Gammon Gold Reports First Quarter Financial Results - Reports Strong Earnings and Operating Cash Flow
HALIFAX, Canada, May 13, 2010 /PRNewswire-FirstCall/ --
- TSX: GAM /NYSE: GRS / BSX: GL7
Gammon Gold Inc. ("Gammon") (TSX:GAM andNYSE:GRS): announces its financial results for the three months ended March 31, 2010. All figures reported are in U.S. dollars unless otherwise indicated.
Strong Financial Performance
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- The Company reported its tenth consecutive quarter of positive
operating cash flow. During the first quarter the Company generated
$17.1 million in operating cash flow as compared to $19.0 million in
the same period in 2009. This continued strong cash flow performance is
due to the ongoing operational enhancements achieved throughout the
Company's operations, which have been supported by the strong metal
price environment.
- In the first quarter, the Company reported earnings before other items
of $12.6 million, or $0.09 per share, as compared to $4.6 million, or
$0.04 per share, in the same period in 2009, an $8 million, or $0.05
per share, improvement over the same period in 2009. This improvement
was positively impacted by a $3.9 million decrease in general and
administrative expenses over the prior year period.
- In the first quarter, the Company reported net earnings of $1.8
million, or $0.01 per share, as compared to $2.5 million, or $0.02 per
share in the same period in 2009.
- Revenues for the first quarter were $54.7 million as compared to $47.3
million in the same period in 2009. During the quarter the Company
realized an average gold and silver price of $1,107 per ounce and
$16.81 per ounce, respectively, as compared to $903 per ounce and
$12.63 per ounce.
Strong Balance Sheet and Cash Profile
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- The Company ended the quarter with cash of $125.0 million, a $100.3
million increase in cash on hand since March 31, 2009. As a result, the
Company was in a net cash position of $89.1 million at March 31, 2010.
- As a result of the Company's improved cash flow profile, the Company's
Balance Sheet has been significantly strengthened, which provides
management with considerable flexibility in executing its future
business development plans. Additionally, the current debt-to-equity
ratio has improved to 4.5%, which is well below industry standards.
Production and Cash Costs
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- During the first quarter, the Company produced 28,431 gold ounces and
1,284,071 silver ounces, or 51,778 gold equivalent ounces at the
Company's long-term gold-to-silver ratio of 55:1. Using the realized
gold-to-silver ratio of 66:1 reported in the first quarter, the Company
produced 48,061 gold equivalent ounces.
- During the first quarter, cash costs were $490 per gold equivalent
ounce using the Company's long-term gold-to-silver ratio of 55:1. Using
the realized gold-to-silver ratio of 66:1 reported in the quarter, cash
costs were $530 per gold equivalent ounce.
Ocampo Capital Expansion Program Largely Complete and Operations
Improving
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- With the installation of the final 3 cyclones at the Ocampo mill
facility at the end of March the 3-phased mill expansion is now
complete. Currently, production at the mill is ramping up to targeted
levels of between 3,300-3,400 tonnes per day with the last 20 days
averaging more than 3,200 tonnes per day.
- The conversion of the heap leach facility to a valley leach design was
completed in late April 2010. This re-optimization of the heap leach
provides an additional 10 million tonnes of stacking capacity to the
heap leach pad.
- During the first quarter a mill redundancy program was launched at
Ocampo that is designed to help improve recoveries and ensure
uninterrupted operations during periods of required maintenance. This
project includes the installation of a seventh thickener (end of May),
a sixth leach tank (end of June), the introduction of additional
automation (Q3 2010) and a fourth tailings filter (Q4 2010).
Recent Highlights
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- On April 12, 2010 the Company announced the nominations of four
additional independent board members including a new independent
Chairman of the Board. Two individuals were appointed effective April
12, 2010 to fill vacant positions on the Board. It is anticipated that
all nominations will be confirmed at the Company's Annual General and
Special Meeting scheduled for May 13, 2010. The new Board nominees were
identified through Korn Ferry International, a leading executive
recruitment firm, and bring with them extensive mining and financial
experience that will broaden and enhance the current Board's collective
expertise.
- On March 23, 2010 the Company announced that it has signed definitive
purchase option agreements on a group of properties called the Mezquite
Project in Zacatecas State, Mexico. The Mezquite Project, in Zacatecas
State, covers 460 hectares and is located 45 kilometres southeast of
Goldcorp's Penasquito property and 22 kilometres northeast of Camino
Rojo (Goldcorp recently announced the acquisition of Camino Rojo). The
property lies within a 70 kilometre belt with over 27.4 million ounces
of gold and 1,611 million ounces of silver, or approximately 57 million
gold equivalent ounces at a gold-to-silver ratio of 55:1, in published
reserves and measure and indicated resources.
- On May 6, 2010 the Company announced that the Company has entered into
an option agreement for a 4,491 hectare block of claims north of the
Ocampo Mine known as the Venus property, from Mexicana de Cananea, S.A.
de C.V. (an operating subsidiary of Grupo México, S.A.B. de C.V.).
This option agreement not only increases Gammon land position by 40% in
the prolific Ocampo and Pinos Altos belts, but could also host
extensions of the Pinos Altos trend. Field mapping and sampling
identified several targets for immediate follow up. A field program is
underway, and a drilling program will be launched in the fourth
quarter.
