AUDITORS REPORT ON RECONCILIATION TO UNITED STATES GAAP

To the Board of Directors and Shareholders of Gammon Gold Inc.

On March 29, 2008, we reported on the consolidated balance
sheets of Gammon Gold Inc. (formerly Gammon Lake Resources Inc.) ("the Company")
as at December 31, 2007 and 2006 and the consolidated statements of operations
and comprehensive loss, cash flows and shareholders equity for each of the
years in the two year period ended December 31, 2007, which are included in the
annual report on Form 40-F. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related supplemental
note entitled "Reconciliation to United States Generally Accepted Accounting
Principles" included in the Form 40-F. This supplemental note is the
responsibility of the Companys management. Our responsibility is to express an
opinion on this supplemental note based on our audits. In our opinion, such
supplemental note, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ KPMG LLP

Chartered Accountants 
Halifax, Canada 
March 29, 2008



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Reconciliation with United States Generally
  Accepted Accounting Principles
  December 31, 2007


The following represents additional information to the
  consolidated financial statements of Gammon Gold Inc. ("the Company") that
  were prepared in accordance with accounting principles generally accepted in
  Canada ("Canadian GAAP"). Set out below are the material adjustments to net
  loss for the years ending December 31, 2007 and 2006, and to shareholders
  equity at December 31, 2007, and December 31, 2006 in order to conform to
  accounting principles generally accepted in the United States of America ("US
  GAAP"). All amounts are stated in US dollars.


Consolidated Statements of
Operations and Comprehensive Loss:

|                                                                                     |                   | Year ended    |                   |   | Year ended   
|------------------------------------------------------------------------------------ | ----------------- | ------------- | ----------------- | - | -------------
|                                                                                     | December 31, 2007 |               | December 31, 2006
|Net loss based on Canadian GAAP                                                      | $                 | (101,313,968) |                   | $ | (25,308,401) 
|Exploration costs
    (a)                                                            |                   | (5,082,825)   |                   |   | (2,918,520)  
|Amortization and depletion of
    exploration costs (a)                              |                   | 2,011,061     |                   |   | 1,245,631    
|Interest expense on long-term
    debt adjusted to fair value (b)                    |                   | (264,399)     |                   |   | (52,344)     
|Foreign exchange gain on
    adjusted long-term debt (b)                             |                   | -             |                   |   | 44,354       
|Future income taxes on US GAAP
    differences                                       |                   | 3,158,207     |                   |   | (433,720)    
|Net loss based on US GAAP                                                            |                   | (101,491,924) |                   |   | (27,425,177) 
|Other comprehensive income
    based on Canadian GAAP                                |                   | -             |                   |   | 10,702,416   
|Change in currency translation
    adjustment (c)                                    |                   | -             |                   |   | (51,242)     
|Amortization of actuarial gains
    from AOCI to net loss, net of tax of $69,708 (d) |                   | 179,248       |                   |   | -            
|Change in funded status of
    employee benefit plans, net of tax of $188,964 (d)    |                   | (343,883)     |                   |   | -            
|                                                                                     |                   |               |                   |   |              
|Comprehensive loss based on US
    GAAP                                              | $                 | (101,656,558) |                   | $ | (16,722,761) 
|                                                                                     |                   |               |                   |   |              
|Loss per share, basic and
    diluted                                                | $                 | (0.90)        |                   | $ | (0.31)       
|                                                                                     |                   |               |                   |   |              
|                                                                                     |                   |               |                   |   |              
|Consolidated Statements of
    Shareholders Equity:                                 |                   |               |                   |   |              
|                                                                                     |                   |               |                   |   |              
|Deficit:                                                                             |                   |               |                   |   |              
|                                                                                     | December 31, 2007 |               | December 31, 2006
|                                                                                     |                   |               |                   |   |              
|Deficit based on Canadian GAAP                                                       | $                 | (161,668,695) |                   | $ | (60,354,727) 
|Change in deficit due to
    reporting currency translation(c)                       |                   | 7,623,523     |                   |   | 7,623,523    
|Exploration costs
    (a)                                                            |                   | (54,038,331)  |                   |   | (48,955,506) 
|Amortization of mineral rights
    (a)                                               |                   | (10,940,680)  |                   |   | (10,940,680) 
|Amortization and depletion of
    exploration costs(a)                               |                   | 3,222,801     |                   |   | 1,211,740    
|Interest expense on long-term
    debt adjusted to fair value (b)                    |                   | (2,378,590)   |                   |   | (2,114,191)  
|Foreign exchange gain on fair
    value adjusted long-term debt(b)                   |                   | (807,628)     |                   |   | (807,628)    
|Future income taxes related to
    exploration costs                                 |                   | 7,134,712     |                   |   | 3,413,408    
|Future income taxes related to
    amortization of mineral rights                    |                   | 2,796,670     |                   |   | 2,796,670    
|Future income taxes related to
    depletion on exploration costs expensed           |                   | (901,973)     |                   |   | (338,876)    
|Deficit based on US GAAP                                                             | $                 | (209,958,191) |                   | $ | (108,466,267)

