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Exhibit 99.1

Annual Information Form

For the year ended December 31, 2010 Dated as of March 23,
2011

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|2010ANNUAL INFORMATION FORM
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GAMMON GOLD INC.(the Company or Gammon
Gold)1701 Hollis Street Founders Square, PO Box 2067 Halifax,
Nova Scotia B3J 2Z1

ANNUAL INFORMATION FORM

TABLE OF CONTENTS

|GLOSSARY OF TERMS                                  | 4 
|-------------------------------------------------- | --
|                                                   |   
|REPORTING CURRENCY AND
      FINANCIAL INFORMATION | 7 
|                                                   |   
|MINERAL RESOURCE
      REPORTING STANDARDS         | 7 
|                                                   |   
|FORWARD-LOOKING
      INFORMATION                  | 7 
|                                                   |   
|SCIENTIFIC AND
      TECHNICAL INFORMATION         | 8 
|                                                   |   
|GENERAL
      INFORMATION                          | 9 
|                                                   |   
|Incorporation                                      | 9 
|Subsidiaries                                       | 9 
|3 Year History                                     | 10
|Proposed & Significant Acquisitions                | 12
|                                                   |   
|NARRATIVE DESCRIPTION OF BUSINESS                  | 13
|                                                   |   
|General                                            | 13
|Production and Total Cash Costs                    | 13
|Mineral Reserves and Mineral Resources             | 15
|Sampling and Analysis, Data Verification           | 19
|Uses
      of Gold                                 | 19
|Markets, Sales and Refining                        | 19
|Employees and Labour Relations                     | 19
|Cycles                                             | 19
|Competitive Conditions                             | 19
|Environmental Protection                           | 20
|Foreign Operations                                 | 20
|                                                   |   
|MINERAL PROPERTIES                                 | 20
|                                                   |   
|The
      Ocampo Mine                              | 20
|The Open Pit Mine                                  | 26
|The Underground Mine                               | 26
|The El Cubo Mine                                   | 27
|Guadalupe y Calvo                                  | 32
|Venus Project, Chihuahua                           | 35
|Los
      Jarros Project, Chihuahua                | 37
|Mezquite Project, Zacatecas                        | 38
|                                                   |   
|TAXES                                              | 40
|                                                   |   
|LEGAL MATTERS                                      | 40
|                                                   |   
|RISK FACTORS                                       | 41

| | 2 | 
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|CAPITAL
      STRUCTURE                                                      | 54
|---------------------------------------------------------------------------- | --
|                                                                             |   
|MARKET
      FOR SECURITIES                                                  | 55
|                                                                             |   
|ESCROWED
      SECURITIES                                                    | 55
|                                                                             |   
|MATERIAL
      CONTRACTS                                                     | 55
|                                                                             |   
|INTEREST
      OF MANAGEMENT & OTHER MATERIAL TRANSACTIONS                   | 55
|                                                                             |   
|TRANSFER
      AGENTS AND REGISTRAR                                          | 56
|                                                                             |   
|DIVIDENDS                                                                    | 56
|                                                                             |   
|INTERESTS
      OF EXPERTS                                                   | 56
|                                                                             |   
|DIRECTORS
      AND OFFICERS                                                 | 58
|                                                                             |   
|AUDIT
      COMMITTEE INFORMATION                                            | 59
|                                                                             |   
|DISCLOSURE
      PURSUANT TO THE REQUIREMENTS OF THE NEW YORK STOCK EXCHANGE | 61
|                                                                             |   
|ADDITIONAL
      INFORMATION                                                 | 61
|                                                                             |   
|SCHEDULE
      A  AUDIT COMMITTEE CHARTER                                 | 62

| | 3 | 
| | - | 

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GLOSSARY OF TERMS

Ag Silver

Assay -Analysis to determine the amount or proportion
of the element of interest contained within a sample

Au Gold

Aue Gold equivalent

Ball mill- A horizontal rotating steel cylinder which
grinds ore to fine particles. The grinding is carried out by the pounding and
rolling of a charge of steel balls carried within the cylinder

Bench- The horizontal ledge in an excavation or mining
operation that is drilled, blasted and excavated separately from other
benches

Clastic Rock- A consolidated sedimentary rock composed
principally of broken fragments that are derived from pre-existing rocks (of any
origin) or from the solid products formed during chemical weathering of such
rocks, and that have been transported mechanically to their places of
deposition; i.e., a sandstone, conglomerate, or shale; or a limestone consisting
of particles derived from a pre-existing limestone

Concentrate- A processing product containing the
valuable ore mineral from which most of the waste mineral has been
eliminated

Crushing- Breaking of ore from the size delivered from
the mine into smaller and more uniform fragments to be then fed to grinding
mills or to a leach pad

Cut-off grade -the minimum metal grade at which
material can be economically mined and processed (used in the calculation of ore
reserves)

Cyanidation- A method of extracting gold or silver by
dissolving it in a weak solution of sodium cyanide

Development- Work carried out for the purpose of
opening up a mineral deposit. In an underground mine, this includes shaft
sinking, crosscutting, drifting and raising. In an open pit mine, development
includes the removal of overburden and/ or waste rock

Dilution- Sub-economic material that is unavoidably
included with the mined ore, lowering the mined grade

Doré- Unrefined gold and silver bullion bars usually
consisting of approximately 90 percent precious metals that will be further
refine (generally offsite) to almost pure metal

Drift- A horizontal tunnel generally driven within or
alongside an orebody and aligned parallel to the long dimension of the ore

Drilling -

Core: a drilling method
that uses a rotating barrel and an annular-shaped, diamond-impregnated
rock-cutting bit to produce cylindrical rock cores and lift such cores to the
surface, where they may be collected, examined and assayed

Geotechnical:
diamond drilling targeted and utilized specifically for the collection of
information used for mine engineering, slope stability, and underground ground
reinforcement purposes

Reverse circulation: a
drilling method that uses a rotating cutting bit within a double-walled drill
pipe and produces rock chips rather than core. Air or water is circulated down
to the bit between the inner and outer wall of the drill pipe. The chips are
forced to surface through the centre of the drill pipe and are collected,
examined and assayed

Exploration- Prospecting, sampling, mapping,
diamond-drilling and other work involved in locating the presence of economic
deposits and establishing their nature, shape and grade

| | 4 | 
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Felsic- mnemonic (adj.) derived from (fe) for feldspar,
(l) for feldspathoid, and (s) for silica, and applied to light-colored rocks
containing an abundance of one or all of these constituents. Also applied to the
minerals themselves, the chief felsic minerals being quartz, feldspar,
feldspathoid, and muscovite

