TSX: GAM / NYSE: GRS / BSX: GL7
HALIFAX, March 25 /CNW/ - Gammon Gold Inc. ("Gammon Gold") (TSX:GAM and NYSE:GRS) is pleased to announce that it has released the audited financial statements for the year ended December 31, 2008.
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Q4 2008 Financial and Operational Highlights
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Q4 2008 Q4 2007 % Change
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Revenues $48.3 million $39.7 million 22%
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Net Earnings (Loss) $21.8 million ($20.7 million) 205%
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Earnings per Share (Loss) $0.18 ($0.19) 195%
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Operating Cash Flow $10.0 million $2.7 million 270%
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Gold Production 43,768 27,571 59%
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Silver Production 1,649,893 1,140,797 45%
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Gold Equivalent Production(x) 64,889 48,184 35%
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Total Cash Costs(xx) $384 $676 (43%)
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Gold-to-Silver Ratio 79:1 56:1
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(x) Gold-to-Silver production and total cash costs were negatively
impacted by an unfavourable gold-to-silver ratio of 79:1 as
compared to the 200-month average of 57:1
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2008 Year End Financial and Operational Highlights
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2008 2007 % Change
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Revenues $212.5 million $152.1 million 40%
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Net Earnings (Loss) $30.2 million ($101.3 million) 130%
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Earnings per Share (Loss) $0.25 ($0.90) 128%
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Operating Cash Flow $55.9 million ($34.2 million) 263%
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Gold Production 154,428 121,387 27%
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Silver Production 5,778,874 5,035,704 15%
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Gold Equivalent Production(x) 251,510 218,734 15%
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Total Cash Costs(xx) $525 $670 (22%)
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Gold-to-Silver Ratio 59:1 52:1
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(x) Gold-to-Silver production and total cash costs were negatively
impacted by an unfavourable gold-to-silver ratio reported in the
last half of 2008.
(xx) Total cash costs per ounce is a non-GAAP financial measure used
throughout the document and is intended to provide additional
information. This item does not have a standardized meaning under
GAAP and should not be considered in isolation or as a substitute
for other GAAP measure of financial performance.
"I consider these results an excellent report card on the new executive
and management teams, only one year into our turnaround and expansionary
program. During 2008, we were able to fully fund our operations, exploration
programs, capital expansion projects and corporate G&A through our
significantly improved cash flow profile and therefore not dilute our
shareholders by issuing equity to support our operations. In fact, as of March
20, 2009, Gammon's cash position of approximately $19.6 million speaks well of
our cash management strategy" stated Rene Marion, CEO of Gammon Gold Inc. He
continued "On the back of the commissioning of the Ocampo, Phase II mill
expansion and our ever increasing confidence in our operating performance and
financial foundation, we have launched the first step in our corporate
development strategy by announcing the pending acquisition of Capital Gold
Corp., a low cost open pit and heap leach gold producer located in Sonora,
Mexico."
Q4 2008 Financial and Operational Highlights
- Revenues for the fourth quarter increased by $8.6 million, or up 22%,
to $48.3 million as compared to $39.7 million in the same period in
2007
- Net earnings increased by $42.5 million, or up 205%, to $21.8 million,
or $0.18 per share, as compared to a net loss of $20.7 million, or
$0.19 per share, in the same period in 2007
- Cash flow from operations increased by $7.3 million, or up 270%, to
$10.0 million, as compared to $2.7 million in the same period in 2007
- Gold and silver production represent the best quarterly production
performance to date
- Gold production increased by 59% to 43,768 ounces as compared to
27,571 ounces in the same period in 2007
- Silver production increased by 45% to 1,649,893 ounces as compared to
1,140,797 ounces in the same period in 2007
- Both gold equivalent production and total cash costs in the quarter
were negatively impacted by an unfavourable gold-to-silver ratio of
79:1 as compared to a ratio of 56:1 reported in the same period of 2007
- Gold equivalent production increased by 35% to 64,889 ounces as
compared to 48,184 ounces for the same period in 2007, even when
considering the unfavourable gold-to-silver ratio of 79:1. Had the
ratio been 56:1, as reported in Q4 2007, gold equivalent production
would have been 73,230 ounces, or up 52%
- Total cash costs decreased by $292 per gold equivalent ounce, or down
43%, to $384 per gold equivalent ounce as compared to $676 per gold
equivalent ounce for the same period in 2007. Total cash costs in the
quarter are significantly below industry average, even when
considering the unfavouable gold-to-silver ratio of 79:1. Had the
ratio been 56:1, as reported in Q4 2007, total cash costs would have
been $341 per gold equivalent ounce
- Total cash costs were positively impacted by a $35 per gold
equivalent ounce partial reversal of the mark-to-market net
realizable value adjustments taken in Q3 2008 as well as a positive
impacts related to the devaluation of the Mexican peso
- Phase I of the mill expansion at Ocampo was commissioned in
mid-November resulting in positive operational contributions to metal
production and unit cost performance.
