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Gammon Gold Confirms Q2 as Another Consecutive Quarter of Record Key Performance Indicators Including Record Production of 71,154 Gold Equivalent Ounces and Operating Cash Flow of $25.3 Million
TSX: GAM / AMEX: GRS / BSX: GL7
HALIFAX, Aug. 8 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and
AMEX: GRS) announces the second quarter unaudited financial results for the
three months ended June 30, 2008. All figures reported are in U.S. dollars
unless otherwise indicated.
Q2 2008 production and cash flow performance has successfully built on
the strong results achieved in Q1 2008 and Gammon is reporting the best ever
production and cash flow performance in the history of the company. The strong
production continues to drive significantly improved cash flow performance and
the strength of the operating cash flow continues to fund 100% of the
expansion capital and the newly expanded exploration program. Cash flow
performance has been so strong that it has allowed the company to make year to
date unscheduled repayments of $8.0 million including the additional
$0.9 million repayment in early July and it is now over six months since the
Company last made a draw down on its debt facility.
René Marion, Chief Executive Officer of Gammon Gold stated: "We are
pleased to report yet another quarter with record achievements. Q2 performance
has built on our strong Q1 performance and this quarter over quarter
improvement in performance was leveraged by the strong positive momentum we
have achieved in executing the first phase of our 3-phase turn around
strategy. The first phase of this strategy has resulted in Q2 2008 providing a
48% improvement in production, a 25% decrease in total cash costs, a 132%
increase in net earnings per share, a $22.6 million improvement in operating
cash flow and an $16.1 million improvement in net free cash flow over Q4 2007
when the turn around strategy was first launched. Our cash flow performance to
date has exceeded our internal targets to such a degree that we have been able
to fully fund our accelerated one-off maintenance programs, capital project
initiatives as well as our significantly expanded exploration program."
Mr. Marion continued, "In the coming quarters the Company expects to continue
building on the productivity gains we have realized to date, while also
turning an increased focus to reducing costs throughout our operations. We are
well poised to fully leverage the 2008 capital project initiatives at Ocampo
where mill capacity will increase by 65-78% and heap leach capacity will
increase by 113-146%. Also noteworthy, additional expansion opportunities are
currently being evaluated based on independent consultation that identifies
significant expansion opportunities beyond our current 2008 plans that were
not considered in the 3-year operational guidance that was issued on March 31,
2008. The execution of our current strategy combined with our significant
growth opportunities will position the Company in strong stead to increase
shareholder wealth into the future. In light of the current valuation of our
stock and industry comparables, we believe that Gammon remains a superior
investment that provides value for our shareholders."
Mr. Russell Tremayne, Chief Operating Officer of Gammon Gold stated: "We
have made great progress in addressing our productivity challenges over the
past 2 quarters such that we are now in a position to direct more focus to
cost optimization. At Ocampo, some immediate initiatives are the rapid
reduction of the stripping ratio over the next few quarters, full access to
20MW of grid power by mid-2009, the optimization of reagent usage and economy
of scale improvements to be realized through the increased mill capacity
project. The Mill expansion is anticipated to be completed in the fourth
quarter as part of the budgeted 2008 capital expansion program. Additional
cost saving strategies will be implemented at El Cubo as well that includes a
targeted workforce optimization program, the consolidation of 100% of the
processing activity to the stand alone Las Torres mill, the closure of the
Tajo mill and the receipt of new underground mining equipment in July that is
expected to improve productivity at El Cubo." Mr. Tremayne continued: "The
arrival of 18 new pieces of underground equipment at both Ocampo and El Cubo
has allowed us to retire some older equipment, improve the availability of the
fleet while increasing productivity. In particular the delivery of 2 new
scissor lift platforms has allowed us to improve the efficiency of our rock
support at Ocampo."
Q2 2008 Highlights
-------------------------------------------------------------------------
For the three-month period ended June 30, 2008.
