Gammon Gold Reports First Quarter Financial Results - Sixth Consecutive Quarter of Positive Cash Flow from Operations, and Announces New Discoveries with Highlights on Exploration Drill Results at Ocampo



    HALIFAX, May 13 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and
NYSE:  GRS) announces the first quarter unaudited financial results for the
three months ended March 31, 2009. All figures reported are in U.S. dollars
unless otherwise indicated.

    
       - Ocampo mill processing rate averages over 3,100 tonnes per day for
         the last 3 weeks of April
       - High grades over significant widths, including 15 metres at 6.14 g/t
         gold eq. in the Picacho open pit
       - Drilling in the North East underground returning very high grades,
         including 4.5 metres at 18.91 g/t gold eq.

    Summarized Financial and Operational Results:
    (in thousands, except ounces, per share amounts, average realized prices
     and total cash costs)
    -------------------------------------------------------------------------
                                                            Quarter Ended
                                                        March 31,   March 31,
                                                            2009        2008
    -------------------------------------------------------------------------
    Gold ounces sold                                      34,599      31,455
    Silver ounces sold                                 1,274,496   1,248,594
    Gold equivalent ounces sold(1)                        52,207      55,099
    Gold equivalency rate                                     72          53
    Gold ounces produced                                  36,829      33,099
    Silver ounces produced                             1,351,300   1,310,971
    Gold equivalent ounces produced(1)                    55,480      57,946
    -------------------------------------------------------------------------
    Revenue from mining operations                       $47,349     $51,368
    Production costs, excluding amortization and
     depletion                                           $21,898     $26,697
    Net earnings                                          $2,625      $8,489
    Net earnings per share                                 $0.02       $0.07
    Net earnings per share, diluted                        $0.02       $0.07
    Cash flows from operations                           $19,031     $14,555
    Net free cash flow(2)                                 $3,917      $1,592
    Total cash at bank                                   $24,686      $7,373
    -------------------------------------------------------------------------
    Total cash costs per gold equivalent ounce(2)           $430        $491
    Total cash costs per gold ounce(2)                      $184        $158
    Average realized gold price per ounce                   $903        $928
    Average realized silver price per ounce               $12.63      $17.69
    -------------------------------------------------------------------------
    Gold equivalent ounces sold (55:1)(3)                 57,772      54,157
    Gold equivalent ounces produced (55:1)(3)             61,398      56,935
    Total cash costs per gold equivalent ounce
     (55:1)(3)                                              $389        $500
    -------------------------------------------------------------------------
    (1)  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.
    (2)  See the Non-GAAP Measures section on page 18 of the associated
         Management's Discussion and Analysis.
    (3)  Gold equivalent ounces include silver ounces produced and sold
         converted to a gold equivalent, based on the Company's long-term
         gold equivalency ratio of 55:1.

    Financial and Operational Highlights

    - During the first quarter of 2009 the Company produced 36,829 ounces of
      gold and 1,351,300 ounces of silver, an increase of 11% and 3% in gold
      and silver production respectively over the same period in 2008, or
      55,480 gold equivalent ounces, a 4% decrease over the same period in
      2008. The decrease is solely the result of the unfavourable gold-to-
      silver ratio of 72:1 experienced in the quarter as compared to 53:1 for
      the same period in 2008. Using the Company's long-term gold equivalency
      rate of 55:1, gold equivalent production in the quarter would have been
      61,398 gold equivalent ounces as compared to 56,935 gold equivalent
      ounces for the same period in 2008, a 8% improvement

    - Cash costs for the first quarter decreased by 12% to $430 per gold
      equivalent ounce, as compared to $491 per gold equivalent ounce for the
      same period in 2008. Using the Company's long-term gold equivalency
      rate of 55:1, cash costs per gold equivalent ounce in the quarter were
      $389, as compared to $500 per gold equivalent ounce in the first
      quarter of 2008, a 22% improvement over Q1 2008.

