Gammon Reports Third Quarter and Key Updates on Operations and Confirms Guidance for 2009
Tue Oct 6, 1:44 PMHALIFAX, Canada, October 6 /PRNewswire-FirstCall/ -- Gammon Gold Inc. ("Gammon") (TSX:GAM and NYSE:GRS): Gammon is pleased to provide an update on operations following the full commissioning of the Ocampo capital expansion program. The expansion program and final commissioning was largely completed in the latter half of the third quarter and has resulted in month over month improvements in our key business performance indicators:
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Ocampo Mine (100%) Jul-09 Aug-09 Sep-09
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Underground - Average ore
tonnes per day 488 577 676
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Open Pit - Average total
tonnes per day 93,507 97,061 98,677
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Mill - Average ore tonnes
per day 2,299 2,515 3,046
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Heap Leach - Average ore
tonnes per day 4,101 6,934 7,399
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Average heap leach gold
equivalent oz. per day
(55:1) 129 125 179
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Average mill gold
equivalent oz per day
(55) 261 294 394
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Total average gold
equivalent oz. per day
(55:1) 390 419 573
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Q4 Forecast
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During the fourth quarter the Company is expecting to produce approximately 80,000 gold equivalent ounces at cash costs of US$380 to US$ 400 per gold equivalent ounce. The fourth quarter is expected to be the first quarter where Ocampo begins to realize the impact on production from the capital expansion program through:
- During the first four days of October, the Company has produced an
average of 1,037 gold equivalent (55:1) ounces per day;
- The continued ramp up of the Ocampo underground, which is expected to
reach targeted levels of 1,200 tonnes per day by the end of the year;
- The commissioned Phase III expansion of the Ocampo mill processing
facility which should allow the Company to increase capacity over the
fourth quarter;
- As a result of the increased tonnage of underground ore being sent to
the mill facility, a greater proportion of higher grade open pit ore
is currently being directed to the Ocampo heap leach facility. This is
expected to increase heap leach production; and
- The re-optimization of the Ocampo heap leach facility which is
expected to allow the Company to benefit from the increased 12,000
tonnes per day stacking capacity over the entire fourth quarter.
Q3 and Key Operational Highlights
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- Assuming a 55:1 gold equivalent ratio, total cash costs for the third
quarter have decreased by 36% over the same period in 2008. For the
nine-month period total cash costs have decreased by 24% over the same
period in 2008.
- Following the first half reinvestment and reorganization program at
Ocampo, and the arrival of two new long hole drills on October 1,
production from the underground mine is expected to continue to
increase towards the year-end target of 1,200 tonnes per day;
- This program has enabled underground operations to establish a
significant production inventory of 8 working stopes and developed
access to ready-to-be drilled or in-process-drilling inventory of
approximately 245,000 tonnes. This is a significant operational
improvement when compared to the beginning of the year when operations
only had 2-3 working stopes and developed access to ready-to-be
drilled or in-process-drilling inventory of approximately 70,000
tonnes;
- Ocampo is anticipating an increased proportion of underground ore in
future mill feed, which is expected to result in less reliance on open
pit ores that are typically lower grade. The targeted increases in
higher grade underground production rates are expected to increase
head grades to the mill. The expected decrease in open pit ore being
sent to the mill is expected to result in a greater portion of the
higher grade open pit tonnage being rerouted to the heap leach
facility for processing that will increase the head grades to the heap
leach;
- Open pit productivities and equipment fleet availability continue to
exceed plan which has resulted in production rates across the open pit
operations continuing to exceed 100,000 tonnes per day in the month of
October;
- The third and final phase of the mill expansion was fully commissioned
by the end of the quarter. The mill facility can now treat up to 3,400
tonnes per day as compared to the average processing volume 1,200
tonnes per day in 2007, a 183% increase;
- The re-optimization of stacking design capacity at the existing heap
leach facility was initiated in September. The new design is expected
to increase current pad capacity by a further 10 million tonnes. This
has allowed operations to restore daily stacking rates of up to 12,000
tonnes per day, which combined with the targeted feed grade
improvement, is expected to significantly increase future heap leach
metal production;
- Ocampo was 100% connected to 20 megawatts of electrical grid power on
July 15, 2009 and is now powered off the Mexican grid network. The
access to grid power is expected to provide energy savings of
approximately US$20-25 per gold equivalent ounce;
- The El Cubo mine continued to increase production rates in the third
quarter following the Union's first-time adoption of a 7-day
continuous work schedule, which is expected to improve future
productivities and operating margins.
