TORONTO, May 12, 2011 /PRNewswire-FirstCall/ -- Gammon
Gold Inc. ("Gammon") (TSX:GAM) (NYSE:GRS): Gammon is pleased to
report financial results from the first quarter ended March 31, 2011. All amounts are in U.S. dollars
unless otherwise indicated.
Gammon concluded the first quarter on plan, with Ocampo delivering record underground
production, record profit margins, record operating cash flow and
record net free cash flow. The Company now operates three wholly
owned gold mines and two advanced development projects in
Mexico that is expected to
underpin the Company's peer-leading growth targets in 2011 and
beyond.
The Company also reiterates its consolidated 2011 production
guidance of 167,000-189,000 gold ounces, 4.8-5.6 million silver
ounces, or 255,000-290,000 gold equivalent ounces at cash costs of
$455-485 per gold equivalent ounce
(assuming a 55:1 gold equivalency ratio).
Company-Wide Quarterly and Subsequent Highlights
-------------------------------------------------------------------------
- Revenues of $70.3 million
- Earnings from operations of $23.6 million, or $0.17 per share
- Net earnings of $19.3 million,
or $0.14 per share, prior to a charge
of $7.6 million, or $0.05 per share, in restructuring costs for the
re-start of operations at the El
Cubo mine (the "El Cubo Charge")
- Strong operating cash flow of $41.2
million, or $0.30 per share,
before the restructuring costs for the re-start of operations at
the El Cubo
- Net free cash flow[1] of $6.4
million, or $0.05 per share,
after the El Cubo restructuring
costs and $9.8 million in
discretionary company-wide exploration expenditures.
- Cash balance of $119.1 million,
as of March 31, 2011
- Successfully resolved the labour disruption at the
El Cubo mine and resumed mining
activities as of May 1, 2011, with
processing scheduled in the third quarter
- Completed the acquisition of Capital Gold Corporation
effective April 8, 2011
- Immediate implementation of strategic productivity enhancement
initiatives at the El Chanate mine including:
- Integration of operations and administration already underway
- Additional mining equipment being mobilized
Ocampo Quarterly Highlights
-------------------------------------------------------------------------
- Record earnings before other items of $37.6 million
- Record operating cash flow of $51.6 million
- Record net free cash flow of $25.6 million
- Gold equivalent production of 49,854 ounces at a 43:1 realized
Q1-11 gold equivalency ratio and a cash cost of $382 per ounce[1], for a record margin of
$1,004 (72%) per gold equivalent
ounce
- Gold production of 25,882 ounces at cash costs of negative
$572 per gold ounce[1,2] for a record
margin of $1,958 (141%) per gold
ounce[2]
- Silver production of 1,035,174 ounces at cash costs of
negative $15.76 per silver ounce[3]
for a record margin of $48 (149%) per
silver ounce[3]
- Gold equivalent production of 44,703 ounces at a 55:1 gold
equivalency ratio at a cash cost of $427 per ounce[1], for a record margin of
$958 (69%)
- Record underground production rate of 1,968 tonnes per day
- Record development of 7,291 metres at the three underground
operations
"Our strengthened operations team at Ocampo has delivered another consecutive
quarter of record margins, operating cash flow and net free cash
flow. At the El Chanate gold mine, we have been impressed by the
level of expertise of the operations team who are already
implementing a number of operational synergies identified during
our operational integration review, including the mobilization of
additional equipment to accelerate open pit mining rates which is
expected to provide increased ore tonnage for processing," stated
Rene Marion, President and Chief
Executive Officer. He continued, "At our El Cubo mine, stoping activities began on
May 1st and we expect to begin
processing ore in the third quarter, resulting in the Company
operating three wholly owned and producing gold mining operations
in Mexico together with a
significantly enhanced portfolio of two development projects and
six exploration properties, all in Mexico."
Further Corporate Highlights
-------------------------------------------------------------------------
- The Company has completed a total of 56,704 metres of drilling
at Ocampo (as of April 30, 2011) that has focused on 10
underground and open pit targets. Results from the 2011 drilling
program continue to report significant results, including multiple
high-grade intercepts, demonstrating the continued prospectivity of
the Ocampo Operations.
