Gammon Gold Releases Ocampo Key Operational Indicators & Financial Metrics for February 2008

    TSX: GAM / AMEX:   GRS / BSX: GL7

    Gammon Reports Continued Strengthening of Key Financial Metrics over
    January with Cashflow from Operations increasing by 63% to $3.1M, Net
    Free Cashflow increasing by 56% to ($0.4M) and a $2.1M Pay Down of Its
    Debt Facility

    HALIFAX, March 11 /CNW/ - Gammon Gold Inc. ("Gammon") (TSX:GAM and
AMEX:  GRS) is pleased to provide its unaudited monthly status update to our

    February Highlights

    - Significant increase in production with an 18.5% increase over January
      and a 21.4% improvement in average monthly production over Q4 and the
      best result since June 2007
    - Significant reduction in consolidated cash costs with a 5% improvement
      over January and an 18.6% improvement of over Q4's average cash costs
      the lowest cost since commercial production was declared at Ocampo in
      Q1 2007.
    - Improved positive operating cash flow was achieved in February as
      compared to January and represents a significant improvement over
      operating cash flows achieved throughout all of 2007.
    - Liquidity position was further strengthened due to ongoing operational
      improvements and stronger market prices for gold and silver which
      continues to underpin the Company's turnaround phase into the later
      part of 2008, at which point the Company's business model is scheduled
      to generate positive net cash flow.
    - Strong cash flow performance established closing cash reserves of
      $1.9 million and the Company also made an accelerated debt facility
      principal reduction payment of $2.1M.
    - There were no facility draw downs taken on the Company's $60 million
      revolving project debt in February or to date in March. The Company's
      net debt position decreased to $27.4 million in February.
    - The Company (inclusive of Gammon Gold's El Cubo mine) continues to
      remain on target to produce in the low to mid point of the targeted
      range of 56,000 to 62,000 gold equivalent ounces during Q1 at total
      cash costs that are lower than the previous guidance of between $580 to
      $600 per gold equivalent ounce.
    - Encouraging resource growth potential exploration results were reported
      at Guadalupe y Calvo which justifies aggressively advancing the present
      exploration program and will support an updating of the resource
      estimate, metallurgical test work and completing a scoping study for a
      potential open pit and underground operation.

    Consolidated Production & Cost Overview

    The Company, including both Ocampo and El Cubo, achieved an 18.5% increase
in production in February as compared to January and a 21.4% improvement in
average monthly production over Q4. In February, the Company produced a total
of 11,019 ounces of gold and 446,260 ounces of silver or 19,466 gold
equivalent ounces, the best single month of production since June 2007, at a
cash cost of $480 per ounce, the lowest cost since commercial production was
declared at Ocampo in Q1 2007. Of this production, El Cubo contributed 3,129
ounces of gold and 146,145 ounces of silver or 5,913 gold equivalent ounces at
a cash cost of $540 per ounce. During February, the Company sold a total of
10,410 ounces of gold and 420,889 ounces of silver or 18,379 gold equivalent
ounces and realized a record average gold price of $931.46/oz and a record
average silver price of $17.38/oz. Of the ounces sold, El Cubo contributed
3,129 ounces of gold and 146,145 ounces of silver or 5,913 gold equivalent

                   Operating and Free Cash Flow (unaudited)

