Gammon Gold Reports First Quarter Financial Results, Including Record Operating Cash Flow and Net Free Cash Flow at Ocampo

TORONTO, May 12 /CNW/ --
TORONTO, May 12 /CNW/ - Gammon Gold Inc. ('Gammon') (TSX:GAM) (NYSE:GRS):  Gammon is pleased to report financial results from the first quarter
ended March 31, 2011. All amounts are in U.S. dollars unless otherwise
indicated.

Gammon concluded the first quarter on plan, with Ocampo delivering
record underground production, record profit margins, record operating
cash flow and record net free cash flow. The Company now operates three wholly owned gold mines and two advanced
development projects in Mexico that is expected to underpin the
Company's peer-leading growth targets in 2011 and beyond.

The Company also reiterates its consolidated 2011 production guidance of
167,000-189,000 gold ounces, 4.8-5.6 million silver ounces, or
255,000-290,000 gold equivalent ounces at cash costs of $455-485 per
gold equivalent ounce( )(assuming a 55:1 gold equivalency ratio).

Company-Wide Quarterly and Subsequent Highlights

    --  Revenues of $70.3 million
    --  Earnings from operations of $23.6 million, or $0.17 per share
    --  Net earnings of $19.3 million, or $0.14 per share, prior to a
        charge of $7.6 million, or $0.05 per share, in restructuring
        costs for the re-start of operations at the El Cubo mine (the
        'El Cubo Charge')
    --  Strong operating cash flow of $41.2 million, or $0.30 per
        share, before the restructuring costs for the re-start of
        operations at the El Cubo
    --  Net free cash flow(1) of $6.4 million, or $0.05 per share,
        after the El Cubo restructuring costs and $9.8 million in
        discretionary company-wide exploration expenditures.
    --  Cash balance of $119.1 million, as of March 31, 2011
    --  Successfully resolved the labour disruption at the El Cubo mine
        and resumed mining activities as of May 1, 2011, with
        processing scheduled in the third quarter
    --  Completed the acquisition of Capital Gold Corporation effective
        April 8, 2011
    --  Immediate implementation of strategic productivity enhancement
        initiatives at the El Chanate mine including:
  o Integration of operations and administration already underway
  o Additional mining equipment being mobilized

Ocampo Quarterly Highlights

    --  Record earnings before other items of $37.6 million
    --  Record operating cash flow of $51.6 million
    --  Record net free cash flow of $25.6 million
    --  Gold equivalent production of 49,854 ounces at a 43:1 realized
        Q1-11 gold equivalency ratio and a cash cost of $382 per ounce
        (1),   for a record margin of $1,004 (72%) per gold equivalent
        ounce
  o Gold production of 25,882 ounces at cash costs of negative $572 per
    gold ounce(1,2) for a record margin of $1,958 (141%) per gold ounce
    (2)
  o Silver production of 1,035,174 ounces at cash costs of negative
    $15.76 per silver ounce(3) for a record margin of $48 (149%) per
    silver ounce(3)
    --  Gold equivalent production of 44,703 ounces at a 55:1 gold
        equivalency ratio at a cash cost of $427 per ounce(1), for a
        record margin of $958 (69%)
    --  Record underground production rate of 1,968 tonnes per day
    --  Record development of 7,291 metres at the three underground
        operations

'Our strengthened operations team at Ocampo has delivered another
consecutive quarter of record margins, operating cash flow and net free
cash flow. At the El Chanate gold mine, we have been impressed by the
level of expertise of the operations team who are already implementing
a number of operational synergies identified during our operational
integration review, including the mobilization of additional equipment
to accelerate open pit mining rates which is expected to provide
increased ore tonnage for processing.' stated René Marion, President
and Chief Executive Officer. He continued, 'At our El Cubo mine,
stoping activities began on May 1(st )and we expect to begin processing ore in the third quarter, resulting in
the Company operating three wholly owned and producing gold mining
operations in Mexico together with a significantly enhanced portfolio
of two development projects and six exploration properties, all in
Mexico.'

Further Corporate Highlights

    --  The Company has completed a total of 56,704 metres of drilling
        at Ocampo (as of April 30, 2011) that has focused on 10
        underground and open pit targets. Results from the 2011
        drilling program continue to report significant results,
        including multiple high-grade intercepts, demonstrating the
        continued prospectivity of the Ocampo Operations.
    --  Regional exploration is proving prospective with a high-grade
        discovery at the La Balleza vein in the Venus Project that
        reported 0.7 metres grading 62.20 grams per tonne gold and
        2,700 grams per tonne silver, located only 3km from the Ocampo
        property boundary.
    --  On February 28, 2011, the Company announced a company-wide
        pre-depletion increase of 459,000 gold equivalent ounces(4 )
        (18%) to Proven and Probable Reserves estimates and a
        pre-depletion increase of 238,000 (47%) gold equivalent ounces
        (5) to Measured and Indicated Resources. These results arise
        from the first systematic exploration program at Ocampo since
        2003.

