Gammon expansion program gets results

Gammon Gold (GAM-T, GRS-N) is seeing steady production increases at its Ocampo gold-silver mine in Chihuahua, Mexico, as its expansion program at the mine nears completion.

Between July and September, production increased to an average of 573 gold equivalent oz. per day from 390 gold-equivalent oz. per day.

Gammon has been ramping up underground production at Ocampo, which should reach 1,200 tonnes per day by the end of the year. The company expects open pit production to exceed 100,000 tonnes per day during the month of October.

During the third quarter, underground production by tonnage increased to 676 tonnes per day in September from 488 tonnes per day in July while ore coming from the open pit increased to 98,677 tonnes per day from 93,507 tonnes.

The mill can now treat up to 3,400 tonnes per day, up from 1,200 tonnes per day in 2007 and 2008.

As more ore is sent to the mill from the underground, Gammon is able to send more high-grade open-pit ore to the heap leach pad, which will increase heap leach production.

Gammon’s other producing mine is the El Cubo underground operation in Guanajuato state. The company has recently moved to a round-the-clock, seven-day-a-week operation though production was severely affected earlier in the year due to a seven-week strike. The mine produced about 60,000 gold-equivalent oz. in 2007 and 2008.

Fourth quarter production from both mines should total 80,000 gold equivalent oz. at a cash cost of US$380-400 per gold equivalent oz.

Cash costs have been reduced significantly – by about US$20-25 per gold equivalent oz. – ever since July when the company hooked up to the national grid in Mexico.

The company expects yearly production will amount come in around the lower end of the previous guidance of 235-265,000 gold equivalent oz. at an average cash cost of US$410-445 per oz. for all of 2009.

Gammon shares were up 5.5% today or 52¢ to $9.90 apiece on a trading volume of 2.7 million shares.