    Financial performance indicators continue to demonstrate that the Company
is successfully advancing its turnaround strategy. Operating cash flow in
February increased by 63% to $3.1 million as compared to $1.9 million in
January and a significant improvement over the monthly average of
($15.01 million) in Q4 which clearly reflects that continued productivity
improvements at both Ocampo and El Cubo, coupled with aggressive cost
management strategies, are continuing to positively impact production and
costs. In February, free cash flow improved by 56% to ($0.4 million) and a 97%
improvement as compared to ($14.7 million) in Q4. Continued strength in
operating cash flow performance will continue to underpin the Company's
planned investment in capital expansion projects in March and throughout Q2
favourably minimizing the impact on the Company's net cash flow generation
profile. Capital expenditures during February were in line with internal
expansion capital projections at $3.5 million and will increase in March with
the scheduled delivery of key underground mining fleet equipment.
    Consolidated cash costs for February decreased by a further 5% to $480 per
ounce over January and by 18.6% over Q4 cash costs and a 37% reduction over Q3
cash costs. Continued improvements in total cash costs are being driven by the
Company's focused productivity and cost optimization efforts. In an
unprecedented environment of high inflationary cost pressures, the Company's
initial cost initiatives have reduced costs from $764/oz in Q3 to $480/oz as
reported in February.

    - The Company (inclusive of Gammon Gold's El Cubo mine) remains on target
      to produce at the low to mid point of the target range of 56,000 to
      62,000 gold equivalent ounces during Q1 at a total cash cost that will
      be lower than the previous guidance of between $580 to $600 per gold
      equivalent ounce.

    There were no facility draw downs taken on the Company's $60 million
revolving project debt in February or to date in March. February's strong cash
flow performance established closing cash reserves of $1.9 million and also
allowed the Company to make an accelerated debt facility principal reduction
payment of $2.1 million such that our net debt position is currently $27.4
million. The Company's liquidity position is increasingly strengthening due to
the continued operational improvements and stronger market prices for gold and
silver which are driving increased Company operational cash flow
contributions. The Company's improving operating cash flow profile combined
with the Company's $60 million project debt financing facility further
demonstrate that the Company is sufficiently funded to progress the Company's
turnaround phase into the later part of 2008, at which point the Company's
business model is scheduled to generate positive net cash flow.
    Mr. Scott Perry, CFO of Gammon Gold stated, "In February, we continued to
gain momentum with our production profile at Ocampo and we continued to post
strong cost reductions which resulted in solid cash flow performance and cash
generation. Favourably impacted by the strong metal prices we are realizing,
we also elected to utilize surplus cash reserves to make an accelerated
principal pay down of $2.1 million on our financing facility." Mr. Perry
continued, "Given the improved operating performance momentum, our financial
foundation has improved significantly which combined with our undrawn debt
financing facility places the company in very strong stead to fully fund the
company's recapitalization initiatives up to the latter part of 2008 when the
business anticipates maintaining steady state positive free cash flow status"
    Mr. Rene Marion, CEO of Gammon Gold stated, "I am very pleased to again be
reporting positive company wide improvements in both production and financial
metrics. As previously announced, we have assembled a proven and strengthened
management team who have successfully orchestrated turnaround strategies
before and have the skills necessary to continue to execute Gammon's growth
strategy. This new management team continues to drive and engineer the
company's turnaround and the success we have achieved to date is evident in
the improvements we have achieved in both production and in total cash costs."
Mr. Marion continued, "For the entire Gammon team this is an exciting time.
Our business plan strategy is well rooted with a strong positive momentum,
which I firmly believe that we will continue to deliver turnaround results
that will be witnessed in the positive news we expect to be releasing in the
coming weeks."

    Ocampo - February 2008

    Gammon Gold is pleased to advise that overall improvements achieved to
date at its Ocampo mine are continuing well into Q1 2008. February's
production improved by 34.4% over January and by 23.2% over average monthly
production over Q4. Production at Ocampo was 7,890 ounces of gold and 300,115
ounces of silver for a gold equivalent production of 13,553 ounces, the best
production month since June 2007. A total of 7,281 ounces of gold and 274,744
ounces of silver were sold during the month or 12,466 gold equivalent ounces.
    Open pit mining performance was very strong in the second half of February
due to one in-maintenance excavator being re-commissioned in mid-February
following which, productivity was immediately increased with daily tonnage
rates increasing to an average of more than 85,000 tonnes per day which is
above the 80,000 tonne per day target. The mine's second excavator is expected
to be re-commissioned in late-March which the Company anticipates will realize
additional improvements in productivity and decreased costs due to presently
unsuited on-lease equipment being phased out. For Ocampo, total cash costs for
February were $451 per gold equivalent ounce, the lowest since declaring
commercial production in January 2007, a decrease of 9.4% over January, 16.2%
over Q4 2007 and 45.2% decrease over Q3 2007.

