perry as Chief Financial Officer and Russell
Tremayne as Chief Operating Officer. I have worked with both Scott and Russell
while seconded to Highland Gold Ltd. from Barrick Gold where as a senior team
we successfully addressed ongoing operational issues and by doing so we were
also able to significantly increase shareholder value.  So I am confident that
we can leverage our collective mining experience to accelerate the execution
of our growth strategy and I know that they will be a tremendous asset to the
Company."

    Ocampo Underground
    ------------------

    Productivity in January improved over Q4 in the underground primarily as a
result of increased development, the re-introduction of longhole mining
methods and decreased dilution. Grades from the underground remained stable at
6.50 g/t gold equivalent over Q4 and grades are expected to improve as the
underground operation ramps up.  Additionally, ongoing development in the
underground provides more flexibility and better sequencing in the
underground. The Company will continue to implement strategies that will
continue to reduce costs and improve productivity. We will also continue to
accelerate development so as to improve access to higher grade ore and
maximize flexibility. The recently implemented bonus schedule has been
favourably received and is expected to continue to positively impact
productivity going forward. The Company has commissioned a new jumbo and
loader and expects to take delivery of additional underground equipment in
March or early Q2 that will have an immediate impact on productivity and
accelerate the development of the underground

    Ocampo Open Pit
    ---------------

    Productivity in the Open Pit declined in January due to the ongoing
scheduled maintenance programs required for the loading fleet (loaders and
shovels). The Company has leased two additional loaders to supplement the
existing fleet during this downtime and productivity is expected to return to
feasibility study levels in the coming months. In January we delivered less
high grade ore to the Mill as a result of the increased tonnage from the
underground resulting in the higher grade ore from the Open Pit being directed
to the Heap Leach facilities.

    Ocampo Mill Circuit
    -------------------

    During January tonnes per day remained near capacity at 1,369 tonnes per
day despite the 4 day downtime experienced at the Mill. The improvement in
underground productivity resulted in more high grade ore from the underground
being delivered to the Mill than in previous months which impacted  head
grades significantly where grades improved to 6.30 g/t gold equivalent or 21%
over Q4. Mill availability decreased to 79% in January due to the downtime
caused by the unavailability of the diesel generators that power the Mill
circuit. Availabilities remain on target to reach over 90% in the first half
of 2008. Metallurgical recoveries in January were an average of 94% gold and
89% silver. Costs per tonne decreased over previous months and further
production enhancements are available that should allow for additional cost
reductions going forward as more traction is realized from our cost saving
initiatives.

    Ocampo Heap Leach Circuit
    -------------------------

    Recoveries at the Heap leach pad were impacted by less ore being delivered
to the pad in November and December as well as ore that has been placed on the
pad that is currently not under leach due to the expansion of the Heap Leach
pad. During January 233,888 tonnes were placed on the Heap Leach which is an
increase of 5% increase over December, however 120,000 tonnes of ore is not
currently under leach due to the expansion of the Heap Leach pads as described
above. In January, we continued to haul 150,000 tonnes of old tailings that
average 1.68 g/t gold equivalent to the Heap Leach Pad. Bottle roll tests are
being done on this material and recoveries are encouraging. We believe that
taking these high grade tails will significantly reduce costs for the Heap
Leach over the next few months. Costs decreased in January as a result of the
cost management initiatives that have been implemented as well as enhanced
operational efficiencies.
    Mr. Marion concluded, "As we move further into Q1 I remain confident that
we will achieved our goals and I continue to reaffirm our forecast scorecard
for the end of Q1 for Ocampo."

    - We have targeted Q1 2008 production at the lower end of between 56,000
      to 62,000 gold equivalent ounces (inclusive of El Cubo)
    - We have targeted total cash costs for Q1 2008 to be consistent with
      those estimated for Q4, 2007
    - Expansion and Sustaining Capital expenditures are anticipated to be
      between $16 and $20 million
    - We are committed to providing an update on 2007 year end reserves and
      resources at the end Q1 2008
    - We also expect to release our 2008 Operating and total cash cost
      guidance together with a 3-year outlook at the end of Q1 2008
    - We have already experienced positive operating cash flow in November
      and January and we expect to achieve sustained positive operating cash
      flow in Q1 2008. We anticipate being Net Free Cash flow positive in the
      latter part of 2008 once expansion capital for the heap leach facility,
      processing facility and the continued development of the Santa Eduviges
      decline is concluded
    - We do not expect any further accounting provisions
    - Performance management systems that are aligned with the Mission and
      Strategy to ensure delivery of results both operationally as well as
      corporately have been introduced and will become fully implemented in
      2008
    - We expect to release during March results from our drilling program at
      Guadalupe y Calvo, our highly prospective exploration property located
      in the southwest portion of Chihuahua State in Mexico.
    

    About Gammon Gold

    Gammon Gold Inc. is a Nova Scotia based mid-tier gold and silver producer
with properties in Mexico. The Company's flagship Ocampo Project in Chihuahua
State achieved commercial production in January 2007. Gammon Gold also
operates its El Cubo operation in Guanajuato State and has the promising
development Guadalupe y Calvo property in Chihuahua State. The Company remains
100% unhedged.

    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 (File No. 001-31739), which may be secured
from Gammon Gold, or from the SEC's website at http://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 reclamations
expenses. 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: Rene Marion, Chief Executive Officer, Gammon
Gold Inc., (902) 468-0614; Anne Day, Director of Investor Relations, Gammon
Gold Inc., (902) 468-0614

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GAMMON GOLD INC.

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