Gammon Reports Strong Production Performance With Ocampo and El Cubo Underground Production Exceeding Targeted Levels
HALIFAX, Canada, January 13 /PRNewswire-FirstCall/ --
- TSX: GAM /NYSE: GRS / BSX: GL7
Gammon Gold Inc. ("Gammon") (TSX:GAM andNYSE:GRS): Gammon is pleased to provide preliminary fourth quarter results as well as an update on operations:
Q4 and Key Operational Highlights --------------------------------- - Consolidated production in the fourth quarter represented the best quarterly performance in 2009. Consolidated gold production for the quarter was 37,066 ounces, an increase of 5,529 ounces (18%) over the previous quarter. Consolidated silver production for the quarter was 1,481,773 ounces, an increase of 216,128 ounces (17%) over the previous quarter. - Using a 55:1 gold equivalent ratio, gold equivalent production was 64,007 ounces, an increase of 9,459 ounces (17%) over the previous quarter. Using the realized gold equivalent ratio for the quarter of 62:1, gold equivalent production was 60,921 ounces, an increase of 9,874 ounces (19%), over the previous quarter. - Using a 55:1 gold equivalent ratio, total cash costs per ounce in the fourth quarter decreased by 10% as compared to the previous quarter. Using the realized gold equivalent ratio of 62:1 for the quarter, total cash costs were $444, a decrease of $56 per ounce (11%), over the previous quarter. - The significant improvement in operating costs was achieved despite the impact of non-recurring maintenance costs at the Ocampo mill processing facility and primary crushing circuit. These higher maintenance costs have been partially offset by the Ocampo mine's access to lower cost 20MW of grid power. - At Ocampo, the planned reinvestment and reorganization program in the underground operation has facilitated a significant increase in production volume. By the end of the year, production from the underground averaged 1,434 tonnes per day in the month of December, exceeding the Company's year-end target of 1,200 tonnes per day by 234 tonnes per day (20%). The average month over month production rates during the quarter were as follows: - October: 650 tonnes per day - November: 1,235 tonnes per day - December: 1,434 tonnes per day, representing a 20% increase over the targeted 1,200 tonnes per day rate - The underground reinvestment program at Ocampo strongly positions future production sequencing such that at quarter end, the mine was actively producing from 11 working areas which compares to 2-3 working areas at the beginning of the year. It is estimated that the mine now has developed access to ready-to-be drilled or in-process-drilling inventory of approximately 200,000 tonnes which compares to 70,000 tonnes at the beginning of the year. - As expected, the re-optimization of the Ocampo heap leach facility has allowed the mine to target increased stacking rates with the mine's heap leach operation averaging 9,775 tonnes per day in the fourth quarter. The increase in higher grade underground production proportionally decreases the tonnes of open pit ore being sent to the mill processing facility. As a result, a greater portion of the higher grade open pit tonnage is routed to heap leach facility for processing, which increases the overall head grades being placed for leaching. This targeted grade improvement, together with the engineered increase of stacking capacity, is expected to increase future heap leach metal production rates. - Despite being a record production quarter on many fronts for 2009, Ocampo's metal production and cost structure was impacted by two unanticipated events. This included a 3-day, unseasonal rainfall of more than 200 millimeters in October as well as the reduced availability of the Ocampo mill processing facility including a 20-day period where the third mill was offline. As a result, a portion of the metal production originally anticipated for the fourth quarter will instead be realized in the first quarter of 2010. - The heavy and unseasonal rainfall impacted production at the underground mine over a period of 5 days and at the open pit mines for a period of 10 days. The significant rainfall impacted the mine's heap leach operations through the dilution of the pregnant pond and the overall leaching solutions. This issue was remediated over a 4-week period, after which the heap leach processing facility was producing at targeted output levels. - During the quarter, daily production rates at the Ocampo mill facility were negatively impacted by the following: - During the commissioning period of the Phase III mill expansion it was discovered that the engineering had undersized the required cyclone capacity. This limited the maximum daily capacity of the mill to approximately 