- Production of 43,465 gold ounces and 1,445,887 silver ounces, or
71,154 gold equivalent ounces, at a quarterly cash cost per ounce of
$505 per gold equivalent ounce, representing a 20% improvement in
gold equivalent production and a 28% reduction in total cash costs
over Q2 2007. Production and cash costs to date position Gammon well
to meet its 2008 guidance
- Revenue from mining operations of $64.6 million compared to
$38.4 million in Q2 2007, reflecting a 68% increase in revenue and an
average realized quarterly gold price of $897 per ounce and realized
silver price of $17.44 per ounce
- Net earnings of $6.5 million or $0.06 per share compared to a net
loss of $25.5 million or $0.23 per share in Q2 2007, representing a
$32.0 million or 125% improvement over Q2 2007
- Adjusted net earnings of $7.0 million or $0.06 per share compared to
an adjusted net loss of $23.5 million or $0.21 per share in Q2 2007,
representing a $30.4 million or 130% improvement over Q2 2007
- Cash flow from operations was a positive $25.3 million, as compared
to negative cash flow from operations of $17.1 million Q2 2007,
representing a $42.4 million or a 248% improvement over Q2 2007
- Positive net free cash flow of $5.3 million as compared to negative
net free cash flow of $35.5 million in Q2 2007, representing a
$40.8 million or a 115% improvement over Q2 2007
- The Company's significantly improved cash flow performance enabled it
to:
- Make $5.0 million in principal debt repayments during the quarter
and a further $0.9 million repayment in early July 2008. To date, a
total of $8.0 in debt repayments have been made on the Company's
revolving line of credit debt facility. The Company's net debt to
book equity ratio has been reduced to 3.8%
- Internally fund our expanded $26-29 million exploration program
designed to increase resources, convert resources and to
potentially increase our production profile
- Internally fund 100% of our year to date 2008 capital expansion
projects where the spending profile was more heavily weighted
towards the first half of this year
- Our key performance indicators are continually achieving best ever
results quarter over quarter, with record tonnes per day being
reported in the Open Pit (83,554 tonnes per day), Mill (1,760 tonnes
per day - 17% over nameplate capacity) and Heap Leach (8,700 tonnes
per day - 9% over nameplate capacity) at Ocampo
- All major new underground production equipment arrived and was
commissioned at Ocampo by late June resulting in immediate
improvements in underground productivity
- All new underground production mining equipment has arrived at
El Cubo which will have a positive impact on production rates through
improved availabilities
- All major contracts have been renegotiated or are being renegotiated
with suppliers resulting in significant savings going forward
- The Company is making significant progress on the advanced pre-
feasibility level scoping study program at our highly prospective
exploration property, Guadalupe y Calvo that is designed to convert
inferred resources to measured & indicated categories and to look for
additional inferred resources. The rate of drilling at Guadalupe y
Calvo has already tripled since the start of the drilling campaign
where camp facilities are now being established, sample preparation
equipment has been ordered and contracts awarded or tendered for
components of the scoping study. To date, 82 holes have been
completed with assays received on 68 holes with results from 7 more
holes in process
- Drilling activities under the expanded exploration program have also
commenced at both Ocampo and El Cubo where historically, less than
20% of each property's land packages have been explored. The focus of
this program is to accelerate the development of these highly
prospective assets to enhance our reserves and resources and
potentially increase our production profile
- The Company announced the appointment of George Elliott to the Board
of Directors. Mr. Elliott is a seasoned business leader with 35 years
of experience in legal affairs and corporate finance throughout a
variety of industries. Most recently, from 2000 to 2007, Mr. Elliott
held the roles of Chairman and CEO for Titanium Corporation Inc.
Prior to this, Mr. Elliott was senior counsel at the law firm Gowling
Lafleur Henderson. Mr. Elliott has also served as an Executive Vice
President of MCAP Financial, which manages over C$20 billion in
mortgage investments for Canadian financial institutions.