            Ocampo Average Monthly Au(e) Production vs Cash Costs

    - During February additional improvements in cash costs were clearly
      evident. These cost reduction efforts throughout the operation continue
      to gain traction and these incremental improvements are expected to
      continue in 2008. Capital expansionary project initiatives that will be
      implemented in 2008 will enhance productivity and reduce operating
      costs in all areas. Most particularly, the optimization of our
      processing facilities, access to 20 megawatts of grid power and the
      delivery of underground equipment will provide significant costs
      savings and enhance overall capacity.
    - The Santa Eduviges decline has intercepted the main mineralized
      structure and we continue to deliver the development ore to the Mill
      for processing.
    - The Company has implemented a bonus incentive program for exemplary
      performance for all operating departments at Ocampo. In the early
      implementation of this program indications are that this incentive
      program is resulting in increased productivity throughout the Ocampo
      operation and is particularly evident in underground development, as
      indicated by the KPI charts in this press release. As the impact of the
      productivity bonuses continues to be internalized by the workforce we
      anticipate that there will be additional productivity gains achieved.
    - By month end in February stockpiles stood at 10,505 tonnes ahead of the
      mill and 106,498 tonnes ahead of the crushing plant. These will
      continue to serve the operation to minimize the possibility of
      production interruption due to possible feed variability from the
      underground or the open pit. The focus going forward will remain on
      maintaining stockpiles ahead of both processing facilities to ensure
      ongoing production during any period of downtime.

    Russell Tremayne, COO of Gammon Gold stated, "Continued improvement is
evident in both our overall production and cost performance metrics in
February. Each month we are building on our previous successes and fully
expect to continue that momentum in the months ahead. Even with the improved
results we have achieved to date, we still have many areas of opportunities to
gain additional traction. Some key areas of our focus are optimizing the
processing facilities, the deployment of additional equipment, as well as
overall improved mine planning and development. We re-commissioned one
excavator in mid-February and the second unit is expected to be
re-commissioned in late March at which time the Open Pit will return to full
production." Mr. Tremayne continued, "We have initiated training on long-hole
mining to our underground workforce that is supported by a successful
production bonus which has already demonstrated a positive impact on
productivity. We continue to accelerate development in the underground to
provide greater flexibility and enhanced mine planning. Presently we have
560,000 tonnes of underground ore fully developed, which represents
approximately one year of production and upon the delivery of additional
equipment for the underground operation that is scheduled to arrive in March
and April, we anticipate seeing immediate improvement in underground
production. We took delivery of one scoop in late February with two additional
scoops already in the country ready for delivery and have recently signed a
maintenance contract for underground equipment that will facilitate optimal
equipment availabilities. We continue to focus on decreasing dilution by
providing additional training to our operators that will be supported by the
recent implementation of a Quality Assurance / Quality Control program that is
overseen by a strong and experienced operations team."
    Mr. Tremayne went on to say, "We are pleased to provide our KPI charts for
February. We continue to see an overall positive trend of ongoing productivity
enhancements that is very encouraging and we will continue to demonstrate
ongoing improvements throughout the balance of the first quarter and into the
second quarter. Particularly encouraging is the progress we are making in the
development of the underground mine where we currently have approximately one
year of production of fully developed ore available with a target of 18 months
of fully developed ore."