Exploration Highlights
- To date, the Company has completed 88,291 metres, or 72%, of its
planned 123,000 metre reserve replacement drilling program at Ocampo;
- As previously released, the San Amado drilling returned a bonanza
grade intercept at hole OG-797 of 0.5 meters at 318 grams per tonne
gold and 1,028 grams per tonne silver or 336.68 grams per tonne gold
equivalent;
- As previously released, the drilling program at Santa Eduviges
underground target has provided some encouraging results with one hole
reporting over 9.0 metres of 14.57 grams per tonne gold equivalent.
Given the ongoing drilling success to date, an additional 5,900 metres
of drilling has been added to the original 4,380 metre program and an
additional diamond drill will be mobilizing in October;
- In September, the Company launched a two year, 40,000 metre drilling
program at the El Cubo operation where the initial drilling will focus
on four of the 16 drill targets indentified as part of the Company's
grass roots exploration program.
Note: The exploration information has been reviewed by Qualified Person, Mr. Ramon Luna. All sample analyses were performed by ALS-Chemex Laboratories, based in Vancouver, British Columbia, or in the Ocampo mine lab, using standard fire assay procedures. The intercepts from OG-797 are the average of two ALS_Chemex assays on each sample. True widths have not been calculated.
Corporate Highlights
- On September 22, 2009 the Company announced the retirement of Mr. Fred
George as President, Chairman and a member of the Board of Directors
of Gammon effective October 13, 2009. Rene Marion, currently Chief
Executive Officer, will subsequently be appointed as President and
Chief Executive Officer. Mr. Ron Smith, an independent director, will
temporarily assume the position of interim Chairman effective October
13, 2009. Mr. George will remain as a consultant to the Board of
Directors;
- On September 22, 2009 the Company also announced the resignation of
Mr. Canek Rangel from the Board of Directors effective immediately.
Mr. Rangel has been a member of the Board of Directors for the past 4
years; and
- Following the resignations of Fred George and Canek Rangel in
September, the Nominating Committee of the Board of Directors began
the process of identifying potential new independent Board members
with the objective of strengthening the Board, which will be led by an
independent Chairman.
Third Quarter 2009 Production Highlights
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(all amounts are in U.S. dollars)
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OCAMPO EL CUBO
Three Months Ended Sept Sept Sept Sept
30/09 30/08 30/09 30/08
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Gold ounces produced 24,807 26,054 7,392 8,042
Silver ounces produced 961,975 988,289 317,382 383,834
Gold equivalent ounces
produced 39,708 42,916 12,227 14,605
Gold ounces sold 22,219 25,961 7,639 7,953
Silver ounces sold 925,666 969,647 323,586 369,217
Gold equivalent ounces
sold 36,631 42,303 12,674 14,270
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Total cash costs per gold
equivalent ounce(x) $433 $724 $697 $853
Total cash costs per gold
ounce(x) $85 $639 $511 $860
Gold to Silver Ratio 64:1 59:1 64:1 59:1
Realized Gold Price $970 $864 $974 $826
Realized Silver Price $15.11 $14.51 $15.22 $14.31
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Gold equivalent ounces
produced (55:1)(xx) 42,297 44,023 13,162 15,021
Total cash costs per gold
equivalent ounce (55:1)(xx) $407 $703 $653 $830
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CONSOLIDATED
Three Months Ended Sept Sept
30/09 30/08
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Gold ounces produced 32,199 34,096
Silver ounces produced 1,279,357 1,372,123
Gold equivalent ounces
produced 51,935 57,521
Gold ounces sold 29,858 33,914
Silver ounces sold 1,249,252 1,338,864
Gold equivalent ounces
sold 49,305 56,573
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Total cash costs per gold
equivalent ounce(x) $501 $757
Total cash costs per gold
ounce(x) $194 $691
Gold to Silver Ratio 64:1 59:1
Realized Gold Price $971 $855
Realized Silver Price $15.15 $14.46
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Gold equivalent ounces
produced (55:1)(xx) 55,459 59,044
Total cash costs per gold
equivalent ounce (55:1)(xx) $470 $735