Mr. Elliott's vast business experience will bring considerable
strength to Gammon's Board of Directors. In addition, Mr. Elliott
will assume the position of Chair of the Nominating & Corporate
Governance Committee
- The Company has appointed Steve Hill, a seasoned executive with over
30 years of mining experience, as General Mine Manager at Ocampo. The
Company has also identified a short list of potential Vice President
of Exploration candidates for near term appointment. Steve has a
strong background in the mining industry and his international
experience will further strengthen our management
As provided above, the positive financial results reported for the second
quarter represents another consecutive quarter of strong performance.
Six Months ended June 30, 2008 Highlights
-------------------------------------------------------------------------
For the six-month period ended June 30, 2008.
- Production of 76,564 gold ounces and 2,756,858 silver ounces, or
129,100 gold equivalent ounces, at a cash cost per ounce of $499 per
gold equivalent ounce, representing a 5% improvement in gold
equivalent production and a 21% reduction in total cash costs per
gold equivalent ounce over the same period in 2007. Production and
cash costs results to date position the Company to achieve our
production guidance and cash costs on an annualized basis without
considering the impact of our 2008 budgeted capital expansion
projects which will be completed during the fourth quarter
- Revenue from mining operations of $115.9 million compared to
$81.9 million for the same period in 2007, reflecting a 42%
improvement over Q2 2007 and an average quarterly gold selling price
of $905 per ounce and silver selling price of $17.31 per ounce
- Net earnings of $15.0 million or $0.13 per share compared to a net
loss of $35.8 million or $0.33 per share for the same period in 2007,
representing a $50.8 million or 142% improvement over the same period
in 2007
- Adjusted net earnings of $13.6 million or $0.11 per share compared to
an adjusted net loss of $30.1 million or $0.28 per share for the
same period in 2007, representing a $43.7 million or a 145%
improvement
- Cash flow from operations was a positive $39.9 million, as compared
to negative cash flow from operations of $26.3 million Q2 2007,
representing a $66.2 million or a 252% improvement over Q2 2007
- Positive net free cash flow of $6.9 million as compared to negative
net free cash flow of $55.9 million in Q2 2007, representing a
$62.8 million or a 112% improvement over Q2 2007
- $30.2 million, or 67-76%, of Ocampo's $40 to $45 million capital
expansion program has been completed including the arrival of primary
production equipment for the underground operations. All major
capital projects remain on schedule and on
budget for 2008
As provided above, the positive financial results reported for the six
months ended June 30, 2008 encompassed the two best consecutive quarters of
financial performance of the Company in its history to date.
The performance over the past two quarters reflects improved performance
at Ocampo as a result of improved mine productivity and underground dilution
levels that were implemented as part of the turn around strategy launched in
December 2007 and surpasses our internal targets. Improvements in key
operational indicators such as daily mill tonnage, heap leach, mining
equipment availability, and open pit production achieved in Q1 2008 all
continued to improve in Q2 2008. This trend is anticipated to continue in
future quarters as productivity initiatives continue to gain further traction.
Summarized Financial and Operating Results
-------------------------------------------------------------------------
(in thousands, except ounces, per share amounts, average realized prices
and total cash costs)
-------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Gold ounces sold 44,273 31,006 75,728 67,388
Silver ounces sold 1,484,763 1,306,267 2,733,357 2,775,445
Gold equivalent
ounces sold(1) 72,694 57,063 127,793 123,368
Gold ounces produced 43,465 32,246 76,564 67,632
Silver ounces
produced 1,445,887 1,357,708 2,756,858 2,779,674
Gold equivalent
ounces produced(1) 71,154 59,313 129,100 123,459
Revenue from mining
operations $64,550 $38,415 $115,918 $81,915
Net earnings / (loss) $6,522 ($25,488) $15,011 ($35,750)
Net earnings / (loss)
per share $0.06 ($0.23) $0.13 ($0.33)
Net earnings / (loss)
per share, diluted(2) $0.05 ($0.23) $0.12 ($0.33)
Adj. Net earnings /
(loss)(3) $7,005 ($23,489) $13,600 ($30,143)
Adj. Net earnings /
(loss) per share(3) $0.06 ($0.21) $0.11 ($0.28)
Cash flows from /
(used in) operations $25,341 ($17,064) $39,894 ($26,325)
Net free cash flow(3) $5,297 ($35,494) $6,889 ($55,920)
Total cash costs per
gold equivalent ounce(3) $505 $702 $499 $632
-------------------------------------------------------------------------
(1) Gold equivalent ounces are calculated based on actual sales.