    Total Meters Developed Waste & Ore - Ocampo

    Underground development decreased in February over January due to the
shorter month and the reduced availability of underground trucks. Additional
underground trucks are expected to arrive in April. We are targeting to
achieve 50 development metres per day and these development activities,
augmented by the implentation of a Quality Assurance and Quality Control
program, will allow the Company to have greater flexibility in mining methods
that will result in increased productivity and decreased dilution.

    Underground Dilution

    Dilution decreased to 17% in February over January and should remain
relatively stable over the next few months. Dilution has been reduced
significantly since October. The re-introduction of longhole mining methods
had a positive impact on reducing dilution. In February the Company
implemented a Quality Assurance / Quality Control program aimed at improving
productivity and decreasing dilution.

    Average Tonnes per Day - Underground

    Average daily underground production decreased in February to 809 tonnes
per day over January as a result of decreased dilution and the unavailability
of underground equipment. Overall, we continue to benefit from the
re-commencement of long-hole production, improved development rates and the
implementation of a new bonus incentive program for underground miners. We
expect that as we take delivery of additional underground equipment in March
and April, we will achieve an increase in productivity.

    Average Au(e) Grade - Underground

    Underground grades increased 10% in February over January and 15% over Q4
as dilution control initiatives gain traction and access to higher grade ore
improves. Quality control programs and sequencing issues continue to be

    Cost per Tonne - Underground

    Costs per tonne in February increased to $40.34 per tonne over January
that was primarily impacted by retroactive underground compensation
adjustments paid out in February. The delivery of additional underground
equipment in March and April and increased development activities that provide
improved flexibility and optimization of mining methods are expected to result
in reductions to below January's levels in average mining cost per tonne.

                             Open Pit Operations

    Average Tonnes per Day - Open Pit

    Average daily production in February from open pit operations increased
significantly and averaged more than 85,000 tonnes per day immediately upon
one excavator being re-commissioned in mid-February. We expect productivity to
further increase once the second excavator is re-commissioned in late March at
which time normal operations will resume at the Open Pit. We are still
targeting above the Feasibility 80,000 tonnes per day and we are confident in
attaining this target in the latter part of the first quarter of 2008.

    Tonnes per Month to the Mill - Open Pit

    In February, 19,870 tonnes of ore from the Open Pit grading 6.8 g/t was
directed to the Mill in order to benefit from the better recoveries of the
Mill circuit. As the capacity of the Mill is expanded, we will be able to
increase the tonnage of high grade ore from the Open Pit to the Mill to take
advantage of the better economics of the Mill.

    Average Tonnes per Day - Heap Leach

    Ore feed to heap leach pad continues to improve despite mechanical and
maintenance issues in the past two quarters. Tonnes to the Heap Leach
increased by 1.4% in February over January in spite of increased tonnes being
re-directed to the Mill due to increased productivity achieved at the Open Pit
and feed from stockpiles ahead of the Heap Leach that was placed on the pad.

    Strip Ratio

    The strip ratio increased in February due to pre-stripping activities at
the high grade Picacho and Conico Pits and it is anticipated that this strip
ratio will decrease in March and remain relatively stable in the coming

    Stock Pile - Heap Leach

    In February the stockpiles ahead of the Heap Leach Pad decreased over
January as high grade Open Pit ore was re-directed to the Mill and feed from
the stockpile was placed on the Leach Pad. We will continue to increase the
stockpiles of low grade ore ahead of the Heap Leach to ensure uninterrupted
processing as well as maximizing the ore head grade delivered to the leach
pad. This will also allow production to continue during unfavourable weather
conditions which impact on open pit operations on occasion.

    Cost per Tonne - Open Pit

    Cost per tonne in the Open Pit in February increased over January as a
result of the continued reliance on leased equipment, spare parts and the
rebuild of the excavators. Costs are anticipated to reduce once the second of
two excavators is re-commissioned and we discontinue the use of the leased
loading equipment in April. We continue to identify areas where additional
cost efficiencies can be achieved.


