Gammon Gold announces further increases in April's consolidated production, a further 55% increase in Ocampo's production and a 41% further reduction
Fri May 9, 7:54 AMHALIFAX, May 9 /CNW/ - Gammon Gold Inc. ("Gammon") (TSX:GAM and AMEX:GRS) is pleased to provide its unaudited monthly status update for April 2008. Since the launch of the turnaround strategy in December 2007, the Company has been reporting monthly updates on its key performance indicators covering a seven (7) month period that clearly demonstrate the continual improvements in key operational performance indicators, financial metrics, and internal management reporting controls that were encompassed in the Company's turnaround business plan. Accordingly, the Company will now discontinue monthly reporting as we are confident that sufficient production and cost information, together with our record Q1 results, have been provided to the market confirming the positive momentum of our turnaround strategy. We will now resume reporting as per statutory requirements.
Consolidated Highlights
- Production for April continued to increase to 24,194 gold equivalent
ounces, a 48% increase over December 2007
- Total cash costs for April reduced further to $481 per gold equivalent
ounce, a 36% improvement over December which was in line with the low
end of our 2008 full year cash cost per ounce guidance of $480 to $515
as we benefited from continued productivity and cost efficiency
enhancements
- Operating cash flow was $5.6 million in April, representing a
$7.1 million improvement over December despite April's result being
effectively understated by the delayed receipt of due & receivable IVA
Tax refunds totaling approximately $4 million which are now scheduled
to be received in mid-May
- The Company reported positive net free cash flow of $0.6 million in
April which represents a 113% improvement over December of
($4.7) million despite April's result being effectively understated by
the delayed receipt of due & receivable IVA Tax refunds totaling
approximately $4 million which are now scheduled to be received in
mid-May. Lower metal prices in April over March also resulted in the
reduction of revenues by approximately $1.8 million
- April's cash flow performance established closing cash reserves of
$6.2 million which, together with the significant improvement in the
Company's year to date net free cash flow profile, has facilitated
cumulative accelerated debt repayments of $5.1 million on our revolving
line of credit debt facility. The Company's $60 million revolving line
of credit debt facility has not been utilized since late January
representing a continuous period of fourteen (14) weeks to date and is
presently drawn down to $29.8 million resulting in a current net debt
balance of $23.6 million
- The Company continues to strengthen its mine management team at Ocampo
by appointing several key senior mining positions with over 200 years
of extensive international operating experience to continue
spearheading the turnaround strategy
Consolidated Overview
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Description April 2008 Mar 2008 Feb 2008 Jan 2008 Dec 2007
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Gold Ounces Produced 14,865 12,834 11,019 9,246 9,600
Silver Ounces Produced 485,041 464,636 446,260 400,075 378,578
Gold Equivalent
Ounces Produced 24,194 22,051 19,466 16,429 16,329
Gold Ounces Sold 15,441 11,872 10,410 9,173 11,192
Silver Ounces Sold 518,684 434,288 420,889 393,417 441,347
Gold Equivalent
Ounces Sold 25,416 20,484 18,379 16,236 19,039
Average Gold Price
Realized 898 $970 $931 $873 $801
Average Silver Price
Realized 17.42 $19.90 $17.38 $15.63 $14.10
Total Cash Cost $481 $485 $480 $506 $756
Operating Cash Flow
(in millions) $5.6 $7.2 $3.1 $1.9 ($1.5)
Net Cash Flow
(in millions) $0.6 $1.9 ($0.4) ($0.9) ($4.7)
Capital Expenditures
(in millions) $5.0 $5.1 $3.5 $2.8 $3.1
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In April, the Company produced a total of 14,865 ounces of gold and
485,041 ounces of silver or 24,194 gold equivalent ounces at a cash cost of
$481 per ounce, representing 48% increase in production and a 36% decrease in
cash costs over December. During April, the Company sold a total of
15,441 ounces of gold and 518,684 ounces of silver or 25,416 gold equivalent
ounces and realized an average gold price of $898 per ounce and an average
silver price of $17.42 per ounce.
In an unprecedented environment of high inflationary cost pressures, the
Company has reduced cash costs from highs of $764 per ounce in Q3 2007 to
$481 per ounce in April. The Company continues to realize improvements in
total cash costs that are supported by the Company's focused productivity and
cost optimization efforts, which together with longer term initiatives, will
continue to accrue over the next eighteen months.
