GRS » Topics » (1) Gold equivalent ounces are calculated based on actual sales. (2) The calculation of total cash cost per gold ounce includes the by-product silver sales revenue.

This excerpt taken from the GRS 6-K filed May 7, 2008.

(1) Gold equivalent ounces are calculated based on actual sales.

(2) The calculation of total cash cost per gold ounce includes the by-product silver sales revenue.

12


Management’s Discussion and Analysis
For the three months ended March 31, 2008


Net Free Cash Flow

Net free cash flow represents an indication of the Company’s continuing capacity to generate discretionary cash flow from operations, comprising cash flows from operating activities net of total capital expenditures. It does not necessarily represent the cash flow in the period available for management to use at its discretion, which may be affected by other sources and non-discretionary uses of cash. The following is a reconciliation of net free cash flow to the financial statements:

(in thousands)

    Three months ended   Three months ended   Three months ended
    March 31, 2008   December 31, 2007   March 31, 2007

 

 

 

 

 

 

 

Cash flows from operating activities per

 

 

 

 

 

 

     financial statements

$

14,553

$

2,704

$

(9,260)

 

 

 

 

 

 

 

Less: Capital expenditures per financial

 

 

 

 

 

 

           statements

 

12,961

 

13,470

 

11,165

 

 

 

 

 

 

 

Net free cash flow

$

1,592

$

(10,766)

$

(20,425)

Risks and Uncertainties


The operations of Gammon are high-risk due to the nature of mining, exploration, and development activities, all of which are conducted in Mexico. For a more detailed discussion of the risk factors and other information, please refer to the Company’s 2007 MD&A, and 2007 Annual Information Form, which are available at www.sedar.com or www.gammongold.com.

Changes in Accounting Policies


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