         - Despite the unfavorable gold-to-silver ratio experienced in the
           latter part of 2008 and into the first quarter of 2009, Ocampo has
           reported cash costs of below $400 per gold equivalent ounce for
           the last two consecutive quarters, which is significantly below
           the current industry average

         - Using the Company's long-term gold equivalence rate of 55:1, cash
           costs at Ocampo were $359 per gold equivalent ounce and $470 per
           gold equivalent ounce at El Cubo an improvement of 23% and 16%
           respectively

    - Revenue for the first quarter decreased to $47.3 million as compared to
      $51.4 million for the same period in 2008. Although gold and silver
      production increased by 11% and 3% respectively over the same period in
      2008, revenues in the quarter were negatively impacted by lower metal
      prices achieved in the quarter, particularly for silver, which
      decreased by 29% over the same period in 2008

    - Net earnings for the first quarter were $2.6 million, or $0.02 per
      share, as compared to $8.5 million, or $0.07 per share, for the same
      period in 2008. Net income for the quarter was negatively impacted
      largely by non-cash performance-based compensation charges, one time
      transactional costs associated with the technical and legal due
      diligence associated with acquisitions and reduced foreign exchange
      gains as compared to the same period in 2008

    - Operating cash flow for the first quarter increased by 31% to $19
      million as compared to $14.5 million for the same period in 2008

    - The Company ended the quarter with cash on hand of $24.7 million, a
      $21.4 million increase since December 31, 2008. The improvement in the
      Company's cash flow performance together with the Company's existing
      working capital position, should be more than sufficient to fund the
      Company's anticipated working capital requirements, growth plans and
      debt repayments in 2009.

    - As a result of the Company's improved cash flow profile, the net debt
      position at the end of the first quarter decreased by $15.7 million to
      $19.5 million as compared to $35.2 at December 31, 2008

    - Net free cash flow for the quarter was $3.9 million, a $2.3 million, or
      146%, increase as compared to net free cash flow of $1.6 million for
      the same period in 2008. Operating cash flow funded over $15 million in
      exploration and sustaining and expansionary capital costs.

    - Effective March 23, 2009 the Company was included in the S&P/TSX Global
      Gold Index

    - In early March 2009, the Phase II Ocampo mill expansion was fully
      commissioned, which increased processing capacity to between 2,800-
      3,000 tonnes per day. The ramp-up period was very successful and since
      April 8, 2009, the mill is consistently achieving over 3,100 tonnes per
      day, above the high end of the targeted capacity range. The Phase III
      expansion of the Ocampo mill remains on target for commissioning early
      in the third quarter. Engineering for the expansion has been completed
      and the gravity circuit equipment associated with the final mill
      expansion has recently been commissioned. Once complete, the Phase III
      expansion will almost triple mill throughput capacity over the average
      daily tonnages achieved in 2007

    - As of May 1, the Company completed 34,000 metres of drilling at Ocampo
      as part of the 2009 drilling program
    

    "As targeted, quarterly production was in line with the Q3, 2008 period
despite the scheduled downtime of milling operations that was required to
accelerate the commissioning of the Phase II mill expansion at Ocampo. I am
particularly pleased to see that since April 8, the mill has been consistently
processing over 3,100 tonnes per day, which is above design specification
levels for this phase of the mill expansion program" stated René Marion, Chief
Executive Officer of Gammon Gold. He continued, "Company-wide cash costs
continue to approach the lower quartile of the world industry cost curve with
Ocampo reporting sub-$400 cash costs for the second consecutive quarter even
at the adverse gold to silver ratio of 72:1. This performance continues to
strengthen the Company's financial foundation such that for the sixth
consecutive quarter, Gammon is reporting positive cash flow from operations,
which strongly underpins our ongoing strategy to operate as an internally
funded business model."