Once again, the Company is reporting a robust monthly financial
performance result as the Company continues to successfully execute its
turnaround strategy. Operating cash flow in April was $5.6 million as compared
to $7.2 million in March and ($1.5) in December, when the turnaround strategy
was launched and is effectively understated by an approximate $4.0 million
timing difference associated with past due & receivable IVA tax refunds being
re-scheduled for receipt in mid-May. In April, the Company reported positive
net cash flow of $0.6 million, a $5.3 million improvement over December
despite April's result being effectively understated by the delayed receipt of
due & receivable IVA Tax refunds totaling approximately $4 million which are
now scheduled to be received in mid-May. Strengthening operating cash flow
performance will continue to support the Company's planned investment in
capital expansion projects. Capital expenditures during April were in line
with internal expansion capital projections at $5.0 million.
http://files.newswire.ca/258/Performancegraph.pdf
Improved cash flow performance has eliminated any requirement for draw
downs on the Company's $60 million revolving line of credit debt facility
during the past fourteen (14) weeks. April's cash flow performance established
closing cash reserves of $6.2 million which, together with the significant
improvement in the Company's year to date net free cash flow profile, has
facilitated cumulative accelerated debt repayments of $5.1 million on our
revolving line of credit debt facility. The Company's $60 million revolving
line of credit debt facility has not been utilized since late January
representing a continuous period of fourteen (14) weeks to date and is
presently drawn down to $29.8 million resulting in a current net debt balance
of $23.6 million.
The Company's improving cash flow profile combined with the Company's
$60 million revolving line of credit debt 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.
Ocampo Results
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The targeted turnaround strategy initiated at Ocampo in December 2007 has
had a significant impact on our production and financial metrics as provided
in the table below. In just five (5) months the impact of our initiatives has
been encouraging and will continue to gain traction as additional productivity
and cost optimization opportunities are targeted over the next eighteen
months.
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Description April 2008 Mar 2008 Feb 2008 Jan 2008 Dec 2007
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Gold Ounces Produced 11,035 8,996 7,890 5,893 6,802
Silver Ounces Produced 335,451 299,161 300,115 244,186 251,072
Gold Equivalent
Ounces Produced 17,486 14,880 13,553 10,279 11,274
Gold Ounces Sold 11,815 8,426 7,281 5,820 8,394
Silver Ounces Sold 370,156 284,188 274,744 237,528 313,841
Gold Equivalent
Ounces Sold 18,933 14,015 12,466 10,086 13,894
Average Gold Price
Realized $889 $946 $926 $886 $801
Average Silver Price
Realized $17.07 $19.27 $17.51 $16.05 $14.08
Total Cash Cost $436 $453 $451 $498 $736
Tonnes per day
Underground 889 883 809 978 979
Tonnes per day
Open Pit 81,531 82,228 74,189 61,324 60,999
Tonnes per day Mill 1,706 1,724 1,435 1,389 1,297
Tonnes per day Heap
Leach 8,873 8,774 7,648 7,545 6,118
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Ocampo Highlights
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- Production increased 55% over December while cash costs improved by
41% over December attributable to the realized benefits associated with
the Company's productivity and cost optimization initiatives
- During the month, the company took delivery of the majority of the new
underground mobile equipment. This equipment was commissioned
throughout the month and into May, with an immediate impact on
productivities. The underground productivity increased to over 940
tonnes per day in April and continues to increase in May as the
operations take advantage of the newly commissioned fleet. It is
anticipated that the remaining new equipment will arrive in mid May
- Open Pit productivity remained stable at over 81,500 tonnes per day and
is a 34% improvement over December
- The Mill averaged over 1,700 tonnes per day in April, a 32% improvement
over December and is 14% over current name plate capacity
- Heap leach tonnes per day in April increased to approximately 8,900 tpd
or by 45% over December
- Orders for all long lead items related to the expansion of the Mill
to 2,600 - 2,800 tonnes per day have been issued with most items
already delivered or in transit
- Both excavators have been re-commissioned and deployed in the open pit
- The fourth tertiary crusher is installed and electronic instrumentation
is currently being tied in, which will increase the heap leach capacity
to 13,000 tonnes per day
- The Company continues to pursue significant cost saving opportunities
such as access to 20 megawatts of grid power and reagent optimization
- Mill and Crushing availabilities were favourable at 90% and 78%
respectively
- In the last two quarters, Ocampo has incurred approximately $12 million
in maintenance works which are now drawing to completion, and will both
continue to decrease in the coming months and will also contribute to
higher productivities resulting in lower operating costs going forward
El Cubo Results
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The targeted turnaround strategy initiated at El Cubo in December 2007 has
also had significant impact on production and financial performance as
provided in the table below. The success at El Cubo is particularly
encouraging as the potential of this mine has been largely underappreciated.
