Gammon Gold Releases Ocampo Key Operational Indicators for December 2007

    TSX: GAM / AMEX:   GRS / BSX: GL7

    Gammon Gold reports on Ocampo Key Operational Indicators in December, a
    greater than 36% reduction in Ocampo's December Total Cash Costs per
    ounce from Q3, and improved operating cash flow in Q4.

    HALIFAX, Jan. 21 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and
AMEX:  GRS): Gammon Gold is pleased to advise that improvements achieved at its
Ocampo mine are continuing and are anticipated to continue into Q1 2008.

    Ocampo - December 2007

    Production at Ocampo increased in December with production of 6,802
ounces of gold and 251,072 ounces of silver for a gold equivalent production
of 11,216 ounces. A total of 8,394 ounces of gold and 313,841 ounces of silver
were sold during the month or 13,912 gold equivalent ounces. During December,
the Company realized an average gold price of $801/oz and an average silver
price of $14.08/oz. For Ocampo, total cash costs (prior to the recording of
any potential quarter end adjustments occurring in the normal course of
events) for December was $525 per gold equivalent ounce, a decrease of 36% as
compared to Q3 and $538 per gold equivalent ounce in Q4, a decrease of 35% as
compared to Q3.

    Ocampo Average Monthly Gold & Silver (Au eq) Production vs Total Cash
    Costs per Ounce


    Consolidated Overview

    Despite a labour stoppage between Christmas and the New Year, the Company
was still able to achieve an overall 2.2% increase in production (4.2% at
Ocampo) in Q4 over Q3. For the fourth quarter, the Company produced a total of
27,571 ounces of gold and 1,140,797 ounces of silver or 48,124 gold equivalent
ounces. Production estimates provided in the December 31, 2007 press release
were based on inventory in zinc precipitate, however as a result of the labour
stoppage, production of a certain portion of these ounces were delayed until
January and therefore could not be calculated in December production figures
as consistent with previous reporting. During the fourth quarter the Company
sold a total of 28,665 ounces of gold and 1,183,729 ounces of silver or 49,969
gold equivalent ounces, an increase of 11.4% over Q3 (an 18% increase at
Ocampo). During the fourth quarter, the Company realized an average gold price
of $794.88/oz and an average silver price of $14.32/oz. Operating cash flow
for December reduced to ($3.5 million) due to year end expenses as well as
changes to working capital.

    Operating and Free Cash Flow 2007 (unaudited)


    Overall, the fourth quarter was the strongest quarter reported in 2007
and the financial indicators clearly demonstrate that we are making tremendous
strides in advancing the Company's turnaround. Operating cash flow in Q4
improved to ($240,000) or by 98% as compared to ($10.6 million) in Q3 and
clearly demonstrate that productivity improvements achieved at Ocampo, coupled
with our aggressive cost management strategies is positively impacting costs.
Free cash flow improved to ($14.7 million) or by 59% in Q4 as compared to
($36.7 million) in Q3. As the Company completes its investment in capital
expansion projects, anticipated to be by mid-2008, the Company anticipates
being free cash flow positive in the later part of 2008. Additional
improvements are anticipated in Q1 2008 as many production and cost savings
initiatives gain additional traction and we leverage strong current metal
prices. Capital costs during the quarter were in line with internal expansion
capital projections at $14.7 million. Cash costs for Q4 are expected to
decrease by 23% to $590 per ounce (net of any year end adjustments) over Q3
cash costs. Continued improvements in total cash costs will be driven by the
Company's focus on increased production and cost optimization efforts.
    The Company (inclusive of Gammon Gold's El Cubo mine) remains on target
to produce from 56,000 to 62,000 gold equivalent ounces during Q1 at a total
cash cost that is consistent with anticipated cash costs for Q4 2007. Total
capital expenditures at Ocampo and El Cubo in Q1 are anticipated to range from
$16 to $20 million in Q1 2008. As of January 1, the Company has drawn
$30.5 million of its $60 million revolving facility
    Mr. Glenn Hynes, CFO of Gammon Gold stated, "The improvement in
production achieved at Ocampo is positively impacting costs and additional
improvement is anticipated in Q1 2008 as many initiatives gain additional
traction and we benefit from the improving metal prices." Mr. Hynes continued,
"Equally important, we will continue to tightly manage expenditures to ensure
sufficient liquidity during this turnaround period. I am very encouraged by
the momentum we are gaining in all areas of our operation and I look forward
to maximizing this positive momentum."
    Rene Marion, CEO of Gammon Gold stated, "We continued to make advances at
Ocampo during December that demonstrate that we are on the right track in
continuing the turnaround at our Ocampo mine. The production metrics for
December clearly confirm that despite the business interruption, the
initiatives we have implemented at Ocampo are having a positive impact on
    Mr. Marion went on to say, "As we enter Q1, 2008, we continue to provide
the following guidance targeted for El Cubo and Ocampo:"