3,100 tonnes per day and reduced the silver recovery by approximately 5%, to 77%. Five Krebb cyclones were ordered and two of the five cyclones were installed by the end of December with immediate positive benefits in both tonnage and silver recoveries. The Phase III commissioning will now be fully completed during Q1, 2010. - On November 28, 2009, the Company detected a problem with the smaller, third mill. When the feed trammel was disassembled it was discovered that the holding bolts had failed and the pinion drive was damaged. The mill repairs were completed in 20 days and the mill was restarted by December 15, 2009. The enhanced configuration of the mill processing facility demonstrated its inherent flexibility as the two remaining mills continued to operate uninterrupted during this maintenance period. This operational flexibility allowed the overall mill circuit to process an average of more than 2,600 tonnes per day during the maintenance period. - At El Cubo, the mine reported its best ever underground production rates of 1,830 tonnes per day during the fourth quarter. This represents an increase of 206 tonnes per day (13%) over Q1, 2009, the pre-labour disruption period. By the end of 2009, underground production averaged 1,876 tonnes per day. This production ramp up is primarily attributable to the adoption of the new 7-day continuous work schedule and the implementation of a production bonus remuneration incentive scheme during the fourth quarter. The average month over month production rates during the quarter were as follows: - October: 1,754 tonnes per day - November: 1,861 tonnes per day - December: 1,876 tonnes per day, representing a 16% increase over the Q1, 2009 average - A significant increase in quarterly cash flow from operations, combined with net proceeds of $109 million from the public offering completed in October, has contributed to the Company's strong cash balance of $129 million as of December 31, 2009. - In addition to the significant cash reserve balance, the Company's US$30 million revolving line of credit facility has been increased to US$50 million following the execution of the facility option to increase funding capacity to US$50 million through the participation of a second syndicate partner. Effective December 31, 2009, Societe Generale has joined the credit facility as an equal syndicate member with The Bank of Nova Scotia. All terms and conditions remain as per the originally established facility with the approximate undrawn capacity on this facility now representing US$23 million. - The Company is currently finalizing its life of mine production plans and anticipates that it will provide updated 3-year guidance and 2009 NI 43-101 Reserve and Resource updates on, or about, March 31, 2010.
"The fourth quarter caps off a transformational year for Gammon Gold. Operations at both mines continue to improve. I am particularly pleased with the continued improvement in underground productivities at both Ocampo and El Cubo, with both operations setting quarterly records. Using the Company's long-term gold equivalency ratio of 55:1, the significant reduction in 2009 annual cash costs of $82 per gold equivalent ounce, or 16% over 2008, demonstrates the success of the operation team's continued focus on implementing ongoing operational efficiencies that will continue to positively impact our operations going forward." stated Rene Marion, Chief Executive Officer. He continued, "Additionally, through the efforts of the entire Gammon team, we now enjoy a strong cash flow profile and a significantly enhanced cash position. Our improved operations, underpinned by our strengthened Balance Sheet, positions the Company well for future growth and success. I believe that 2010 is a year that holds great promise for the Company and we are committed to delivering on that potential."
Fourth Quarter 2009 Production Highlights ----------------------------------------- (all amounts are in U.S. dollars) ------------------------------------------------------------------------- OCAMPO EL CUBO Three Months Ended Dec Dec Dec Dec 31/09 31/08 31/09 31/08 ------------------------------------------------------------------------- Gold ounces produced 28,169 33,877 8,897 9,891 Silver ounces produced 1,085,406 1,176,427 396,367 473,466 Gold equivalent ounces produced (Realized) 45,681 48,922 15,240 15,967 Gold ounces sold 29,463 31,671 8,786 9,333 Silver ounces sold 1,125,069 1,083,571 384,442 450,747 Gold equivalent ounces sold (Realized) 47,539 45,546 14,923 15,116 ------------------------------------------------------------------------- Total cash costs per gold equivalent ounce(x) $385 $383 $632 $502 Total cash costs per gold ounce(x) ($43) $207 $304 $328 Gold to Silver Ratio 