TSX: GAM / AMEX: GRS / BSX: GL7
HALIFAX, May 7 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and AMEX:GRS) announces the first quarter unaudited financial results for the three months ended March 31, 2008. All figures reported are in U.S. dollars unless otherwise indicated.
Q1 2008 Highlights
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- Total production of 33,099 gold ounces and 1,310,971 silver ounces, or
57,946 gold equivalent ounces, at a quarterly cash cost per ounce of
$491 per gold equivalent ounce, representing a 20% improvement in gold
equivalent production and a 27% reduction in total cash costs over
Q4 2007.
- Revenue from mining operations of $51.4 million compared to
$43.5 million in Q1 2007 and $39.7 million in Q4 2007, reflecting an
average quarterly gold selling price of $928 per ounce and silver
selling price of $17.69 per ounce.
- Net earnings per share of $0.07 compared to net loss per share of
$(0.10) in Q1 2007 and a net loss per share of $(0.19) in Q4 2007,
representing a 137% improvement over Q4 2007.
- Cash flow from operations was a positive $14.6 million, as compared to
negative cash flow from operations of $9.3 million Q1 2007 and positive
cash flow from operations of $2.7 million in Q4 2007, representing a
440% improvement over Q4 2007.
- Positive net free cash flow of $1.6 million as compared to negative net
free cash flow of $20.4 million in Q1 2007 and negative net free cash
flow of $10.8 million in Q4 2007, representing a 108% improvement over
Q4 2007.
- Improved cash flow performance enabled the Company to make $2.1 million
in principal debt repayments during the quarter, a $1.5 million
repayment during the first week of April 2008, and a further
$1.5 million repayment in early May 2008.
- In March 2008, the Company announced encouraging drilling results at
its Guadalupe y Calvo exploration project. Exploration diamond drilling
recommenced on this project during Q4 2007 as part of a 15-hole
(2,400 metre) exploration drilling program.
- Given the positive production and financial results achieved in Q1
combined with the Company's significantly improved cash flow profile,
the Company remains confident that it will be able to fully fund its
2008 business plan, and meet the 2008 full year production and cash
cost per ounce guidance issued by the Company on March 31, 2008.
As provided above, the positive financial results reported for the first
quarter represents the best quarterly financial performance of the Company in
its history.
Summarized Financial and Operating Results
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(in thousands, except ounces, per share amounts, average realized prices
and total cash costs)
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Three months Three months Three months
ended ended ended
March 31, Dec. 31, March 31,
2008 2007 2007
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Gold ounces sold 31,455 28,665 36,322
Silver ounces sold 1,248,594 1,183,729 1,469,178
Gold equivalent ounces sold(1) 55,099 49,969 66,305
Gold ounces produced 33,099 27,571 35,126
Silver ounces produced 1,310,971 1,140,797 1,421,966
Gold equivalent ounces
produced(1) 57,946 48,124 64,146
Revenue from mining operations $51,368 $39,700 $43,500
Net earnings / (loss) $8,489 ($20,729) ($10,262)
Net earnings / (loss) per share $0.07 ($0.19) ($0.10)
Net earnings / (loss) per share,
diluted(2) $0.07 ($0.19) ($0.10)
Cash flows from / (used in)
operations $14,553 $2,704 ($9,260)
Net free cash flow(3) $1,592 ($10,766) ($20,425)
Total cash costs per gold
equivalent ounce(3) $491 $676 $575
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(1) Gold equivalent ounces are calculated based on actual sales.
(2) Net loss per share on a diluted basis is the same as net loss per
share on an undiluted basis in Q4 2007 and Q1 2007, as all factors
were anti-dilutive.
(3) See the Non-GAAP Measures section of the Q1 2008 Management's
Discussion and Analysis.
In the first quarter 2008, the Company produced 33,099 gold ounces and
1,310,971 silver ounces or 57,946 gold equivalent ounces, representing a 20%
increase over Q4 2007 at a cash cost of $491 per gold equivalent ounce,
representing a 27% decrease over Q4 2007.
In the first quarter of 2008, the Company sold 31,455 ounces of gold and
1,248,594 ounces of silver or 55,099 gold equivalent ounces, representing a
10% increase over Q4 2007. Total revenues increased by $11.7 million to
$51.4 million from $39.7 million in Q4 2007, representing a 29% increase in
sales that reflects increased sales of gold and silver ounces and stronger
metal prices.
Consolidated net earnings were $8.5 million in Q1 2008, representing an
increase of $29.2 million over Q4 2007. These improvements were primarily due
to higher production, higher metal prices and lower costs of production as
evidenced by the reduction in total cash costs per gold equivalent ounce to
$491 in Q1 2008, representing a decrease of 27% over Q4 2007.
Q1 2008 performance reflected improved performance at Ocampo as a result
of improved mine productivity and underground dilution levels. Key operational
indicators such as daily mill tonnage, heap leach, mining equipment
availability, and open pit production, all improved in Q1 2008. This trend is
anticipated to continue in future quarters as productivity initiatives
continue to gain traction.
