Gammon Gold Reports Best Ever Quarter for Gold & Silver Production plus Best Ever Cash Cost Performance. Gammon also Provides Guidance for 2009 which Targets up to 33% and 55% Improvement in Gold and Silver Production Respectively Over 2008



    HALIFAX, Jan. 12 /CNW/ - Gammon Gold Inc. ("Gammon") (TSX:GAM and
NYSE:  GRS): Subject to the year-end independent external audit and annual
accounts finalization, Gammon is pleased to report a record operating quarter
as highlighted below:

    
    Unaudited Consolidated Highlights
    ---------------------------------

    Q4 2008

       - Gold production of 43,768 ounces
       - Silver production of 1,649,893 ounces
       - Gold equivalent production of 64,889 ounces (at a 79:1 gold-to-
         silver ratio)
         (73,458 adjusted gold equivalent ounces at the 56:1 gold-to-silver
         ratio realized in Q4 2007)
       - Cash costs of $439 per gold equivalent ounce (at a 79:1 gold-to-
         silver ratio)
         ($388 per adjusted gold equivalent ounce at the 56:1 gold-to-silver
         ratio realized in Q4 2007)

     2008 Full Year

       - Gold production of 154,428 ounces
       - Silver production of 5,778,874 ounces
       - Gold equivalent production of 251,510 (at a 59:1 gold-to-silver
         ratio)
         (266,006 adjusted gold equivalent ounces at the 52:1 gold-to-silver
         ratio realized in 2007)
       - Cash costs of $539 per gold equivalent ounce (at a 59:1 gold-to-
         silver ratio)
         ($510 per adjusted gold equivalent ounce at the 52:1 gold-to-silver
         ratio realized in 2007)

    Note: The Q4 2008 and full year 2008 cash cost per gold equivalent ounce
results are anticipated to decrease further from the current reported results
due to the pending reversal of a portion of the adverse mark-to-market
valuation adjustment previously recognized by the Company in Q3, 2008,
reflecting improved precious metal and foreign exchange market conditions
relative to Q3, 2008. Revisions to cash costs will be provided in the
Company's Management's Discussion and Analysis for the year ended December 31,
2008.

    2009 Guidance

       - Gold production from 185,000 to 205,000 ounces
       - Silver production from 8,170,000 to 8,945,000 ounces
       - Gold equivalent production from 290,000 to 320,000 ounces (at a 78:1
         gold-to-silver ratio)
         (from 333,000 to 367,000 adjusted gold equivalent ounces at a 55:1
         gold-to-silver ratio assumed in the Company's March 31, 2008 three-
         year guidance)
       - Cash costs from $410 to $445 per gold equivalent ounce (at a 78:1
         gold-to-silver ratio)
         (from $360 to $390 per adjusted gold equivalent ounce at the 55:1
         gold-to-silver ratio assumed in the Company's March 31, 2008 three-
         year guidance)


    Unaudited Consolidated Q4 2008 Production and Cash Costs
    --------------------------------------------------------

       - Gold production of 43,768 ounces (59% improvement over Q4 2007)
       - Silver production of 1,649,893 ounces (45% improvement over Q4 2007)
       - Gold equivalent production of 64,889 ounces at a 79:1 gold-to-silver
         ratio (35% improvement over Q4 2007)
       - Adjusted gold equivalent production of 73,458 ounces (53%
         improvement over 2007 using the same gold-to-silver ratio of 56:1
         realized in Q4 2007)

       - Cash costs of $439 per gold equivalent ounce at the realized 79:1
         gold-to-silver ratio (35% improvement over Q4 2007)
       - Cash costs of $388 per adjusted gold equivalent ounce at the 56:1
         gold-to-silver ratio realized in Q4 2007  (43% improvement over Q4
         2007)



    http://files.newswire.ca/258/GRAPH_1.doc



    Total cash costs for Q4 2008 of $439 per gold equivalent ounce represents
the Company's best ever quarterly cash cost performance and was achieved
despite the unfavorable gold-to-silver ratio of 79:1 during the quarter.
    The success achieved to date in improving productivity and operational
efficiencies is also reflected in the strength of the Company's positive
Operating Cash Flow performance which has increased by $6.3 million (233%)
over the same period in 2007. This positive momentum is expected to carry
forward into 2009 as we continue to benefit from the ongoing processing
expansion at Ocampo and our targeted operational effectiveness initiatives.