62 78 63 81 Realized Gold Price $1,090 $802 $1,102 $775 Realized Silver Price $17.52 $10.26 $17.57 $9.53 ------------------------------------------------------------------------- Gold equivalent ounces produced (55:1)(xx) 47,903 55,267 16,104 18,499 Total cash costs per gold equivalent ounce (55:1)(xx) $367 $340 $598 $433 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED Three Months Ended Dec Dec 31/09 31/08 ------------------------------------------------------------------------- Gold ounces produced 37,066 43,768 Silver ounces produced 1,481,773 1,649,893 Gold equivalent ounces produced (Realized) 60,921 64,889 Gold ounces sold 38,249 41,004 Silver ounces sold 1,509,511 1,534,318 Gold equivalent ounces sold (Realized) 62,462 60,662 ------------------------------------------------------------------------- Total cash costs per gold equivalent ounce(x) $444 $413 Total cash costs per gold ounce(x) $33 $234 Gold to Silver Ratio 62 79 Realized Gold Price $1,093 $796 Realized Silver Price $17.54 $10.05 ------------------------------------------------------------------------- Gold equivalent ounces produced (55:1)(xx) 64,007 73,766 Total cash costs per gold equivalent ounce (55:1)(xx) $422 $364 ------------------------------------------------------------------------- (x) Cash costs for the three-month and the twelve-month period of 2009 have not been finalized and are subject to adjustment (xx) Comparative performance metrics using the Company's long term gold equivalency guidance ratio (55:1) Year Ended December 31, 2009 Production Highlights -------------------------------------------------- (all amounts are in U.S. dollars) ------------------------------------------------------------------------- OCAMPO EL CUBO Year Ended Dec Dec Dec Dec 31/09 31/08 31/09 31/08 ------------------------------------------------------------------------- Gold ounces produced 108,705 115,656 27,842 38,772 Silver ounces produced 3,998,850 3,995,725 1,183,339 1,783,149 Gold equivalent ounces produced (realized) 168,993 182,399 45,578 69,111 Gold ounces sold 105,818 112,682 27,185 37,964 Silver ounces sold 3,976,304 3,867,178 1,170,280 1,739,361 Gold equivalent ounces sold (realized) 166,071 177,404 44,782 67,624 ------------------------------------------------------------------------- Total cash costs per gold equivalent ounce(x) $417 $491 $627 $623 Total cash costs per gold ounce(x) $95 $269 $389 $441 Gold to Silver Ratio 66 59 66 58 Realized Gold Price $977 $866 $983 $855 Realized Silver Price $14.90 $14.66 $14.94 $14.67 ------------------------------------------------------------------------- Gold equivalent ounces produced (55:1)(xx) 181,411 188,306 49,357 71,193 Total cash costs per gold equivalent ounce (55:1)(xx) $389 $476 $579 $605 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED Year Ended Dec Dec 31/09 31/08 ------------------------------------------------------------------------- Gold ounces produced 136,547 154,428 Silver ounces produced 5,182,189 5,778,874 Gold equivalent ounces produced (realized) 214,571 251,510 Gold ounces sold 133,003 150,646 Silver ounces sold 5,146,584 5,606,539 Gold equivalent ounces sold (realized) 210,852 245,038 ------------------------------------------------------------------------- Total cash costs per gold equivalent ounce(x) $462 $528 Total cash costs per gold ounce(x) $155 $313 Gold to Silver Ratio 66 59 Realized Gold Price $978 $864 Realized Silver Price $14.91 $14.66 ------------------------------------------------------------------------- Gold equivalent ounces produced (55:1)(xx) 230,769 259,498 Total cash costs per gold equivalent ounce (55:1)(xx) $430 $512 ------------------------------------------------------------------------- (x) Cash costs for the three-month and the twelve-month period of 2009 have not been finalized and are subject to adjustment (xx) Comparative performance metrics using the Company's long term gold equivalency guidance ratio (55:1)
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 Guadalupe y Calvo development property in Chihuahua State.
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 2009 and 2010 results, operating performance projections for 2009 and 2010, our ability to fully fund our business model internally, 2009 and 2010 gold and silver production and the cash and operating costs associated therewith, the ability to achieve productivity and operational efficiencies, 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.
For further information: Rene Marion, Chief Executive Officer, Gammon Gold Inc., +1-416-646-3825; Anne Day, Director of Investor Relations, Gammon Gold Inc., +1-902-468-0614; http://www.gammongold.com
SOURCE Gammon Gold Inc.
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