Gammon Gold, Inc.

Gammon Gold, Inc. (GRS) has been rallying as investors brace for the impact of inflation coming back into play due to underlying economic fundamentals.

Company Description

Gammon Gold, Inc. engages in the acquisition, exploration and mining of gold and silver deposits in Mexico. The company has a market cap of $828 million.

Estimates On The Rise

With gold prices rising in reaction to concerns about inflation, analysts have been quick to upgrade their earnings projetions for Gammon. The current-year estimate has doubled in the last month, advancing to 6 cents per share.

The next-year estimate has also been on the move, climbing to 30 cents per share from just 2 cent just last month. This is more than a 400% earnings grwoth projection.

Production Increasing

Gammon is bullish on its ability to mine for precious metals in 2009, forecasting total gold production growing to 205,000 from 185,000 ounces. The company is targeting silver production increasing to 8,945,000 ounces from 8,170,000.

Valuations

In light of current earnings projections, this is not a cheap stock. Taking a look forward into next-year, the forward P/E multiple is still 23X, a steep premium to the overall market.

The Chart

Shares of GRS have been on a big rally since early December, advancing from $2.25 to a recent high just below $7, an impressive short-term return of more than 200%. Some short-term resistance has developed around this new high, take a look below.

Read the full analyst report on GRS