Gammon Gold Reports Fourth Quarter and Year End Financial Results - Reports
Record Adjusted Earnings, Operating Cash Flow and Net Free Cash Flow

TSX: GAM / NYSE: GRS / BSX: GL7

HALIFAX, March 30 /CNW/ - Gammon Gold Inc. ("Gammon") (TSX:GAM and NYSE: GRS): announces its financial results for the three and twelve months ended December 31, 2009. All figures reported are in U.S. dollars unless otherwise indicated.

    
    Strong Financial Performance
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    - The Company reported its ninth consecutive quarter of positive
      operating cash flow. During the fourth quarter the Company generated
      $31.6 million in operating cash flow as compared to $10.0 million in
      the same period in 2008, a $21.6 million, or 216%, improvement. This
      improvement was primarily due to the ongoing operational enhancements
      achieved throughout the Company's operations. For the 12 months ended
      December 31, 2009, the Company reported $78.2 million in operating cash
      flow as compared to $55.9 million in 2008, a $22.3 million, or a 40%,
      improvement.

    - The Company reported $9.0 million in positive free cash flow, its best
      quarter to date, for the fourth quarter as compared to negative free
      cash flow of $6.5 million in the same period in 2008, a $15.5 million,
      or a 238% improvement. This is primarily as a result of improved
      operations, the reduction in capital expenditures due to the near
      completion of the Ocampo capital expansion program and the strong metal
      prices realized in the quarter. For the 12 months ended December 31,
      2009, the Company reported $1.4 million in free cash flow as compared
      to negative free cash flow of $10.9 million in 2008, a $12.3 million
      or a 113% improvement.

    - In the fourth quarter, the Company reported earnings before other items
      of $0.16 per share as compared to $0.04 per share in the same period
      in 2008, a $0.12 per share, or a 300% improvement. This result
      represents the Company's best ever performance to date. For the
      12 months ended December 31, 2009, earnings before other items
      increased to $0.22 per share as compared to $0.11 per share in the same
      period in 2008, a $0.11 per share, or a 100% improvement.

    - In the fourth quarter, the Company reported net earnings of $0.10 per
      share. This compared to $0.26 per share in the same period in 2008
      which is primarily related to a $0.14 per share foreign exchange gain
      and a $0.08 per share future tax recovery recorded in the fourth
      quarter of 2008 that were not realized in the fourth quarter of 2009.
      Whereas earnings in the fourth quarter of 2009 were negatively impacted
      by a foreign exchange loss of $0.01 per share and future tax expense of
      $0.03 per share. Prior to these non-cash adjustments earnings per share
      for the fourth quarter were $0.14 per share as compared to earnings of
      $0.05 per share in the fourth quarter of 2008. Net earnings for the 12
      months ended December 31, 2009 were $0.01 per share as compared to
      $0.34 per share in the same period in 2008. The decrease in earnings
      for the year as compared to 2008 is primarily related to a $0.14 per
      share foreign exchange gain and a $0.08 per share future tax recovery
      adjustment that were recorded in 2008 whereas 2009 earnings were
      negatively impacted by a foreign exchange loss of $0.09 per share and
      future tax expense of $0.05 per share. Prior to these non-cash
      adjustments, earnings for the year were $0.16 per share as compared to
      $0.09 per share in 2008.

    - Revenues for the fourth quarter were $68.2 million as compared to
      $48.3 million in the same period in 2008. During the quarter the
      Company realized an average gold and silver price of $1,093 per ounce
      and $17.54 per ounce, respectively, as compared to $796 per ounce and
      $10.05 per ounce. Revenues for the 12-month period ended December 31,
      2009 were $206.8 million as compared to $212.5 million in the same
      period in 2008. During the year the Company realized an average gold
      and silver price of $978 per ounce and $14.91 per ounce, respectively,
      as compared to $864 per ounce and $14.66 per ounce.

    - Operating margins in the fourth quarter improved to 56% or $615 per
      gold equivalent ounce using the Company's long-term gold-to-silver
      ratio of 55:1. Operating margins for the 12-month period ended December
      31, 2009 improved to 49% or $483 per gold equivalent ounce using the
      Company's long-term gold-to-silver ratio of 55:1.