    Q1 2008 Forecasted Highlights          Ocampo & El Cubo
    Production (oz  Au (eq))               From 56,000 to 62,000
    Total Cash Costs                       In line with those estimated for
                                           Q4 2007
    Expansion and Sustaining Capital       $16-20 Million

    "The Company continues to remain satisfied that it has access to
sufficient liquidity to fully execute its growth strategy through this
turnaround period. Additionally, we are encouraged by significant improvements
in both operating and free cash flow as well as in overall productivity and
therefore, remain confident that we will continue to maintain this positive
momentum and achieve, or exceed, our Q1 2008 production guidance."

    Ocampo Highlights

    - During December the Company continued to realize the positive impact
      from the strategies initiated at Ocampo. Cost reduction efforts
      throughout the operation continue to gain traction and these
      incremental improvements will continue into 2008. The Company has also
      enhanced its mine management team by appointing Russell Tremayne as
      Director of Operations. Mr. Tremayne brings over 35 years of experience
      in mining. Initially, Russell will assume the role as acting General
      Manager of Ocampo where his background and experience in turnaround
      situations will be key to completing the turnaround at Ocampo. While at
      Highland Gold Mining Corporation, Russell was responsible for all
      operational activities including production, development/stripping,
      mill operation, engineering and production planning, logistics and
      purchasing, quality control, utilities and communications and
      successfully addressed the operational issues at Highland's MNV mine.
      He has a great deal of experience and success dealing with safety and
      environmental issues which will be of great benefit to Gammon.

    - We expect that an additional 5 megawatts of main grid power will be
      operational in the last week of January, and this will immediately
      reduce both our reliance on diesel generated power and reduce costs.
      The access to grid power also minimizes exposure to business
      interruption should there be problems with one of our generators. The
      additional 5 megawatts will increase main grid power to a total of 7

    - The Santa Eduviges decline has advanced a total of 684 metres and by
      the end of December was only 70 metres from cross cutting the main
      mineralized structure.

    - During early Q1 2008 the Company will roll out a bonus incentive plan
      for exemplary performance for all operating departments at Ocampo. It
      is anticipated that the impact of this incentive program will result in
      significantly enhanced productivity throughout the Ocampo operation.

    - During December stockpiles of 12,500 tonnes ahead of the mill and
      140,000 tonnes ahead of the crushing plant were established 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.

    Dave Keough, COO of Gammon Gold stated, "The implementation of optimized
mining methods has positively impacted productivity at Ocampo, most
particularly we are seeing a significant increase in tonnes and gold/silver
head grades due to lower dilution from the underground as a result of the
re-introduction of longhole mining. We continue to drive improvements in
productivity throughout Ocampo by continuing to introduce enhanced mining
methods, the deployment of equipment as well as overall improved mine planning
and development and equipment availability. In Q1, We will continue to work
through outstanding maintenance and equipment productivity issues particularly
with the Heap Leach primary crusher and open pit loading fleet. Dilution
underground reduced by a further 60% from November and Q4 dilution of 28% was
22% lower than the weighted average of 36% for the previous 3 quarters. We
continue to focus on dilution by providing further operator training and
implementing a Quality Assurance / Quality Control program in Q1, 2008.
    Mr. Keough went on to say, "As the following graphs demonstrate, overall
we are seeing productivity improvements in all areas of mine and this will
carry forward into the balance of Q1 and beyond. Particularly encouraging is
the 33% increase in underground production in December and we are seeing this
trend continue into January. "


    Underground dilution


    In December, dilution was further reduced by over 60% over November to
    approximately 18%.The re-introduction of longhole mining method had a
    positive impact on reducing dilution

    Tonnes per day - Underground


    Average daily underground production is beginning to increase as a result
    of with the re-commencement of longhole production, improved development
    rates and the implementation of a new piece-meal bonus incentive program
    for underground miners and achieved close to 1,000 tonnes per day despite
    the work stoppage in late December.

