April 12, 2010 / 2:49 PM / 8 years ago

UPDATE 2-Gammon Gold Q1 output falls; shrs rise on board revamp

* Q1 gold production 28,431 oz vs 36,829 oz year-ago

* Co names new chairman, 3 other independent directors

* Shares rise more than 8 pct

By Arnika Thakur

BANGALORE, April 12 (Reuters) - Canada’s Gammon Gold Inc GAM.TO said quarterly gold production fell about 23 percent, hurt by some operational problems, but its shares rose more than 8 percent as it named four mining veterans to its board, including a new chairman.

“While the production miss was a negative for us, this was offset by the experience and independence of the four new directors,” said analyst Brian Christie of Desjardins Securities in a note.

The mid-tier gold and silver producer with assets in Mexico said its new independent chairman Colin Benner has more than 40 years of experience in the mining industry and sits on the boards of many companies.

Benner joins Gammon from PBS Coals Ltd where he was the chairman. Previously, he was chief executive at Lundin Mining (LUN.TO), a diversified base metals mining company.

Should all nominations to the board be confirmed, seven of the nine directors would be considered independent, Gammon said in a statement.

“The market is grabbing this as a sign that there is a new groom at Gammon and they are going to change the way things are being done,” said Christopher Ecclestone, an analyst at Global Hunter Securities.

The analyst said Gammon has a lot of cash and people have been waiting for transactions for a long time.

“I think with the new management, there is a much greater chance that a good transaction will take place,” he said.

Gammon said it began the year on a strong financial position. “We continue to realize strong cash flow margins that together with our expanded $26 to $30 million exploration program, will best position the company’s assets to deliver on their long-term potential,” Gammon said separately.


Gammon said preliminary first-quarter gold production showed a 23 percent fall to 28,431 ounces from a year ago, hurt by operational problems at its Ocampo project in Mexico.

Silver production fell to about 1.28 million ounces from about 1.35 million ounces a year ago.

The company said using its long-term gold-to-silver ratio of 55:1, total cash costs per gold equivalent ounce were expected to be $488 to $498, up from $411 a year ago.

Gammon Gold has a 100 percent interest in the Ocampo gold-silver project in Chihuahua, Mexico. It also owns the El Cubo Mine located in Guanajuato, Mexico.

Shares of the company were up about 7 percent at C$7.72 in afternoon trade Monday on the Toronto Stock Exchange. They touched a high of C$7.83 earlier in the session. (Reporting by Arnika Thakur; Editing by Gopakumar Warrier)

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