    Strengthened Balance Sheet and Cash Profile
    -------------------------------------------------------------------------

    - The Company ended the year with cash of $129.0 million, a
      $125.7 million increase in cash on hand since December 31, 2008. As a
      result, the Company was in a net cash position of $92.1 million at
      December 31, 2009.

    - On October 22, 2009, the Company completed a public offering of
      12,926,000 common shares at a price of $8.90 per common share. The net
      proceeds of over $108 million are available for funding expanded
      exploration programs at the Ocampo and El Cubo mine sites, the
      advancement of the Guadalupe y Calvo project, debt repayments,
      greenfields exploration and general corporate purposes.

    - As a result of the gross proceeds received through the public offering
      and the Company's improved cash flow profile, the Company's Balance
      Sheet has been significantly strengthened, which provides management
      with considerable flexibility in executing its future business plans.
      Additionally, the current debt-to-equity ratio has improved to 4.7%,
      which is well below industry standards.

    - As of December 31, 2009, the Company's $30 million revolving line of
      credit facility was increased to $50 million following the
      participation of Société Générale as the second syndicate partner. All
      terms and conditions remain as per the originally established facility
      with the approximate undrawn capacity on this facility now representing
      $22.6 million.


    Strong Production and Cash Costs Reduction
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    - During the fourth quarter, cash costs were $423 per gold equivalent
      ounce using the Company's long-term gold-to-silver ratio of 55:1. Using
      the realized gold-to-silver ratio of 62:1 reported in the quarter, cash
      costs were $445 per gold equivalent ounce.

    - During the year, cash costs were $430 per gold equivalent ounce using
      the Company's long-term gold-to-silver ratio of 55:1, a decrease of
      $82 per gold equivalent ounce over 2008, a 16% improvement. Using the
      realized gold-to-silver ratio of 66:1 reported for the year, cash costs
      were $462 per gold equivalent per ounce, a decrease of $66 per gold
      equivalent ounce, a 13% improvement.

    - During the fourth quarter, the Company produced 36,829 gold ounces and
      1,465,098 silver ounces, or 63,467 gold equivalent ounces at the
      Company's long-term gold-to-silver ratio of 55:1. Using the realized
      gold-to-silver ratio of 62:1 reported in the fourth quarter, the
      Company produced 60,407 gold equivalent ounces. The fourth quarter was
      the best gold and silver production quarter in 2009.

    - During the year, the Company produced 136,309 gold ounces and
      5,165,514 silver ounces, or 230,228 gold equivalent ounces at the
      Company's long-term gold-to-silver ratio of 55:1. Using the realized
      gold-to-silver ratio of 66:1 for the year, the Company produced
      214,072 gold equivalent ounces.


    Ocampo Capital Expansion Program Essentially Complete and Operations
    Improving
    -------------------------------------------------------------------------

    - By the end of 2009, the Ocampo capital expansion program was
      substantially complete. Both the Phase III mill expansion and the heap
      leach expansion are expected to be fully commissioned during the second
      quarter of 2010. Supported by the improved operational cash flow
      profile achieved through the Company's improved operations, the Company
      continued to internally fund the Ocampo capital expansion program
      in 2009.

    - The planned reinvestment and reorganization program in the underground
      operation has facilitated a significant increase in production volume.
      Production from the underground averaged 1,434 tonnes per day in the
      month of December, exceeding the Company's year-end target of
      1,200 tonnes per day by 20%.

    - During the fourth quarter the mill facility was impacted by unforeseen
      issues including required maintenance of the third mill and the
      replacement of five under-sized cyclones. The issues with the third
      mill were resolved by mid-December. Two cyclones of the five cyclones
      were installed by the end of December 2009 and by the end of the first
      quarter of 2010, the three remaining cyclones were installed at the
      Ocampo mill facility. This will allow the Company to complete the
      commissioning of the Phase III mill expansion and begin to ramp up to
      target production levels of 3,300 to 3,400 tonnes per day during Q2
      2010. Also during the fourth quarter a heavy and unseasonal rainfall
      impacted production at the Ocampo underground mine over a period of
      5 days and at the Ocampo open pit mines for a period of 10 days. The
      significant rainfall also impacted the mine's heap leach operations
      through the dilution of the pregnant pond and the overall leaching
      solutions. This issue was remediated over a 4-week period, after which
      the heap leach processing facility was producing at targeted output
      levels.

