Thursday, July 15, 2010

Gammon Gold (AMEX:GRS) a Contender or Pretender?

How long can the narrative of potential be applied to Gammon Gold (NYSE:GRS)? It's not an easy question to answer, but the beating it's been taking lately shows investors aren't believing the story anymore, especially after completely shutting down their El Cubo mine from labor unrest.

Consequently, whether you use Toronto or New York as a measure, the stock has been hit hard and at similar levels at either exchange.

The P/E on Gammon is a huge 93.16 as well.

Interestingly, Scotia Capital upgraded the beleaguered stock from "Underperform" to "Sector Performer" last week, and the share price has risen a little since then.

One potential positive for the company is they can now focus primarily on their Ocampo mine, which had been generating 77 percent of the reserve base of the company, and which resources formally used at El Cuba have now been transferred there.

While this could be a buying opportunity after the stock has plunged, the overall story still must make sense, and Gammon has yet to prove their narrative and the reality are one and the same.

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