    http://files.newswire.ca/258/GRAPH_2.doc

    http://files.newswire.ca/258/GRAPH_3.doc


    Unaudited Consolidated 2008 Full Year Performance
    -------------------------------------------------

    2008 was an impressive year for the Ocampo Mine where the productivity
challenges experienced during the 2007 commissioning have been largely
addressed. Concurrent to the turnaround plan, the Company took advantage of
2008's improved gold and silver prices to launch an aggressive expansionary
program to further leverage the productivity gains realized to date.
    Key to the Company's further expansion program is the multiple-phased mill
processing facility expansion at Ocampo that will more than double the 2007
realized mill processing rate. This additional capacity has only just begun to
positively contribute to the improvements achieved in 2008 and will favorably
augment Gammon's production profile in 2009 and beyond.
    The success of the turnaround strategy is evident in the full-year results
achieved in 2008 as compared to 2007, as provided below:

       - Gold production of 154,428 ounces (27% improvement over 2007)
       - Silver production of 5,778,874 ounces (15% improvement over 2007)
       - Gold equivalent production of 251,510 ounces at the realized 59:1
         gold-to-silver ratio (15% improvement over 2007)
       - Adjusted gold equivalent production of 266,006 ounces at the gold-
         to-silver ratio of 52:1 realized in 2007 (22% improvement over 2007)

       - Cash costs of $539 per gold equivalent ounce at the realized 59:1
         gold-to-silver ratio (20% improvement over 2007)
       - Cash costs of $510 per adjusted gold equivalent ounce at the 52:1
         gold-to-silver ratio realized in 2007 (24% improvement over 2007)


    http://files.newswire.ca/258/GRAPH_4.doc


    The chart below depicts the 2008 gold equivalent production and cash costs
performance (at the realized gold-to-silver ratio of 59:1) as compared to the
Company's Three-Year Guidance provided on March 31, 2008 (incorporating an
assumed gold-to-silver equivalency ratio of 55:1). This comparison
demonstrates that the Company's production and cash cost results were in-line
with the full year guidance ranges if not for the adverse change in the gold
equivalent ratio in the latter part of the year. As previously mentioned, it
should be noted that the total cash cost per ounce charts below do not reflect
the pending reduction in total cash costs from the reversal of a portion of
the adverse mark-to-market valuation adjustment previously recognized by the
Company in Q3, 2008.


    http://files.newswire.ca/258/GRAPH_5.doc

    http://files.newswire.ca/258/GRAPH_6.doc


    Relative to 2007, Operating Cash Flow improved by $89 million (262%) to
$55 million with the majority of this improvement being attributable to the
positive operational performance results realized from the combined turnaround
and expansionary programs.


    http://files.newswire.ca/258/GRAPH_7.doc

    http://files.newswire.ca/258/GRAPH_8.doc


    "Despite only commissioning the Phase I mill expansion at the Ocampo Mine
in mid-November, we are particularly encouraged by the positive operational
performance in the fourth quarter, which has resulted in the Company reporting
some of its best ever performance results. Cost reductions are being achieved
at our Ocampo mine as we realize the benefits of many initiatives, principally
the Phase I mill expansion, optimized cyanide consumption levels and a
reduction in the open pit stripping ratio. We anticipate seeing further
improvements in operating costs at Ocampo once we complete the Phase II mill
expansion and fully connect to the electrical grid power network to eliminate
the need for costly diesel fueled power generation" stated René Marion, Chief
Executive Officer of Gammon Gold. "2008 was the first full year where the new
management team was in place, collectively meeting numerous milestones
throughout the year. Although Ocampo delivered excellent results in 2008, the
full impact of the benefits has not yet been fully reflected, thereby
positioning 2009 as a great year for further, realizable growth. While many
companies have been forced to delay expansionary projects due to liquidity
constraints, the vast majority of the Gammon's expansionary capital program
has been completed and financed internally which positions the Company well in
terms of its financial footing."