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Reconciliation with United States Generally
  Accepted Accounting Principles
  December 31, 2007


|                                                                                         |                   |              |                   |   |             
|---------------------------------------------------------------------------------------- | ----------------- | ------------ | ----------------- | - | ------------
|Accumulated other
    comprehensive income:                                              |                   |              |                   |   |             
|                                                                                         | December 31, 2007 |              | December 31, 2006
|AOCI based on Canadian GAAP                                                              | $                 | 6,434,399    |                   | $ | 6,434,399   
|Change in AOCI due to reporting
    currency translation(c)                              |                   | (7,623,523)  |                   |   | (7,623,523) 
|Change in funded status of
    employee benefit plans, net of tax of $188,964 (d)        |                   | (485,906)    |                   |   | (142,023)   
|Amortization of actuarial gains
    from AOCI to net loss, net of tax of $69,708 (d)     |                   | 179,248      |                   |   | -           
|AOCI based on US GAAP                                                                    | $                 | (1,495,782)  |                   | $ | (1,331,147) 
|                                                                                         |                   |              |                   |   |             
|                                                                                         |                   |              |                   |   |             
|Consolidated Balance Sheets:                                                             |                   |              |                   |   |             
|                                                                                         |                   |              |                   |   |             
|The following material balance
    sheet differences exist between Canadian and US GAAP: |                   |              |                  
|                                                                                         |                   |              |                   |   |             
|Mineral properties and
    related deferred costs:                                       |                   |              |                   |   |             
|                                                                                         | December 31, 2007 |              | December 31, 2006
|Reported under Canadian GAAP                                                             | $                 | 380,702,037  |                   | $ | 368,730,285 
|Exploration costs
    (a)                                                                |                   | (54,038,331) |                   |   | (48,955,506)
|Amortization of mineral rights
    (a)                                                   |                   | (10,940,680) |                   |   | (10,940,680)
|Amortization and depletion of
    exploration costs(a)                                   |                   | 3,222,801    |                   |   | 1,211,740   
|Adjustment for mineral property
    purchase at fair value (b)                           |                   | (3,186,218)  |                   |   | (2,921,819) 
|Reported under US GAAP                                                                   | $                 | 315,759,609  |                   | $ | 307,124,020 
|                                                                                         |                   |              |                   |   |             
|Long term debt:                                                                          |                   |              |                   |   |             
|                                                                                         | December 31, 2007 |              | December 31, 2006
|Reported under Canadian GAAP                                                             | $                 | -            |                   | $ | 6,735,223   
|Adjustment of long-term debt to
    fair value(b)                                        |                   | -            |                   |   | (2,921,819) 
|Interest payable on long-term
    debt adjusted to fair value (b)                        |                   | -            |                   |   | 2,114,191   
|Foreign exchange gain on fair
    value adjusted long-term debt (b)                      |                   | -            |                   |   | 807,628     
|Reported under US GAAP                                                                   | $                 | -            |                   | $ | 6,735,223   
|                                                                                         |                   |              |                   |   |             
|Future income tax liability:                                                             |                   |              |                   |   |             
|                                                                                         | December 31, 2007 |              | December 31, 2006
|Reported under Canadian GAAP                                                             | $                 | 108,879,303  |                   | $ | 70,492,523  
|Future income tax adjustments                                                            |                   | (9,148,665)  |                   |   | (5,871,202) 
|Reported under US GAAP                                                                   | $                 | 99,730,638   |                   | $ | 64,621,321  
|                                                                                         |                   |              |                   |   |             
|Employee future benefits:                                                                |                   |              |                   |   |             
|                                                                                         | December 31, 2007 |              | December 31, 2006
|Reported under Canadian GAAP                                                             | $                 | 3,746,145    |                   | $ | 3,224,429   
|Change in funded status of
    employee benefit plans (d)                                |                   | 425,911      |                   |   | 142,023     
|Reported under US GAAP                                                                   | $                 | 4,172,056    |                   | $ | 3,366,452   

