Gammon Gold Reports Second Quarter Financial Results, the Seventh Consecutive Quarter of Positive Operating Cash Flow



    HALIFAX, Aug. 13 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and
NYSE:  GRS) announces its unaudited financial results for the three and six
months ended June 30, 2009. All figures reported are in U.S. dollars unless
otherwise indicated.

    Second Quarter Financial Highlights

    For the three-month period ended June 30, 2009:

    
    - Revenues of $43.3 million
    - Cash from operations of $13.7 million, the seventh consecutive quarter
      of positive operating cash flow
    - Earnings before other items of $3.4 million or $0.03 per share
    - A $7 million foreign exchange loss resulting from the strengthening of
      the Mexican peso and Canadian dollar relative to the U.S. dollar
      negatively impacted earnings and contributed to a net loss of
      $7.6 million, or $0.06 per share, for the quarter
    - The Company ended the quarter with a strong cash position of
      $22 million and as a result, the Company's net debt position, defined
      as long-term debt and capital leases less cash, improved to
      $21.5 million
    - Successfully renegotiated the amendment of its $50 million credit
      facility and received a waiver of first quarter covenant violations and
      thereby restored full access to the undrawn portion of the facility

    For the six-month period ended June 30, 2009:

    - Revenues of $90.7 million
    - Cash from operations of $32.7 million
    - Earnings before other items of $8 million or $0.07 per share
    - A $5.1 million foreign exchange loss recognized in the period
      contributed to a net loss of $4.7 million or $0.04 per share for the
      period

    Second Quarter Operational Highlights

    - Production of 31,115 ounces of gold, 1,083,471 ounces of silver or
      47,123 gold equivalent ounces, using the gold-to-silver ratio of 67:1
      experienced in the quarter. Using the Company's long term gold-to-
      silver ratio of 55:1, gold equivalent production was 50,814 ounces.
      While production at Ocampo during the quarter was in line with Q1 2009
      production levels, production at El Cubo was negatively impacted by a
      7-week labour disruption that adversely affected consolidated
      production during the quarter.

    - Cash costs for the quarter were $453 per gold equivalent ounce, using
      the gold-to-silver ratio of 67:1 experienced during the quarter. Using
      the Company's long term gold-to-silver ratio of 55:1, cash costs were
      $420 per gold equivalent ounce, or 18% lower than Q2 2008, despite
      incurring extraordinary costs related to the El Cubo work stoppage in
      April 2009.

    - During the latter part of June, operations at the Ocampo heap leach
      processing facility were suspended to accommodate the conversion to a
      more cost effective overland conveyor stacking system, removing the
      grasshoppers off the face of the heap.

    - Improved Ocampo's underground lateral development productivities year
      to date by over 100% with over 30 development headings being cycled.

    - Recruited over 100 new miners at Ocampo's underground operations.

    - The aggressive $12.3 million, 123,000 metre exploration program at
      Ocampo remains on target with 72,822 meters drilled in 397 holes to
      the end of July 2009.

    - Presidential approval was received for the absolute freehold of the
      4,275 hectare Ocampo land package whereby Gammon became the first gold
      mining company headquartered outside of Mexico to purchase exclusive
      land rights and titles from the Ejidos for the property used in its
      operations.

    - Successfully negotiated the conclusion of the 7-week strike at the El
      Cubo mine that resulted in the adoption of a 7-day continuous work
      schedule that is expected to improve productivities and therefore,
      operating margins over time. During the labour disruption, management
      remained steadfast in its resolve that the union adopt a continuous
      work schedule.

    Subsequent Highlights

    - Phase III Ocampo mill expansion is currently in the commissioning phase
      that will increase mill processing capacity to between 3,300 and 3,400
      tonnes per day. The 3-phased mill expansion has effectively more than
      doubled the original name plate capacity of 1,500 tonnes per day at a
      minimal capital cost of $4.7 million to date.

    - Ocampo was fully connected to 20 megawatts of grid power on July 15,
      2009 and currently all areas of the mine are accessing CFE grid power.
      The lower cost and more reliable source of grid power is expected to
      provide significant costs savings of approximately $20-25 per gold
      equivalent ounce going forward.

    - The Company commissioned a re-optimization of the stacking design
      capacity of the existing heap leach facility. The revised stacking
      design resulted in a 10-million tonne increase of the current heap
      leach pad capacity. This additional capacity will allow the Company to
      further defer the capital costs associated with the phase 3 heap leach
      expansion to 2011 and is expected to restore daily stacking rates to
      between 10-12,000 tonnes per day by early August 2009.

    - On July 2, 2009 the Company made $15 million in debt repayments against
      its term loan.
    

    "As the 18-month Ocampo capital expansion program is largely complete,
the Company can begin to leverage the benefit of this strategic and innovative
expansion program. The positive impact the expansion program has already had
on our operations is evident in the improved cash costs reported in the second
quarter. Using our long-term gold equivalency ratio of 55:1, in spite of the
lower production achieved in the quarter and extraordinary costs incurred
related to the El Cubo labour disruption, cash costs have decreased by 18%
over the same period in 2008." stated René Marion, Chief Executive Officer of
Gammon Gold. Mr. Marion continued, "Additionally, we are confident that the
additional processing capacity available at Ocampo will be supported by the
ongoing ramp-up of the underground, and when combined with the return to
normal operations at El Cubo, we anticipate that improved production and an
enhanced cost structure will be achieved during the latter part of 2009."