    Average Grade - Underground Au(e)


    Underground grades continue to improve as dilution control initiatives
    gain traction and access to higher grade ore improves. Since July,
    development, quality control programs and sequencing issues continue to
    be addressed and have largely been responsible for the 46% improvement in
    underground grades since that time.

    Cost per Tonne - Underground


    Average costs per tonne have averaged less than $30 per tonne in the past
    number of months. Further reductions in costs are expected to be achieved
    as the Company continues to implement improved mining methods. Increased
    development activities that provide improved flexibility and optimization
    of mining methods is expected to result in a further reduction in average
    mining cost per tonne. December's costs were affected by one off
    Christmas and end of year production bonuses, which contributed $4.45 to
    costs per tonne for the month.

                             Open Pit Operations

    Average Tonnes per day - Open Pit


    Average daily production from the open pit operations continues to
    improve overall, however December tonnage was impacted by the lack of
    Loading equipment due to scheduled major maintenance programs. In early
    January the Company leased additional equipment to supplement the
    existing loading fleet (while the fleet undergoes such maintenance
    programs. 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.

    Feed to the Mill from Open Pit per month


    High grade ore from the Open Pit continues to be directed to the Mill in
    order to benefit from the better recoveries of the Mill circuit. During
    December, less tonnes from the Open Pit were re-directed to the Mill as a
    result of the increased tonnage at a higher grade from the Underground.
    As the capacity of the Mill is expanded, we will be able to send more
    high grade ore from the Open Pit to the Mill.

    Average Tonnes per day - Heap Leach


    Ore feed to heap leach pad continues to improve despite weather,
    mechanical and maintenance issues in the past two quarters. Tonnes to the
    Heap Leach increased in December as fewer tonnes were re-directed to the
    Mill and feed from stockpiles ahead of the Heap Leach was placed on the

    Strip Ratio


    The strip ratio declined significantly in December and it is anticipated
    that this strip ratio will remain relatively stable in the coming months.
    However we will continue our focus on reducing the strip ratio at the
    Open Pit.

    Stockpile - Heap Leach


    In order to ensure uninterrupted processing and maximizing the ore head
    grade delivered to the leach pad we will continue to increase stockpiles
    of low grade ore ahead of the Heap Leach. This will also allow production
    to continue during unfavourable weather conditions which impact on open
    pit operations on occasion.

    Cost per tonne - Open Pit


    Costs per tonne increased in December due to scheduled maintenance of
    equipment as well as increased labour costs related to annual and
    December bonuses that contributed $0.09 to costs per tonne for the month.


    Average Tonnes per day - Mill


    Tonnes per day at the Mill remained close to design capacity in December.
    Despite a labour stoppage in late December, tonnes per day remained near
    capacity at 1,297 tonnes per day. By establishing a stockpile and with
    the improvement in ore feed from the underground, we anticipate that the
    Mill will continue to operate at 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 Availability


    Mill availability continues to improve reaching 88% in December. Our
    target is to achieve 90% availability in Q1 2008.

    Avg Grade eAu OP & UG


    Average grades to the Mill have improved primarily as a result of the
    additional high grade ore from the Underground displacing ore from the
    pit. As we continue to accelerate development and optimize mining methods
    and decrease dilution, we anticipate continued improvement in overall

    Cost per Tonne - Mill


    Costs per tonne continue to improve dramatically as a result of cost
    reduction programs and further cost improvements are anticipated through
    power and reagent consumption and throughput enhancements. Annual and
    December bonuses contributed $1.72 to costs per tonne in December.

                                 Heap Leach

    Gold & Silver Recovery - Heap Leach


    Recoveries remain solid. During the first half of 2008 the recoveries
    will again trend upward (similar to first half of 2007) as pond levels
    reduce and the fringes of the leach pad are put under leach. These areas
    are not currently under leach due to construction of the pad expansion.

    Head Grade - Heap Leach


    Grades to the Heap Leach improved in December as more high grade ore from
    the Open Pit was directed to the Heap Leach pad due to the increase
    tonnes mined of high grade underground ore which took priority in the
    mill. In December the cutoff 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


    Costs in December were impacted by increased maintenance costs as well as
    increased labour costs due to annual production and Christmas bonuses
    paid in December, which contributed $0.34 to costs per tonne.