    Operations
    ----------

    Unaudited Q4 2008 Ocampo Production & Cash Costs
    ------------------------------------------------
       - Gold production of 33,877 ounces (73% improvement over Q4 2007)
       - Silver production of 1,176,427 ounces (58% improvement over Q4 2007)
       - Gold equivalent production of 48,922 ounces at the realized gold-to-
         silver ratio of 78:1 (48% improvement over Q4 2007)
       - Adjusted gold equivalent production of 55,051 ounces at the 56:1
         gold-to-silver ratio realized in Q4 2007 (66% improvement over Q4
         2007)

       - Cash costs of $395 per gold equivalent ounce at the realized 78:1
         gold-to-silver ratio (37% improvement over Q4 2007)
       - Cash costs of $351 per adjusted gold equivalent ounce at the 56:1
         gold-to-silver ratio realized in Q4 2007 (56% improvement over Q4
         2007)

    Unaudited Q4 2008 El Cubo Production & Cash Costs
    -------------------------------------------------

       - Gold production of 9,891 ounces (23% improvement over Q4 2007)
       - Silver production of 473,466 ounces (20% improvement over Q4 2007)
       - Gold equivalent production of 15,967 ounces at the realized 78:1
         gold-to-silver ratio (6% improvement over Q4 2007)
       - Adjusted gold equivalent production of 18,412 ounces at the 56:1
         gold-to-silver ratio realized in Q4 2007 (22% improvement over Q4
         2007)

       - Cash costs of $572 per gold equivalent ounce at the realized 78:1
         gold-to-silver ratio (29% improvement over Q4 2007)
       - Cash costs of $495 per adjusted gold equivalent ounce at the 56:1
         gold-to-silver ratio realized in Q4 2007 (38% improvement over Q4
         2007)

    -------------------------------------------------------------------------
                    OCAMPO               EL CUBO             CONSOLIDATED
              Q4 2008    Q4 2007    Q4 2008    Q4 2007    Q4 2008    Q4 2007
    -------------------------------------------------------------------------
    Gold
     ounces
     produced  33,877     19,553      9,891      8,018     43,768     27,571
    Silver
     ounces
     pro-
     duced  1,176,427    746,060    473,466    394,737  1,649,893  1,140,797

    Gold
     equi-
     valent
     ounces
     produced  48,922     33,070     15,967     15,114     64,889     48,184
    Gold
     ounces
     sold      31,671     20,647      9,333      8,018     41,004     28,665
    Silver
     ounces
     sold   1,083,571    788,992    450,747    394,737  1,534,318  1,183,729
    Gold
     equi-
     valent
     ounces
     sold      45,546     34,855     15,116     15,114     60,662     49,969
    Total cash
     costs per
     gold
     equivalent
     ounce       $395       $624       $572       $803       $439       $676
    Total cash
     costs per
     gold ounce  $216       $505       $466       $805       $273       $589
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
                     OCAMPO                EL CUBO             CONSOLIDATED
                 2008       2007       2008       2007       2008       2007
    ------------------------------------------------------------------------
    Gold
     ounces
     produced 115,656     87,647     38,767     33,740    154,428    121,387
    Silver
     ounces
     pro-
     duced  3,995,725  3,453,388  1,783,145  1,582,316  5,778,874  5,035,704
    Gold
     equi-
     valent
     ounces
     produced 182,400    154,423     69,142     64,311    251,510    218,734
    Gold
     ounces
     sold     112,682     87,357     37,964     33,740    150,646    121,097
    Silver
     ounces
     sold   3,867,178  3,445,667  1,739,361  1,582,316  5,606,539  5,027,983
    Gold
     equi-
     valent
     ounces
     sold     177,404    153,961     67,624     64,311    245,028    218,272
    Total
     cash
     costs
     per gold
     equivalent
     ounce       $501       $702       $639       $593       $539       $670
    Total cash
     costs per
     gold ounce  $285       $703       $465       $511       $331       $614
    ------------------------------------------------------------------------


