Gammon Gold improves operations in Q3

Gammon Gold (GAM-T, GRS-N) significantly improved gold and silver production in the third quarter at its projects in Mexico.

The company, which will release its third quarter financial results on Nov. 12, says it improved gold production by 29% to 34,000 oz. compared to the same period last year while silver production improved by 23% to nearly 1.4 million oz.

Combined gold-equivalent production improved by 22% to 57,500 oz. gold despite the rainy season, which the company says often negatively affects the heap leach facility.

Gammon reports further progress in October, the first part of the fourth quarter. At the Ocampo mine in Chihuahua state, the company set a new average stacking rate of 11,000 tonnes per day onto the heap leach pad.

Overall mill processing also reached a new high, averaging 1,850 tonnes per day in October.

Gammon is actually working on an upgrade to the processing facility to increase capacity to 2,400-2,600 tonnes per day. The company is in the ramp-up phase right now and as of Nov. 3 had reached 2,350 tonnes without any apparent operation issues or bottlenecks.

Gammon decided to install a third mill at Ocampo last month, and moved the Marcey mill from the El Cubo plant over to Ocampo. The foundation and electrical room are nearly complete; the company expects to have it up and running early in the second quarter of 2009. The added facility is expected to boost production by 10%.

Lower metals prices made the company decide to stockpile low grade ore from the Ocampo open pit to later stack onto the heap leach pad. Gammon says this will improve the ore grades and will defer heap leach capital expansion requirements until 2010. The company also says that heap leach gold equivalent grades increased by more than 40% in October as a result.

Exploration drilling at Ocampo resulted in the discovery of a new gold vein that returned some bonanza grades. Gammon has named the vein San Amado. It’s located in the northeast portion of the underground operation and the company says it appears to be an extension of the San JuanBalmavera vein system, which is one of the highest grade veins in the mine complex.

One drill hole returned 3.5 metres (true width) grading 30.57 grams gold per tonne and 2,126 grams silver. Gammon says these numbers are the average of two sets of assays.

Another 2.5-metre intersection returned 82.4 grams gold per tonne and 681 grams silver; also an average from two sets of assays.

Gammon plans to continue drilling in this area. The company has two drills going in the open pits and two drills exploring the down dip extension in the underground.

Over at El Cubo in Guanajuato state, Gammon has cut the workforce by 19% — about 230 people and says it has made the operation more efficient and cost effective. Since the beginning of the year, the company has cut 31% of staff at El Cubo.

The third processing mill was put on care and maintenance during the third quarter as all underground production is now sent to the lower cost Las Torres processing plant. Gammon says the 600-metre haulage level to Los Torres is operating at 60% capacity and that the rest of the locomotive cars needed have been ordered, which will enable the company to reach full capacity in the coming quarters.