Rene Marion, Chief Executive Officer said: "Since launching our targeted
turnaround strategy in December we have continually achieved historic
performance milestones." Mr. Marion continued, "I am particularly pleased at
how quickly we have gained positive traction as our progress exceeds our
internal targets for this period. For example, at Ocampo, the mill averaged
over 1,700 tonnes per day, the open pit averaged 83,000 tonnes per day and the
heap leach averaged 8,700 tonnes per day in March. These are improvements of
33%, 36% and 42% respectively since December when we launched the turnaround
initiatives. During this period, we have also seen Ocampo's gold equivalent
production improve by 33% with a corresponding decrease of 44% in total cash
costs per gold equivalent ounce and at El Cubo a 42% improvement in gold
equivalent production with a corresponding decrease of 31% in total cash costs
per gold equivalent ounce."
Commenting on the Company's performance Scott Perry, Chief Financial
Officer said: "The Company has been able to achieve significant improvement in
its Q1 financial performance where for the first time in the Company's
operational history we are reporting positive net income of $8.5 million and
positive net free cash flow of $1.6 million. The positive cash flow generation
has allowed us to not only fund our operations internally, but to also make Q1
aggregate debt repayments of $2.1 million on our revolving line of credit
facility. In April and early May we were able to make additional aggregate
debt repayments of $3.0 million on this facility. To date, we have made a
total of $5 million in debt reduction payments signifying the strong
turnaround in cash flow performance and our improved financial foundation."
Mr. Perry continued: "The operational success we have achieved to date
provides us with a strong level of confidence that we will be able to fully
fund our 2008 business plan and comfortably achieve our 2008 production and
cash cost targets."
Three Year Operational Outlook
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Gammon Gold
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Production 2008 2009 2010
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Gold Ounces 139-155k oz 168-184k oz 197-213k oz
Silver Ounces 5,848-6,621k oz 7,283-8,055k oz 8,717-9,490k oz
Gold Equivalent(1) 245-275k oz 300-330k oz 355-385k oz
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Cash Cost per Ounce(2) 2008 2009 2010
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Gold Equivalent(1) $480-515/oz $435-$470/oz $395-$430/oz
Gold (Silver
byproduct credit)(2) $230-300/oz $145-$210/oz $70-$135/oz
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1. Assumes a 55.17 silver to gold ratio
2. Assumes metal price of US$800/oz for gold and US$14.50/oz for silver
Mr. Marion continued, "We will continue to drive forward with our turnaround strategy and expansionary capital plans for both Ocampo and El Cubo in 2008 that will allow us to build on the positive advancements we have already achieved. Additionally, our cash flow has improved to a level such that we are able to internally fund an increase in our budgeted exploration programs in the latter half of 2008 that will allow us to accelerate our drilling program at our advanced exploration property, Guadalupe y Calvo, to target the completion of a scoping study by mid-2009, as well as at Ocampo and El Cubo to potentially increase the Reserve & Resource base and production profiles at both mines."
Unaudited Financial Statements for the three-months ended March 31, 2008 are attached to this release and are posted on SEDAR at www.sedar.com and on the Company's website at www.gammongold.com. The Management's Discussion and Analysis for the three-months ended March 31, 2008 is posted on SEDAR at www.sedar.com and on the Company's website at www.gammongold.com.
A webcast and conference call will be held on Wednesday, May 7, 2008 starting at 10:00 am Eastern Time (11:00 am Atlantic Time). Senior management will be on hand to discuss the results.
Conference Call Access:
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- Local Toronto Participants: 1-416-646-3097
- North America Toll Free: 1-800-814-3911
- Outside North America: 1-416-646-3097
When the Operator answers please ask to be placed into the Gammon Gold First Quarter Results Conference Call.
Live Webcast:
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The event will be broadcast live on the internet via webcast. To access the webcast please follow the link provided below:
http://w.on24.com/r.htm?e(equal sign)109226&s(equal sign)1&k(equal sign)1E4948853CF2FAA082504FA5ADA02D1F
Archive Call Access:
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If you are unable to attend the conference call, a replay will be available until midnight, Wednesday, May 14, 2008 by dialing the appropriate number below:
- Local Toronto Participants: 1-416-640-1917 Passcode: 21271078(number sign)
- North America Toll Free: 1-877-289-8525 Passcode: 21271078(number sign)
- Outside North America: 1-416-640-1917 Passcode: 21271078(number sign)
Archive Webcast:
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The webcast will be archived for 365-days by following the link provided below: http://w.on24.com/r.htm?e(equal sign)109226&s(equal sign)1&k(equal sign)1E4948853CF2FAA082504FA5ADA02D1F or via the Company's website at www.gammongold.com.