    "During Q4, 2008, the Ocampo team has achieved record production levels
and cash cost performance along with many other key performance indicators.
With Phase I of the mill expansion now fully commissioned, processing rates
remain in line with the new nameplate capacity of 2,400 to 2,600 tonnes per
operating day. Phase II of the mill expansion is underway and is expected to
more than double average 2007 mill throughput rate by mid-2009. The capital
requirements related to the mill expansion program were minimal yet the impact
of the increased capacity is substantial with a very short term payback."
stated Russell Tremayne, Chief Operating Officer of Gammon Gold. "We have been
very proactive in adapting our operations to the current market environment
and the flexibility of our mine plan has allowed us to quickly and decisively
respond to market influences."

    2009 Outlook
    ------------

    Based on the increase in processing capacity at Ocampo and overall
productivity improvements throughout our operations, the Company has provided
updated guidance for 2009.

    2009 Consolidated Guidance
    --------------------------

       - Gold production of 185,000 to 205,000 Ounces (33% improvement over
         2008, 69% over 2007)
       - Silver production of 8,170,000 to 8,945,000 Ounces (55% improvement
         over 2008, 78% over 2007)
       - Gold equivalent production of 290,000 to 320,000 ounces at an
         assumed gold-to-silver equivalency ratio of 78:1 (45% of this
         production anticipated in H1, 2009, and 55% in H2, 2009)
       - Adjusted gold equivalent production of 333,000 to 367,000 ounces at
         a 55:1 gold-to-silver ratio as assumed in the Company's March 31,
         2008 three-year guidance
       - Cash costs per gold equivalent ounce of $410 to $445 at the assumed
         78:1 gold-to-silver equivalency ratio
       - Cash costs per adjusted gold equivalent ounce of $360 to $390 at a
         55:1 gold-to-silver ratio as assumed in the Company's March 31, 2008
         three-year guidance


    http://files.newswire.ca/258/GRAPH_9.doc

    http://files.newswire.ca/258/GRAPH_10.doc


    In responding to the current period of economic and commodity price
volatility, management has completed a detailed fiscal review that focused on
eliminating and/or deferring all non-business-critical and discretionary
investment expenditures. As part of this review, management felt it was
prudent to temporarily defer work at the Guadalupe y Calvo advanced
exploration development project to maximize company-wide cash flow generation.
As part of the Scoping Study for this project that was scheduled for
completion in Q1 2009, the Company completed 126 holes for 38,339 metres in
2008, bringing the project total drilling to 183 holes for 52,075 metres. 
Further drilling and engineering work required to complete the Scoping Study
has been temporarily postponed.  The Company will continue to re-evaluate this
decision on a periodic basis.
    "We anticipate further improved performance results in 2009, underpinned
by the strategies developed and largely executed on in 2008," stated Mr.
Marion. "What is particularly significant is that assuming a 55:1
gold-to-silver ratio as per the three-year guidance released on March 31,
2008, our 2009 guidance for gold equivalent production is anticipated to be
between 333,000 and 367,000 gold equivalent ounces at a cash cost of between
$360 and $390 per gold equivalent ounce. This is more in line with the March
31, 2008 guidance provided for 2010 and is up to a 68% production improvement
over 2007 with a cash cost reduction of up to 45% over the same 2-year period.
Our 2009 business plan is based on conservative metal price assumptions and we
continue to believe that we are well positioned to fully fund our business
model internally."

    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 reclamation
expenses including, anticipated 2009 results, any decrease in cash costs for
Q4 2008 and full year 2008 resulting from a reversal of the mark-to-market
valuation adjustment made in Q3 2008, our ability to fully fund our business
model internally, 2009 gold and silver production and the cash and operating
costs associated thereafter, the ability to achieve productivity and
operational efficiencies, the ability to complete the Phase II mill expansion,
the connection to the grid power, 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: René 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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