Flotation- A process by which some mineral particles
are induced to become attached to bubbles and float, and other particles to
sink, so that the valuable minerals are concentrated and separated from the
uneconomic gangue or waste

Grade- The amount of metal in each ton of ore,
expressed as troy ounces per ton or grams per tonne for precious metals and as a
percentage for most other metals

Mill-head grade: metal
content of mined ore going into a mill for processing

Recovered grade:metal
content that was extracted from ore by processing

Reserve grade:estimated
metal content of an orebody that satisfies all economic, mining, and other
criteria to be considered a reserve

g Grams

g/t Grams per tonne

Grinding (Milling)- Powdering or pulverizing of ore, by
pressure or abrasion, to liberate valuable minerals for further metallurgical
processing

LIBOR- The London Inter-Bank Offered Rate for
deposits

Metric conversion

Troy ounces
    x
    31.10348
    =
    GramsTroy ounces per short ton
    x
    34.28600
    =
    Grams per tonneTons
    x
    0.90718
    =
    TonnesFeet
    x
    0.30480
    =
    MetresMiles
    x
    1.60930
    =
    KilometresAcres
    x
    0.40468
    =
    HectaresFahrenheit
    (°F-32) x 5 ÷ 9
    
    =
    Celsius


Mill- A processing facility where ore is finely ground
and thereafter undergoes physical or chemical treatment to extract the valuable
metals. Also the device used to perform grinding (milling)

Mineral Reserve -See Narrative Description of
Business  Mineral Reserves and Mineral Resources.

Mineral Resource -See Narrative Description of
Business  Mineral Reserves and Mineral Resources.

Mining claim- That portion of applicable mineral lands
that a party has staked or marked out in accordance with applicable mining laws
to acquire the right to explore for and exploit the minerals under the
surface

Net profits interest royalty(also called net
profits interest or net profit interest) - A royalty based on the
profit remaining after recapture of certain operating, capital and other
costs

Net smelter return royalty(also called a net smelter
return) - A royalty based on a percentage of valuable minerals produced
with settlement made either in kind or in currency based on the spot sale
proceeds received less all of the offsite smelting, refining and transportation
costs associated with the purification of the economic metals

NI 43-101- National Instrument 43-101  Standards of
Disclosure for Mineral Projects

Open pit mine- A mine where materials are removed
entirely from a working that is open to the surface

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Ore- Rock, generally containing metallic or
non-metallic minerals, which can be mined and processed at a profit

Orebody- A sufficiently large amount of ore that is
contiguous and can be mined economically

Oxide ore(also called oxides)- Mineralized
rock in which some of the original minerals have been oxidized. Oxidation tends
to make the ore more amenable to cyanide solutions so that minute particles of
gold will be readily dissolved

Qualified Person -An individual who is an engineer or
geoscientist with at least five years of experience in mineral exploration, mine
development or operation or mineral project assessment, or any combination of
these; has experience relevant to the subject matter of the mineral project and
the relevant technical report; and is a member or licensee in good standing of a
professional association as defined in NI 43-101

Ramp- An inclined roadway connecting two levels in an
open pit mine, or inclined tunnel in an underground mine

Reclamation- The process by which lands disturbed as a
result of mining activity are modified to support beneficial land use.
Reclamation activity may include the removal of buildings, equipment, machinery
and other physical remnants of mining, closure of tailings storage facilities,
leach pads and other mine features, and contouring, covering and re-vegetation
of waste rock and other disturbed areas

Reclamation Costs- The cost of reclamation plus other
costs, including without limitation certain personnel costs, insurance, property
holding costs such as taxes, rental and claim fees, and community programs
associated with closing an operating mine in compliance with relevant
regulations in the local jurisdiction

Recovery rate- A term used in process metallurgy to
indicate the proportion of valuable material physically recovered in the
processing of ore. It is generally stated as a percentage of the material
recovered compared to the total material originally present

Resuing- A method of stoping wherein the wall rock on
one side of the vein is removed before the ore is broken. Employed on narrow
veins, less than 30 in (76 cm), and yields cleaner ore than when wall and ore
are broken together.

Refining- The final stage of metal production in which
impurities are removed from the molten metal

Skarn- A metamorphic rock that is usually variably
colored green or red, occasionally grey, black, brown or white.

Shaft- A vertical passageway to an underground mine for
ventilation, moving personnel, equipment, supplies and material including ore
and waste rock

Stope- An underground excavation from which ore is
extracted

Tailings- The ground rock material that remains after
all economically and technically recoverable precious metals have been removed
from the ore during processing

Tailings storage facility- A natural or man-made
confined area suitable for depositing the material that remains after the
treatment of ore

Tons- Short tons (2,000 pounds)

Tonnes- Metric tonnes (1,000 kilograms), mt

Total cash costs- See Narrative Description of
Business-Production and Total Cash Costs

tpd- tonnes per day

Volcanics- A general collective term for extrusive
igneous and pyroclastic material and rocks

Volcanoclastic- Pertaining to a clastic rock containing
volcanic material without regard to its origin or environment

| | 6 | 
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|Vuggy Silica- The texture produced by the
      dissolving of minerals and rock fragments, and the replacement of the
      remaining matrix of the rock by silica minerals, usually quartz. This
      texture is common in high-sulphidation epithermal systems.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                  
|Wallrock- The rock forming the walls of a vein or
      other mineral deposit                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                  

REPORTING CURRENCY AND FINANCIAL INFORMATION

All currency amounts in this Annual Information Form are
expressed in United States dollars, unless otherwise indicated. The exchange
rate used to calculate US dollar to Mexican Peso throughout this Annual
Information Form is, PESO 1.00 = US$0.08102, as at December 31, 2010.

Gammon Gold Inc. (Gammon Gold or the Company)
prepares its financial statements in accordance with Canadian generally accepted
accounting principles (GAAP), which differ in certain material respects
from accounting principles generally accepted in the United States of America
(U.S. GAAP). The Companys annual financial statements are reconciled
to U.S. GAAP. Unless otherwise stated, financial information in this Annual
Information Form is presented in accordance with Canadian GAAP.

MINERAL RESOURCE REPORTING STANDARDS

Under Canadian rules, estimates of Inferred Mineral Resources
may not form the basis of feasibility or other economic studies. United States
investors are cautioned not to assume that all or any part of Measured or
Indicated Mineral Resources will ever be converted into Mineral Reserves. United
States investors are also cautioned not to assume that all or any part of an
Inferred Mineral Resource exists, or is economically or legally mineable.

