Gammon Gold Reports Record Earnings and Operating Cash Flow

March 23, 2011

TORONTO, March 23 /PRNewswire-FirstCall/ – Gammon Gold Inc. (“Gammon”) (TSX: GAM) (NYSE: GRS): Gammon is pleased to report financial results from the fourth quarter
and year-ended December 31, 2010. All amounts are in U.S. dollars
unless otherwise indicated.

Gammon concluded the fourth quarter with Company-wide record revenues,
record operating cash flow, record margins, a strong cash balance, new
discoveries and increased Reserves and Resources at its Ocampo and El
Cubo projects, with development activities at the El Cubo slated to
resume next month.

Company-Wide Quarterly and Subsequent Highlights

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        --  Net earnings of $23.5 million, or $0.17 per share
        --  Record operating cash flow of $35.6 million, or $0.26 per share
        --  Net free cash flow of $7.1 million, or $0.05 per share
        --  Cash balance of $113.1 million
        --  Available liquidity of approximately $160.7 million
        --  Addition to company-wide year-end Reserves of 18% before mining
            depletion, or 9% post mining depletion
        --  Addition to company-wide year-end Measured and Indicated
            Resources of 47%
        --  El Cubo to resume operations under a more productive Collective

Ocampo Quarterly Highlights

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        --  Record earnings before other items of $33.6 million
        --  Record operating cash flow of $41.9 million
        --  Net free cash flow of $15.0 million
        --  Gold equivalent production of 51,199 ounces at cash costs of
            $427 per ounce1 for a record margin of $954 (69%) per gold
            equivalent ounce1
      o Gold production of 29,384 ounces at cash costs of negative $388 per
        ounce2 for a record margin of $1,769 (128%) per gold ounce2
      o Silver production of 1,199,829 ounces at cash costs of negative
        $15.21 per ounce3 for a record margin of $42.61 (156%) per silver
        --  Record production at the North-East underground mine of 1,671
            tonnes per day
        --  Commissioned second underground mine, Santa Eduviges, in late
        --  Identified new Reserves of 398,000 gold equivalent ounces4

“The Ocampo team has delivered a set of record results for the mine and
the company including $116 million in operating cash flow in 2010. We
have achieved consecutive quarter over quarter improvements throughout
2010, de-risked the operation through a dedicated capital re-investment
program and increased our Reserve and Resource base,” stated Ren©
Marion, President and Chief Executive Officer, “In 2011, we anticipate
Ocampo’s strong performance will continue where we will not only
benefit from the expected strong gold price environment but will
continue to leverage our considerable silver production to the strongly
appreciating silver price. In the coming months, we will also
recommence production at El Cubo and advance our portfolio of
development and exploration properties for the benefit of our

Corporate Highlights

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        --  On Feb. 23, 2011, the Company announced a new Collective
            Agreement at the El Cubo mine. The Company believes this new
            agreement will allow for improved productivity and cost
            reductions. Operating supplies and mobile equipment began
            arriving during the week of March 14. Underground development
            work is expected to begin in April.
        --  On Feb. 28, 2011, the Company announced a company-wide
            pre-depletion increase of 459,000 gold equivalent ounces4(18%)
            to Proven and Probable Reserves estimates and a pre-depletion
            increase of 238,000 (47%) gold equivalent ounces1 to Measured
            and Indicated Resources. This represents the first increase in
            reserves and resources since the Ocampo mine was commissioned.
        --  Underground mine productivity at Ocampo in January and February
            continues to exceed targets, reporting an average rate of 1,877
            tonnes per day
        --  The second underground mine at Ocampo, Santa Eduviges, was
            commissioned in late December, 2010 and continues to ramp-up in
            production during January and February.
        --  The three-phased mill expansion at Ocampo was completed in the
            third quarter of 2010 that increased processing capacity by
            127% from 2007 processing rates.
        --  The conversion of the Ocampo heap leach facility to a valley
            leach design was completed during 2010 and provided an
            additional 10 million tonnes of stacking capacity.
        --  The Company appointed four new independent directors to the
            board including Mr. Colin K. Benner (Chairman), Mr. Richard M.
            Colterjohn, Mr. Alan R. Edwards and Mr. Joseph G. Spiteri, all
            of whom bring a wealth of mining experience and possess solid
            industry reputations.
        --  The Company also appointed Ambassador Martha I. Lara-Alatorre
            of Mexico as Government Relations Advisor to its Board of
            Directors. As an elected official and career diplomat,
            Ambassador Lara-Alatorre worked in public service and the
            Mexican Foreign Service from 1971 until December 2007.

