Ocampo
On Track to Become the Next Mid-Tier Producer
Gammon Gold has a 100% interest in the Ocampo Gold-Silver Project located in Chihuahua, Mexico, and has been actively exploring the Ocampo Mining District since 1999. In 2004, the company awarded a Feasibility study to Kappes, Cassidy and associates in Reno, Nevada to determine if the project would support an ongoing commercial operation producing gold and silver with its underground minable resources, and it's open pit resources.
The Ocampo Project is located at approximately 28˚12.5' latitude and 108˚25' longitude. It is approximately 235-kilometres southwest of the state capital Chihuahua, within the Ocampo Municipio, in the State of Chihuahua, Mexico. The project area ranges from 1,600-metres to 2,200-metres in elevation.
A positive Feasibility study was completed in November 2004 for phase one development of the Ocampo Project, and this study demonstrated excellent economic potential at the then price of US$ 450/oz gold and US$7.50/oz silver. Annual production from operations is planned to average 270,000 ounces gold-equivalent (170,000 oz. gold and 6-million oz. silver) over the first seven years of mining, at a currently estimated cash cost of US $325 per gold-equivalent ounce, once full production is achieved at feasibility production rates.
A highly experienced mine development and construction team was assembled to move the Ocampo Project through to production. In February 2005, John C. Thornton, Chief Operating Officer; John Roberts, Chief Mining Engineer; and Richard Jeffress, Manager of Projects, joined Gammon Gold. Together, they brought more than 100 years of industry experience to the Project. The senior management of Gammon Lake awarded an EPMC (Engineering, Procurement and Manager of Construction) contract to Kappes, Cassiday and Associates (KCA) of Reno, Nevada, a pioneering firm in precious metals heap leaching, for mill and heap leach processing design, construction and commissioning.
Gammon Gold met its near-term objective of gold-silver production with its first gold pour on February 1, 2006 as planned in the Feasibility study from ore stacked and leached during first operations which began in Q4 2005 in the open pits. The second project completion within the Ocampo project was the turn over of the Mill facilities also completed under KCA management in September 2006. During commissioning in September of 2006, the first gold pour from this facility was recorded. Gammon Gold became the first Junior Mining Company to complete two process facilities and two mine start-up completions in the same year ever accomplished in the Mining industry.
The operations management was handed over to Mr. Dave Keough in July of 2007, and has been successful in moving the commissioned plants and mines towards normal operations with an excellent experienced team of operators.
The Company has developed a very positive working relationship with both federal and state governments in Mexico. Fred George, Chairman and President of Gammon Gold, has met with many Mexican government officials including the past President of Mexico Mr. Fox, to discuss the Company's development and production plans at Ocampo. Government officials have demonstrated their solid commitment to the Ocampo Project and will provide both industrial electrical power to the Project and 25-kilometres of road paving. These initiatives are expected to assist in reducing capital and operating costs associated with the Project.
Gammon Gold has laid a solid foundation for continued growth and is now close to achieving the Company's near-term objective of becoming the next mid-tier producer in Mexico.
Exploration Activities Targeting Further Expansion of Gold and Silver Resources and Reserves
One dynamic driving Gammon Gold's growth is the excellent resource potential at the Company's 100%-owned Ocampo Project.
While Feasibility planned construction has been completed, and operations have been initiated for the Project, the potential remains for expansion of resources and reserves. Gammon has outlined a total property resource of 10.7-million ounces gold-equivalent, consisting of 5.8-million ounces of gold and 295-million ounces of silver. Measured and Indicated resources amount to 83.8-million tonnes grading 1.07 g/t gold and 50 g/t silver. This represents 2.8-million ounces of gold and 133-million ounces of silver, or 5-million ounces on a gold-equivalent basis. A further 29-million tonnes grading 3.13 g/t gold and 172 g/t silver remains in the inferred category, representing 2.95-million ounces of gold and 161.9-million ounces of silver (5.69-million ounces gold-equivalent).