2008 Financial and Operational Highlights
In early 2008, the Company assembled a proven, senior executive management
team with a successful track record in turnaround situations that brings with
them over 125 years of collective experience in mining. This dynamic team was
able to attract a senior mine management team, with 400 years combined
experience in international mining:
- Revenues for 2008 increased by $60.4 million, or up 40%, to
$212.5 million as compared to $152.1 million in 2007
- Net earnings increased by $131.5 million, or up 130%, to $30.2 million,
or $0.25 per share, as compared to a net loss of $101.3 million, or
$0.90 per share, in 2007. Operating cash flow increased by
$90.1 million, or up 263%, to $55.9 million as compared to negative
operating cash flow of $34.2 million in 2007. The strong operating cash
flow performance allowed the Company to fully fund all operations,
exploration programs, capital expansion projects and corporate G&A
- Gold production increased by 27% to 154,428 ounces as compared to
121,387 ounces in 2007
- Silver production increased by 15% to 5,778,874 ounces as compared to
5,035,704 ounces in 2007
- Gold equivalent production increased by 15% to 251,510 ounces as
compared to 218,734 ounces in the same period in 2007 in line with
guidance, even when considering the unfavourable gold-to-silver ratio
of 59:1 in 2008. Had the ratio remained at 55:1, the ratio used to
determine our 2008 guidance, gold equivalent production would have been
259,498 ounces, a 19% improvement
- Total cash costs decreased by $145, or down 22%, to $525 per gold
equivalent ounce as compared to $670 for the same period in 2007 even
when considering the unfavourable gold-to-silver ratio of 59:1 in 2008,
within 1.9% of guidance. Had the ratio remained at 55:1, the ratio used
to determine our 2008 guidance, total cash costs would have been
$509 per gold equivalent ounce and within guidance
- The El Cubo workforce, including contractors, was reduced by 29% in
2008. The positive impact of this optimization began to be realized in
Q4 2008.
- At El Cubo, we improved the mining rate of in-situ ore by 55% and
reduced the reliance on the mining of lower grade rezagas
- Restructured the Company's corporate credit facility comprising a
US$30 million non-revolving term loan and a US$20 million revolving
line of credit
Subsequent Events
The strategies and programs launched in 2008 have had proven results that
are expected to positively impact performance throughout 2009. Additionally,
the expansionary programs that will be completed in 2009 are expected to
contribute significantly to our organic growth profile to such a degree, that
the revised 2009 production guidance issued by the Company in January 2009, is
essentially the same gold and silver production levels that the Company had
anticipated for 2010.
The mill expansion at Ocampo is well advanced with the delivery and
installation of the gravity circuit anticipated by April, 2009. During Q1
2009, management scheduled stoppages of the mill while various operating
systems related to the Phase II expansion were tied in. Concurrently, the
Company maximized the benefit of this downtime to upgrade much of the
electrics in the mill.
"As a result of the strategic decision to commission the Phase II
expansion in Q1, one quarter ahead of schedule, mill utilization in January
and February were reduced to between 84% and 88% respectively, so that the
circuit could be upgraded, including electric, additional pumps, pumping
circuits and process controls to handle the increased flows." stated Russell
Tremayne, Chief Operating Officer of Gammon Gold. He continued, "With the
Marcey ball mill now commissioned, mill utilization has returned to over 95%.
Since commissioning, we have averaged approximately 2,800 tonnes per day
through the mill and with the installation of the gravity circuit anticipated
for early Q2 2009, we expect to achieve improved recoveries from the mill
processing facility."
The decision to complete the mill expansion at Ocampo in the first 6
months of 2009 corresponds with the Company's revised open pit and underground
expansion plans at Ocampo. In the open pit we are stripping new areas for
production while our underground development program to increase the number of
stoping areas is progressing well. Partially as a result of the Phase II
commissioning activities in January and February and the temporary step-up in
open pit stripping, production in Q1 2009 is expected to be lower than the
previous quarter, but it is not expected to negatively impact achieving our
budgeted 2009 production levels.
Engineering for Phase III of the mill expansion program was initiated in
Q4 2008 with final construction and commissioning targeted in early Q3 2009.
Following completion, the Phase III expansion will effectively triple mill
throughput capacity over the average daily tonnages achieved in 2007.