    
    Ocampo Exploration Highlights

    - A total of 23,284 metres of exploration drilling was completed at
      Ocampo during the quarter. This included 13,668 metres in the open pits
      and 9,616 metres of underground diamond drilling. In addition, 2,158
      metres of exploration and ore development has been completed during the
      same period. Currently seven drills are on site, including 3
      underground diamond drills, 2 surface diamond drills and 2 reverse
      circulatory surface drills. To date, the Company has completed
      34,000 metres of drilling at Ocampo as part of the 2009 drilling
      program

         - The underground drilling was successful in defining new
           mineralization on the Animas, Balvanera, Briseida, Jesus Maria,
           Rosario, San Fernando, and San Juan veins, mostly down-dip below
           the 1547 Level

         - The drilling in the open pits resulted in better definition of
           mill-feed ores in the Picacho Pit and discovered mill-feed grade
           mineralization in one hole below the planned pit

         - The first exploration drill hole in 2009 on the Altagracia Target
           (east-southeast extension of the Ocampo Picacho open pit) returned
           16.5 metres at 6.52 grams per tonne gold and 59.1 grams per tonne
           silver for 7.60 grams per tonne gold equivalent, including 9.0
           metres at 11.32 grams per tonne gold and 90.7 grams per tonne
           silver for 12.97 grams per tonne gold equivalent, less than 40
           metres below surface

    - The Company has completed surface mapping that defined significant
      extensions to the northeast underground vein system and in many cases
      extended the known structures substantially beyond the known workings.
      The Maria, Jesus Maria, San Amado, Leona, Sta. Ana, San Miguel,
      Rosario, Sta. Juliana, Aventurero, and Belen veins now all have mapped
      extensions well past the existing underground workings


    Highlighted Drill Results

    Open Pit Targets

    -------------------------------------------------------------------------
                                                                       GOLD
                                                                      EQUIVA-
                                                                       LENT
                                                ELEVA-   GOLD  SILVER  (G/T)
     HOLE      VEIN       FROM     TO  LENGTH    TION   (G/T)   (G/T)  (55:1)
    -------------------------------------------------------------------------
    OG-531   PICACHO      82.5    93.0  10.5   1,830.0   2.02    135    4.47
    OG-534   PICACHO      97.5   121.5  24.0   1,778.1   0.91     92    2.58
    OG-541   PICACHO      67.5    82.5  15.0   1,840.2   2.72    188    6.14
    OG-548   PICACHO      76.5    79.5   3.0   1,824.2   1.32     81    2.79
    OG-563   ADULARIA    243.0   246.0   3.0   1,585.0   2.45    245    6.90
    OG-563   PICACHO     247.5   255.0   7.5   1,579.0   1.31     73    2.64
    -------------------------------------------------------------------------
    Note: This exploration information has been reviewed by Qualified Person,
    Mr. Ramon Luna. All sample analyses were performed by Chemex
    Laboratories, based in Vancouver, British Columbia, or in the Ocampo mine
    lab, using standard fire assay procedures. Hole OG-563 results are
    outside the current pit limits. True widths have not been calculated.


    Underground Targets

    -------------------------------------------------------------------------
                                                                       GOLD
                                                                      EQUIVA-
                                                                       LENT
                                                ELEVA-   GOLD  SILVER  (G/T)
     HOLE      VEIN       FROM     TO  LENGTH    TION   (G/T)   (G/T)  (55:1)
    -------------------------------------------------------------------------
    OU-462    ANIMAS      54.0    57.0   3.0   1,525.1   3.88    624   15.22
    OU-462    ANIMAS      62.0    66.0   4.0   1,519.0   2.34     60    3.43
    OU-462    ANIMAS      58.0    60.0   2.0   1,522.9   1.42    103    3.29
    OU-455   BALVANERA    87.0    89.0   2.0   1,497.7   1.09    148    3.78
    OU-470   BALVANERA    48.0    52.0   4.0   1,540.0   3.06    108    5.02
    OU-470A  BALVANERA    43.0    62.0  19.0   1,540.2   2.25    121    4.45
    OU-448  JESUS MARIA  120.0   124.5   4.5   1,595.5   6.38    690   18.91
    OU-470    ROSARIO     49.0    52.0   3.0   1,438.5   3.80    142    6.37
    OU-446  SAN FERNANDO  60.0    61.0   1.0   1,566.6   7.00    555   17.08
    OU-472   SAN JUAN    114.9   117.0   2.1   1,468.5   3.16    223    7.21
    -------------------------------------------------------------------------
    Note: This exploration information has been reviewed by Qualified Person,
    Mr. Ramon Luna. All sample analyses were performed by Chemex
    Laboratories, based in Vancouver, British Columbia, or in the Ocampo mine
    lab, using standard fire assay procedures. Hole OU-448 in Jesus Maria is
    considered an extension of a known vein, but is considered a new
    discovery as this hole lies outside of resources. True widths have not
    been calculated.


