Gammon Reports Best Ever Cost Margins and Continued Strengthening of Performance at Ocampo During the Fourth Quarter: Meets Operational Guidance for 2010

TSX: GAM / NYSE: GRS / BSX: GL7

TORONTO, Jan. 9 /CNW/ - Gammon Gold Inc. ("Gammon") (TSX:GAM and NYSE: GRS): is pleased to provide preliminary results from the Ocampo mine for the fourth quarter and 2010. Operations at Ocampo continued to strengthen in the fourth quarter benefiting from the strong performance of the North-East underground mine. All figures reported are in U.S. dollars unless otherwise indicated.

During the fourth quarter, the Company reported production at Ocampo of 29,384 gold ounces and 1,199,829 silver ounces, or 51,199 gold equivalent(1) ounces (realized(2) 53,030 ounces) at total cash costs of $426 per gold equivalent(1) ounce (realized(2) $410). On a by-product basis, taking Ocampo's silver production as a credit, total cash costs per ounce of gold sold were negative $390. Ocampo achieved a record margin of $955 per gold equivalent ounce(1) or 69%, and an operating cash flow for the period of approximately $40.0 million.

For the year ended December 31, 2010, the Company reported production at Ocampo of 103,220 gold ounces and 4,417,413 silver ounces, or 183,538 gold equivalent(1) ounces at total cash costs of $422 per gold equivalent(1) ounce, meeting the Company's guidance for 2010.

"Throughout 2010 we have reported significant quarter over quarter improvements at Ocampo in virtually every key performance indicator. We have met our 2010 production and cash cost guidance and attained a strong and consistent production profile that leverages our record margins," said René Marion, President and Chief Executive Officer. "Our strong cash flow profile and robust financial position, including a cash balance of $113 million, provides us with the flexibility to invest in our future, and fully fund our growth strategy."

Recent Highlights

    <<
    -------------------------------------------------------------------------
    -   Development of the North-East and Santa Eduviges underground mines
        continue to benefit from having access to the additional workforce
        redeployed from the Company's El Cubo mine. More than 7,200 metres of
        development were completed in the fourth quarter
    -   Commercial production at Santa Eduviges commenced in late December
    -   On December 9, Gammon announced significant drill results for Reserve
        expansion and four new discoveries at Ocampo at Balvanera, El Rayo,
        Stockwork Hill and Polvorin
    -   On December 16, 2010, the Company announced that it has entered into
        a binding Letter of Intent with Aurion Resources Ltd. that will
        provide Gammon with an option to earn up to a 70% joint venture
        interest in the 12,985 hectare La Bandera Project located in Durango,
        Mexico
    -   The Preliminary Economic Assessment of the Guadalupe y Calvo
        development property is expected to be released later this month


    Ocampo Key Performance Metrics
    -------------------------------------------------------------------------
                                                                    % Change
    Underground    Q1 2010   Q2 2010   Q3 2010   Q4 2010      2010 (Q4 vs Q1)
    -------------------------------------------------------------------------
    Average tpd      1,377     1,500     1,596     1,671     1,537       21%
    Head grade
     gold (g/t)       2.33      2.22      2.16      2.52      2.27        8%
    Head grade
     silver (g/t)    160.0     138.1     125.9     166.4     144.5        4%
    Total
     development     3,903     4,744     6,546     7,220    22,413       85%
    -------------------------------------------------------------------------
                                                                    % Change
    Open Pits      Q1 2010   Q2 2010   Q3 2010   Q4 2010      2010 (Q4 vs Q1)
    -------------------------------------------------------------------------
    Average tpd     93,730   103,117    97,992   105,737   100,171       13%
    Head grade
     gold (g/t)       0.46      0.50      0.72      0.53      0.54       15%
    Head grade
     silver (g/t)     27.8      28.2      40.5      27.3      30.4       (2%)
    -------------------------------------------------------------------------
                                                                    % Change
    Mill Facility  Q1 2010   Q2 2010   Q3 2010   Q4 2010      2010 (Q4 vs Q1)
    -------------------------------------------------------------------------
    Average tpd      2,920     3,182     3,113     3,161     3,095        8%
    Head grade
     gold (g/t)       1.62      1.71      1.88      2.02      1.81       25%
    Head grade
     silver (g/t)    105.4      98.6     109.3     115.7     107.3       10%
    -------------------------------------------------------------------------
    Heap Leach                                                      % Change
     Facility      Q1 2010   Q2 2010   Q3 2010   Q4 2010      2010 (Q4 vs Q1)
    -------------------------------------------------------------------------
    Average tpd      7,328    10,017     6,830     9,553     8,434       30%
    Head grade
     gold (g/t)       0.34      0.40      0.46      0.39      0.39       16%
    Head grade
     silver (g/t)     20.8      22.6      26.5      22.8      23.1        9%
    -------------------------------------------------------------------------
                                                                    % Change
    Production     Q1 2010   Q2 2010   Q3 2010   Q4 2010      2010 (Q4 vs Q1)
    -------------------------------------------------------------------------
    Gold Ounces
     Produced       21,855    24,963    27,018    29,384   103,220       34%
    Silver Ounces
     Produced      960,817 1,066,998 1,189,769 1,199,829 4,417,413       25%
    Gold eq.(1)
     Ounces
     Produced       39,325    44,363    48,650    51,199   183,538       30%
    Gold
     Equivalency
     Ratio(2)           66        65        64        50        60      (24%)
    Gold eq.(2)
     Ounces
     Produced
     (Realized)     36,546    41,362    45,520    53,030   176,458       45%
    -------------------------------------------------------------------------
    Total Cash                                                      % Change
     Costs         Q1 2010   Q2 2010   Q3 2010   Q4 2010      2010 (Q4 vs Q1)
    -------------------------------------------------------------------------
    Total cash
     costs per
     gold eq.
     ounce (55:1)     $423      $430      $411      $426      $422        1%
    Total cash
     costs per
     gold eq.
     ounce
     (Realized)       $458      $461      $440      $410      $440       11%
    Total cash
     costs per
     gold ounce         $8      ($33)    ($121)    ($390)    ($146)   (4975%)
    >>

