Gammon Gold Announces Second Quarter 2007 Financial Results



    TSX: GAM / AMEX:   GRS / BSX: GL7

    HALIFAX, Aug. 9 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and
AMEX:  GRS) announces second quarter financial results for the three months
ended June 30, 2007. The Company reported sales of $38.4 million compared to
$11.5 million for the same period in 2006. Net loss for the quarter was
$25.5 million or $0.23 per share compared to $2.2 million or $0.03 per share
for the same period in 2006.

    All figures are in US dollars unless otherwise stated.

    
    Quarter 2 Highlights
    -------------------------------------------------------------------------

    -   Q2 sales of 31,591 gold ounces and 1,334,795 silver ounces or
        58,207 gold equivalent ounces compared to 13,672 gold ounces and
        251,155 silver ounces or 18,409 gold equivalent ounces for the same
        period in 2006
    -   Revenues from mining operations of $38.4 million compared to
        $11.5 million in Q2 2006
    -   Ocampo mine working through various start up maintenance and
        productivity issues that resulted in less than 70% combined Q2
        operating availability at leach pad crushing and mill operations
    -   Ocampo open pit production increased by 12% over Q1
    -   Ocampo open pit provided unbudgeted high grade tonnage to the mill
    -   Production at El Cubo grew 16% over Q1 production (with cash cost per
        gold equivalent ounce declining $70 to $439) with further increases
        anticipated in Q3/Q4
    -   Adjusted cash cost per gold equivalent ounce of $474 for Q2 which
        increased to $614 per gold equivalent ounce after including a
        $2.5 million cash production write down ($43 cash cost per ounce) to
        reflect Ocampo's low operating utilization and a $5.7 million cash
        write down ($97 cash cost per ounce) to adjust leach pad and mill
        inventory to lower of cost and net realizable value
    -   Net loss per share of $0.23 compared to Q2 2006 net loss per share of
        $0.03
    -   To strengthen Gammon management team a number of key executives with
        considerable operating experience were appointed as follows:
              -    Mr. Russell Barwick as CEO (Q2)
              -    Mr. Glenn Hynes as CFO (Q2)
              -    Mr. Dave Keough as COO (July)
              -    Mr. Roberto Diaz as President of Mexican Operations (July)
              -    Dr. Luis Chavez as Corporate Director for Mexican
                   Operations, and new Gammon board member (July)

    -   Completion of $178.1 million ($200 million Cdn) (10 million common
        shares) equity offering (April) repaying all bank credit facilities
    -   Write off of long term low grade stockpile totaling $4.3 million
    -   Ordered Ocampo open pit expansion equipment and new underground
        equipment at total cost of $13 million
    -   Advanced Santa Eduviges decline developed under the Ocampo open pit
        for a possible new underground mine
    -   Re-commenced exploration effort at the exciting Guadalupe y Calvo
        property
    -   Announced company name change to Gammon Gold Inc. to better
        communicate Company's core focus as primary gold and silver producer

    Q2 was a period of transition for Gammon as the Company commenced the
strengthening of its senior Management team with the addition of Russell
Barwick as CEO and Glenn Hynes as CFO in the quarter. Subsequent to quarter
end, the further addition of Dave Keough as COO, Roberto Diaz as President,
Mexican Operations and Dr. Luis Chavez as Corporate Director bolstered
Gammon's management team.
    The Company operated at less than 70% of its name plate capacity at its
Ocampo property in Q2 as the Company worked through start up and equipment
availability issues at its leach pad crushing and mill operations. These
issues were the primary cause of Q2's significant cash cost per gold
equivalent ounce as fixed operating costs were allocated against fewer sold
ounces. Importantly, open pit mine production increased 12% in Q2 through
productivity improvements in the quarter enabling accelerated waste stripping
activities.
    At El Cubo Q2 production increased 16% over Q1 as the 2400 tonne per day
Las Torres mill was brought on line and by leveraging fixed operating costs,
cash cost per gold equivalent ounce in Q2 declined $70 to $439. Further
production increases and cash cost reductions are anticipated in Q3/Q4 as Las
Torres moves towards full utilization from Q2's 45% utilization level.
    "Q2 was a foundation building quarter" commented Gammon's CEO Russell
Barwick "While our El Cubo operation made solid progress in growing production
by 16% over Q1 and is targeting even further growth in Q3 and Q4, our Ocampo
leach pad crushing and mill operation was limited to less than 70% of capacity
as various start up and maintenance issues were worked through. We are
delighted that the newly strengthened operational team joined us in July as
they have direct experience managing start up operations and optimizing
projects. The operation will become more consistent in the coming quarters as
we improve maintenance practices, optimize costs, strengthen site management
and target capital investments in needed areas."
    The Company is also dedicating capital investment to increase Ocampo's
name plate capacity with the Q3 addition of a fourth high grade crusher at the
open pit ($2.5 million) which will increase daily throughput capacity by
10-15% to 12,000 - 13,000 tonnes per day and the addition of a third tailing
filter (Q1 2008) at the mill operation ($4.5 million) increasing daily high
grade mill throughput by 33% from 1,500 to 2,000 tonnes per day. Barwick noted
"these investments will drive substantial payback as we will gain significant
expanded capacity with incremental capital expenditure thus further lowering
future cash costs".

