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
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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
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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
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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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