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(x) Cash costs for the three-month and the nine-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)
Nine Months Ended September 30, 2009 Production Highlights
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(all amounts are in U.S. dollars)
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OCAMPO EL CUBO
Nine Months Ended Sept Sept Sept Sept
30/09 30/08 30/09 30/08
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Gold ounces produced 81,197 81,779 18,945 28,881
Silver ounces produced 2,927,156 2,819,298 786,972 1,309,683
Gold equivalent ounces
produced 124,200 133,477 30,338 53,144
Gold ounces sold 76,355 81,011 18,399 28,631
Silver ounces sold 2,851,235 2,783,607 785,838 1,288,614
Gold equivalent ounces
sold 118,532 131,858 29,859 52,508
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Total cash costs per gold
equivalent ounce(x) $430 $529 $626 $658
Total cash costs per gold
ounce(x) $150 $295 $433 $456
Gold to Silver Ratio 68:1 54:1 68:1 53:1
Realized Gold Price $933 $892 $927 $881
Realized Silver Price $13.86 $16.47 $13.66 $16.67
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Gold equivalent ounces
produced (55:1)(xx) 134,418 133,039 33,253 52,693
Total cash costs per gold
equivalent ounce (55:1)(xx) $398 $530 $572 $664
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CONSOLIDATED
Nine Months Ended Sept Sept
30/09 30/08
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Gold ounces produced 100,142 110,660
Silver ounces produced 3,714,128 4,128,981
Gold equivalent ounces
produced 154,538 186,621
Gold ounces sold 94,754 109,642
Silver ounces sold 3,637,073 4,072,221
Gold equivalent ounces
sold 148,391 184,366
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Total cash costs per gold
equivalent ounce(x) $470 $566
Total cash costs per gold
ounce(x) $205 $337
Gold to Silver Ratio 67:1 54:1
Realized Gold Price $932 $890
Realized Silver Price $13.83 $16.54
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Gold equivalent ounces
produced (55:1)(xx) 167,672 185,732
Total cash costs per gold
equivalent ounce (55:1)(xx) $434 $568
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(x) Cash costs for the three-month and the nine-month period of 2009
have not been finalized and are subject to adjustment
(xx) Comparative performance metrics using the Company's long term gold
equivalency guidance ratio (55:1)
"The various expansion initiatives at our flagship Ocampo operation are effectively complete and on the back of the underground redevelopment program and the increased tonnages being realized, we are anticipating a record company-wide production result in the fourth quarter. The expected benefits of the expanded operation are now being realized and we expect improved productivities across a number of key performance indicators. Our operating performance projections for the fourth quarter will showcase just what can be expected from Ocampo in 2010 and we expect to see the Company achieve its full year production and cash cost guidance" stated Rene Marion , Chief Executive Officer.
2009 Consolidated Operational Outlook
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The Company is forecasting that it will meet the low end of its
previous guidance which is summarized in the table below:
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2009 Consolidated Operational Outlook
2009
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Production:
Gold Ounces 150-170koz
Silver Ounces 5,600-6,400koz
Gold Equivalent Ounces 235-265koz
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Cash Costs:
Cash Cost per Gold Equivalent Ounce ($US/oz) $410-$445/oz
Cash Cost per Gold Ounce ($US/oz) $190-$240/oz
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Assumptions:
Gold to Silver Equivalency Ratio
(second half 2009) 65:1
Silver Price (US$/oz) $13.08
Exchange Rate (Mexican Peso:US Dollar) 12.5:1
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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 results, operating performance projections for 2009 and 2010, our ability to fully fund our business model internally, 2009 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: please visit the Gammon Gold website at http://www.gammongold.com or contact: Rene Marion, Chief Executive Officer, Gammon Gold Inc., +1-(902)-468-0614; Anne Day, Director of Investor Relations, Gammon Gold Inc., +1-(902)-468-0614/ (GAM. GRS)
SOURCE Gammon Gold Inc.
158.94 (1.43%)