2

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Reconciliation with United States
  Generally Accepted Accounting Principles
  December 31, 2007


Consolidated Statements of Cash Flows:

As a result of the treatment of mining interests under item
(a) above, cash expended for exploration costs would be classified as operating
rather than investing, resulting in the following totals under US GAAP:

|                        |                   | Year ended   |                  |   | Year ended  
|----------------------- | ----------------- | ------------ | ---------------- | - | ------------
|                        | December 31, 2007 |              | December 31,2006
|                        |                   |              |                  |   |             
|Cash used in operations | $                 | (39,274,715) |                  | $ | (20,026,018)
|                        |                   |              |                  |   |             
|Cash used in investing  | $                 | (68,404,668) |                  | $ | (84,863,419)
|                        |                   |              |                  |   |             

(a)Mineral properties and related deferred costs

In March 2002, the Emerging Issues Committee of the CICA
issued EIC 126  Accounting by Mining Enterprises for Exploration Costs
which affects mining companies with respect to the deferral of exploration
costs. EIC 126 refers to CICA Handbook Section 3061, Property, Plant and
Equipment, paragraph .21 which states that for a mining property, the cost
of the asset includes exploration costs if the enterprise considers that such
costs have the characteristics of property, plant and equipment. EIC 126 then
states that a mining enterprise that has not established mineral reserves
objectively, and therefore does not have a basis for preparing a projection of
the estimated cash flow from the property is not precluded from considering the
exploration costs to have the characteristics of property, plant and equipment.
EIC 126 also sets forth the Committees consensus that a mining enterprise in
the exploration stage is not required to consider the conditions regarding
impairment in determining whether exploration costs may be initially
capitalized. With respect to impairment of capitalized exploration costs, if an
enterprise has not established mineral reserves objectively, and therefore does
not have a basis for preparing a projection of the estimated cash flow from the
property it is not obliged to conclude that capitalized costs have been
impaired. However, such an enterprise should consider the conditions set forth
in CICA Handbook Section 3061 in determining whether subsequent write-down of
capitalized exploration costs related to mining properties is required.

Under Canadian GAAP, the Company considers that exploration
costs have the characteristics of property, plant and equipment and,
accordingly, defers such costs. Furthermore, pursuant to EIC 126, deferred
exploration costs would not automatically be subject to regular assessment of
recoverability, unless certain conditions exist.

Under United States GAAP, exploration costs incurred in
locating areas of potential mineralization are expensed as incurred. Commercial
feasibility is established in compliance with the US Securities and Exchange
Commission Industry Guide 7, and consists of identifying that part of a mineral
deposit that can be economically and legally extracted or produced at the time
of the reserve determination. After an area of interest has been assessed as
commercially feasible, expenditures specific to the area of interest for further
development are capitalized.

Prior to May 1, 2004, the Company considered mineral rights
to be intangible assets with finite lives pursuant to FAS 142, Goodwill and
Other Intangible Assets, and amortized over the estimated useful lives of 6
years. EITF-04-2, Whether Mineral Rights are Tangible or Intangible Assets,
concluded that mineral rights are tangible property and the aggregate carrying
amount of the mineral rights should be reported as a separate component of
property, plant and equipment.

(b)Fair value of long-term debt

In consideration for the Soyopa claims acquired in November,
2001 (Note 8(c)), the Company entered into a non-interest bearing loan agreement
as disclosed in Note 8. Commencing in 2006, the loan has been presented at its
fair value under Canadian GAAP. Under US GAAP, interest must be imputed on this
loan in accordance with Accounting Principles Board ("APB") Opinion No. 21,

3

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Reconciliation with United States Generally
  Accepted Accounting Principles
  December 31, 2007


Interest on Receivables and Payables. The reduction in the principal
amount of the loan as a result of imputing a market rate of interest also
reduces the carrying values of the Companys mineral properties accordingly.