    (in                            OCAMPO                       EL CUBO
    ounces and
    total cash

    THREE MONTHS          2010          2009            2010          2009

    Gold ounces           28,207        29,463              -         8,786

    Silver             1,170,723     1,125,069              -       384,442
    ounces sold

    ounces sold
    (realized)5           51,439        47,539              -        14,923

    Gold ounces           29,384        27,932              -         8,897

    Silver             1,199,829     1,068,731              -       396,367

    (realized)5           53,030        45,167              -        15,240

    Revenue from         $71,017       $51,783              -       $16,437

    Mine standby               -             -         $1,413             -

    Net earnings         $33,636       $22,254       ($1,736)        $3,635
    / (loss)
    before other

    Cash flow            $41,894       $34,840       ($2,959)        $8,399

    Total cash
    costs per
    (realized)5             $411          $384              -          $643

    Total cash
    costs per
    gold ounce2           ($388)         ($51)              -          $320

    ounces sold
    (55:1)1               49,493        49,918              -        15,776

    (55:1)1               51,199        47,363              -        16,103

    Total cash
    costs per
    (55:1)1                 $427          $366              -          $608

    (in                           OCAMPO                          ELCUBO
    ounces and
    total cash

    YEAR ENDED           2010          2009            2010            2009

    Gold ounces         100,615       105,818          11,160          27,185

    Silver            4,415,308     3,976,304         555,469       1,170,280
    ounces sold

    ounces sold
    (realized)6         173,716       166,071          19,713          44,782

    Gold ounces         103,220       108,467          10,844          27,842

    Silver            4,417,413     3,982,175         536,457       1,183,339

    (realized)6         176,458       168,494          19,108          45,578

    Revenue            $215,717      $162,579         $22,549         $44,222
    from mining

    Mine                      -             -          $9,214          $1,905

    Net                 $89,616       $54,240       ($10,018)          ($327)
    earnings /
    other items

    Cash flow          $116,108       $87,182        ($3,434)         $12,874

    Total cash
    costs per
    ounce6                 $440          $417            $826            $630

    Total cash
    costs per
    gold ounce2          ($146)           $95            $587            $390

    ounces sold
    (55:1)1             180,893       178,114          21,259          48,463

    (55:1)1             183,537       180,871          20,596          49,357

    Total cash
    costs per
    (55:1)1                $423          $389            $766            $582

(_____________________________________________ )
(1) Using the Company’s long-term gold equivalency ratio of 55:1.
(2) Using silver revenues as a by-product cost credit.
(3) Using gold revenues as a by-product cost credit.
(4) Using the reserve metal prices of $1,025/oz for gold and $16.60/oz for
silver for a gold to silver ratio of 61.75:1.
(5) Using the realized gold equivalency ratio of 50:1 in 2010 and 62:1 in
(6) Using the realized gold equivalency ratio of 61:1 in 2010 and 66:1 in

Audited Financial Statements and Management’s Discussion and Analysis
The audited financial statements and related Management’s Discussion and
Analysis can be found on the Company’s website at www.gammongold.com or under the Company’s profile on www.sedar.com. The Company’s Form 40-F containing the complete audited financial
statements has also been filed with the Securities and Exchange
Commission at http://www.sec.gov/edgar.shtml. Upon request, the Corporation will provide a hard copy of the
Company’s complete audited financial statements free of charge.

Conference Call and Webcast
The Company’s audited year-end financial results for the period ended
December 31, 2010 will be released before the market open on Wednesday, March 23, 2011. The financial statements will be available on the Company’s website at
www.gammongold.com or www.sedar.com.

A webcast and conference call will be held on Thursday, March 24, 2011 starting at 10:00 am Eastern Time. Senior management will be on hand to discuss the results.

Conference Call Access:

        --  Canada & US Toll Free: 1-(888) 231-8191
        --  International & Toronto: 1-(647) 427-7450 

When the Operator answers please ask to be placed into the Gammon Gold
Fourth Quarter and Year End 2010 Results Conference Call.

Archive Call Access:
If you are unable to attend the conference call, a replay will be
available until midnight, March 31, 2011 by dialing the appropriate
number below:

        --  Local Toronto Participants: 1-416-849-0833   Passcode:
        --  North America Toll Free: 1-800-642-1687  Passcode: #40954049

Archive Webcast:
The webcast will be archived for 90 days by following the link provided

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3390640 or via the Company’s website at www.gammongold.com.

About Gammon Gold
Gammon Gold Inc. is a mid-tier gold and silver producer with properties
in Mexico.  Gammon’s flagship Ocampo Mine is located in Chihuahua
State.  Gammon also owns the El Cubo Mine in Guanajuato State, which is
undergoing re-commissioning, and the Guadalupe y Calvo development
property in Chihuahua State.  In 2010 Gammon completed option purchase
agreements to acquire the Los Jarros and Venus Projects located
directly north and east of the Ocampo mine, the Mezquite Project in
Zacatecas State, and has signed a binding Letter of Intent to joint
venture into the La Bandera Gold Project in Durango State. The Company
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, 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”,  ”target”, 
”continue”, ”estimate”, ” ”may”, and similar expressions identify
forward-looking statements. Forward-looking statements include, among
other things, statements regarding anticipated future financial and
operational performance, the future price of gold and silver, the
timing of re-commissioning and re-commencement of production at El
Cubo, the de-risking of operations, future exploration results of its
exploration and development program at Guadalupe y Calvo, the Company’s
ability to delineate additional resources and reserves as a result of
such program, and the company’s ability to mine such targets by
mid-2011, statements regarding its financial exposure to litigation,
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
completion of the Ocampo expansion program and improvements to the heap
leach pad, costs and timing of the development and commencement of
production of new deposits, costs and timing of construction, costs and
timing of future exploration and reclamation expenses including,
anticipated 2011 results, operating performance projections for 2011,
our ability to fully fund our business model internally, 2011 gold and
silver production and the cash and operating costs associated
therewith, the ability to achieve productivity and operational
efficiencies, 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





Source: newswire

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