About Gammon Gold

Gammon Gold Inc. is a mid-tier gold and silver producer with properties in Mexico. Gammon's flagship Ocampo Property in Chihuahua State achieved commercial production in January 2007. Gammon also owns the suspended El Cubo mine in Guanajuato State and has the promising Guadalupe y Calvo development property in Chihuahua State. Gammon recently completed option purchase agreements to acquire the Mezquite Project in Zacatecas State, Mexico and the Venus project located north of the Ocampo mine. Gammon also recently signed a definitive agreement to acquire the Los Jarros Project in Chihuahua State. Since 2008, the Company has increased its Mexican land position by over 59% and has made strategic investments in Golden Queen Mining Co. Ltd. and Corex Gold Corporation. The Company's Executive Office is located in Toronto, Ontario.

    <<
                             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/A, which may be secured from Gammon Gold, or from the SEC's website at http://www.sec.gov/edgar.shtml.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

Certain statements included herein, including information as to the future financial or operating performance of the Company, its subsidiaries and its projects, constitute forward-looking statements. The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "continue", "budget", "estimate", "forecast", "may", "will", "schedule" and similar expressions identify forward-looking statements. Forward-looking statements include, among other things, statements regarding targets, estimates and assumptions in respect of gold and silver production and prices, operating costs, results and capital expenditures, mineral reserves and mineral resources and anticipated grades, recovery rates, future financial or operating performance, margins, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of construction, costs and timing of future exploration and reclamation expenses including, anticipated 2010 and 2011 results, operating performance projections for 2010 and 2011, our ability to fully fund our future growth internally, our ability to expedite the development of the Santa Eduviges underground, the continued positive results from our exploration programs, our ability to complete the Preliminary Economic Assessment of Guadalupe y Calvo in 4-6 weeks, 2010 and 2011 gold and silver production and the cash and operating costs associated therewith, the ability to achieve productivity and operational efficiencies, further improvements to silver recoveries resulting from improvements to the Ocampo mill and the timing of each thereof. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. Such factors include, among others, known and unknown uncertainties and risks relating to additional funding requirements, reserve and resource estimates, commodity prices, hedging activities, exploration, development and operating risks, illegal miners, political and foreign risk, uninsurable risks, competition, limited mining operations, production risks, environmental regulation and liability, government regulation, currency fluctuations, recent losses and write-downs, restrictions in the Company's loan facility, dependence on key employees, possible variations of ore grade or recovery rates, failure of plant, equipment or process to operate as anticipated, accidents and labour disputes. Investors are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, investors are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein.

    <<
    (1) Using the Company's long term gold equivalency ratio of 55:1
    (2) Gold equivalent ounces include silver ounces produced and sold
        converted to a gold equivalent based on the ratio of the actual
        realized sales prices of the commodities
    >>

SOURCE GAMMON GOLD INC.

For further information: please visit the Gammon Gold website at www.gammongold.com or contact: René Marion, Chief Executive Officer, Gammon Gold Inc., 416-646-3825; Anne Day, Director of Investor Relations, Gammon Gold Inc., 416-646-3825

Organization Profile

GAMMON GOLD INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890