In 2009, we will continue to improve our internal production profile
through our continuous improvement programs, our enhanced exploration program
and corporate development opportunities in the North American precious metals
sector.
On March 13, 2009, the Company announced a pending transaction with
Capital Gold Corp. in an all-share transaction subject to due diligence,
definitive documentation, regulatory approvals and the satisfaction of certain
other conditions. Capital Gold's El Chanate mine is a low cost, open pit and
heap leach gold operation located in Sonora, Mexico. As the Company has only
recently announced the proposed transaction with Capital Gold Corp., and has
not finalized a definitive agreement, it has not been able properly consider
the impact of the anticipated synergies of the combined companies, such as the
re-deployment of standby equipment at Ocampo to El Chanate, procurement
synergies and the reduction of Capital Gold's corporate G&A costs. Therefore,
the Company will not issue updated 3-year guidance that incorporates this
transaction until the Company has sufficient time to develop a strategic plan
that fully quantifies the magnitude of the potential synergies that are
expected to positively impact costs and production. The acquisition is
anticipated to close within the next 6 months.
"The new team at Gammon has not only delivered on its 2008 objectives, we
have also positioned the Company as a leader among our peers. Our organic
growth profile coupled with our corporate development initiatives, firmly
positions Gammon to grow in 2009 and beyond. I am particularly excited that we
are taking the first step in delivering on our corporate development model
through the pending acquisition of Capital Gold." stated Rene Marion, CEO of
Gammon Gold. He continued, "We have the assets and a team with the experience
and tenacity to deliver on our 2009 objectives and we are looking forward to a
year of continued growth and success."
Reserves and Resource Update
The Company's 2008 Reserve and Resource estimates are provided in the
Company's 2008 Annual Information Form that is posted on the Company's website
at www.gammongold.com or under the Company's profile on www.sedar.com.
Audited Financial Statements and Management's Discussion and Analysis
The audited financial statements and related Management's Discussion and
Analysis can be found on the Company's website at www.gammongold.com or under
the Company's profile on www.sedar.com. The Company's Form 40-F containing the
complete audited financial statements has also been filed with the Securities
and Exchange Commission at http://www.sec.gov/edgar.shtml. Upon request, the
Corporation will provide a hard copy of the Company's complete audited
financial statements free of charge.
Conference Call Details:
A webcast and conference call will be held on Thursday, March 26, 2009
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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- Toll Free: 1-800-733-7571
When the Operator answers please ask to be placed into the Gammon Gold
Fourth Quarter and Year End 2008 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://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2547600
Archive Call Access:
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If you are unable to attend the conference call, a replay will be
available until midnight, Thursday, April 2, 2009 by dialing the appropriate
number below:
- Local Toronto Participants: 1-416-640-1917 Passcode: 21297534(number sign)
- North America Toll Free: 1-877-289-8525 Passcode: 21297534(number sign)
- Outside North America: 1-416-640-1917 Passcode: 21297534(number sign)
Archive Webcast:
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The webcast will be archived for 365 days by following the link provided
below: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)2547600 or via
the Company's website at www.gammongold.com.
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, 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. This News Release
includes certain "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and "forward-looking
information" within the meaning of applicable Canadian legislation. All
statements other than statements of historical fact, included in this release,
including, without limitation, statements regarding potential mineralization
and reserves, exploration results, and future plans and objectives of Gammon
Gold, are forward-looking statements (or forward-looking information) that
involve various risks and uncertainties. There can be no assurance that such
statements will prove to be accurate and actual results and future events
could differ materially from those anticipated in such statements. Important
factors that could cause actual results to differ materially from Gammon
Gold's expectations include, among others, risks related to international
operations, the actual results of current exploration activities, risks
relates to the completion and integration of acquisitions, conclusions of
economic evaluations and changes in project parameters as plans continue to be
refined as well as future prices of gold and silver, as well as those factors
discussed in the section entitled "Risk Factors" in Gammon Gold's Form 40-F
and Annual Information Form as filed with the United States Securities and
Exchange Commission. Although Gammon Gold has attempted to identify important
factors that could cause actual results to differ materially, there may be
other factors that cause results not to be as anticipated, estimated or
intended.
There can be no assurance that such statements will prove to be accurate
as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements. Gammon Gold does not undertake to
update any forward-looking statements that are included herein, except in
accordance with applicable securities laws.
