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Jbay76 (< 20)

GammonGold's 4th quarter Earnings

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March 23, 2011 – Comments (1) | RELATED TICKERS: AUQ , GOLD , SIL

Gammon Gold has released their 4th quarter earnings, ending in Dec 2010, today...2 days earlier than originally intended.  In reading it, they had a pretty good 4th quarter, though I am left with some questions.

When they talk about the results from the Ocampo Mine, they state that

 

Record earnings before other items of $33.6 million Record operating cash flow of $41.9 million Net free cash flow of $15.0 million Gold equivalent production of 51,199 ounces at cash costs of $427 per ounce1 for a record margin of $954 (69%) per gold equivalent ounce1 Gold production of 29,384 ounces at cash costs of negative $388 per ounce2 for a record margin of $1,769 (128%) per gold ounce2 Silver production of 1,199,829 ounces at cash costs of negative $15.21 per ounce3 for a record margin of $42.61 (156%) per silver ounce3 Record production at the North-East underground mine of 1,671 tonnes per day Commissioned second underground mine, Santa Eduviges, in late December Identified new Reserves of 398,000 gold equivalent ounces4

What does it men to generate PMs at a cash cost of negative value?  Does that mean that the metal is essentially comiong out for free?  Or does it mean that the value cash negative is the value that the company owes or pays to get that ounce?

Overall, them boys did good.  Hopefully it helps with their aqcuisition bid for Capial Gold!

1 Comments – Post Your Own

#1) On March 24, 2011 at 12:00 PM, rfaramir (29.57) wrote:

Your question about negative cash costs was already answered on another blog entry, but let me add a little on this one on "gold equivalent ounces".

Gammon Gold is obviously a gold miner. What is their interest in the silver that happens to come out? In this case, they chose to count each silver ounce as equivalent to about 1/40th of an ounce of gold (the current ratio).

They could have chosen (I think) to further reduce their gold cash costs with those silver ounces. I suspect why they did not were 2 reasons: 1) it would have reduced the apparent amount of gold they were mining (it would have been all gold, not gold + 1/40th silver), and 2) their costs were already negative from the other byproducts they were selling.

That sounds like a pretty sweet mine, by the way! 

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