FORWARD-LOOKING INFORMATION

Certain statements included herein, including information as to
the future financial or operating performance of the Company, its subsidiaries
and its projects, constitute forward-looking statements. The words believe,
expect, anticipate, contemplate, target, plan, intends,
continue, budget, estimate, forecast, may, will,
schedule and similar expressions identify forward-looking statements.
Forward-looking statements include, among other things, statements regarding
targets, estimates and assumptions in respect of gold and silver and gold
equivalent production and prices, cash and operating costs, results and capital
expenditures, mineral reserves and mineral resources and anticipated grades,
recovery rates, future financial or operating performance, margins, operating
and exploration expenditures, costs and timing of the development of new
deposits, costs and timing of construction, costs and timing of future
exploration and reclamation expenses, anticipated 2010 year-end and 2011
results, the Companys ability to fully fund its business model, including its
capital and exploration program, internally, anticipated 2010 year-end and 2011
interim and annual gold and silver production and the cash and operating costs
associated with the same, the ability to achieve productivity and operational
efficiencies, the ability to achieve cash flow margin improvements, the ability
to complete further reduction in the open pit stripping ratio, the ability to
develop and put into production its exploration targets and the timing of each
thereof, the ability to successfully execute its acquisition strategy, the
acquisition of Capital Gold (the Acquisition) including whether the completion
of the Acquisition will ultimately occur, whether the anticipated synergies of
the proposed Acquisition will occur, the assessment of the value of the
properties of Capital Gold and obtaining the required security holder,
regulatory, third party and other approvals and the outcome of any pending
litigation related to the Acquisition. Forward-looking statements are
necessarily based upon a number of estimates and assumptions that, while
considered reasonable by Gammon Gold, are inherently subject to significant
business, economic, competitive, political and social uncertainties and
contingencies. Important factors that could cause actual results to differ
materially from Gammon Golds expectations include, among others, risks related
to international operations, the actual results of current exploration
activities, conclusions of economic evaluations and changes in project
parameters as plans continue to be refined, future prices of gold and silver,
known and unknown uncertainties and risks relating to additional funding
requirements, reserve and resource estimates, hedging activities, development
and operating risks, illegal miners, uninsurable risks, competition, limited
mining operations, production risks, environmental regulation and liability,
government regulation, currency fluctuations, recent losses and write-downs,
restrictions in Gammon Gold's loan facility, dependence on key employees,
possible variations of ore grade or recovery rates, failure of plant, equipment
or process to operate as anticipated, accidents and labour disputes as well as
those factors discussed in the section entitled Risk Factors herein. Although
Gammon Gold has attempted to identify important factors that could cause actual
results to differ materially, there may be other factors that cause results not
to be as anticipated, estimated or intended. There can be no assurance that such
statements will prove to be accurate as actual results and future events could
differ materially from those anticipated in such statements. Forward-looking
statements are not guarantees of future performance. Accordingly, readers should
not place undue reliance on forward-looking statements.

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The Company may, from time to time, make oral forward-looking
statements. The Company advises that the above paragraph and the risk factors
described in this Annual Information Form and in the Company's other documents
filed with the Canadian securities commissions and the United States Securities
and Exchange Commission (the SEC) should be read for a description of
certain factors that could cause the actual results of the Company to materially
differ from those in the oral forward-looking statements. Forward-looking
statements are made as of the date of this Annual Information Form or, in the
case of documents incorporated by reference herein, as of the date of such
document. The Company disclaims any intention or obligation to update or revise
any oral or written forward-looking statements whether as a result of new
information, future events or otherwise, except as required by applicable
law.

SCIENTIFIC AND TECHNICAL INFORMATION

Mineral Reserves have been estimated in accordance with the
National Instrument 43-101 (NI 43-101), as required by Canadian
securities regulatory authorities. In addition, while the terms Measured,
Indicated and Inferred Mineral Resources are required pursuant to NI 43-101,
the SEC does not recognize such terms. Canadian standards differ significantly
from the requirements of the SEC, and Mineral Resource information contained
herein is exclusive of, and not comparable to similar information regarding
Mineral Reserves disclosed in accordance with requirements of the SEC. Investors
should understand that Inferred Mineral Resources have a great amount of
uncertainty as to their existence and great uncertainty as to their economic and
legal feasibility.

Scientific and technical information for the El Cubo property
have been prepared by employees of Gammon Gold Inc. under the supervision of
Glenn R. Clark, P. Eng. of Glenn R. Clark & Associates Limited.

Unless otherwise indicated, scientific or technical information
in this Annual Information Form relating to Mineral Reserves or Mineral
Resources for the Ocampo property have been prepared by employees of Gammon Gold
Inc. under the supervision of Ramon Luna, P. Geo.

The scientific and technical information relating to the
Guadalupe y Calvo Project is based on the technical report on the Guadalupe y
Calvo Project dated November 25, 2002 and was prepared by Clancy J. Wendt and
Mark G. Stevens, C.P.G., Pincock, Allen & Holt in accordance with NI 43-101.
The full text of this report is available under the Companys profile at
www.sedar.com.

The scientific and technical information relating to the Venus,
Los Jarros and Mezquite mineral properties was prepared by Peter Drobeck.,
Registered Geologist, Senior Vice President of Exploration and Business
Development of Gammon Gold Inc.

Each of Messrs. Luna, Clark, Wendt, Stevens and Drobeck is a
Qualified Person as defined in NI 43-101. A Qualified Person means an
individual who is an engineer or geoscientist with at least five years of
experience in mineral exploration, mine development or operation or mineral
project assessment, or any combination of these, has experience relevant to the
subject matter of the mineral project and the relevant technical report, and is
a member in good standing of a professional association.

Definitions

A Mineral Resource(or a Resource) is a
concentration or occurrence of natural, solid, inorganic or fossilized organic
material in or on the Earths crust in such form and quantity and of such a
grade or quality that it has reasonable prospects for economic extraction. The
location, quantity, grade, geological characteristics and continuity of a
Mineral Resource are known, estimated or interpreted from specific geological
evidence and knowledge. Mineral Resources are sub-divided, in order of
increasing geological confidence, into Inferred, Indicated and Measured
categories.