    Average Tonnes per Day - Mill

    In February, tonnes per day at the Mill increased over January and
remained close to design capacity at 1,435 tonnes per day. By establishing a
stockpile ahead of the Mill and with the general improvement in ore feed from
the underground, we anticipate that the Mill will continue to operate at or
above design capacity in Q1. We are reviewing the economics of increasing the
capacity at the Mill to 2,800 tonnes per day and anticipate having the
additional capacity available in the second half of 2008.

    Mill Availibility

    Mill availability increased to 80% in February as a result of the Company
having access to an additional 5 megawatts of grid power that has reduced the
reliance on the diesel generators. By the latter part of 2008 the Company will
have access to 20 megawatts of grid power that will eliminate the reliance on
the diesel generators and provide a more economical and reliable power supply.

    Average Grade Au(e) - Open Pit & Underground

    Average grades to the Mill have continued to improve primarily due to the
deployment of QA/QC programs in the underground operation. As we continue to
accelerate development and optimize mining methods and decrease dilution, we
anticipate continued improvement in overall grades to the Mill. We anticipate
that this positive trend will continue as Underground productivity improves.

    Cost per Tonne - Mill

    Costs per tonne increased in February primarily due to provision of
inventory spares but are expected to decrease in the months ahead and
additional cost improvements are anticipated through power and reagent
consumption and throughput enhancements.

                                 Heap Leach

    Metal Recovery Life of Mine

    Recoveries in February were negatively impacted as fewer tonnes were
placed on the pad in November and December, however overall recoveries
continue to trend towards life of mine design averages. The approximately
120,000 tonnes of ore that were not under leach due to construction activities
are now under leach.

    Head Grade - Heap Leach

    Grades to the Heap Leach increased to 1.17 g/t in February, in line with
plans. In February, more higher grade ore from the Open Pit was directed to
the Mill. In December the cut-off grade was lowered from 0.4 g/t Au eq to 0.3
g/t Au eq but the head grade of material delivered to the Heap Leach Pad went
up due to stockpiling low grade material in front of the Crusher.

    Cost per Tonne - Heap Leach

    Per tonne costs increased in February as compared to January but remained
lower than Q4 average costs. Cost improvements are anticipated going forward
as we gain additional traction from our cost reduction programs.

    Ocampo Underground

    Productivity in February was consistent with January and improved over Q4
in the underground primarily as a result of increased development, the
re-introduction of long-hole mining methods and decreased dilution. Grades
from the underground increased to 7.50 g/t gold equivalent over Q4.
Additionally, ongoing development in the underground provides more flexibility
and better sequencing in the underground. The Company will continue to
implement strategies that will continue to reduce costs and improve
productivity. We will also continue to accelerate development so as to improve
access to higher grade ore and maximize flexibility. The recently implemented
bonus schedule has been favourably received and is expected to continue to
positively impact productivity going forward. The Company has commissioned a
new jumbo and loader and expects to take delivery of additional underground
equipment in March or April that will have an immediate impact on productivity
and accelerate the development of the underground.

    Ocampo Open Pit

    Productivity in the Open Pit improved in February once one of the two
excavators was re-commissioned in mid-February. The second excavator is
expected to be re-commissioned in late-March at which time it is anticipated
that productivity in the Open Pit will increase immediately. The Company has
leased two additional loaders to supplement the existing fleet during, however
once the second excavator is fully operational we will discontinue the use of
the leased equipment expected to be in April, that will have an immediate
impact on costs. Productivity is expected to return to, or exceed, feasibility
study levels in the coming months. In February we delivered more high grade
ore to the Mill to supplement the feed to the Mill and to benefit from the
better economics of the Mill.

