Gammon Gold meets production guidance and outperforms cash cost guidance in Q1 reporting the best financial performance for March and the first positi
Mon Apr 7, 7:30 AMHALIFAX, April 7 /CNW/ - Gammon Gold Inc. ("Gammon") (TSX:GAM and AMEX:GRS) is pleased to provide its unaudited monthly status update for March 2008.
Consolidated Highlights
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- Production for March increased to 22,051 gold equivalent ounces
resulting in Gammon posting Q1 production of 57,946 gold equivalent
ounces which meets our original production guidance of 56,000 to
62,000 gold equivalent ounces.
- Total cash costs for Q1 of $489 per gold equivalent ounce represented a
25% improvement over the prior quarter's cash cost result and were
19-23% lower than our original Q1 cost guidance of $580-$600 per gold
equivalent ounce, approximately $100 per gold equivalent ounce lower.
Additionally, first quarter cash costs were on the low end of the 2008
full year cash cost guidance recently provided by the Company which is
significant as production in the first quarter of 2008 is estimated to
be the lowest production quarter in 2008.
- Operating cash flow improved to $7.2 million in March, the best month
in the Company's history, and $12.2 million for Q1, representing a
$12.4 million improvement over Q4.
- The Company reported positive net cash flow of $1.9 million in March a
133% improvement over December of -5.7 million, which is when the
company first launched its turn around strategy. Q1 net cash flow of
$0.6 million is a $15.6 million improvement over Q4 and is also the
first quarter that the company has recorded cumulative positive net
cash flow.
- Similar to the month of February, no facility draw downs were taken on
the Company's $60 million revolving line of credit in March resulting
in a period of eleven (11) weeks to date since the last facility debt
draw down was made in mid-January.
- March's record cash flow performance established closing cash reserves
of $7.2 million allowing Gammon to make an unplanned April 4th
$1.5 million debt repayment on its revolving line of credit debt
facility. Together with the unplanned debt repayment of $2.1 million
made in late February the Company has now made $3.6 million of
unplanned debt repayments in 2008. The Company's $60 million line of
credit debt facility is presently drawn down to $31.3 million.
- The Company's funding position and cash flow profile are continually
strengthening which is expected to underpin the Company's turnaround
phase into the latter part of 2008, at which point the Company's
business model is scheduled to achieve consistent positive net cash
flow status.
- As announced on April 2, Gammon has taken further steps to strengthen
the Board of Directors by appointing Andre Falzon and Rene Marion to
the Board. Mr. Falzon will also take on the added responsibility of
Chair of the Audit Committee.
Consolidated Results
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Consolidated Production & Cost Overview
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Description March 2008 Q1 2008 Q4 2007
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Gold Ounces Produced 12,834 33,099 27,571
Silver Ounces Produced 464,636 1,310,971 1,140,797
Gold Equivalent Ounces Produced 22,051 57,946 48,182
Gold Ounces Sold 11,872 31,455 28,665
Silver Ounces Sold 434,288 1,248,594 1,183,729
Gold Equivalent Ounces Sold 20,484 55,099 50,041
Average Gold Price Realized $970 $928 $795
Average Silver Price Realized $19.90 $17.69 $14.32
Total Cash Cost $485 $489 $650
Operating Cash Flow $7.2M $12.2M -$0.2M
Net Cash Flow $1.9M $0.6M -$15.0M
Capital Expenditures $5.1 $11.4M $14.8M
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The Company, including both Ocampo and El Cubo, achieved a 36% increase in
production in March as compared to December. In March, the Company produced a
total of 12,834 ounces of gold and 464,636 ounces of silver or 22,051 gold
equivalent ounces at a cash cost of $485 per ounce, a decrease of 25% over
December. During March, the Company sold a total of 11,872 ounces of gold and
434,288 ounces of silver or 20,484 gold equivalent ounces and realized an
average gold price of $970/oz and an average silver price of $19.90/oz.
