TORONTO (miningweekly.com) - Halifax, Nova Scotia-based Gammon Gold, which recently scrapped plans to buy rival Capital Gold, plans to increase production to between 365 000 oz and 395 000 oz of gold-equivalent by 2011, the firm said on Wednesday.

This would be an increase of between 45% and 56% from the company's performance in 2008, when it produced 252 000 gold-equivalent ounces, or 155 000 oz of gold and 5,78-million ounces of silver.

Gammon Gold, which produces precious metals from two mines in Mexico, also expects a significant improvement in cash costs over the next three years.

To increase production and lower costs, the company is expanding the mill at its Ocampo mine to process as much as 3 400 t/d, an increase of 165% over the 1 275 t/d realised in 2007, and will also increase the tonnage to the heap leach to between 12 000 t/d and 14 000 t/d ahead of schedule.

The ramp up of underground mining at Ocampo will also continue throughout this year, and the mill expansion is expected to be fully complete by the third quarter.

Cash costs are estimated at between $305 to $340 per gold equivalent ounce in 2011, which represents a decline of between 35% and 42% from costs in 2008.

This year, the company expects to produce between 333 000 and 367 000 gold-equivalent ounce, at a total cash cost of between $360/oz and $395/oz.

Shares in Gammon Gold slid 1,2% on Wednesday, to C$7,41 apiece by 16:15 in Toronto.