    - The expansion and re-optimization of the heap leach pad through the
      conversion to a valley leach design will provide an additional
      10 million tonnes of stacking capacity. This initiative has
      successfully deferred the construction of the Phase III expansion for
      additional heap leach capacity until 2012. The current heap leach
      conversion to valley fill is progressing on schedule and is expected
      to be fully commissioned by the end of the second quarter.

    - The operations continue to benefit from the cost savings realized
      through the access to the more reliable and cost effective 20 megawatts
      of grid power at the Ocampo mine. Previously, the Company had relied on
      diesel generated power for its energy requirements. This diesel
      generated power now serves as a back-up power supply should there be
      any interruptions in grid power service.


    El Cubo Delivers Productivity Improvements
    -------------------------------------------------------------------------

    - During the year, the Company was able to negotiate the adoption of a
      7-day continuous work schedule at the El Cubo mine that, once
      implemented in mid-2009, began to deliver continually improved
      productivity. In the fourth quarter, the El Cubo mine reported record
      productivity levels, with December reporting the highest levels
      reported in the mine's history. The mine's performance was further
      supported by the adoption of a new production incentive bonus program
      that was introduced during the fourth quarter. By mid-year, the Company
      anticipates that the El Cubo mine will be operating at its targeted
      level of 1,850 tonnes per day.

    - On October 1, 2009 the Company announced that it had successfully
      renewed the Las Torres Lease Agreement for an additional three-year
      term. The Las Torres Lease Agreement provides Gammon with the mining
      rights and use of the Las Torres processing and administration
      facilities located at Gammon's El Cubo Mine.

    - In early, 2010 the Company entered into a toll milling agreement with
      a subsidiary of Fresnillo, whereby 50,000 tonnes of ore from its Los
      Chorros mine will be toll-milled at the El Cubo Las Torres mill. The
      processing of Los Chorros ore will allow the Company to utilize unused
      capacity in its 2,000 tonne per day Las Torres mill facility while the
      El Cubo mine ramps up production to targeted levels. The revenue fees
      generated from this agreement will be offset against operating
      expenses.


    Strategic Exploration Program Launched
    -------------------------------------------------------------------------

    - In mid-2008 the Company launched a strategic exploration program, the
      first dedicated and strategic program since 2004. 2009 was the first
      full year where the strong cash flow profile supported an aggressive
      115,500 metre exploration program at Ocampo. The 2009 program was
      focused on in-fill drilling of open pit reserves to increase reserve
      confidence, drilling open pit resources within existing resource open
      pit limits and the identification of new grassroots targets.

    - During the past six months, the Company focused on drilling at the
      Santa Eduviges underground target at Ocampo. Santa Eduviges is located
      under the current open pits and is within close proximity of the main
      crushing circuit. Development of Santa Eduviges was a key focus of the
      exploration program of the Company during the latter part of 2009 and
      early 2010. Currently, the Company is targeting to have Santa Eduviges
      in production in the second half of 2010.

    - The 2009 Ocampo exploration program implemented priority drilling
      programs at Las Molinos, Altagracia, Picacho SE, San Amado, Cerro
      Colorado and Santa Librada. The $13.3 million 2010 exploration program
      will continue to develop these and other new potential targets
      identified throughout the year.

    - In the fourth quarter of 2009, an exploration program was launched at
      the El Cubo mine. Until the launch of this 44,000 metre program, there
      had not been a strategic exploration program conducted on this property
      in more than a decade. Early drill results from the Dolores - Capulin
      and the Fenix target have been very encouraging and follow up drilling
      on these targets continue as part of the $9.6 million 2010 exploration
      program.