    Ocampo Mill Circuit

    During February tonnes per day improved over January and remained near
capacity at 1,435 tonnes per day. Grades improved to 7.16 g/t gold equivalent
from 6.34 g/t in January as a result of higher grade ore from both the
underground and open pit being delivered to the Mill. Mill availability
improved to 80% in February primarily as a result of the access to 5 megawatts
of additional grid power in late January that has provided a more economical
and more reliable source of power to the Mill. Continuous improvements in
availabilities remain on target for 2008. Metallurgical recoveries in February
were an average of 95% gold and 89% silver.

    Ocampo Heap Leach Circuit

    Recoveries at the Heap leach pad remained stable in February. During the
month 221,787 tonnes were placed on the Heap Leach which is a decrease over
January due to the shorter month. By the end of February, the 120,000 tonnes
of ore that was not under leach due to the expansion of the Heap Leach pads
was placed under leach. In February, we continued to haul from the old
tailings that average 1.68 g/t gold equivalent to the Heap Leach Pad. We
believe that taking these high grade tails will significantly reduce costs for
the Heap Leach over the next few months and expect that we will have stacking
completed before the start of the wet season.
    Mr. Marion concluded, "February was once again one of the best operational
performances in the history of the company which was largely evident in
improvements in our financial metrics for the month. Particularly notable was
the Company's cash flow result which established an opening working capital
cash position of $1.9 million while also facilitating an accelerated debt
financing facility principal repayment reduction that has decreased our net
debt position to $27.4 million. Our portfolio's strong performance in the
quarter to date period gives the team and I, strong confidence that we will
achieve our goals and accordingly, we have updated our forecast scorecard for
the end of Q1."

    - We have targeted Q1 2008 production at the low to mid point of 56,000
      to 62,000 gold equivalent ounces (inclusive of El Cubo)
    - We anticipate lower total cash costs for Q1 2008, be significantly
      lower than the previous guidance of between $580 to $600 per gold
      equivalent ounce.
    - Expansion and Sustaining Capital expenditures are now anticipated to be
      between $10 and $14 million
    - We are committed to providing an update on 2007 year end reserves and
      resources at the end Q1 2008
    - We also expect to release our 2008 operating and total cash cost
      guidance together with a 3-year outlook at the end of Q1 2008
    - Since November, we have already experienced positive operating cash
      flow three of the last four months and we expect to achieve sustained
      positive operating cash flow in Q1 2008. We anticipate being
      sustainably Net Free Cash flow positive in the latter part of 2008 once
      expansion capital for the heap leach facility, processing facility and
      the continued development of the Santa Eduviges decline is concluded
    - We envision that our planned continued reduction in total cash costs
      will position the Company not to take any further accounting provisions
      in Q1 2008
    - Performance management systems that are aligned with the Mission and
      Strategy to ensure delivery of results both operationally as well as
      corporately have been introduced and will become fully implemented in

    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
    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 reclamations
expenses. Forward-looking statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable by the Company,
are inherently subject to significant business, economic, competitive,
political and social uncertainties and contingencies. Many factors could cause
the Company's actual results to differ materially from those expressed or
implied in any forward-looking statements made by, or on behalf of, the
Company. Such factors include, among others, known and unknown uncertainties
and risks relating to additional funding requirements, reserve and resource
estimates, commodity prices, hedging activities, exploration, development and
operating risks, illegal miners, political and foreign risk, uninsurable
risks, competition, limited mining operations, production risks, environmental
regulation and liability, government regulation, currency fluctuations, recent
losses and write-downs, restrictions in the Company's loan facility,
dependence on key employees, possible variations of ore grade or recovery
rates, failure of plant, equipment or process to operate as anticipated,
accidents and labour disputes. Investors are cautioned that forward-looking
statements are not guarantees of future performance and, accordingly,
investors are cautioned not to put undue reliance on forward-looking
statements due to the inherent uncertainty therein.

For further information:

For further information: please visit the Gammon Gold website at or contact: Rene Marion, Chief Executive Officer, Gammon
Gold Inc., (902) 468-0614; Anne Day, Director of Investor Relations, Gammon
Gold Inc., (902) 468-0614

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