An Inferred Mineral Resource is that part of a
Mineral Resource for which quantity and grade or quality can be estimated on the
basis of geological evidence, limited sampling and reasonably assumed but not
verified geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes.

An Indicated Mineral Resource is that part of a
Mineral Resource for which quantity, grade or quality, densities, shape and
physical characteristics can be estimated with a level of confidence sufficient
to allow the appropriate application of technical and economic parameters, to
support mine planning and evaluation of the economic viability of the deposit.
The estimate is based on detailed and reliable exploration and testing
information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are
spaced closely enough for geological and grade continuity to be reasonably
assumed.

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A Measured Mineral Resourceis that part of a
Mineral Resource for which quantity, grade or quality, densities, shape,
physical characteristics are so well established that they can be estimated with
confidence sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on detailed and
reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings
and drill holes that are spaced closely enough to confirm both geological and
grade continuity.

A Mineral Reserve(or a Reserve) is the
economically mineable part of a Measured or Indicated Mineral Resource
demonstrated by at least a preliminary feasibility study. This study must
include adequate information on mining, processing, metallurgical, economic and
other relevant factors that demonstrate, at the time of reporting that economic
extraction can be justified. A Mineral Reserve includes diluting materials and
allowances for losses that may occur when the material is mined. Mineral
Reserves are sub-divided in order of increasing confidence into Probable Mineral
Reserves and Proven Mineral Reserves.

A Probable Mineral Reserveis the economically
mineable part of an Indicated and, in some circumstances, a Measured Mineral
Resource demonstrated by at least a preliminary feasibility study. This study
must include adequate information on mining, processing, metallurgical, economic
and other relevant factors that demonstrate, at the time of reporting, that
economic extraction can be justified.

A Proven Mineral Reserveis the economically
mineable part of a measured Mineral Resource demonstrated by at least a
preliminary feasibility study. This study must include adequate information on
mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be
justified.

GENERAL INFORMATION

Incorporation

Gammon Gold has its executive office located at 56 Temperance
Street, 5thFloor, Toronto, Ontario, M5H 3V5. The registered office
of the Company is located at 1, Place Ville-Marie, Suite 3900, Montreal, Quebec,
H3B 4M7. The President & Chief Executive Officer and Chief Financial Officer
currently work out of the executive office. The Companys common shares are
listed on the Toronto Stock Exchange (TSX: GAM), the New York Stock Exchange
(NYSE: GRS) and the Berlin Stock Exchange (BSX: GL7).

The Company was incorporated under Part 1A of the Companies Act
(Quebec) on February 25, 1986, under the name Golden Rock Explorations Inc. By
Articles of Amendment dated April 17, 1998, the Company changed its name to,
Gammon Lake Resources Inc., and consolidated its common shares on a 15:1 basis
(the Common Shares). By Articles of Amendment dated June 7, 2007, the
Company changed its name to its current name, Gammon Gold Inc.

Subsidiaries

The table below provides details with respect to the Companys
direct and indirect wholly-owned subsidiaries:

|Name of
      Subsidiary(1)                      | Percentage ofVoting SecuritiesOwned | Jurisdiction ofIncorporationor
      Organization | Nature of Business                                                         
|------------------------------------------------ | ----------------------------------- | ------------------------------------------------- | ---------------------------------------------------------------------------
|Gammon Lake Holdings
      Inc. (2)              | 100% (direct)                       | Nova Scotia                                       | Holding corporation
      for Gammon Lake de Mexico                        
|Gammon
      Lake Chihuahua, S.A de C.V.(3)      | 100%
      (indirect)               | Mexico                                            | Holding
      corporation for Minera El Cubo                               
|Gammon
      Lake de México, S.A. de C.V. (4)    | 100%
      (indirect)               | Mexico                                            | Operating
      corporation for the Ocampo mine                            
|Gammon
      Lake Resources (USA) Inc. (5)       | 100%
      (direct)                 | Arizona                                           | Operating
      corporation for United States office administrative matters
|Mexgold
      Resources Inc. (6)                 | 100%
      (direct)                 | Ontario                                           | Holding
      corporation for Minera El Cubo and Metales                   
|Compania
      Minera del Cubo, S.A. de C.V. (7) | 100%
      (indirect)               | Mexico                                            | Operating
      corporation for the Minera El Cubo                         

|Metales Interamericanos, S.A. de C.V.
      (8) | 100% (indirect) | Mexico   | Inactive                              
|----------------------------------------------- | --------------- | -------- | --------------------------------------
|Gammon Lake GYC, S.A de C.V. (9)                | 100% (indirect) | Mexico   | Holding corporation for Minera El Cubo
|Capital Gold AcquireCo Inc. (10)                | 100% (direct)   | Delaware | Inactive                              

| | 9 | 
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Notes:

|1.  | Gammon Gold and all of its subsidiaries are sometimes
      referred to collectively in this document as the
  Company.                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.  | Referred to in this document as Gammon Lake
      Holdings.                                                                                                                                                                                    
|3.  | Referred to in this document as Gammon Lake
      Chihuahua.                                                                                                                                                                                   
|4.  | Referred to in this document as Gammon Lake de
      Mexico. 2% of the issued and outstanding shares of Gammon Lake de
      Mexico, S.A. de C.V. are held by Gammon Gold directly in accordance with
      Mexican corporate law requirements.
|5.  | Referred to in this document as Gammon Lake Resources
      USA.                                                                                                                                                                               
|6.  | Referred to in this document as
  Mexgold.                                                                                                                                                                                                     
|7.  | Referred to in this document as Minera El
      Cubo.                                                                                                                                                                                          
|8.  | Referred to in this document as
  Metales.                                                                                                                                                                                                     
|9.  | Referred to in this document as Gammon Lake
      GYC                                                                                                                                                                                          
|10. | Referred to in this document as Capital Gold
      AcquireCo.                                                                                                                                                                                  

3 Year History

Mineral Projects

During the past three years, the Company has been focused on
the exploration and development of its mineral interests and the production of
gold and silver at its Ocampo mine, in the municipality of Ocampo, in the State
of Chihuahua, Mexico (collectively referred to herein as the (Ocampo
Mine). The Ocampo Mine is described in this document under Mineral
Properties - The Ocampo Mine. The Company has also been producing gold and
silver from its El Cubo mine and certain related properties located in
Guanajuato State (collectively referred to herein as the El Cubo Mine).
The El Cubo Mine is described in this document under Mineral Properties - The
El Cubo Mine.