Operational Results

 _____________________________________________________________________
|Three Months Ended March 31    |                   |                 |
|(in thousands, except ounces   |         Ocampo    |       El Cubo   |
|and total cash costs)          |                   |                 |
|_______________________________|___________________|_________________|
|                               |     2011|     2010|     2011|   2010|
|_______________________________|_________|_________|_________|_______|
|Gold ounces sold               |   26,031|   22,406|        -|  6,650|
|_______________________________|_________|_________|_________|_______|
|Silver ounces sold             |1,060,306|1,020,204|      (-)|319,454|
|_______________________________|_________|_________|_________|_______|
|Gold equivalent ounces sold    |         |         |         |       |
|(realized)                     |   50,681|   37,861|        -| 11,531|
|_______________________________|_________|_________|_________|_______|
|Gold ounces produced           |   25,882|   21,855|        -|  6,576|
|_______________________________|_________|_________|_________|_______|
|Silver ounces produced         |1,035,174|  960,817|        -|323,254|
|_______________________________|_________|_________|_________|_______|
|Gold equivalent ounces produced|         |         |         |       |
|(realized)                     |   49,854|   36,546|        -| 11,515|
|_______________________________|_________|_________|_________|_______|
|Revenue from mining operations |  $70,313|  $41,902|        -|$12,785|
|_______________________________|_________|_________|_________|_______|
|Mine standby costs             |        -|        -|   $7,555|      -|
|_______________________________|_________|_________|_________|_______|
|Net earnings / (loss) before   |         |         |         |       |
|other items                    |  $37,579|  $15,161| ($7,926)| $1,063|
|_______________________________|_________|_________|_________|_______|
|Cash flow from operations      |  $51,564|  $16,034|($11,570)| $2,783|
|_______________________________|_________|_________|_________|_______|
|Total cash costs per gold      |         |         |         |       |
|equivalent ounce(1) (realized) |     $382|     $455|        -|   $763|
|_______________________________|_________|_________|_________|_______|
|Total cash costs per gold ounce|         |         |         |       |
|(1,2)                          |   ($572)|       $3|        -|   $515|
|_______________________________|_________|_________|_________|_______|
|Gold equivalent ounces sold    |         |         |         |       |
|(55:1)(5)                      |   45,309|   40,955|        -| 12,458|
|_______________________________|_________|_________|_________|_______|
|Gold equivalent ounces produced|         |         |         |       |
|(55:1)(5)                      |   44,703|   39,325|        -| 12,453|
|_______________________________|_________|_________|_________|_______|
|Total cash costs per gold      |         |         |         |       |
|equivalent ounce (55:1)(1,5)   |     $427|     $421|        -|   $706|
|_______________________________|_________|_________|_________|_______|

  1. Non-GAAP measures are described on page 24 of the first quarter
     2011 Management's Discussion and Analysis
  2. Using silver revenues as a by-product cost credit.
  3. Using gold revenues as a by-product cost credit.
  4. Using the reserve metal prices of $1,025/oz for gold and $16.60/oz
     for silver for a gold to silver ratio of 61.75:1. For a breakdown
     of reserves and resources by category and additional information
     relating to reserves and resources, see pages 15-18 of the
     Company's 2010 Annual Information Form that is available on the
     Company's website at
     www.gammongold.com or
     www.sedar.com.
  5. Using the Company's long-term gold equivalency ratio of 55:1.

Conference Call and Webcast


The Company will release the Company's first quarter financial results
for the three-month period ended March 31, 2011 before the market opens
on Thursday, May 12, 2011. The Company's Consolidated First Quarter 2011 Financial Statements and
Management's Discussion and Analysis is available on the Company's
website at www.gammongold.com or www.sedar.com.

A webcast and conference call will be held on Thursday, May 12, 2011 starting at 9:00 am Eastern Time. Senior management will be on hand to discuss the results.

Conference Call Access:

    --  Canada & US Toll Free: 1-(888) 231-8191
    --  International & Toronto: 1-(647) 427-7450 

When the Operator answers please ask to be placed into the Gammon Gold
First Quarter 2011 Results Conference Call.

Conference Call Webcast:


The conference call 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=3487440

Archive Call Access:


If you are unable to attend the conference call, a replay will be
available until midnight, May 19, 2011 by dialing the appropriate
number below:

    --  Local Toronto Participants: 1-416-849-0833   Passcode:
        #60684299
    --  North America Toll Free: 1-800-642-1687  Passcode: #60684299

Archive Webcast:


The webcast will be archived for 90 days by following the link provided
below:

http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3487440 or via the Company's website at www.gammongold.com.

About Gammon Gold


Gammon Gold Inc. is a publicly traded mid-tier gold and silver producer
engaged in the mining, development, exploration and acquisition of
resource properties in North America. The Company owns and operates
three producing mines in Mexico, the Ocampo mine in Chihuahua State,
the El Chanate project in Sonora State, and the El Cubo mine in
Guanajuato State. Gammon Gold also owns the Guadalupe y Calvo advanced
exploration property in Chihuahua State and the Orion Project in the
State of Nayarit, and has six exploration properties in various states
throughout Mexico. The Company's Executive Office is located in
Toronto, Ontario.

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.

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'', ''target'',
''continue'', ''estimate'', ''may'', and similar expressions identify
forward-looking statements. Forward-looking statements include, among
other things, statements regarding anticipated future financial and
operational performance, the future price of gold and silver, the
timing of re-commissioning and re-commencement of production at El
Cubo, the de-risking of operations, future exploration results of its
exploration and development program at Guadalupe y Calvo, the Company's
ability to delineate additional resources and reserves as a result of
such program, and the company's ability to mine such targets by
mid-2011, statements regarding its financial exposure to litigation,
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
completion of the Ocampo expansion program and improvements to the heap
leach pad, costs and timing of the development and commencement of
production of new deposits, costs and timing of construction, costs and
timing of future exploration and reclamation expenses including,
anticipated 2011 results, operating performance projections for 2011,
our ability to fully fund our business model internally, 2011 gold and
silver production and the cash and operating costs associated
therewith, the ability to achieve productivity and operational
efficiencies, 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.

To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/May2011/12/c3577.html

For further information please visit the Gammon gold website at www.gammongold.com or contact: