April 11, 2011 / 2:32 PM / in 6 years

UPDATE 1-Gammon Gold Q1 output down; sees higher 2011 production

* Q1 prod 25,882 oz vs 28,431 oz last year

* Sees 2011 total production of 255,000 to 290,000 gold equivalent oz

* Sees 2011 total cash costs of $455 to $485 per oz

* Shares rise 2 pct to year high (Follows alerts)

April 11 (Reuters) - Gammon Gold said its quarterly gold output fell 9 percent but the miner sees higher gold equivalent production in 2011, helped by contribution from the El Chanate mine in northern Mexico.

Gammon got the El Chanate mine through its recent acquisition of Capital Gold after battling with smaller rival Timmins Gold for several months.

For the year, Halifax, Nova Scotia-based Gammon, which completed its $420 million acquisition of Capital Gold last week, sees production of 205,000 to 230,000 gold equivalent ounces from its Ocampo and El Cubo mines in Mexico.

While total production, including production attributable to Gammon from Capital Gold's El Chanate mine, is seen at 255,000 to 290,000 gold equivalent ounces at total cash costs of $455 to $485 per ounce.

In 2010, Gammon produced 183,537 gold equivalent ounces at Ocampo and 20,596 ounces at El Cubo.

Last month, Gammon Gold had reported a rise in its quarterly income on higher gold and silver prices and it had said it expected to benefit from rising prices this year as well.[ID:nL3E7EN1Z0]

The company also said underground development and mining at the El Cubo mine will commence in mid-April with processing of production ore scheduled for the third quarter.

In the current first quarter, the company produced 25,882 ounces, down from 28,431 ounces last year.

Gammon Gold shares were trading up 10 Canadian cents at C$10.13 on Monday morning on the Toronto Stock Exchange. They touched a one-year high of 10.27 earlier in the session. (Reporting by Arnika Thakur in Bangalore; Editing by Gopakumar Warrier)

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