For Q1, the Company, including both Ocampo and El Cubo, achieved a
20% increase in production as compared to Q4 2007. In Q1, the Company produced
a total of 33,099 ounces of gold and 1,310,971 ounces of silver or 57,946 gold
equivalent ounces at a cash cost of $489 per gold equivalent ounce, a decrease
of 25% over Q4 2007. During Q1, the Company sold a total of 31,455 ounces of
gold and 1,248,594 ounces of silver or 55,099 gold equivalent ounces and
realized an average gold price of $928/oz and an average silver price of
$17.69/oz.
Continued improvements in total cash costs are being driven by the
Company's focused productivity and cost optimization efforts with many areas
for additional costs savings identified. In an unprecedented environment of
high inflationary cost pressures, the Company's initial cost initiatives have
reduced costs from highs of $764/oz in Q3 2007 to $485/oz as reported in
March.
The Company reported in March the best financial performance in the
Company's history and these indicators continue to demonstrate that the
Company is successfully advancing its turnaround strategy. Operating cash flow
in March increased by 132% to $7.2 million as compared to $3.1 million in
February. In March the Company reported positive net cash flow of $1.9 million
a 133% improvement as compared to December, when the turnaround strategy was
launched, and the first time in Company history. Continued strengthening in
operating cash flow performance will continue to support the Company's planned
investment in capital expansion projects in Q2 favourably minimizing the
impact on the Company's net cash flow generation profile. Capital expenditures
during March were in line with internal expansion capital projections at
$5.1 million and are expected to increase in April with the further delivery
of key underground mining fleet equipment.
Check the following link for Operating and Free Cash Flow (Unaudited):
http://files.newswire.ca/258/Graphic.doc
There were no facility draw downs taken on the Company's $60 million
revolving project debt in March, or during the past eleven (11) weeks to date.
March's strong cash flow performance established closing cash reserves of
$7.2 million allowing Gammon to make an unplanned April 4th $1.5 million debt
repayment on its revolving line of credit debt facility. Together with the
unplanned debt repayment of $2.1 million made in late February the Company has
now made $3.6 million of unplanned debt repayments in 2008 which further
attests to the strength of the Company's cash flow performance. The Company's
$60 million line of credit debt facility is presently drawn down to
$31.3 million.
The Company's liquidity position is increasingly strengthening
attributable to the continued operational improvements which are driving
increased Company operational cash flow contributions. The Company's improving
operating cash flow profile combined with the Company's $60 million project
debt financing facility further demonstrate that the Company is sufficiently
funded to progress the Company's turnaround phase into the later part of 2008,
at which point the Company's business model is scheduled to achieve consistent
positive net cash flow status.
Operational Results
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Production & Cost Overview - Ocampo & El Cubo
Ocampo El Cubo
Description March 2008 Q1 2008 March 2008 Q1 2008
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Gold Ounces
Produced 8,996 22,779 3,838 10,320
Silver Ounces
Produced 299,161 843,462 165,475 467,509
Gold Equivalent
Ounces Produced 14,880 38,712 7,171 19,234
Gold Ounces Sold 8,426 21,527 3,446 9,928
Silver Ounces
Sold 284,188 796,460 150,000 452,134
Gold Equivalent
Ounces Sold 14,015 36,567 6,469 18,532
Average Gold
Price Realized $946 $922 $1,031 $940
Average Silver
Price Realized $19.27 $17.68 $21.08 $17.75
Total Cash Cost $452 $464 $554 $538
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Ocampo
Overall improvements achieved to date at Ocampo continued into March 2008.
March's production improved by 32% over December. March production at Ocampo
was 8,996 ounces of gold and 299,161 ounces of silver for a gold equivalent
production of 14,880 ounces.
Q1 production at Ocampo increased by 11% over Q4 2007 and was
22,779 ounces of gold and 843,462 ounces of silver for a gold equivalent
production of 38,712 ounces at a cash cost of $452 per gold equivalent, a
decrease of 39% over December of an audited result of $735 per gold equivalent
ounce. A total of 21,527 ounces of gold and 796,460 ounces of silver were sold
during the quarter or 36,567 gold equivalent ounces at average weighted
selling prices of $922 gold and $17.68 silver.