    Mr. Marion stated, "In early January we made changes to mine management at
Ocampo to create a more effective and motivated team. As part of strengthening
operations at Ocampo, we are pleased to welcome Russell Tremayne as Director
of Operations. Russell was the Director of Operations at Highland Gold Mining
Corporation and reported directly to me, so I am personally familiar with his
skills and therefore keenly aware of what an asset he will be to the Gammon
team. Russell was instrumental in significantly improving productivities
whilst championing a safety culture and improving safety metrics" Mr. Marion
continued, "We are very fortunate to have attracted such a high caliber
individual to the Gammon team and look forward to the successes the operations
will achieve under Russell's guidance."

    Ocampo Underground

    Regardless of the labour disruption between Christmas and the New Year,
productivity in December improved in the underground primarily as a result of
increased development, the re-introduction of longhole mining methods and
decreased dilution. As a result grades from the underground improved by 19% to
6.43 g/t gold equivalent over Q3 and grades are expected to continue to
improve as the underground operation ramps up. 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 introduced bonus schedule is expected to
positively impact productivity going forward.

    Ocampo Open Pit

    Productivity in the Open Pit declined in December due to scheduled
maintenance programs required for the loading fleet (loaders and shovels). The
Company has leased two additional loaders to supplement the existing fleet
during this downtime and productivity in expected to return to feasibility
study levels in February. In December less high grade ore was directed to the
Mill as a result of the increased tonnage from the underground. This higher
grade ore from the Open Pit was directed to the Heap Leach, where grades from
improved by 11% to 1.23 g/t gold equivalent in December.

    Ocampo Mill Circuit

    During December tonnes per day remained near capacity at 1,297 tonnes per
day despite the labour disruption experienced in late December. The
improvement in underground productivity resulted in more high grade ore from
the underground being delivered to the Mill than in previous months, and this
has impacted head grades significantly where grades improved to 6.00 g/t gold
equivalent or 33% over Q3. Mill availability improved to 88% in December and
is targeted to reach over 90% in the first half of 2008. Metallurgical
recoveries also continued to improve to an average of 96% gold and 93% silver.
Costs per tonne remain consistent on average with previous months and further
production enhancements are available that should allow for additional cost
reductions going forward as more traction is realized from our cost saving

    Ocampo Heap Leach Circuit

    Recoveries at the Heap leach pad remained strong in December and were
consistent with previous months. During the month the cutoff grade was lowered
from 0.4 g/t gold equivalent to 0.3 g/t gold equivalent, however the head
grade of material delivered to the Heap Leach Pad went up due to stockpiling
low grade material in front of the Crusher. During December 222,000 tonnes
were placed on the Heap Leach a 16% increase over Q3. Most recently, we
started to haul 150,000 tonnes of old tailings that average 1.68 g/t gold
equivalent to the Heap Leach Pad. Bottle roll tests are being done on this
material and recoveries are encouraging. We believe that taking these high
grade tails will significantly reduce costs for the Heap Leach going over the
next few months. Costs increased in December as a result of increased
maintenance costs as well as additional labour costs due to one-time bonuses
paid out in December.
    Mr. Marion concluded, "My confidence in the sustainability of our
initiatives over the next 3 months continues and I feel confident in
reaffirming our forecast scorecard for the end of Q1 for Ocampo. My goal in
communicating these objectives is to provide shareholders with benchmarks to
measure my performance as CEO as well as that of the Senior Management team."

    - We have targeted Q1 2008 production of between 56,000 to 62,000 gold
      equivalent ounces (inclusive of El Cubo)
    - We have targeted Total Cash Costs for Q1 2008 to be consistent with
      those estimated for Q4, 2007
    - Expansion and Sustaining Capital expenditures are anticipated to be
      between $16 and $20 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
    - We have already experienced positive operating cash flow in November
      and we expect to achieve sustained positive operating cash flow in Q1
      2008. We anticipate being 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
    - The Company will endeavor not to take any further accounting provisions
      in Q1 2008
    - Along with the Board and the Senior Management team, we will develop a
      clear Corporate Vision. Under the Board's guidance, Management will
      execute that strategy in 2008 and beyond.
    - 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'', ''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; Glenn Hynes, Chief Financial Officer, Gammon Gold
Inc., (902) 468-0614

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