Gammon Basks in the Glow of Silver and Gold

Amid this concerted commodity sell-off that has seen mining stocks systematically trimmed around the edges, Gammon Gold (NYSE: GRS) has once again proven that its superior growth profile makes it worth its weight in gold and silver.

Sales volume from Gammon's flagship Ocampo mine grew by 34% for the first quarter to more than 50,000 gold equivalent ounces, or GEOs. At a realized gold-to-silver ratio of 43:1, my top pick among precious metal miners scored a remarkable cash cost of just $382 per ounce. Considering Barrick Gold (NYSE: ABX), the world's largest gold producer, reported a cash cost of $308, I consider Gammon's achievement noteworthy. With only the one producing mine, Gammon generated more cash flow than undervalued competitor Northgate Minerals (AMEX: NXG) did from three mines combined.

Importantly, Gammon is now leaping in scale from one mining operation to three this year. Even while the company celebrates a defining strategic victory in the acquisition of Capital Gold -- and its former flagship El Chanante mine -- the long-awaited return to production for Gammon's El Cubo mine is poised to chip in 20,000 to 30,000 ounces of gold during the second half of 2011 alone. Stepping back to appreciate the emerging consolidated footprint, we find that Gammon is positioned to deliver year-over-year production growth of between 39% and 58% for 2011.

No matter which Foolish lens one employs to examine Gammon Gold, I believe the miner stacks up as an enormously compelling vehicle for precious metals exposure. I have previously highlighted the company's exciting exploration success, the remaining potential for sustained organic reserve growth, and a low cost-structure sustained by the recent acquisition as major feathers in this gold miner's cap.

But what happens when we pause to view Gammon Gold as if it were a primary silver miner? After all, Gammon's consolidated silver reserves of 71 million ounces make the miner a veritable powerhouse in silver. If we shift our view to consider gold as a by-product of Gammon's silver production, we discover a silver miner with silver-equivalent production volume to match Hecla Mining (NYSE: HL), but at cash costs beneath those of major producer Pan American Silver (Nasdaq: PAAS). Whereas Gammon shares recently traded for six times estimated 2011 cash flow, Silvercorp Metals (NYSE: SVM) commanded twice that multiple. Comparing multiples to net asset value, Gammon slays nearly the entire silver group, including Coeur d'Alene Mines (NYSE: CDE).

Whether Fools are drawn to Gammon Gold by the miner's rapidly expanding gold production, or the powerful silver kicker derived principally from the flagship Ocampo mine, Gammon Gold stacks up against the competition through every precious lens.

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