Gammon Reports Preliminary Second Quarter Production and Updated 2009 Guidance
“While production at Ocampo was in line with Q1 2009, the 7-week labour disruption at
“Underground development and stope preparation at Ocampo is ahead of plan where underground development productivity has improved by over 105% year-to-date. Currently, we have 8 longhole stopes in production with 7 additional stopes anticipated shortly” stated
Second Quarter 2009 Production Highlights
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OCAMPO EL CUBO
Three Months Ended June June June June
30/09 30/08 30/09 30/08
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Gold ounces produced 28,035 32,946 3,079 10,519
Silver ounces produced 976,143 987,547 107,328 458,340
Gold equivalent ounces
produced 42,495 51,849 4,628 19,305
Gold ounces sold 28,310 33,523 2,151 10,750
Silver ounces sold 1,023,511 1,017,500 92,556 467,263
Gold equivalent ounces
sold 43,616 52,988 3,465 19,706
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Total cash costs per
gold equivalent
ounce $430-450* $463 $660-680* $618
Total cash costs per
gold ounce $165-185* $203 $535-555* $375
Gold to Silver Ratio 67:1 52:1 71:1 52:1
Realized Gold Price $922 $893 $891 $866
Realized Silver Price $13.82 $17.09 $12.50 $16.85
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Gold equivalent ounces
produced (55:1)** 45,782 50,901 5,030 18,852
Total cash costs per
gold equivalent ounce
(55:1)** $400-420 $472 $600-620 $633
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CONSOLIDATED
Three Months Ended June June
30/09 30/08
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Gold ounces produced 31,115 43,465
Silver ounces produced 1,083,471 1,445,887
Gold equivalent ounces
produced 47,123 71,154
Gold ounces sold 30,461 44,273
Silver ounces sold 1,116,067 1,484,763
Gold equivalent ounces
sold 47,081 72,694
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Total cash costs per
gold equivalent
ounce $445-465* $505
Total cash costs per
gold ounce $190-210* $245
Gold to Silver Ratio 67:1 52:1
Realized Gold Price $920 $897
Realized Silver Price $13.71 $17.08
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Gold equivalent ounces
produced (55:1)** 50,814 69,754
Total cash costs per
gold equivalent ounce
(55:1)** $415-435 $515
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* Total cash costs for the three month and the six month period of
2009 have not been finalized but are expected to fall within the
given range provided
** Comparative performance metrics using the Company's long term gold
equivalency guidance ratio (55:1)
Q2 2009 Operations Overview
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Ocampo
The development of the underground mine continued during the quarter and although solid progress continues to be made, the ramp-up of the underground mine is currently 8 weeks behind schedule. The Company responded to the delayed underground production by re-sequencing the open pit mine plan to accommodate the production tonnage shortfall. As a result of the increased presence of lower grade open pit production in the mill feed, grades to the mill were lower than planned which impacted production in the quarter.
In the latter part of the quarter, operations at the heap leach processing facility were temporarily suspended while the Company converted to a stacking system that utilizes a new overland conveyor, eliminating the need for many of the grasshoppers, which is expected to result in improved production rates going forward. Notwithstanding, the heap leach operations incurred 13 days of downtime during the quarter associated with this upgrade, which impacted production in the quarter.