- Regional exploration is proving prospective with a high-grade
discovery at the La Balleza vein in the Venus Project that reported
0.7 metres grading 62.20 grams per tonne gold and 2,700 grams per
tonne silver, located only 3km from the Ocampo property boundary.
- On February 28, 2011, the
Company announced a company-wide pre-depletion increase of 459,000
gold equivalent ounces[4] (18%) to Proven and Probable Reserves
estimates and a pre-depletion increase of 238,000 (47%) gold
equivalent ounces[5] to Measured and Indicated Resources. These
results arise from the first systematic exploration program at
Ocampo since 2003.
Operational Results
Three Months Ended March 31 Ocampo El Cubo
(in thousands, except ounces and
total cash costs)
2011 2010 2011 2010
Gold ounces sold 26,031 22,406 - 6,650
Silver ounces sold 1,060,306 1,020,204 - 319,454
Gold equivalent ounces sold
(realized) 50,681 37,861 - 11,531
Gold ounces produced 25,882 21,855 - 6,576
Silver ounces produced 1,035,174 960,817 - 323,254
Gold equivalent ounces produced
(realized) 49,854 36,546 - 11,515
Revenue from mining operations $70,313 $41,902 - $12,785
Mine standby costs - - $7,555 -
Net earnings / (loss) before other
items $37,579 $15,161 ($7,926) $1,063
Cash flow from operations $51,564 $16,034 ($11,570) $2,783
Total cash costs per gold equivalent
ounce1 (realized) $382 $455 - $763
Total cash costs per gold ounce[1,2] ($572) $3 - $515
Gold equivalent ounces sold (55:1)[5] 45,309 40,955 - 12,458
Gold equivalent ounces produced
(55:1)[5] 44,703 39,325 - 12,453
Total cash costs per gold equivalent
ounce (55:1)[1,5] $427 $421 - $706
1. Non-GAAP measures are described on page 24 of the first
quarter 2011 Management's Discussion and Analysis
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. For a breakdown of reserves and resources by category
and additional information relating to reserves and resources, see
pages 15-18 of the Company's 2010 Annual Information Form that is
available on the Company's website at http://www.gammongold.com or
http://www.sedar.com.
5. Using the Company's long-term gold equivalency ratio of
55:1.
Conference Call and Webcast The Company will release the
Company's first quarter financial results for the three-month
period ended March 31, 2011 before
the market opens on Thursday, May 12,
2011. The Company's Consolidated First Quarter 2011
Financial Statements and Management's Discussion and Analysis is
available on the Company's website at http://www.gammongold.com or
http://www.sedar.com.
A webcast and conference call will be held on Thursday, May 12, 2011 starting at 9:00 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 First Quarter 2011 Results Conference Call.
Conference Call Webcast: The conference call event will be
broadcast live on the internet via webcast.
To access the webcast please follow the link provided below:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3487440
Archive Call Access:
If you are unable to attend the conference call, a replay will
be available until midnight, May 19,
2011 by dialing the appropriate number below:
- Local Toronto Participants: 1-416-849-0833 Passcode:
#60684299
- North America Toll Free: 1-800-642-1687 Passcode:
#60684299
Archive Webcast:
The webcast will be archived for 90 days by following the link
provided below:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3487440
or via the Company's website at http://www.gammongold.com.
About Gammon Gold
Gammon Gold Inc. is a publicly traded mid-tier gold and silver
producer engaged in the mining, development, exploration and
acquisition of resource properties in North America. The Company owns and operates
three producing mines in Mexico,
the Ocampo mine in Chihuahua
State, the El Chanate project in Sonora State, and the El Cubo mine in Guanajuato State. Gammon Gold
also owns the Guadalupe y Calvo advanced exploration property in
Chihuahua State and the Orion Project in the State of Nayarit, and has six exploration
properties in various states throughout Mexico. 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
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", "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 therein.
For further information:
For further information please visit the Gammon gold website at
http://www.gammongold.com or contact:
Scott Perry Anne Day
Chief Financial Officer Director of Investor Relations
Gammon Gold Inc. Gammon Gold Inc.
+1-647-260-8880 +1-647-260-8880
SOURCE Gammon Gold Inc.
