Gammon Reported Preliminary Operating Results

 

HALIFAX - Gammon Gold Inc. reported its preliminary Q2, 2009 operating results as well as an update on the Company's activities in Guanajuato.

"While production at Ocampo was in line with Q1 2009, the 7-week labour disruption at El Cubo adversely affected production during the quarter. As a result of the lower consolidated production levels achieved in the quarter, consolidated cash costs are expected to be between $445 and $465 per gold equivalent ounce." stated Rene Marion, Chief Executive Officer of Gammon Gold. He continued, "With the completion of the 18-month strategic capital expansion program at Ocampo and the resumption of operations at El Cubo, we fully expect increased production and an enhanced cost structure during the second half of 2009. While we have revised our 2009 guidance to address the production shortfall, our guidance for 2010 remains unchanged at 200 to 220 thousand gold ounces and 8.5 to 9.3 million silver ounces."

"Underground development and stope preparation at Ocampo is ahead of plan where underground development productivity has improved by over 105% year-to-date. Currently, we have 8 longhole stopes in production with 7 additional stopes anticipated shortly" stated Russell Tremayne, Chief Operating Officer.

The development of the underground mine continued during the quarter and although solid progress continues to be made, the ramp-up of the underground mine is currently 8 weeks behind schedule. The Company responded to the delayed underground production by re-sequencing the open pit mine plan to accommodate the production tonnage shortfall. As a result of the increased presence of lower grade open pit production in the mill feed, grades to the mill were lower than planned which impacted production in the quarter.

In the latter part of the quarter, operations at the heap leach processing facility were temporarily suspended while the Company converted to a stacking system that utilizes a new overland conveyor, eliminating the need for many of the grasshoppers, which is expected to result in improved production rates going forward. Notwithstanding, the heap leach operations incurred 13 days of downtime during the quarter associated with this upgrade, which impacted production in the quarter.

During the quarter, production at El Cubo was adversely affected by the 7-week labour strike as well as a one-week phase-in period. The labour dispute was favourably resolved and the workforce began a phased-in return to work on June 15, 2009, while processing operations resumed on June 21, 2009. The change to a 7-day work roster was always a key strategy for 2009. Operations at El Cubo continue to ramp-up and the adoption of a 7-day continuous work schedule is expected to positively impact productivity in the coming quarters.