Many of the productivity initiatives have yet to be implemented so there is
potential to achieve additional improvements as we advance the turnaround
strategy.
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Description April 2008 Mar 2008 Feb 2008 Jan 2008 Dec 2007
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Gold Ounces Produced 3,830 3,838 3,129 3,353 2,798
Silver Ounces
Produced 149,590 165,475 146,145 155,889 127,506
Gold Equivalent
Ounces Produced 6,708 7,171 5,913 6,150 5,055
Gold Ounces Sold 3,626 3,446 3,129 3,353 2,798
Silver Ounces Sold 148,528 150,100 146,145 155,889 127,506
Gold Equivalent
Ounces Sold 6,483 6,469 5,913 6,150 5,055
Average Gold Price
Realized $923 $1,031 $939 $849 $800
Average Silver
Price Realized $18.38 $21.08 $17.28 $15.02 $14.16
Total Cash Cost $613 $554 $541 $519 $811
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El Cubo Highlights
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- Production remained strong at 6,708 gold equivalent ounces
- Metallurgical recoveries continue to improve with gold at 92% and
silver at 89% in April and 91% and 86% respectively year to date. This
compares favorably to the 2007 average of 87% for both gold and silver
- Total cash costs increases in the past few months are due to
retroactive salary increases and an additional payroll in April and are
anticipated to decrease during the second half of the year as:
- The third mill will be placed on care and maintenance in mid 2008
and all ore will be routed to the more efficient and lower cost Las
Torres Mill
- 30% of production is currently being hauled along the 600 level to
the Las Torres Mill that will ramp up throughout the year and
subsequently eliminate the more expensive surface haulage
- The new underground equipment fleet is expected to be delivered
during Q3 that should positively impact production
- The introduction of longhole mining in the La Loca vein is having a
positive impact on productivity and reduced dilution
Mr. Rene Marion, CEO of Gammon Gold stated, "The continued positive
results achieved in April follow the best quarter in the Company's history and
provide reassurance that the positive trends are continuing into Q2. The
turnaround strategy is well rooted and is being effectively executed by a
seasoned team who can drive ongoing continuous improvement initiatives
throughout the operation."
Mr. Scott Perry, CFO of Gammon Gold stated, "The Company's year to date
operational and financial performance continues to be highly encouraging and
has significantly improved our financial foundation which is best demonstrated
by the cumulative $5.1 million accelerated debt repayments we have made in
2008." Mr. Perry continued, "Gammon's improving cash flow profile positions
the Company well to fully fund the Company's 2008 business plan."
Mr. Marion further concluded, "We started the issuance of monthly key
performance indicators during a period when we were experiencing significant
productivity challenges at Ocampo. However, we were so confident in our
cornerstone asset and our turnaround strategy that we elected to issue monthly
performance updates to communicate our progress. Seven monthly updates have
been released to date and we feel the quality of our monthly disclosure has
provided the market with sufficient data to make evident the continual
turnaround advancements we are achieving. Equally noteworthy, in these monthly
updates not only have we provided evidence of the productivity and financial
improvements achieved, we have provided this data in a timely manner which is
a testament to the strength of our internal management systems. We are
confident that we have demonstrated sufficient progress and will now
discontinue the release of monthly updates and return to statutory
disclosure."
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.
ContactsRene Marion Chief Executive Officer
Gammon Gold Inc.
(902) 468-0614 Anne Day
Director of Investor Relations
Gammon Gold Inc.
(902) 468-0614 or please visit the Gammon Gold website at www.gammongold.com
35.22 (0.30%)