These figures were calculated based on drilling completed prior to the January 2006 Technical report issued to the TSX. Since commissioning completion in January 2007, Gammon Gold has continued its aggressive exploration program focused on upgrading and expanding resources at the Project. Data from drilling completed during Q4 2007 off will be complied into a new resource/reserve calculation to be issued during early Q1 2008.
In the Technical report issued in January 2006, the deposits at Ocampo are defined by 197,037-metres of drilling in 1,038 holes. Approximately 50% of drilling has been conducted from underground drill stations to define the NE ore deposits, and has been facilitated by 28 kilometers of underground development in ramps and level drives. This underground development has helped pinpoint both known and undetected high-grade zones, with little or no surface expression, deep below the surface.
The opening of ramps and level drives has allowed the Company to access these high-grade zones for underground drilling directly in the zones. This, in turn, has extended the depth that Gammon is able to reach by completing down-dip drilling from underground drill stations. Access ramps have been constructed at a scale of 4-metres wide by 4.5-metres high to facilitate mining and extraction of ore, thereby reducing the capital required for mine development.
San Eduviges - Planning for Ocampo's Third Mine
During the spring of 2007, management directed that an inclined shaft be driven to access the San Eduviges vein system underneath the PGR open pits of Refugio and Plaza de Gallos. Mining drives completed in the 19th century were opened up, cleaned out, and sampled revealing along with drilling information completed in higher elevations productive vein systems that could well become Ocampo's third mine in the district. The complete access to the San Eduviges 4 vein system, as well as the San Theodora, Arroyo, and El Rayo structures is expected during Q4 of 2007, and will facilitate on vein exploration as well as access form placement of drilling bays to test each vein system further at depth.
Developing a World-Class Gold and Silver Deposit
The Ocampo Project encompasses 10,000-hectares and consists of an Open Pit Project area centered on a northwest trending structural system called the PGR Trend, and an Underground Project area located in the Northeast. The Project is characterized by mountainous terrain that is shot through with very high-grade ore shoots, often of bonanza grade, that run over a vertical extent that has been tracked for 700-metres. The entire area is dotted at various elevations with old mines following these shoots. The highest outcrop of mineralization, at the Plaza de Gallos area, occurs at an elevation of 2,150-metres; the lowest, at the Santa Juliana Mine, is at 1,400 meters elevation.
While the evidence for a rich 700-metre ore horizon is abundant at Ocampo, not a single ore shoot has yet been tested over the entire 700-meter extent of this horizon. The area's old-time miners were generally not able to mine at depths greater than 150 to 300 meters along the horizon, either because of limited mining technology or dewatering problems with overflowing ground water as their rudimentary underground mines sunk to the levels of the area's high valley floors. Dewatering today is routine, but often thwarted old-time miners.
In fact, many of these ore shoots extend well below local water tables, and the gold and silver grades of some of the shoots improve as they go deeper, as much as 350 meters below the valley floors. As the first modern-day explorer at Ocampo, Gammon Gold believes it is uniquely fortunate to have 100% ownership of an entire district containing a major mineralized structural system with such a significant vertical ore horizon.
Ocampo is also blessed with another unique economic advantage: The underground silver ores tested to date are actually cyanide-leachable with very high recoveries. That is because the ore is a silver sulfide. Unlike galena or sphalerite ores, it is more than 90% cyanide-soluble. Test work by Kappes, Cassidy & Associates of Reno, Nevada over the past seven years indicates recoveries for the Northeast Underground area of 96% for gold and 93% for silver in a milling environment. Heap Leach recoveries from the Open Pit area are 87% for gold and 72% for silver for the high-grade component of this area, and 77% gold recovery for the low grade open pit ore with 48 % recovery for the low grade silver.
With 28-kilometres of ramps and tunnels completed to date in September 2007, not only to serve as mine infrastructure, but also to further open the way to examine and pinpoint continued exploration drilling, in conjunction with 4 drills running continuously, management is extremely optimistic about the resource/reserve expansion potential of the project. During the next 18 months to the end of Q1 2009, the Ocampo mine has planned to complete an additional 21 kilometers of development to further it's exploration, but more importantly to expand the number of stopes available for production.