    New Targets

    -------------------------------------------------------------------------
                                                                       GOLD
                                                                      EQUIVA-
                                                                       LENT
                                                ELEVA-   GOLD  SILVER  (G/T)
     HOLE      VEIN       FROM     TO  LENGTH    TION   (G/T)   (G/T)  (55:1)
    -------------------------------------------------------------------------
    OG-596  ALTAGRACIA    88.5    95.5   7.0   1,793.5   1.79     35    2.43
    OG-597  ALTAGRACIA    71.0    72.1   1.1   1,829.9   0.20     33    0.80
    OG-597  ALTAGRACIA   142.0   151.0   9.0   1,772.0  11.32     91   12.97
    OG-598  ALTAGRACIA   127.0   132.0   5.0   1,786.0   1.17     28    1.68
    OG-599  ALTAGRACIA   146.5   148.0   1.5   1,755.0   0.56      5    0.65
    OG-599  ALTAGRACIA   151.0   153.0   2.0   1,753.5   0.38      9    0.54
    OG-599  ALTAGRACIA   189.5   205.0  15.5   1,720.0   0.36      5    0.45
    OG-600  ALTAGRACIA   103.0   104.0   1.0   1,788.0   0.23     41    0.97
    -------------------------------------------------------------------------
    Note: This exploration information has been reviewed by Qualified Person,
    Mr. Ramon Luna. All sample analyses were performed by Chemex
    Laboratories, based in Vancouver, British Columbia, or in the Ocampo mine
    lab, using standard fire assay procedures. Altagracia is a new discovery.
    True widths have not been calculated.
    

    "The Company has significantly increased its exploration activities at
Ocampo with very encouraging results thus far on all fronts. Not only do we
see high grades over significant widths both in the Picacho open pit and the
North East underground drilling programs, but we are seeing very high grade
ore in the deepest level on the San Juan Vein as we develop along ore. We have
also discovered the new southeast extension of the Picacho pit, the Jesus
Maria and the Altagracia target, which appears to be the South Eastern
estension of the open pit trend." stated Peter Drobeck, Senior Vice President
of Exploration and Business Development. He continued, "Surface mapping has
essentially doubled the known strike length of veins in the northeast
underground area and we continue to define significant high-grade
mineralization in and below the Picacho Open Pit. With only a small portion of
the over 12,000 hectare Ocampo land package explored, the potential to add to
our Ocampo reserve and resource base is excellent and we intend to provide a
status update late in the third quarter of 2009."

    Conference Call & Webcast:
    --------------------------

    A webcast and conference call will be held on Wednesday, May 13, 2009
starting at 10:00 am Eastern Time (11:00 am Atlantic Time). Senior management
will be on hand to discuss the results.

    Conference Call Access:
    -----------------------

    Toll Free: 1-800-590-1817
    When the Operator answers please ask to be placed into the Gammon Gold
First Quarter 2009 Results Conference Call.

    Live Webcast:
    -------------

    The event will be broadcast live on the internet via webcast. To access
the webcast please follow the link provided below:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2627460

    Archive Call Access:
    --------------------

    If you are unable to attend the conference call, a replay will be
available until midnight, Friday, May 22, 2009 by dialing the appropriate
number below:

    - Local Toronto Participants: 1-416-640-1917  Passcode: 21304051#
    - North America Toll Free: 1-877-289-8525     Passcode: 21304051#
    - Outside North America: 1-416-640-1917       Passcode: 21304051#

    Archive Webcast:
    ----------------

    The webcast will be archived for 365 days by following the link provided
below:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2627460 or via
the Company's website at www.gammongold.com.

    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 on gold and silver prices.

    
                             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: Scott Perry, Chief Financial 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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