    The Company's MD&A includes additional details of Q2's performance as well
as an outline of management's plans and priorities for the coming quarters.


    Further details on the history of the Company, its mineral properties and
the risk factors associated with respect to the Company can be found under the
Company's associated documents including its Annual Information Form at
www.sedar.com or on the Company's website at www.gammongold.com

    Quarterly Financial Statements for the second quarter ended June 30, 2007
are attached to this release. These should be read in conjunction with the
Notes to the Financial Statements and Management Discussion and Analysis,
posted on SEDAR at www.sedar.com or on the Company's website at
www.gammongold.com

    Conference Call Details

    Gammon Lake would like to remind shareholders that a conference call will
be held on Friday, August 10, 2007 at 11:00 am Eastern Time (12:00 pm Atlantic
Time) to discuss the financial results. You may join the call by dialing:

    North American Toll Free:   +1 (866) 400-3310
    Outside Canada & US:        +1 (416) 850-9144
    When the Operator answers; ask to be placed into the Gammon Gold Second
    Quarter Results 2007 Conference Call.

    If you are unable to attend the conference call, a playback will be
available for 30 days immediately after the event by dialing +1 (866) 245-6755
or +1 (416) 915-1035 for calls from outside Canada and the US. Enter passcode
711366. A link to the playback will also be posted on Gammon Gold's website at
www.gammongold.com approximately two hours after the conference call. This
call will also be Webcast and will be accessible by using the following link
which will launch the player directly at their site
http://viavid.net/dce.aspx?sid=00004291.

    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 information regarding the Company contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements are subject to a variety of risks and uncertainties
which could cause actual events or results to differ from those reflected in
the forward-looking statements. Should one or more of these risks and
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in forward looking
statements. Specific reference is made to "Risk Factors" in the Company's
Annual Information Form and Form 40-F Report. Forward-looking statements may
include estimates, plans, expectations, opinions, forecasts, projections,
guidance or other statements that are not statements of fact including,
without limitation, statements regarding potential mineralization and
reserves, including the impact of any future exploration on reserve estimates;
expectations regarding the timing and extent of production at the Ocampo
project; estimates regarding the future costs related to exploration at
Ocampo; the nature and availability of additional funding sources; and future
plans and objectives of Gammon. In some cases, you can identify
forward-looking statements by the use of words such as may, will, should,
could, expect, plan, intend, anticipate, believe, estimate, predict, potential
or continue or the negative or other variations of these words, or other
comparable words or phrases. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
the Company's expectations include, among others, risks related to
international operations, including political turmoil and limited local
infrastructure to support large scale mining operations; the actual results of
current exploration activities; conclusions of economic evaluations and
changes in project parameters as plans continue to be refined; and
fluctuations in future prices of gold and silver. These factors are set out in
the Company's annual information form. The Company's forward-looking
statements are expressly qualified in their entirety by this cautionary
statement.


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gammon Gold Inc.
    Consolidated Balance Sheets
                                                      June 30    December 31
                                                         2007           2006
                                                   (Unaudited)      (Note 3a)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Assets
    Current
      Cash and cash equivalents                 $  32,763,726  $   2,940,763
      Restricted cash                                 105,527      1,133,337
      Receivables
        Commodity taxes                            18,631,643     12,044,712
        Trade / other                               1,967,612      3,009,053
      Inventories
        Supplies                                   11,744,862      8,173,726
        Ore stockpiles                              2,476,022      4,829,834
        Ore in process                             28,789,834     33,271,178
      Prepaids and deposits                         1,452,742        775,479
                                                -------------- --------------
                                                   97,931,968     66,178,082