During the quarter, production at
Six Months Ended June 30, 2009 Production Highlights
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OCAMPO EL CUBO
Six Months Ended June June June June
30/09 30/08 30/09 30/08
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Gold ounces produced 56,391 55,725 11,553 20,839
Silver ounces produced 1,965,181 1,831,009 469,590 925,849
Gold equivalent ounces
produced 84,492 90,561 18,111 38,539
Gold ounces sold 54,136 55,050 10,733 20,678
Silver ounces sold 1,928,311 1,813,960 462,727 919,397
Gold equivalent ounces
sold 81,901 89,555 17,205 38,238
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Total cash costs per
gold equivalent
ounce $430-450* $466 $545-565* $580
Total cash costs per
gold ounce $180-200* $185 $335-355* $302
Gold to Silver Ratio 69:1 53:1 70:1 52:1
Realized Gold Price $919 $905 $889 $902
Realized Silver Price $13.26 $17.36 $12.65 $17.33
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Gold equivalent ounces
produced (55:1)** 92,120 89,016 20,090 37,673
Total cash costs per
gold equivalent ounce
(55:1)** $390-410 $474 $490-510 $632
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CONSOLIDATED
Six Months Ended June June
30/09 30/08
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Gold ounces produced 67,944 76,564
Silver ounces produced 2,434,771 2,756,858
Gold equivalent ounces
produced 102,603 129,100
Gold ounces sold 64,896 75,728
Silver ounces sold 2,390,563 2,733,357
Gold equivalent ounces
sold 99,086 127,793
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Total cash costs per
gold equivalent
ounce $445-465* $499
Total cash costs per
gold ounce $205-225* $217
Gold to Silver Ratio 69:1 52:1
Realized Gold Price $913 $905
Realized Silver Price $13.15 $17.31
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Gold equivalent ounces
produced (55:1)** 112,212 126,689
Total cash costs per
gold equivalent ounce
(55:1)** $410-430 $508
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* Total cash costs for the three month and the six month period of
2009 have not been finalized but are expected to fall within the
given range provided
** Comparative performance metrics using the Company's long term gold
equivalency guidance ratio (55:1)
Ocampo Capital Projects Update
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During the latter part of the quarter and into July, the Company had
commissioned, or is in the process of commissioning, the final capital
expansion projects at Ocampo:
- Effective July 15, 2009, the Ocampo mine was fully connected to 20
megawatts of grid power and currently all areas of the mine are
accessing CFE grid power. The diesel generators that had been the chief
source of power, have been shut down, however, they remain on site as a
source of backup power that can service 100% of our power requirements.
In the coming weeks, there is a planned one-day shutdown in order to
accommodate the connection of Agnico Eagle's Pinos Altos property, the
Company's joint venture partner in the project, after which the project
will be fully complete. The lower cost and more reliable source of grid
power is expected to provide significant costs savings of approximately
$20-25 per gold equivalent ounce going forward.
- From June 18 to July 4, operations at the Ocampo heap leach processing
facility were suspended to accommodate the conversion to a more cost
effective overland conveyor stacking system, removing the grasshoppers
off the face of the heap. During the second quarter the Company
commissioned a re-optimization of the stacking design capacity of the
existing heap leach facility. The revised stacking design resulted in a
10-million tonne increase of the current heap leach pad capacity. This
additional capacity will allow the Company to further defer the capital
costs associated with the phase 3 heap leach expansion to 2011 and to
restore daily stacking rates to between 10-12,000 tonnes per day by
early August 2009.
- The Company is currently commissioning the Phase III mill expansion at
Ocampo that when complete, will increase mill capacity to between 3,300
to 3,400 tonnes per day. The 3-phased mill expansion has effectively
more than doubled the original name plate capacity of 1,500 tonnes per
day at a minimal capital cost of $4.7 million to date.
- Highlights of the underground operation include:
- Improvements in lateral development productivities by 105% or
6,707 metres year to date
- 17 headings available for jumbo development and a further 17 for
jackleg headings
- Over 2,900 metres of air and water pipes replaced
- 8 longhole stopes in production by mid-July with 7 more to be
brought into production within the next month
- Crews for 3 longhole drill rigs fully trained with two more
drills on order for delivery in 4 weeks
- A drilled inventory of 17,000 tonnes ready to blast
- Over 100 new miners recruited
Revised 2009 Consolidated Operational Outlook
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Production during the first six months of 2009 was lower than expected,
however with the successful end to the work stoppage at El Cubo the Company is
now able to provide revised guidance for 2009 that lowers production yet
maintains previous cash cost guidance and is summarized in the table below:
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Revised 2009 Consolidated Operational Outlook
2009
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Production:
Gold Ounces 150-170koz
Silver Ounces 5,600-6,400koz
Gold Equivalent Ounces 235-265koz
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Cash Costs:
Cash Cost per Gold Equivalent Ounce $410-$445/oz
Cash Cost per Gold Ounce $190-$240/oz
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Assumptions:
Gold to Silver Equivalency Ratio (second half 2009) 65:1
Silver Price (US$/oz) $13.08
Exchange Rate (Mexican Peso:US Dollar) 12.5:1
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About Gammon Gold
Gammon Gold Inc. is a
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 # 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 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 2009 results, any decrease in cash costs for Q4 2008 and full year 2008 resulting from a reversal of the mark-to-market valuation adjustment made in Q3 2008, our ability to fully fund our business model internally, 2009 gold and silver production and the cash and operating costs associated thereafter, the ability to achieve productivity and operational efficiencies, the ability to complete the Phase II mill expansion, the connection to the grid power, further reduction in the open pit stripping ratio 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.
SOURCE GAMMON GOLD INC.