    - During 2009, activity at the advanced Guadalupe y Calvo project was
      restricted by a production covenant imposed by the Company's lenders.
      In the fourth quarter of 2009 this restrictive covenant was lifted and
      the Company will focus on completing a Scoping Study during the third
      quarter of 2010.


    Recent Highlights
    -------------------------------------------------------------------------

    - On March 16, 2010, the Ontario Superior Court of Justice certified the
      proposed class action commenced by Ed J. McKenna in 2008 in respect of
      investors who purchased the securities through underwriters in Canada
      under the Company's April 2007 prospectus. Certification is a
      procedural step in the litigation and no determination has been made
      of the merits of the claim. Management continues to be of the opinion
      that the claim is without merit, and that a strong defence exists
      against the claim.

    - On March 23, 2010 the Company announced that it has signed definitive
      purchase option agreements on a group of properties called the Mezquite
      Project ("Mezquite") in Zacatecas State, Mexico. The Mezquite Project,
      in Zacatecas State, covers 460 hectares and is located 45 kilometres
      southeast of Goldcorp's Penasquito property and 22 kilometres northeast
      of Camino Rojo (Goldcorp recently announced the acquisition of Camino
      Rojo). The property lies within a 70 kilometre belt with over
      27.4 million ounces of gold and 1,611 million ounces of silver, or
      approximately 57 million gold equivalent ounces at a gold-to-silver
      ratio of 55:1, in published reserves and resources in all categories.
    

"2009 was a year where we successfully advanced the majority of our internal growth strategy. We have reported record operating and free cash flow levels. Earnings before other items for the quarter and for the year were strong, with the fourth quarter reporting our best ever quarterly result. We are near the completion of the strategic capital expansion program at Ocampo. Operations are running well and we launched an aggressive exploration program after years of inactivity. Although production was impacted by certain unforeseen events during the fourth quarter, we delivered on the majority of our targets for the year. With operations steadily moving to planned levels, we look forward to consistently delivering targeted production levels by mid-2010." stated René Marion, President and Chief Executive Officer.

    
    Fourth Quarter 2009
    -------------------

    (all amounts are in U.S. dollars and are in thousands, except ounces,
    per share amounts, average realized prices and total cash costs)
    -------------------------------------------------------------------------

    Three Months Ended                              Dec. 31/09    Dec. 31/08
    -------------------------------------------------------------------------
    Gold ounces sold                                    38,249        41,004
    Silver ounces sold                               1,509,511     1,534,318
    Gold equivalent ounces sold(1)                      62,462        60,662
    Gold equivalency rate                                   62            79
    Gold ounces produced                                36,829        43,768
    Silver ounces produced                           1,465,098     1,649,893
    Gold equivalent ounces produced(1)                  60,407        64,889
    -------------------------------------------------------------------------
    Revenue from mining operations                     $68,220       $48,262
    Production costs, excluding amortization
     and depletion                                     $27,113       $24,521
    Net earnings                                       $13,452       $31,555
    Net earnings per share                               $0.10         $0.26
    Net earnings per share, diluted                      $0.10         $0.26
    Cash flows from operations                         $31,597        $9,965
    Net free cash flow(2)                               $8,950       ($6,446)
    Total cash                                        $128,977        $3,258
    -------------------------------------------------------------------------
    Total cash costs per gold equivalent ounce(2)         $445          $413
    Total cash costs per gold ounce(2)                     $35          $234
    Average realized gold price per ounce               $1,093          $796
    Average realized silver price per ounce             $17.54        $10.05
    -------------------------------------------------------------------------
    Gold equivalent ounces sold (55:1)(3)               65,694        68,901
    Gold equivalent ounces produced (55:1)(3)           63,467        73,766
    Total cash costs per gold equivalent
     ounce (55:1)(3)                                      $423          $364
    -------------------------------------------------------------------------
    (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 29 of the 2009 Annual
        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.