Consolidated Balance Sheets
(In thousands of United States Dollars)
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At December 31 2008 2007
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ASSETS
Current
Cash and cash equivalents $ 3,258 $ 3,709
Receivables
Commodity taxes 8,762 10,240
Trade / other 4,932 1,740
Inventories 49,318 51,586
Prepaids and deposits 2,389 2,250
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68,659 69,525
Deposits on property, plant and equipment 4,930 5,395
Other long-term assets 4,653 192
Long-term ore stockpiles 2,119 -
Mining interests and property, plant
and equipment 597,126 572,041
Goodwill 106,799 106,799
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$ 784,286 $ 753,952
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LIABILITIES
Current
Payables and accruals $ 30,457 $ 17,279
Current portion of long-term debt
and capital leases and other
long-term obligations 30,861 33,073
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61,318 50,352
Long-term debt and capital leases 7,991 1,334
Other long-term obligations 4,677 -
Asset retirement obligations 3,622 2,991
Employee future benefits 1,659 3,746
Future income taxes 77,301 108,879
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156,568 167,302
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SHAREHOLDERS' EQUITY
Capital stock 719,426 699,512
Contributed surplus 33,288 42,373
Deficit (131,430) (161,669)
Accumulated other comprehensive income 6,434 6,434
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627,718 586,650
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$ 784,286 $ 753,952
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Consolidated Statements of Operations and Comprehensive Income / (Loss)
(In thousands of United States Dollars except per share data)
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For the years ended December 31 2008 2007
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Revenue from mining operations $ 212,522 $ 152,059
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Expenses
Production costs, excluding
amortization and depletion 127,024 144,623
Refining costs 1,662 1,510
General and administrative 29,945 24,156
Amortization and depletion 40,715 43,392
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199,346 213,681
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Earnings / (loss) before other items 13,176 (61,622)
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Interest on long-term debt (1,936) (3,897)
Foreign exchange gain / (loss) 9,337 (8,933)
Interest and other income 410 772
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7,811 (12,058)
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Earnings / (loss) before income taxes 20,987 (73,680)
Future income tax (recovery) / expense (10,296) 27,634
Current tax expense 1,044 -
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(9,252) 27,634
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Net earnings / (loss) and comprehensive
income / (loss) $ 30,239 $ (101,314)
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Earnings / (loss) per share
Basic $ 0.25 $ (0.90)
Diluted $ 0.25 $ (0.90)
Weighted average shares outstanding
Basic 119,110,568 113,176,605
Diluted 120,812,872 113,176,605
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Consolidated Statements of Cash Flows
(In thousands of United States Dollars)
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For the years ended December 31 2008 2007
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OPERATING ACTIVITIES
Net earnings / (loss) $ 30,239 $ (101,314)
Items not affecting cash 19,732 85,646
Change in non-cash operating working
capital 5,962 (18,524)
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55,933 (34,192)
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INVESTING ACTIVITIES
Decrease / (increase) in deposits on
property, plant and equipment 465 (4,345)
Expenditures on mining interests and
property, plant & equipment (66,841) (69,142)
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(66,376) (73,487)
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FINANCING ACTIVITIES
Repayment of capital lease obligation (2,551) (2,500)
Proceeds from long-term debt 13,880 36,973
Repayment of long-term debt (8,109) (130,624)
Net proceeds from issuance of capital
stock - 170,026
Proceeds from exercise of stock
options 6,772 33,439
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9,992 107,314
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Net decrease in cash and cash
equivalents (451) (365)
Cash and cash equivalents, beginning of
year 3,709 4,074
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Cash and cash equivalents, end of year $ 3,258 $ 3,709
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Cash and cash equivalents is comprised
of the following:
Cash $ 3,258 $ 3,601
Restricted cash - 108
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$ 3,258 $ 3,709
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Consolidated Statements of Shareholders' Equity
(In thousands of United States Dollars)
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For the years ended December 31 2008 2007
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Capital stock
Balance, beginning of year $ 699,512 $ 463,333
For cash pursuant to exercise of
stock options 6,772 33,439
Fair value of share-based
compensation exercised 13,142 32,714
Public offering - 178,120
Share issuance costs - (8,094)
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Balance, end of year $ 719,426 $ 699,512
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Contributed surplus
Balance, beginning of year $ 42,373 $ 71,747
Fair value of share-based
compensation exercised (13,142) (32,714)
Forfeitures of stock options (429) (1,848)
Stock option expense 4,486 5,188
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Balance, end of year $ 33,288 $ 42,373
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Deficit
Balance, beginning of year $ (161,669) $ (60,355)
Net earnings / (loss) 30,239 (101,314)
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Balance, end of year (131,430) (161,669)
Accumulated other comprehensive income 6,434 6,434
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Total deficit and accumulated other
comprehensive income $ (124,996) $ (155,235)
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Total shareholders' equity $ 627,718 $ 586,650
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