On December 16, 2010 the Company announced that it had entered
into binding Letter of Intent with Aurion Resources Limited wherein both parties
agreed to negotiate a definitive agreement that would provide Gammon with an
option to earn up to a 70% joint venture interest in the 12,985 hectare La
Bandera Project, located in Durango, Mexico. Under the terms defined in the
Letter of Intent, Gammon will have the option to earn its interest through a
$250,000 private placement in Aurion and a series of escalating work
commitments.

In September 2010, the Company applied for a mineral concession
over an area of 14,699 hectares in the northern part of San Luis Potosí State,
Mexico. At the end of the year the application was still in the process of being
titled. This application occurs on the north side of properties controlled by
Negociacion Minera Santa Maria de la Paz y Anexos, S.A. de C.V. who are
presently operating an underground mine on their properties and recovering gold,
silver, and copper from complex skarn deposits. The Company considers it
reasonable that similar deposits could occur underneath the valley immediately
north of this competitors operations, and has therefore applied for this
concession to explore this valley. The valleys in this part of Mexico are
commonly filled with less than 100 metres of colluvial material, making such a
valley a good target to explore with conventional geophysical methods. A
geophysical program is planned for 2011.

In August 2010, the Company executed a definitive purchase
agreement for the Los Jarros Project (Los Jarros) in Chihuahua State, Mexico.
The project consists of one purchase option agreement with Valdez Gold Inc., of
Canada and includes eight mineral concessions covering 43,229 hectares surface
area. The agreement allows the Company to purchase a 100% interest in the
properties for $2,500,000 over a four year term, and can be cancelled with 30
days notice. Los Jarros covers ground between Ocampo and Venus, the eastern
side of the Ocampo district, the southeast structural trend of the Pinos Altos
district, the northwest and southeast structural trend of the Concheno mine, and
a block of ground further to the south that covers an epithermal gold
occurrence. The project is a grass roots exploration project with no defined
Resources or Reserves.

During 2010, the Company executed two purchase option
agreements that now comprise the Venus Project (Venus) in Chihuahua, Mexico.
The agreement with Mexicana de Cananea S.A. de C.V. allows the Company to
purchase 100% of the rights of four mineral concessions that total 4,491
hectares in area, for a total price of $7,000,000 over a four year option
period. The agreement also stipulates that the Company will invest a minimum of
$3,000,000 in exploration works over the four-year option period. The second
agreement is with Pedro Murillo M., and concerns one mineral concession covering
84 hectares area. This agreement allows the Company to purchase 100% of the
mineral rights covered by the concession for a total of $750,000 paid over four years. Both agreements allow the Company to
terminate the agreements at any time with 30 days notice with no further
payment obligations. The Venus Project occurs one kilometre north of the Ocampo
Mine properties, eight kilometres north of the Ocampo Northeast underground
mine, and eight kilometres northwest of the Pinos Altos Mine operated by Agnico
Eagle Mines Limited. The properties cover outcropping showings of gold-silver
veins that are geologically similar to those found in the Ocampo and Pinos Altos
districts. The property is a grass roots exploration project with no defined
resources or reserves.

| | 10 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

In March 2010, Gammon signed a definitive purchase option
agreements on a group of properties called the Mezquite Project (Mezquite)
covering 460 hectare in Zacatecas State, Mexico. The option agreements include a
series of option payments that total $1,400,000 over a 3 year period.

In May 2009, Gammon Lake de Mexico obtained surface control of
surface land around the Ocampo Mine site which consists of 4,275 hectares
through a land acquisition expropriation procedure validated by both the Ejidos
and the Mexican authorities; this was finalized by the Company successfully
obtaining the Presidential decree of expropriation. Total price paid for this
land was approximately $1,000 per hectare.

El Cubo Labour Disruption

On June 17, 2010, the Company announced the suspension of
operations at the El Cubo mine as a result of continued labour disruptions, the
termination of 397 unionized workers for participating in a work stoppage, and
rising operating costs associated with the failure of the unionized workforce to
achieve expected productivity levels, the union subsequently declared a strike
on June 30, 2010. On October 2, 2010, the Labour Court released its ruling that
declared the strike action illegal. In accordance with this ruling, the union
released the assets to the Company. 154 contract miners, including supervisors,
surveyors, geologists and maintenance personnel, as well as 30 pieces of key
underground mining equipment were redeployed from El Cubo to the Ocampo mine in
late June to focus on development of the underground mines. On February 23,
2011, the Company announced that it had successfully resolved the labour
disruption at its 100% owned El Cubo mine, located in Guanajuato State, Mexico.
The Company has now secured a new two year collective agreement which has been
unanimously approved by the union. In March 2011, employees were rehired and
commenced training at the University of Guanajuato.

Shareholder Rights Plan

On August 19, 2010, the directors of the Company approved the
entering into of a Shareholder Rights Plan Agreement, dated as of August 19,
2010, between Gammon and Computershare Investor Services Inc., as rights agent
(the Rights Agreement), that contains the terms of a shareholder rights plan
applicable to Gammons shareholders the (Rights Plan). On February 18, 2011
the Rights Plan was approved by the independent shareholders of Gammon.

Corporate Finance

In the last three years, the Company completed a public
offering of 12,926,000 common shares at a price of $8.90 per common share for
gross proceeds of $115,041,400 completed on October 22, 2009. The offering was
sold on a bought deal basis to a syndicate of underwriters led by BMO Nesbitt
Burns Inc., UBS Securities Canada Inc. and including Dundee Securities
Corporation, Macquarie Capital Markets Canada Ltd., Canaccord Capital
Corporation and Research Capital Corporation. In addition, 1,686,000 common
shares were issued pursuant to the full exercise of the over-allotment
option.

On November 28, 2008, the Company restructured its credit
facility and under terms of the new agreement, gained access to a $50,000,000
credit facility split evenly between Bank of Montreal and Bank of Nova Scotia.
The facility was comprised of a US$30 million non-revolving term loan (the
NRT) and a $20,000,000 revolving line of credit (the RT). The NRT was
repayable in instalments, with the last instalment due in June 2010. The RT was
set to mature on November 28, 2009 with the balance payable at that date.
Interest was payable at prime rate plus 2.5% or in the case of US dollar
advances, LIBOR + 3.5%.

On November 5, 2009, the Companys credit facility was
restructured and replaced with a $30,000,000 revolving line of credit with the
Bank of Nova Scotia. The agreement included an option to increase the facility
to $50,000,000 under similar terms and conditions, provided that the Bank of
Nova Scotias exposure did not exceed $30,000,000. On December 31, 2009, the
Company signed an agreement with Société Générale to increase the total
revolving credit facility to $50,000,000, with the exposure divided equally
between the two lenders. Interest is payable at LIBOR + 3.75% to 4.25% depending
on the leverage ratio of the Company.