    
    Summarized Financial and Operational Results:

    (in thousands, except ounces, per share amounts, average realized prices
    and total cash costs)
    -------------------------------------------------------------------------
                                                  For the Three Months Ended
                                                June 30, 2009  June 30, 2008
                                                                (Restated)(4)
    -------------------------------------------------------------------------
    Gold ounces sold                                   30,461         44,273
    Silver ounces sold                              1,116,067      1,484,763
    Gold equivalent ounces sold(1)                     47,081         72,694
    Gold equivalency rate                                67:1           52:1
    Gold ounces produced                               31,115         43,465
    Silver ounces produced                          1,083,471      1,445,887
    Gold equivalent ounces produced(1)                 47,123         71,154
    -------------------------------------------------------------------------
    Revenue from mining operations                    $43,326        $64,550
    Production costs, excluding amortization
     and depletion                                    $22,451        $35,998
    Earnings before other items                        $3,422         $9,726
    Net (loss)/earnings                               ($7,573)        $4,848
    Net (loss)/earnings per share                      ($0.06)         $0.04
    Net (loss)/earnings per share, diluted             ($0.06)         $0.04
    Cash flows from operations                        $13,715        $24,342
    Net free cash flow(2)                             ($6,922)        $4,299
    Total cash                                        $21,951         $8,215
    -------------------------------------------------------------------------
    Total cash costs per gold equivalent ounce(2)        $453           $501
    Total cash costs per gold ounce(2)                   $198           $238
    Average realized gold price per ounce                $920           $897
    Average realized silver price per ounce            $13.71         $17.44
    -------------------------------------------------------------------------
    Gold equivalent ounces sold (55:1)(3)              50,753         71,269
    Gold equivalent ounces produced (55:1)(3)          50,814         69,754
    Total cash costs per gold equivalent ounce
     (55:1)(3)                                           $420           $511
    -------------------------------------------------------------------------
    (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 21 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.
    (4) See Note 15 of the second quarter consolidated financial statements.


    Summarized Financial and Operational Results

    (in thousands, except ounces, per share amounts, average realized prices
    and total cash costs)
    -------------------------------------------------------------------------
                                                    For the Six-Months Ended
                                                June 30, 2009  June 30, 2008
                                                                (Restated)(4)
    -------------------------------------------------------------------------
    Gold ounces sold                                   64,896         75,728
    Silver ounces sold                              2,387,821      2,733,357
    Gold equivalent ounces sold(1)                     99,086        127,793
    Gold equivalency rate                                69:1           52:1
    Gold ounces produced                               67,944         76,564
    Silver ounces produced                          2,434,771      2,756,858
    Gold equivalent ounces produced(1)                102,603        129,100
    -------------------------------------------------------------------------
    Revenue from mining operations                    $90,675       $115,918
    Production costs, excluding amortization
     and depletion                                    $45,546        $60,690
    Earnings before other items                        $8,008        $22,056
    Net (loss)/earnings                               ($4,700)       $11,892
    Net (loss)/earnings per share                      ($0.04)         $0.10
    Net (loss)/earnings per share, diluted             ($0.04)         $0.10
    Cash flows from operations                        $32,746        $38,897
    Net free cash flow(2)                             ($3,005)        $5,891
    Total cash at bank                                $21,951         $8,215
    -------------------------------------------------------------------------
    Total cash costs per gold equivalent ounce(2)        $454           $505
    Total cash costs per gold ounce(2)                   $210           $245
    Average realized gold price per ounce                $913           $905
    Average realized silver price per ounce            $13.13         $17.55
    -------------------------------------------------------------------------
    Gold equivalent ounces sold (55:1)(3)             108,311        125,425
    Gold equivalent ounces produced (55:1)(3)         112,213        126,689
    Total cash costs per gold equivalent ounce
     (55:1)(3)                                           $415           $515
    -------------------------------------------------------------------------
    (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 21 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.
    (4) See Note 15 of the second quarter consolidated financial statements.
    

    Unaudited Financial Statements and the Management's Discussion and
Analysis for the three and six months ended June 30, 2009 will be posted on
SEDAR at www.sedar.com and on the Company's website at www.gammongold.com.

    A webcast and conference call will be held on Thursday, August 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: 1-800-732-9303

    When the Operator answers please ask to be placed into the Gammon Gold
Second 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=2729320

    Archive Call Access:
    --------------------
    If you are unable to attend the conference call, a replay will be
available until midnight, Saturday, August 22, 2009 by dialing the appropriate
number below:

    - Local Toronto Participants: 1-416-640-1917
      Passcode: 21310631#
    - North America Toll Free: 1-877-289-8525
      Passcode: 21310631#
    - Outside North America: 1-416-640-1917
      Passcode: 21310631#

    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=2729320 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 (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, the timing of the completion of the Phase III Ocampo mill
expansion, anticipated 2009 results, 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 III 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: Rene Marion, Chief Executive Officer, Gammon
Gold Inc., (902) 468-0614; Anne Day, Director of Investor Relations, Gammon
Gold Inc., (902) 468-0614; www.gammongold.com

Organization Profile

GAMMON GOLD INC.

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