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 information regarding the Company contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward looking statements. Specific reference is made to "Risk Factors" in the Company's Annual Information Form and Form 40-F Report. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact including, without limitation, statements regarding potential mineralization and reserves, including without limitation, statements regarding future cash costs and production at El Cubo and Ocampo and the ability to continue to successfully implement the Company's turn-around strategy, statements regarding the resource growth potential of Guadalupe y Calvo, statements regarding the company's ability to continue its improved cash flow performance, the impact of any future exploration on reserve estimates; expectations regarding the timing and extent of production at the Ocampo project; the implications of the Mexican Single Rate Tax on future income tax payments; estimates regarding the future costs related to exploration at Ocampo; the nature and availability of additional funding sources; and future plans and objectives of Gammon. In some cases, you can identify forward-looking statements by the use of words such as may, will, should, could, expect, plan, intend, anticipate, believe, estimate, predict, potential or continue or the negative or other variations of these words, or other comparable words or phrases. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations include, among others, risks related to international operations, including political turmoil and limited local infrastructure to support large scale mining operations; the actual results of current exploration activities; conclusions of economic evaluations and changes in project parameters as plans continue to be refined; and fluctuations in future prices of gold and silver. These factors are set out in the Company's Annual Information Form. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.
Consolidated Balance Sheets
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(Unaudited, in thousands of March 31 December 31
United States dollars) 2008 2007
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ASSETS
Current
Cash and cash equivalents $ 7,373 $ 3,601
Restricted cash - 108
Receivables
Commodity taxes 11,739 10,240
Trade / other 3,540 1,740
Inventories (Note 5) 57,041 51,586
Prepaids and deposits 1,979 2,250
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81,672 69,525
Deposits on property, plant and equipment 5,897 5,395
Deferred compensation 86 192
Mining interests and property, plant and
equipment 574,745 572,041
Goodwill 106,799 106,799
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$ 769,199 $ 753,952
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LIABILITIES
Current
Payables and accruals $ 20,674 $ 17,279
Current portion of long-term debt and
capital leases 34,641 33,073
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55,315 50,352
Long-term debt and capital leases 1,340 1,334
Asset retirement obligations 3,060 2,991
Employee future benefits 4,083 3,746
Future income taxes 108,999 108,879
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172,797 167,302
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SHAREHOLDERS' EQUITY
Capital stock 710,874 699,512
Contributed surplus 32,274 42,373
Deficit (153,180) (161,669)
Accumulated other comprehensive income 6,434 6,434
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596,402 586,650
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$ 769,199 $ 753,952
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Consolidated Statements of Operations and Comprehensive Income / (Loss)
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Three months Three months
ended ended
(Unaudited, in thousands of United States March 31, March 31,
dollars except per share data) 2008 2007
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Revenue from mining operations $ 51,368 $ 43,500
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Expenses
Production costs, excluding amortization
& depletion 26,697 37,440
Refining costs 374 475
General and administrative 5,014 3,664
Amortization and depletion 9,926 12,606
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42,011 54,185
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Earnings / (loss) before other items 9,357 (10,685)
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Interest on long-term debt (570) (2,486)
Foreign exchange gain / (loss) 3,352 (1,632)
Interest and other income 74 53
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2,856 (4,065)
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Earnings / (loss) before income taxes 12,213 (14,750)
Future income tax expense / (recovery) 1,927 (4,488)
Current tax expense 1,797 -
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3,724 (4,488)
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Net earnings / (loss) and comprehensive
income / (loss) $ 8,489 $ (10,262)
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Earnings / (loss) per share (Note 6)
Basic $ 0.07 $ (0.10)
Diluted $ 0.07 $ (0.10)
Weighted average shares outstanding (Note 6)
Basic 118,227,858 104,754,700
Diluted 120,826,919 104,754,700
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Consolidated Statements of Cash Flows
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Three months Three months
ended ended
(Unaudited, in thousands of March 31, March 31,
United States dollars) 2008 2007
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OPERATING ACTIVITES
Net earnings / (loss) $ 8,489 $ (10,262)
Amortization and depletion 9,926 12,606
Unrealized foreign exchange (gain) / loss (1,854) 3,155
Stock option expense, net of forfeitures 430 304
Employee future benefits 337 185
Future income tax expense / (recovery) 1,927 (4,488)
Change in non-cash operating working
capital (Note 7) (4,702) (10,760)
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14,553 (9,260)
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INVESTING ACTIVITES
Increase in deposits on property, plant
and equipment (502) -
Expenditures on mining interests and
property, plant and equipment (12,961) (11,165)
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(13,463) (11,165)
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FINANCING ACTIVITIES
Repayment of capital lease obligation (608) (688)
Proceeds from long-term debt 4,380 2,198
Repayment of long-term debt (2,135) -
Proceeds from exercise of options 937 17,412
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2,574 18,922
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Net increase / (decrease) in cash and
cash equivalents 3,664 (1,503)
Cash and cash equivalents, beginning of
period 3,709 4,074
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Cash and cash equivalents, end of period $ 7,373 $ 2,571
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Cash and cash equivalents is comprised of
the following:
Cash $ 5,473 $ 2,571
Temporary investments 1,900 -
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$ 7,373 $ 2,571
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