(2) Net loss per share on a diluted basis is the same as net loss per
share on an undiluted basis for the three and six months ended
June 30, 2007, as all factors were anti-dilutive.
(3) See the Non-GAAP Measures section of the Q2 2008 Management's
Discussion and Analysis.
"Our three phase turn around strategy was launched in early December after
the completion of an operational audit that identified key business critical
initiatives. The first element of this turn around strategy focused primarily
on improving productivity towards the technical limits of the infrastructure,
progress against which has significantly exceeded our internal expectations to
date. Now we expect to favourably augment our performance further by directing
more focus on cost reduction management. We have identified numerous
opportunities to decrease costs that will be underpinned by our ongoing
production improvements together with the benefits to be realized from our
budgeted 2008 capital expansion investment projects currently underway."
stated René Marion, Chief Executive Officer of Gammon Gold.
Scott Perry, Chief Financial Officer of Gammon Gold stated: "Costs in Q1
and Q2 were negatively impacted by a stronger Mexican Peso exchange rate and a
number of non-recurring costs associated with the execution of our turn around
strategy, our recently implemented long term incentive and retention programs
as well as preparations for the rainy season at Ocampo. Despite these
additional costs we have reported the Company's best ever cash flow
performance that continues to fully fund our capital expansion projects as
well as our exploration program and has allowed us to continue to make
unscheduled debt repayments of $8.0 million on our revolving line of credit
facility. The operational success we have achieved to date provides us with a
strong level of confidence that we will be able to fully fund our 2008
business plan and comfortably achieve our 2008 production and cash cost per
ounce targets." Mr. Perry continued: "Net earnings for the quarter were
particularly strong coming in line with Q1 performance despite being impacted
by an unfavourable $3.7 million swing in foreign exchange gains & losses when
compared to our first quarter results."
Looking Forward - Current Opportunities
During the second half of 2008, productivity is expected to continue to
improve, driven by a number of key elements primarily focused on our Ocampo
operation:
Production
- As of the end of June 2008, all underground production equipment has
been received at Ocampo and is now fully commissioned. The Company
currently has 9-12 months or 560,000 tonnes of underground ore
completely developed to accelerate the planned ramp-up in production
- Key elements of the accelerated maintenance program were largely
completed in Q2, positively impacting equipment availability,
particularly in the Open Pit and the milling and crushing plants
- As a result of the new pit phasing design, the strip ratio will now
decrease rapidly over the next 9-12 months allowing for increased ore
production rates from the open pit operations
- By Q4 2008 the Company anticipates completing the expansion of the Mill
circuit to 2,400-2,600 tonnes per tonne per day as well as the
expansion of the heap leach crushing circuit to 13,000-15,000 tonnes
per day, a 114%-132% increase in mill productivity over Q2 2007 and a
65%-91% increase in the crushing circuit productivity over Q2 2007
- At both Ocampo and El Cubo the Company continues to implement optimum
mining methods such as longhole mining that should maximize
productivity and decrease dilution in the underground operations
- New underground production mining equipment began arriving in July at
El Cubo which will have a positive impact on production rates through
improved availabilities
- Complete the consolidation of all processing activities to the more
efficient and higher capacity Las Torres mill at El Cubo
Costs incurred during the first 6 months of 2008 were impacted by one-off
costs related to the turn around strategy launched in December 2007 as the
Company addressed productivity and maintenance issues throughout its
operations. With these expenditures substantially behind us, a number of costs
saving opportunities have been identified:
Costs
- The accelerated maintenance program at Ocampo was largely completed in
Q2 2008 that resulted in significantly higher maintenance costs and
these additional expenditures will not be incurred in the balance of
2008
- The new pit re-phasing plan will rapidly reduce the strip ratio at the
Ocampo open pit that will have an impact on reducing costs for the
balance of the year