    Deposits on capital equipment                   1,139,360      1,049,588
    Deferred compensation                             408,711        856,016
    Long term ore inventory in stockpile                    -      2,043,040
    Mining interests and capital assets (Note 4)  550,648,819    539,395,321
    Goodwill                                      107,198,716    107,198,716
                                                -------------- --------------

                                                $ 757,327,574  $ 716,720,763
                                                -------------- --------------
                                                -------------- --------------

    -------------------------------------------------------------------------
    Liabilities
    Current
      Payables and accruals                     $  21,803,469  $  30,849,472
      Current portion of long-term debt and
       capital leases                               7,642,157     66,988,072
                                                -------------- --------------
                                                   29,445,626     97,837,544

    Long term debt and capital leases               3,251,041     63,607,600
    Employee future benefits (Note 5)               2,275,401      3,224,429
    Future income taxes                            69,381,856     70,492,523
                                                -------------- --------------
                                                  104,353,924    235,162,096
                                                -------------- --------------
    Shareholders' Equity
    Capital stock (Note 6)                        677,679,187    459,037,054
    Contributed surplus (Note 6)                   60,682,383     72,159,949
    Deficit                                       (96,104,311)   (60,354,727)
    Accumulated other comprehensive
     income (Note 6)                               10,716,391     10,716,391
                                                -------------- --------------
                                                  652,973,650    481,558,667
                                                -------------- --------------

                                                $ 757,327,574  $ 716,720,763
                                                -------------- --------------
                                                -------------- --------------

    -------------------------------------------------------------------------
    Nature of operations and going concern assumption (Note 1)


    On behalf of the Board:  "Fred George"         Director
                            -------------------
                             "Russell Barwick"     Director
                            -------------------

       See accompanying notes to the consolidated financial statements.


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gammon Gold Inc.
    Consolidated Statements of Operations, Comprehensive Loss and
    Deficit
    (Unaudited)
                   Three months   Three months     Six months     Six months
                          ended          ended          ended          ended
                        June 30        June 30        June 30        June 30
                           2007           2006           2007           2006
                                      (Note 3a)                     (Note 3a)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenues
     from mining
     operations   $  38,414,989  $  11,507,809  $  81,914,903  $  13,398,799
                  -------------- -------------- -------------- --------------
    Expenses
      Production
       costs
       excluding
       amortiza-
       tion &
       depletion  $  35,393,663  $   3,967,984  $  72,834,081  $   7,116,324
      Write down
       of long
       term
       inventory      4,319,654              -      4,319,654              -
      Refining
       costs            371,701         60,011        846,005         71,612
      General and
       administra-
       tive           9,732,208     15,043,533     13,396,194     17,366,446
      Amortization
       and deple-
       tion          13,867,340      1,437,214     26,473,338      2,126,636
                  -------------- -------------- -------------- --------------

                     63,684,566     20,508,742    117,869,272     26,681,018
                  -------------- -------------- -------------- --------------

    Loss before
     other items    (25,269,577)    (9,000,933)   (35,954,369)   (13,282,219)
                  -------------- -------------- -------------- --------------

    Interest on
     long term
     debt         $    (732,108) $  (1,293,601) $  (3,217,724) $  (1,721,806)
    Foreign
     exchange
     gain (loss)     (2,128,348)     1,879,742     (3,760,840)     1,377,732
    Gain (loss)
     on equity
     investment               -       (183,912)             -        166,037
    Interest and
     sundry             265,164        331,826        318,447        395,242
                  -------------- -------------- -------------- --------------
                     (2,595,292)       734,055     (6,660,117)       217,205
                  -------------- -------------- -------------- --------------

    Loss before
     income taxes $ (27,864,869) $  (8,266,878) $ (42,614,486) $ (13,065,014)

    Future income
     tax
     (recovery)      (2,377,165)    (6,051,802)    (6,864,902)    (6,163,611)
                  -------------- -------------- -------------- --------------

    Net loss      $ (25,487,704) $  (2,215,076) $ (35,749,584) $  (6,901,403)
                  -------------- -------------- -------------- --------------
                  -------------- -------------- -------------- --------------

      Other
       comprehen-
       sive loss              -       (387,680)             -       (667,888)

    Comprehensive
     loss
     (Note 6)     $ (25,487,704) $  (2,602,756) $ (35,749,584) $  (7,569,291)
                  -------------- -------------- -------------- --------------
                  -------------- -------------- -------------- --------------