Key performance indicators continue to improve at Ocampo since the launch
of the turn-around strategy in December. The more notable improvements as a
result of availability and utilization initiatives include:
- The open pit in March achieved an average mining rate of 83,300 tonnes
per day, the best single month ever, a 36% improvement from December.
Both excavators have now been refurbished and returned to operations
- The heap leach in March achieved an average crushing and stacking rate
of 8,774 tonnes per day, the second best single month ever, a
43% improvement over December
- The mill in March achieved an average processing rate of 1,724 tonnes
per day, the best single month ever representing an improvement of
33% over December and 15% higher than the nameplate capacity.
El Cubo
Significant improvements have been achieved to date at El Cubo. March's
production improved by 42% over December. March production at El Cubo was
3,838 ounces of gold and 165,475 ounces of silver for a gold equivalent
production of 7,171 ounces. A total of 3,446 ounces of gold and 150,100 ounces
of silver were sold during the month or 6,469 gold equivalent ounces at
average weighted selling prices of $1,031 gold and $21.08 silver.
Production in Q1 improved by 27% over Q4 2007. Q1 production at El Cubo
was 10,320 ounces of gold and 467,509 ounces of silver for a gold equivalent
production of 19,234 ounces at a cash cost of $538 per gold equivalent a
decrease of 24% over Q4 2007. A total of 9,928 ounces of gold and
452,134 ounces of silver were sold during the quarter or 18,532 gold
equivalent ounces at average weighted selling prices of $940 gold and $17.75
silver.
Mr. Fred George, Chairman of the Board of Gammon Gold stated, "The
addition of two seasoned executives to the Board has significantly
strengthened the Board's depth and experience. Andre Falzon and Rene Marion
collectively have over 50 years of mining experience that will allow the Board
to contribute more strategically to the growth of the Company." Mr. George
continued, "Mr. Falzon's strong financial background makes him the ideal
person to Chair the Audit Committee and we are pleased that he has accepted
this appointment. Additionally, the Board is committed to identifying
additional candidates to further enhance the Board of Directors and support
the growth of the Company."
Mr. Rene Marion, CEO of Gammon Gold stated, "As a Company we are very
pleased with the continued positive results that we are achieving both
operationally and financially. This positive momentum is very encouraging and
underscores the abilities of the newly assembled management teams, which is
evident in the results we are reporting today. I am confident that the teams
will continue to drive additional improvements as we execute on our growth
strategy."
Mr. Scott Perry, CFO of Gammon Gold stated, "The Company's financial
performance in March represented the best month and quarter financial
performance in the history of the Company. The combination of our improved
production profile and the higher than planned improvement in total cash costs
has resulted in this significant overall improvement. In March, we once again
generated positive cash flow from operations and for the first time, we also
generated positive net cash flow across the entire Group allowing us to
generate significant surplus cash reserves, a portion of which was used to
fund a second unplanned line of credit debt repayment of $1.5 million on April
4th. Together with the unbudgeted debt repayment of $2.1 million made in
February, I think nothing attests more to the Company's rapidly improving cash
flow profile then the fact that we have been generating surplus cash which is
being used to fund debt repayments on our line of credit debt facility."
Mr. Perry continued, "Gammon's improving cash flow profile is ahead of our
planned targets and given the continued positive operating performance
momentum combined with the availability on our debt facility, I believe the
Company is strongly positioned to fully fund the company's recapitalization
initiatives up to the latter part of 2008 when the business anticipates
maintaining steady state positive free cash flow status".
Mr. Marion further added, "Our business plan strategy is well rooted with
a strong positive momentum and I firmly believe that we will continue to
report positive results in the quarter and years ahead. I would also like to
congratulate the entire Gammon team as it is their collective efforts that
have contributed to our achievements to date and who are integral to our
continued success."
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
development Guadalupe y Calvo property in Chihuahua State. The Company remains
100% unhedged.
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 (File No. 001-31739), 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 reclamations
expenses. 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.
Contactsplease visit the Gammon Gold website at www.gammongold.com or contact: Rene Marion Chief Executive Officer
Gammon Gold Inc.
(902) 468-0614 Anne Day
Director of Investor Relations
Gammon Gold Inc.
(902) 468-0614
104.65 (0.82%)