- All activities relating to the preparation for the rainy season at
Ocampo have been completed and no further significant expenditures are
expected to be incurred during the balance of 2008
- Optimizing consumables and reagents, such as cyanide are expected to
provide an annualized cost saving opportunity of up to $45 per ounce at
Ocampo over the next 18 months
- In the second half of 2009 the Company anticipates having access to
20 megawatts of grid power that is expected to provide an additional
cost saving opportunity of up to $24 per ounce at Ocampo
- The consolidation of operations and administration to the Los Torres
Mill at El Cubo during the second half of 2008 will allow the Company
to fully utilize the lower cost Las Torres Mill
- Full commissioning of the 600 metre central haulage level at El Cubo is
anticipated by year end which will eliminate the costly surface haulage
and improve the efficiency of our underground mining operations
- Labour rationalization as well as general and administrative costs
reductions at El Cubo are anticipated to be realized in the second half
of 2008
Additional Growth Opportunities - 2009 & Beyond
The Company has identified additional growth opportunities beyond the
current 2008 capital expansion plans that have the potential to significantly
increase capacity and production profiles over and above the current
expansionary plans.
- The Company has launched its expanded exploration program at our highly
prospective exploration property, Guadalupe y Calvo that is designed to
increase resources and convert inferred resources to measured &
indicated. A Scoping Study is expected to be complete by Q1 2009.
Pending positive results from the Scoping Study, the Company could have
the opportunity to accelerate advancement of this property to
production by capitalizing on the availability of the three mills
placed on care and maintenance at El Cubo
- The Company is currently reviewing the additional capital expansion
opportunities at Ocampo identified by an independent mining consultant
firm that indicate significant increases in capacity beyond the current
2008 capital expansion program
Based on the receipt and the Company's review of the Scoping Study from
Guadalupe y Calvo as well as results from the basic engineering studies
currently underway at Ocampo, the Company anticipates issuing an updated
3 year operational outlook, by the end of Q1 2009.
Ocampo Capital Project Update
-----------------------------
During the first half of 2008, $30.2 million, or 67-76%, of Ocampo's
$40 to $45 million capital expansion program has been completed including the
arrival of primary production equipment for the underground operations. All
major capital projects remain on schedule and on budget for 2008.
20 Megawatt Grid Power
In partnership with Agnico-Eagle on a 50-50% cost sharing basis, Gammon is
contributing $7 million to the construction of a 25 km, 115 Kv power line to
bring in full grid power for its Ocampo operations. Contracts have been
awarded for power line and substation construction and negotiations for power
line right-of-way are nearly completed. Gammon expects to be on-line by the
end of the second half of 2009. When the project is completed, lower cost grid
power is expected to further reduce production costs by up to $24 per gold
equivalent ounce.
Mill Upgrades
Milling of ore in Ocampo uses a dry-stack tailings disposal system
utilizing two existing plate-filter lines. As part of a larger project to
raise mill production by upwards of 65-78%, a third filter line is being
added. The project is currently 50% complete with the filter frame already
installed. Commissioning is expected by the fourth quarter of 2008. In order
to support an increase in mill production requirements, Gammon is installing
additional cyclones, pumps and an oxygen injection plant.
Heap Leach Pad Expansion
As of the end of June 2008, Gammon had completed a lined leach pad
expansion on-time and on-budget which will allow for an additional 5 million
tonnes of ore to be stacked and leached. A design for additional pad space is
underway and construction is anticipated to commence in late 2008.
Mr. Marion added further comments, "Capital projects designed to increase
production capacity at Ocampo are well underway and are expected to remain on
target and on budget. The increased capacity that we will gain through our
expansionary projects, combined with our aggressive cost reduction initiatives
will underpin Gammon's growth strategy going forward. Our strategic activities
over the past six months have positioned Gammon to target ongoing improvements
throughout our operations in the quarters and years ahead."