    Twelve Months Ended December, 31 2009 Highlights
    ------------------------------------------------

    (all amounts are in U.S. dollars and are in thousands, except ounces,
    per share amounts, average realized prices and total cash costs)
    -------------------------------------------------------------------------

    Twelve Months Ended                              Dec 31/09     Dec 31/08
    -------------------------------------------------------------------------
    Gold ounces sold                                   133,003       150,646
    Silver ounces sold                               5,146,584     5,606,539
    Gold equivalent ounces sold(1)                     210,853       245,028
    Gold equivalency rate                                   66            59
    Gold ounces produced                               136,309       154,428
    Silver ounces produced                           5,165,514     5,778,874
    Gold equivalent ounces produced(1)                 214,072       251,510
    -------------------------------------------------------------------------
    Revenue from mining operations                    $206,801      $212,522
    Production costs, excluding amortization
     and depletion                                     $96,504      $127,651
    Net earnings                                        $1,732       $39,994
    Net earnings per share                               $0.01         $0.34
    Net earnings per share, diluted                      $0.01         $0.33
    Cash flows from operations                         $78,218       $55,933
    Net free cash flow(2)                               $1,357      ($10,908)
    Total cash                                        $128,977        $3,258
    -------------------------------------------------------------------------
    Total cash costs per gold equivalent ounce(2)         $462          $528
    Total cash costs per gold ounce(2)                    $156          $313
    Average realized gold price per ounce                 $978          $864
    Average realized silver price per ounce             $14.91        $14.66
    -------------------------------------------------------------------------
    Gold equivalent ounces sold (55:1)(3)              226,577       252,583
    Gold equivalent ounces produced (55:1)(3)          230,228       259,498
    Total cash costs per gold equivalent
     ounce (55:1)(3)                                      $430          $512
    -------------------------------------------------------------------------
    (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 29 of the 2009 Annual
        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.
    

The financial statements along with the Management's Discussion and Analysis will be available on the Company's website at www.gammongold.com or www.sedar.com.

Financial Results Conference Call & Webcast

The Company's audited quarterly and year-end financial results for the three month and twelve month period ended December 31, 2009 will be released before the market opens on Tuesday, March 30, 2010. The financial statements will be available on the Company's website at www.gammongold.com or www.sedar.com.

A webcast and conference call will be held on Tuesday, March 30, 2010 starting at 10:00 am Eastern Time (11:00 am Atlantic Time). Senior management will be on hand to discuss the results. Directly following the Company's fourth quarter and year-end 2009 results conference call and webcast, the Company will host a live webcast of its Analyst Day presentations beginning at 11:00 a.m. Eastern Time. The fourth quarter and year-end 2009 results webcast and the Analyst Day webcast will be available through the following link:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2975940

    
    Fourth Quarter and Year End Financial Results Conference Call Access:
    ---------------------------------------------------------------------

    - Canada & US Toll Free:      1-(888) 231-8191
    - International & Toronto:    1-(647) 427-7450
    

When the Operator answers please ask to be placed into the Gammon Gold Fourth Quarter and Year End 2009 Results Conference Call. Please note the Analyst Day presentations will only be available via the live webcast.

    
    Archive Fourth Quarter and Year End Financial Results Conference
    ----------------------------------------------------------------
    Call Access:
    ------------
    

If you are unable to attend the conference call, a replay will be available until midnight, April 6, 2010 by dialing the appropriate number below:

    
    - Local Toronto Participants: 1-416-849-0833  Passcode: 58806907#
    - North America Toll Free:    1-800-642-1687  Passcode: 58806907#

    Archive Fourth Quarter and Year End Financial Results and
    ---------------------------------------------------------
    Analyst Day Webcast:
    --------------------
    

The Fourth Quarter and Year End Financial Results and the Analyst Day webcast will be archived for 90 days by following the link provided below:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2975940 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 Guadalupe y Calvo development property in Chihuahua State.

    
                             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 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 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 2009 and 2010, 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.

SOURCE GAMMON GOLD INC.

For further information: For further information: Scott Perry, Chief Financial Officer, Gammon Gold Inc., (416) 646-3825; Anne Day, Director of Investor Relations, Gammon Gold Inc., (902) 468-0614; www.gammongold.com

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GAMMON GOLD INC.

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