On November 5, 2010, the Company renegotiated the credit
facility with the Bank of Nova Scotia and Société Générale. The revised
agreement provides for a $75,000,000 revolving facility, which may be increased
to $100,000,000 upon the completion of the acquisition of Capital Gold Corporation, subject to
satisfactory due diligence by the lenders on Capital Gold. The credit facility
does not require principal repayments other than a one-time payment at maturity
equal to the drawn balance at that point in time. The revised agreement expires
36 months from the date of closing with interest payable at a rate of LIBOR plus
a margin of 3.25% to 3.75%. There are no operational covenants associated with
this facility, and there are no restrictions on the use of the proceeds. As of
December 31, 2010, the Company had drawn $26,380,000 under the revolving
facility and had issued a $1,000,000 letter of credit against the facility.

| | 11 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

Proposed & Significant Acquisitions

On October 1, 2010, the Company and its wholly-owned
subsidiary, Capital Gold AcquireCo, Inc. ("AcquireCo"), entered into a merger
agreement with Capital Gold Corporation ("Capital Gold") pursuant to which
Gammon Gold will acquire all of the outstanding common stock of Capital Gold
(the Acquisition). Under the merger agreement, AcquireCo will merge with and
into Capital Gold, and the separate corporate existence of AcquireCo will cease
with Capital Gold surviving as a wholly-owned subsidiary of Gammon Gold. Under
the original merger agreement, each stockholder of Capital Gold was to receive
0.5209 common shares of Gammon Gold and a cash payment in the amount of $0.79
per share (plus cash in lieu of any fractional share interests) for each share
of Capital Gold common stock such stockholder holds immediately prior to the
completion of the Acquisition, unless such stockholder exercises and perfects
its appraisal rights under the Delaware General Corporation Law. On
October 29, 2010, Capital Gold and Gammon Gold entered into Amendment No. 1 to
the merger agreement to provide that appraisal rights are available in
connection with the Acquisition and included a closing condition that provides
that Gammon Gold is not obligated to complete the Acquisition if holders of more
than 10% of the outstanding shares of Capital Gold common stock have exercised
appraisal rights under Delaware Law with respect to the Acquisition.
On March 9, 2011, Capital Gold and Gammon Gold entered into Amendment No. 2 to
the merger agreement to provide that the termination fee payable by Capital
Gold, under certain circumstances, be reduced from $10,300,000 to $5,575,000. In
addition, Gammon Golds ability to terminate the amended merger agreement for
any reason with the payment of a $2,000,000 termination fee was eliminated. On
March 17, 2011, Capital Gold and Gammon Gold entered into Amendment No. 3 to the
merger agreement to provide an increase to the cash component of the merger
consideration to be paid to Capital Golds stockholders by $0.30 per share, for
a total cash payment in the amount of $1.09 per share. In addition, the
outstanding warrants and stock options of Capital Gold will be exchanged for (or
will be deemed to become) warrants and options to acquire common shares of the
Company, with the exercise price of such warrants and options and the number of
shares issuable on exercise being adjusted to reflect any change in the market
value of the Company's common shares between the date of the merger agreement
and the date the Acquisition is completed. It is expected that the current
stockholders of Capital Gold will own approximately 20% of the outstanding
common shares of the Company on a fully diluted basis immediately following the
completion of the Acquisition.

In addition, three officers and consultants of Capital Gold are
party to agreements with Capital Gold that provide for certain payments in event
that their employment or engagement by Capital Gold is terminated following a
change of control of Capital Gold. The amended merger agreement contemplates
that, if such amounts become payable, they may be satisfied by payment in cash
or by the issuance of common shares of the Company at the volume weighted
average price of the Gammon Gold common shares on the NYSE for the five trading
days immediately preceding the completion of the Acquisition, subject to the
consent of the officers and consultants involved.

If the Acquisition is not completed, under the amended merger
agreement, Capital Gold has agreed to pay a termination fee of $5,750,000 to
Gammon Gold under certain circumstances. Capital Gold may also be entitled to a
termination fee of up to $2,000,000 under certain circumstances. Capital Gold
has, among other things, agreed to provide Gammon Gold with certain other
customary deal protections, including a non-solicitation provision and a right
to match.

The Acquisition is subject to approval by the stockholders of
Capital Gold, [in addition to regulatory approvals] and the satisfaction of
certain other customary conditions. The Acquisition is not subject to approval
by the shareholders of Gammon Gold because the number of common shares to be
issued will not exceed 25% of the outstanding common shares of Gammon Gold. On
February 17, 2011, Capital Gold provided to Capital Gold stockholders of record
as of February 14, 2011, a definitive proxy statement/prospectus, dated February 16, 2011,
relating to a special meeting of Capital Golds stockholders that convened and
adjourned on March 18, 2011. The special meeting was called for the purpose of
considering and voting on the proposal to approve and adopt the plan of merger
contained in the amended merger agreement, as well as the adjournment of the
special meeting, if necessary or appropriate, including to solicit additional
proxies if there are not sufficient votes to adopt the amended merger agreement
at the time of the special meeting. On March 18, 2011, Capital Gold convened the
special meeting to vote on a proposal to adjourn the special meeting to give
Capital Golds stockholders additional time to consider the increased
consideration offered by Gammon Gold and to review a supplement to the
definitive proxy statement/prospectus after it was filed with the U.S.
Securities and Exchange Commission (the SEC). Capital Golds stockholders
adjourned the special meeting until April 1, 2011. Gammon Gold prepared and
filed with the SEC a registration statement on Form F-4 (as amended and supplemented from time to time, (the Registration Statement)
to register the shares issuable in connection with the Acquisition for issuance
in the United States. The Registration Statement was declared effective by the
SEC on February 17, 2011.

| | 12 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

Capital Gold is a gold production and exploration company.
Through its Mexican subsidiaries and affiliates, it owns 100% of the El Chanate
gold mine (El Chanate) located near the town of Caborca in Sonora, Mexico. On
August 2, 2010, Capital Gold acquired Nayarit Gold Inc., which owns the Orion
gold project in Nayarit, Mexico. Capital Gold is focused on optimizing the El
Chanate operations and advancing the Del Norte deposit in the Orion District in
the State of Nayarit, Mexico. Capital Gold also owns and leases mineral
concessions near the town of Saric, also located in Sonora, that are undergoing
exploration for gold and silver mineralization.