During the periods subsequent to November 2001, the interest imputed on the
loan is recorded as a period expense for US GAAP. For Canadian GAAP, the imputed
interest is added to the cost of the mineral properties.

(c)Reporting currency

Effective January 1, 2007, the Company changed its reporting
currency to the United States dollar from the Canadian dollar. As a result of
the change in reporting currency, the financial information of prior periods has
been translated using the current rate method, as if the US dollar had been the
reporting currency in prior years. The resulting cumulative exchange difference
of $7,623,523 has been reported in accumulated other comprehensive income.

(d) Employee future benefits

In September 2006, the Financial Accounting Standards Board
issued FAS No. 58, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, which requires the recognition of the funding
status of a benefit plan in the Companys financial statements. FAS No. 158 also
requires that the plan assets and benefit obligations be measured as of the date
of the Companys fiscal year-end. Under FAS No. 158, the Company is required to
recognize unamortized actuarial gains and losses, prior service cost and
remaining transitional amounts not recognized under Canadian GAAP, and to
recognize changes in the funded status, through other comprehensive income, in
the year in which the changes occur.

(e) Accounting for stripping costs

During 2004, a committee of the Emerging Issues Task Force ("EITF")
began discussing the accounting treatment for stripping costs incurred during
the production phase of a mine, EITF 04-06, Accounting for stripping costs
incurred during production in the mining industry. During March 2005, the
EITF reached a consensus that stripping costs incurred during the production
phase of a mine are variable production costs that should be included in the
costs of inventory produced during the period that the stripping costs are
incurred. The FASB ratified the EITF consensus, which is effective for the first
reporting period in fiscal years beginning after December 15, 2005, with early
adoption permitted. The Company has included stripping costs during the
production phase of the mine as part of production costs for both Canadian and
US GAAP purposes.

(f)Recent US accounting pronouncements

In June 2006 the FASB issued FASB Interpretation ("FIN") 48,
Accounting for Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109, which clarifies the accounting for uncertainty in income
taxes recognized in an enterprises financial statements in accordance with FAS
No. 109, Accounting for Income Taxes. This interpretation prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return, and provides guidance on accounting and disclosure based on whether
it is more likely than not that an uncertain tax position will be sustained on
review by taxation authorities. FIN 48 was effective for the Company on January
1, 2007, and had no material impact on the Companys consolidated financial
results.

In September 2006, the FASB issued FAS No. 157, Fair Value
Measurements. FAS No. 157 provides guidance on how to use fair values to
measure assets and liabilities and applies whenever other standards require or
permit assets or liabilities to be measured at fair value. Expanded disclosures
about the use of fair value to measure assets and liabilities are also required.
FAS No. 157 is effective for the Company on January 1, 2008 and is applied on a
prospective basis. In February 2008, the FASB issued FSP FAS No. 157-2 which
delays the effective date of FAS No. 157 for non-financial assets and
liabilities except for items that are recognized
or disclosed at fair value in the financial statements on a recurring basis
(at least annually) to fiscal years beginning after November 15, 2008. The
Company is evaluating the impact of FAS 157 and FSP FAS No. 157-2 on its
consolidated financial statements.

4

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Reconciliation with United States Generally
  Accepted Accounting Principles
  December 31, 2007


In February 2007, the FASB issued FAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities - Including an
amendment of FASB Statement No. 115. FAS No. 159 expands the use of fair
value accounting but does not affect existing standards which require assets or
liabilities to be carried at fair value. The objective of FAS No. 159 is to
improve financial reporting by providing companies with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. Under FAS No. 159, a company may elect to use fair value to measure
eligible items at specified election dates and report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. Eligible items include, but are not limited to,
accounts and loans receivable, available-for-sale and held-to-maturity
securities, equity method investments, accounts payable, guarantees, issued debt
and firm commitments. If elected, FAS No. 159 is effective for fiscal years
beginning after November 15, 2007.The Company is currently assessing
whether fair value accounting is appropriate for any of its eligible items and
cannot estimate the impact, if any, on the results of consolidated operations
and financial position.

In December 2007, FASB issued FAS No. 160,

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