Unaudited Financial Statements for the three-months ended June 30, 2008
are attached to this release and are posted on SEDAR at www.sedar.com and on
the Company's website at www.gammongold.com. The Management's Discussion and
Analysis for the three-months ended June 30, 2008 is posted on SEDAR at
www.sedar.com and on the Company's website at www.gammongold.com.
Conference Call and Webcast:
A webcast and conference call will be held on Friday, August 8, 2008
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: 1-800-762-8795
When the Operator answers please ask to be placed into the Gammon Gold
Second Quarter 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://w.on24.com/r.htm?e=115156&s=1&k=612D0B17749C728C344923B6AA35599E
Archive Call Access:
If you are unable to attend the conference call, a replay will be
available until midnight, Friday, August 15, 2008 by dialing the appropriate
number below:
- Local Toronto Participants: 1-416-640-1917 Passcode: 21279147#
- North America Toll Free: 1-877-289-8525 Passcode: 21279147#
- Outside North America: 1-416-640-1917 Passcode: 21279147#
Archive Webcast:
The webcast will be archived for 365-days by following the link provided
below:
http://w.on24.com/r.htm?e=115156&s=1&k=612D0B17749C728C344923B6AA35599E 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.
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 without limitation, statements regarding future cash costs
and production at El Cubo and Ocampo and the ability to continue to
successfully implement the Company's turn-around strategy, statements
regarding the resource growth potential of Guadalupe y Calvo, statements
regarding the company's ability to continue its improved cash flow
performance, the impact of any future exploration on reserve estimates;
expectations regarding the timing and extent of production at the Ocampo
project; the implications of the Mexican Single Rate Tax on future income tax
payments; 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.
Consolidated Balance Sheets
(Unaudited, in thousands of United States dollars)
-------------------------------------------------------------------------
June 30 December 31
2008 2007
-------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 8,215 $ 3,601
Restricted cash - 108
Receivables
Commodity taxes 13,196 10,240
Trade / other 3,903 1,740
Inventories (Note 6) 61,150 51,586
Prepaids and deposits 3,422 2,250
-------------- --------------
89,886 69,525
Deposits on property, plant and equipment 6,522 5,395
Other long-term assets 4,879 192
Mining interests and property, plant and
equipment 585,594 572,041
Goodwill 106,799 106,799
-------------- --------------
$ 793,680 $ 753,952
-------------- --------------
-------------------------------------------------------------------------
LIABILITIES
Current
Payables and accruals $ 31,227 $ 17,279
Current portion of long-term debt and
capital leases (Note 7) 29,904 33,073
-------------- --------------
61,131 50,352
Long-term debt and capital leases (Note 7) 5,992 1,334
Other long-term obligations 326 -
Asset retirement obligations 3,120 2,991
Employee future benefits 4,306 3,746
Future income taxes 112,170 108,879
-------------- --------------
187,045 167,302
-------------- --------------
SHAREHOLDERS' EQUITY
Capital stock 715,559 699,512
Contributed surplus 31,300 42,373
Deficit (146,658) (161,669)
Accumulated other comprehensive income 6,434 6,434
-------------- --------------
606,635 586,650
-------------- --------------
$ 793,680 $ 753,952
-------------- --------------
Consolidated Statements of Operations and Comprehensive Income / (Loss)
(Unaudited, in thousands of United States dollars except per share data)
-------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue
from mining
operations $ 64,550 $ 38,415 $ 115,918 $ 81,915
-------------- -------------- -------------- --------------
Expenses
Production
costs,
excluding
amortiza-
tion &
depletion 36,303 39,714 63,000 77,154
Refining
costs 419 372 793 846
General and
administra-
tive 7,580 9,732 12,594 13,396
Amortization
and
depletion 10,529 13,867 20,455 26,473
-------------- -------------- -------------- --------------