On July 16, 2010, the Company completed a non-brokered private
placement with Corex Gold Corporation (Corex) by acquiring 4,706,000 units of
Corex for an aggregate purchase price of CAD$3,200,000 ($3,000,000). Each unit
consists of one common share and one half of one share purchase warrant
exercisable at CAD$0.90, for a period of twenty four months following the
closing date of the transaction. Corex is a gold exploration Company whose
principal asset is the Santana Gold Project in Sonora State, Mexico.

On June 1, 2010, the Company completed a non-brokered private
placement with Golden Queen Mining Co. Limited (Golden Queen) by acquiring
5,000,000 units of Golden Queen for an aggregate purchase price of CAD$8,000,000
($7,600,000). Each unit consists of one common share, one quarter of one share
purchase warrant exercisable at CAD$1.75, and one quarter of one share purchase
warrant exercisable at CAD$2.00, for a period of eighteen months following the
closing date of the transaction. Golden Queen is a gold exploration and
development company whose principal asset is the Soledad Mountain property
located in Kern County, Southern California.

NARRATIVE DESCRIPTION OF BUSINESS

General

Gammon Gold Inc. is a publicly traded mid tier gold and silver
producer engaged in the mining, development, exploration and acquisition of
resource properties in North America. The Company owns two mines in Mexico, the
Ocampo mine in Chihuahua State, and the El Cubo mine in Guanajuato State, and
also owns the Guadalupe y Calvo advanced exploration property in Chihuahua
State, Mexico. The Company has also recently executed purchase option agreements
to acquire the Mezquite Project in Zacatecas State, Mexico (460 hectares), the
Venus Project located north of the Ocampo mine in Chihuahua State, Mexico (4,575
hectares), the Los Jarros Project in Chihuahua State, Mexico (43,229 hectares),
and has signed a binding Letter of Intent to enter into a joint venture
regarding the La Bandera gold project in Durango State. The Company has also
acquired a new block of three claims on the west side of the Ocampo Mine
properties that added 2,886 hectares to the Ocampo mineral properties  now
totalling 14,641 hectares. A major new exploration concession of 14,669
hectares, Fraile Norte was also staked in the state of San Luis Potosi to
cover potential extensions of the Santa Maria de la Paz mining district. The
Company has also made strategic investments in Golden Queen and Corex.

Production and Total Cash Costs

Summarized Annual Financial and Operating Results

(in thousands, except ounces, per share amounts, average
realized prices and total cash costs)Year EndedDecember 31, 2010Gold ounces sold
    
    111,775Silver ounces sold
    
    4,970,777Gold equivalent ounces sold
      (realized)(1)
    
    193,429Gold equivalency ratio
      (realized)(5)
    
    61Gold ounces produced
    
    114,064Silver ounces produced
    
    4,953,870Gold equivalent ounces produced (realized)(1)
    
    195,566Revenue from mining operations
    $
    238,266Production costs, excluding amortization
      and depletion
    $
    90,866


| | 13 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

Earnings before other items
    $
    60,263Net (loss) / earnings
    $
    (147,487
    )Net (loss) / earnings per share
    $
    (1.06
    )Net (loss) / earnings per share,
      diluted(2)
    $
    (1.06
    )Cash flows from operations
    $
    97,583Net free cash flow(3)
    $
    (9,633
    )Total cash
    $
    113,142Total assets
    $
    819,388Total long-term financial liabilities
    $
    31,035Cash dividends declared
    $
    NilTotal cash costs per gold equivalent ounce
      (realized)(3)
    $
    479Total cash costs per gold ounce(3)
    $
    (73
    )Average realized gold price per ounce
    $
    1,229Average realized silver price per ounce
    $
    20.30Gold equivalent ounces sold
      (55:1)(4)
    
    202,152Gold equivalent ounces produced
      (55:1)(4)
    
    204,133Total cash costs per gold equivalent ounce
      (55:1)(3)(4)
    $
    459


Notes:

| | 1. | Gold equivalent ounces include silver ounces produced and
      sold converted to a gold equivalent based on the ratio of the actual
      realized sales prices of the commodities.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Net loss per share on a diluted basis is the same as net
      loss per share on an undiluted basis in 2010 as all factors were
      anti-dilutive.                                
| | 3. | See the Non-GAAP Measures section on page 31.                                                                                                                                       
| | 4. | Gold equivalent ounces include silver ounces produced and
      sold converted to a gold equivalent, based on the Companys long-term gold
      equivalency ratio of 55:1.         
| | 5. | Silver ounce equal to one gold
ounce.                                                                                                                                               

|(in thousands, except ounces and total cash costs)
|--------------------------------------------------
|                                                  
|                                                  
|                                                  
|Gold ounces produced                              
|Silver ounces produced                            
|Gold equivalent ounces produced(1)                
|Gold ounces sold                                  
|Silver ounces sold                                
|Gold equivalent ounces sold(1)                    
|Revenue from mining operations                    
|Production costs                                  
|Refining costs                                    
|Mine standby costs                                
|Net earnings /(loss) before other items           
|Total cash costs (per gold equivalent ounce)(2)   
|Total cash costs per gold ounce(2)                
|Total cash costs per gold equivalent ounce(2)(3)  

| |    | 
| | -- | 
| | 14 | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

|Notes:
|------
|1.    
|2.    
|3.    

Mineral Reserves and Mineral Resources

The Company completed extensive drilling at the Ocampo Mine
property during the year, completing 751 drill holes for a total of 137,393
metres. The drilling at Ocampo was divided into 400 drill surface holes for
73,266 metres, and 351 underground drill holes for 64,127 metres. The entire
drill database for Ocampo, from 1997 through 2010, now totals 2,954 drill holes
for 523,889 metres.

The primary focus of the 2010 underground drilling program was
to extend known vein resources in the Northeast underground mine, both along
strike and downward below existing ore shoots, infill new vein discoveries
drilled from surface at the Northeast underground, and to delineate additional
resources in the Santa Eduviges veins directly under the operating open pits.
The Company was successful on all three fronts, with the addition of Reserves in
15 of the existing 21 veins at the Northeast underground, the addition of six
new vein discoveries at the Northeast underground, and the addition of five new
veins in the Santa Eduviges complex. After accounting for 2010 depletion, and
assuming current underground mining rates, the Company has effectively added
more than three additional years of production to its underground operations at
Ocampo.