    Loss per
     share
     (Note 7)     $       (0.23) $       (0.03) $       (0.33) $       (0.09)
                  -------------- -------------- -------------- --------------

    -------------------------------------------------------------------------

    Deficit,
     beginning
     of period    $ (70,616,607) $ (61,035,286) $ (60,354,727) $ (56,348,959)

    Net loss        (25,487,704)    (2,215,076)   (35,749,584)    (6,901,403)
                  -------------- -------------- -------------- --------------

    Deficit, end
     of period    $ (96,104,311) $ (63,250,362) $ (96,104,311) $ (63,250,362)
                  -------------- -------------- -------------- --------------
                  -------------- -------------- -------------- --------------

    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements.


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gammon Gold Inc.
    Consolidated Statements of Cash Flows
    (Unaudited)
                   Three months   Three months     Six months     Six months
                          ended          ended          ended          ended
                        June 30        June 30        June 30        June 30
                           2007           2006           2007           2006
                                      (Note 3a)                     (Note 3a)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows from
     (used in)
     operating
     activities
      Net (loss)  $ (25,487,704) $  (2,215,076) $ (35,749,584) $  (6,901,403)
      Amortization
       and
       depletion     13,867,340      1,437,214     26,473,338      2,126,636
      Unrealized
       foreign
       exchange
       (gain) loss    2,290,454     (3,145,957)     5,445,576     (2,965,150)
      Stock option
       expense        3,775,484     11,814,759      4,079,047     11,814,759
      Employee
       future
       benefits      (1,233,634)             -     (1,048,851)
      Future income
       tax recovery  (2,377,165)    (6,051,802)    (6,864,902)    (6,163,611)
      Increase
       (decrease)
       of accrued
       interest on
       long term
       debt            (253,460)       390,915     (1,106,553)       478,900
      Gain (loss)
       on long term
       equity
       investment             -        183,912              -       (166,037)
      Change in
       non-cash
       operating
       working
       capital
       (Note 10)     (7,645,734)    (4,465,317)   (17,552,558)    (8,079,656)
                  -------------- -------------- -------------- --------------
                    (17,064,419)    (2,051,352)   (26,324,487)    (9,855,562)
                  -------------- -------------- -------------- --------------

    Cash flows
     from (used in)
     investing
     activities
      Acquisition
       of
       investment             -       (226,337)             -     (6,614,638)
      Advances to
       related
       companies              -        266,235              -        248,488
      Expenditures
       on mining
       interests
       and related
       deferred
       costs and
       acquisition
       of capital
       assets       (18,429,576)   (38,023,598)   (29,594,952)   (60,610,137)
                  -------------- -------------- -------------- --------------
                    (18,429,576)   (37,983,700)   (29,594,952)   (66,976,287)
                  -------------- -------------- -------------- --------------

    Cash flows from
     (used in)
     financing
     activities
      Repayment of
       capital
       lease
       obligation      (625,281)      (137,115)    (1,312,815)      (332,950)
      Proceeds from
       (repayment
       of)long-term
       debt        (119,696,619)    41,523,434   (117,498,377)    64,731,176
      Net proceeds
       from equity
       offering     170,284,097                   170,284,097
      Proceeds from
       exercise of
       options and
       warrants      15,830,041        522,490     33,241,687      9,500,811
                  -------------- -------------- -------------- --------------
                     65,792,238     41,908,809     84,714,592     73,899,037
                  -------------- -------------- -------------- --------------

    Net change in
     cash            30,298,243      1,873,757     28,795,153     (2,932,812)
    Effect of
     exchange rate
     changes on
     cash                     -       (908,159)             -       (864,654)
    Cash and cash
     equivalents
      Beginning of
       period         2,571,010        987,530      4,074,100      5,750,594
                  -------------- -------------- -------------- --------------
      End of
       period     $  32,869,253  $   1,953,128  $  32,869,253  $   1,953,128
                  -------------- -------------- -------------- --------------
                  -------------- -------------- -------------- --------------

    -------------------------------------------------------------------------

       See accompanying notes to the consolidated financial statements.
    




For further information:

For further information: Russell Barwick, Chief Executive Officer,
Gammon Gold Inc. (902) 468-0614; Glenn Hynes, Chief Financial Officer, Gammon
Gold Inc., (902) 468-0614; www.gammongold.com

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GAMMON GOLD INC.

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