54,831 63,685 96,842 117,869
-------------- -------------- -------------- --------------
Earnings /
(loss) before
other items 9,719 (25,270) 19,076 (35,954)
-------------- -------------- -------------- --------------
Interest on
long-term
debt (347) (732) (917) (3,218)
Foreign
exchange
(loss) /
gain (329) (2,128) 3,023 (3,761)
Interest and
other income 99 265 173 318
-------------- -------------- -------------- --------------
(577) (2,595) 2,279 (6,661)
-------------- -------------- -------------- --------------
Earnings /
(loss) before
income taxes 9,142 (27,865) 21,355 (42,615)
-------------- -------------- -------------- --------------
Future income
tax expense /
(recovery) 1,100 (2,377) 3,027 (6,865)
Current tax
expense 1,520 - 3,317 -
-------------- -------------- -------------- --------------
2,620 (2,377) 6,344 (6,865)
-------------- -------------- -------------- --------------
Net earnings /
(loss) and
comprehensive
income /
(loss) $ 6,522 $ (25,488) $ 15,011 $ (35,750)
-------------- -------------- -------------- --------------
-------------------------------------------------------------------------
Net earnings /
(loss) per
share
(Note 8)
Basic $ 0.06 $ (0.23) $ 0.13 $ (0.33)
Diluted $ 0.05 $ (0.23) $ 0.12 $ (0.33)
Weighted
average
shares
outstanding
(Note 8)
Basic 118,374,420 112,417,219 118,301,139 108,894,973
Diluted 120,749,503 112,417,219 120,820,514 108,894,973
-------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(Unaudited, in thousands of United States dollars)
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Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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OPERATING
ACTIVITIES
Net earnings
/ (loss) $ 6,522 $ (25,488) $ 15,011 $ (35,750)
Amortization
and
depletion 10,529 13,867 20,455 26,473
Unrealized
foreign
exchange
loss 2,126 2,291 272 5,446
Stock
option
expense,
net of
forfei-
tures 975 3,776 1,405 4,079
Employee
future
benefits 223 (1,234) 560 (1,049)
Future
income
tax
expense /
(recovery) 1,100 (2,377) 3,027 (6,865)
Other
long-term
obligations 326 - 326 -
Change in
non-cash
operating
working
capital
(Note 9) 3,540 (7,899) (1,162) (18,659)
-------------- -------------- -------------- --------------
25,341 (17,064) 39,894 (26,325)
-------------- -------------- -------------- --------------
INVESTING
ACTIVITIES
Increase
in deposits
on property,
plant and
equipment (625) - (1,127) -
Expenditures
on mining
interests
and
property,
plant and
equipment (20,044) (18,430) (33,005) (29,595)
-------------- -------------- -------------- --------------
(20,669) (18,430) (34,132) (29,595)
-------------- -------------- -------------- --------------
FINANCING
ACTIVITIES
Repayment
of capital
lease
obligations (620) (625) (1,228) (1,313)
Proceeds
from long-
term debt - 4,195 4,380 6,394
Repayment
of long-
term debt (6,035) (123,892) (8,170) (123,892)
Proceeds
from
equity
offering - 170,284 - 170,284
Proceeds
from
exercise
of options 2,825 15,830 3,762 33,242
-------------- -------------- -------------- --------------
(3,830) 65,792 (1,256) 84,715
-------------- -------------- -------------- --------------
Net increase
in cash and
cash
equivalents 842 30,298 4,506 28,795
Cash and
cash
equivalents,
beginning of
period 7,373 2,571 3,709 4,074
-------------- -------------- -------------- --------------
Cash and cash
equivalents,
end of
period $ 8,215 $ 32,869 $ 8,215 $ 32,869
-------------- -------------- -------------- --------------
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Cash and cash
equivalents
is comprised
of the
following:
Cash $ 7,315 $ 32,869 $ 7,315 $ 32,869
Temporary
investments 900 - 900 -
-------------- -------------- -------------- --------------
$ 8,215 $ 32,869 $ 8,215 $ 32,869
-------------- -------------- -------------- --------------
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For further information:
For further information: Scott Perry, Chief Financial Officer, Gammon Gold Inc., (902) 468-0614; Anne Day, Director of Investor Relations, Gammon Gold Inc., (902) 468-0614; www.gammongold.com
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