Gammon Gold (GRS) Offers To Acquire Capital Gold Corp (CGLD) For $0.76 Per Share

March 12, 2009 5:16 PM EDT

Gammon Gold Inc. (NYSE: GRS) and Capital Gold Corporation (OTCBB: CGLD) have entered into a letter agreement ("Letter of Intent") relating to Gammon Gold's proposed acquisition of Capital Gold in an all-share transaction subject to satisfactory completion of due diligence and the negotiation of definitive documentation, receipt of Capital Gold shareholder approval, regulatory approvals and the satisfaction of certain other conditions.

The Letter of Intent contemplates, among other things, the issuance of 0.1028 Gammon Gold shares for each Capital Gold common share outstanding (the "Exchange Ratio"). The Exchange Ratio implies a value for each Capital Gold share of US$0.76 and represents a premium of 29% to Capital Gold shareholders based on the respective 10-day volume weighted average trading prices of Gammon Gold's and Capital Gold's common shares closing on March 11, 2009. Capital Gold has approximately 198 million shares outstanding on a fully diluted basis.

Following closing of the Acquisition, it is expected that Mr. John Brownlie, currently Capital Gold's Chief Operating Officer and director, will become a director of Gammon Gold.

Gammon Gold, Inc., formerly Gammon Gold Resources Inc., incorporated on February 25, 1986, is engaged in the exploration for, and development of gold and silver deposits in Mexico. [SM]

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