- The Company has launched a $26-$30 million strategic company-wide
exploration program that is targeting reserve growth, the continued
development of previously identified targets and the identification of
potential new targets for follow up activity.
"During the past two quarters the Company dealt with unanticipated operational challenges that negatively impacted productivity in those quarters. The Company is focused on consistently delivering targeted productivity levels at our current operations and leveraging our strong balance sheet and cash flow profile for our growth plans." stated René Marion, President and Chief Executive Officer. He continued, "With a view to the future, in 2010 our near term focus will include the development of Santa Eduviges, our second underground mine at Ocampo, the completion of a scoping study at our advanced exploration property, Guadalupe y Calvo, the success of our company-wide exploration program and the active pursuit of accretive acquisitions including the recent earn-in deals at the Mezquite project in the Penasquito/Comino Rojo district and the Venus project in the Ocampo/Pinos Altos district."
First Quarter 2010
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OCAMPO EL CUBO
Three Months Ended March March March March
31/10 31/09 31/10 31/09
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Gold ounces produced 21,855 28,356 6,576 8,473
Silver ounces produced 960,817 989,038 323,254 362,262
Gold equivalent ounces
produced (Realized)(1) 36,546 41,997 11,515 13,483
Gold ounces sold 22,406 25,826 6,650 8,609
Silver ounces sold 1,020,204 902,058 319,454 369,696
Gold equivalent ounces
sold (Realized)(1) 37,861 38,285 11,531 13,720
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Total cash costs per
gold equivalent
ounce(2) $458 $430 $766 $525
Total cash costs per
gold ounce(2) $8 $196 $522 $295
Gold to Silver Ratio(4) 66 72 65 71
Realized Gold Price $1,107 $909 $1,109 $894
Realized Silver Price $16.77 $12.61 $16.94 $12.69
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Gold equivalent ounces
produced (55:1)(3) 39,325 46,338 12,453 15,060
Total cash costs per
gold equivalent
ounce (55:1)(2)(3) $423 $390 $709 $470
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CONSOLIDATED
Three Months Ended March March
31/10 31/09
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Gold ounces produced 28,431 36,829
Silver ounces produced 1,284,071 1,351,300
Gold equivalent ounces
produced (Realized)(1) 48,061 55,480
Gold ounces sold 29,056 34,435
Silver ounces sold 1,339,658 1,271,754
Gold equivalent ounces
sold (Realized)(1) 49,392 52,005
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Total cash costs
per gold equivalent
ounce(2) $530 $455
Total cash costs per
gold ounce(2) $125 $221
Gold to Silver Ratio(4) 66 72
Realized Gold Price $1,107 $903
Realized Silver Price $16.81 $12.63
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Gold equivalent ounces
produced (55:1)(3) 51,778 61,398
Total cash costs per
gold equivalent
ounce (55:1)(2)(3) $490 $411
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(all amounts are in U.S. dollars and are in thousands, except ounces,
per share amounts, average realized prices and total cash costs)
(1) 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.
(2) See the Non-GAAP Measures section on page 21 of the 2010 First
Quarter Management's Discussion and Analysis.
(3) Gold equivalent ounces include silver ounces produced and sold
converted to a gold equivalent, based on the Company's long-term
gold equivalency ratio of 55:1.
(4) Silver ounce equal to one gold ounce.
The financial statements along with the Management's Discussion and Analysis will be available on the Company's website at www.gammongold.com or www.sedar.com.
The Company's quarterly financial results for the three month period ended March 31, 2010 will be released before the market opens on Thursday, May 13, 2010. 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, May 13, 2010 starting at 10:00 am Eastern Time (11:00 am Atlantic Time). Senior management will be on hand to discuss the results.
First Quarter 2010 Conference Call
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Conference Call Access:
- Toll Free: 1-888-231-8191
When the Operator answers please ask to be placed into the Gammon Gold First Quarter 2010 Results Conference Call.
Archive Call Access:
If you are unable to attend the conference call, a replay will be available until midnight, May 20, 2010 by dialing the appropriate number below:
- Local Toronto Participants: 1-416-849-0833 Passcode: 68244844
- North America Toll Free: 1-800-642-1687 Passcode: 68244844
First Quarter 2010 Webcast
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Live Webcast:
The 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=3026760
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=3026760 or via the Company's website at http://www.gammongold.com.
About Gammon Gold
Gammon Gold Inc. is a 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. The Company recently completed a purchase option agreement to acquire the Mezquite Project ("Mezquite") in Zacatecas State, Mexico. The Company is based in Halifax, Nova Scotia with an Executive Office 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 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 2010 results, operating performance projections for 2009 and 2010, our ability to fully fund our business model internally, 2010 gold and silver production and the cash and operating costs associated therewith , the ability to achieve productivity and operational efficiencies, the ability to access grid power at Ocampo, 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: please visit the Gammon Gold website at http://www.gammongold.com or contact: Scott Perry, Chief Financial Officer, Gammon Gold Inc., +1-(416)-646-3825; Anne Day, Director of Investor Relations, Gammon Gold Inc., +1-(902)-468-0614 (GAM. GRS)
SOURCE Gammon Gold Inc.
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