Gammon Gold (GRS) said Wednesday that its fourth quarter net earnings rose 74%, beating analyst profit estimates by a wide margin as the company benefited from strong performance at its Ocampo mine.
For the quarter ending December 31, the gold and silver producer had net earnings of $23.5 million, or 17 cents per share, up from the $13.5 million, or 10 cents per diluted share, for the year-ago period. Revenue from mining operations was $71 million, up 4% from $68.2 million. Analysts polled by Thomson Reuters expected the Halifax-based company to earn 12 cents a share on revenues of $74.5 million.
Recently, Gammon Gold, which owns the Ocampo and El Cubo mines in Mexico, has been competing with Timmins Gold (OTC:TMGOF) to acquire Capital Gold (Pending:CGC), which also holds properties in Mexico. Gammon recently bolstered its offer by raising the cash component to $1.09 per Capital share, plus 0.5209 of a Gammon common share, but as of last week, the total value of roughly $364 million was still short of Timmins' sweetened $398 million bid. Capital Gold’s shareholders will be voting on which deal to accept on April 1.
During the quarter, Gammon produced 29.4 million ounces of gold, down from 36.8 million ounces for the year-ago period because of a suspension at its El Cubo mine due to a worker’s strike. The company said today it will restart the mine as it has reached a new collective agreement with its workers. Meanwhile, silver production came in at 1.2 billion ounces, down from 1.5 billion ounces.
However, at the Ocampo mine, the company produced and sold more silver in the fourth quarter over last year, leading to gold equivalent production of 51,199 ounces at cash costs of $427 per ounce, for a record margin of $954, or 69%, per gold equivalent ounce, Gammon said.
"In 2011, we anticipate Ocampo's strong performance will continue, where we will not only benefit from the expected strong gold price environment but will continue to leverage our considerable silver production to the strongly appreciating silver price," said CEO Rene Marion.
The company's shares rose about 4.4% to trade at C$9.40 on the Toronto Stock Exchange as of 9:30 am EST.