The Ocampo drilling resulted in the definition of an additional
398,000 ounces gold equivalent in Reserves, which after depletion and adjustment
for different gold and silver prices resulted in a net addition of 195,000
ounces gold equivalent at Ocampo. In addition to these Reserve additions, the
drilling helped define an additional 184,000 ounces gold equivalent in Measured
and Indicated Resources at Ocampo at metal prices significantly lower than spot
prices. Apart from the definition of Reserves, the surface drilling work also
made numerous new discoveries, and extended several known occurrences, many of
which will be followed-up with additional drilling in 2011 with the intent to
define Reserves or Resources on some of these target areas.

Key additions to the reserves at Ocampo included the Santa
Juliana, Santa Eduviges, Belen, Las Molinas, Upper Balvanera, and Altagracia
areas. Key new discoveries included the Santa Librada target area, the El Rayo
Vein, Polvorin Vein, Refugio Norte zone, Los Monos, and the Stockwork Hill
target area. All of these showed some drill intercepts with gradewidth
combinations in excess of current mine cut-off grades.

At the El Cubo Mine, the Company completed 18,388 metres of
surface drilling and 3,250 metres of underground drilling during the first half
of the year before the mine was closed by the union. This work helped to define
an additional 61,000 ounces gold equivalent Reserves at El Cubo, which after
depletion and adjustment for different gold-to-silver price ratio, resulted in
the net addition of 38,000 ounces gold equivalent to the Reserves. A new
Resources addition from the exploration program is the Dolores and Capulin
target areas in the south-central portion of the property. In addition, the
drilling discovered new mineralization south of the previously-known ores in the
South Villalpando target area. The initial Measured and Indicated Resource at
Dolores Capulin is 43,000 gold equivalent ounces.

At December 31, 2010, Gammons total Proven and Probable gold
equivalent Reserves were 2,726,000 gold equivalent ounces. Mineral Reserves and
Mineral Resources have been estimated as at December 31, 2010 in accordance with
definitions adopted by the Canadian Institute of Mining, Metallurgy and
Petroleum and incorporated into NI 43-101. Reserves for the Ocampo and El Cubo
properties have been estimated using an assumed gold price of $1,025 per ounce
and a silver price of $16.60 per ounce for a gold equivalent ratio of 61.75:1.
Resources at the Ocampo and El Cubo properties have been estimated assuming a
gold price of $1,250 per ounce and a silver price of $22.75 per ounce and have
been summarized at a gold equivalent ratio of 55:1.The Guadalupe y Calvo
Inferred Resources have been summarized at a gold equivalent ratio of 55:1.
Reserve estimations incorporate current and/or expected mine plans and cost
levels at each property. Varying cut-off grades have been used depending on the
mine and type of ore. Gammon Golds normal data verification procedures have
been employed in connection with the calculations. For the cut-off grades used
in the estimation of Reserves, see Notes to the Mineral Resources and
Reserves Tables.

Although the Company has carefully prepared and verified the
Mineral Reserve figures presented below and elsewhere in this Annual Information
Form, such figures are estimates, which are, in part, based on forward-looking
information, and no assurance can be given that the indicated level of mineral
will be produced. Estimated Reserves may have to be recalculated based on actual
production experience. Market price fluctuations of gold and silver as well as
increased production costs or reduced recovery rates may render the present
Proven and Probable Reserves unprofitable to develop at a particular site or
sites for periods of time. See Risk Factors and Forward-Looking
Information.

| | 15 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

|Ocampo Proven & Probable
      Reserves(4)(5)(7)(8)(10)(11) | 
|----------------------------------------------------------- | 
|Mineral Category                                            | 
|Open Pit Area(9)                                            | 
|Proven                                                      | 
|Probable                                                    | 
|Total Open Pit Area Proven &
      Probable                 | 
|Underground Area                                            | 
|Proven                                                      | 
|Probable                                                    | 
|Total Underground Area Proven &
      Probable              | 
|                                                            | 
|Total Proven                                                | 
|Total Probable                                              | 
|                                                            | 
|Total Ocampo Proven
      & Probable                        | 

|El Cubo Proven & Probable
      Reserves(4)(5)(7)(10)(11)       | 
|--------------------------------------------------------------- | 
|Mineral Category                                                | 
|El Cubo                                                         | 
|Proven                                                          | 
|Probable                                                        | 
|Total El Cubo Proven & Probable
      Reserves                  | 
|Las Torres (Underground)                                        | 
|Proven                                                          | 
|Probable                                                        | 
|Total Las Torres Proven & Probable
      Reserves               | 
|                                                                | 
|Total Proven  El Cubo and Las
      Torres                     | 
|Total Probable  El Cubo and Las
      Torres                   | 
|                                                                | 
|Total Proven &
      Probable Reserves  El Cubo and Las Torres | 

|Total Summary of Proven & Probable
      Reserves(4)(5)(7)(8)(10)(11) | 
|--------------------------------------------------------------------- | 
|Mineral Category                                                      | 
|                                                                      | 
|Total Proven                                                          | 
|Total Probable                                                        | 
|                                                                      | 
|Total Proven &
      Probable Reserves                                | 



| | 16 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

|Ocampo Measured, Indicated & Inferred
Resources(3)(4)(5)(7)(8)(10)(11)
|----------------------------------------------------------------------
|Mineral Category                                                      
|Open Pit Area(9)                                                      
|Measured                                                              
|Indicated                                                             
|Total Open Pit Area Measured &
      Indicated                        
|Inferred                                                              
|Underground Area                                                      
|Measured                                                              
|Indicated                                                             
|Total Underground Measured &
      Indicated                          
|Inferred                                                              
|Summary - Total Measured &
      Indicated                            
|Total Measured                                                        
|Total Indicated                                                       
|Total Ocampo Measured &
      Indicated                               
|Summary - Total Inferred                                              
|Total Ocampo
      Inferred                                           

|El Cubo Measured, Indicated & Inferred
      Resources(3)(4)(5)(7)(10)(11) | 
|-------------------------------------------------------------------------- | 
|Mineral Category                                                           | 
|El Cubo                                                                    | 
|Measured                                                                   | 
|Indicated                                                                  | 
|Total El Cubo Measured &
      Indicated                                   | 
|Inferred                                                                   | 
|Las Torres                                                                 | 
|Measured                                                                   | 
|Indicated                                                                  | 
|Total Las Torres Measured &
      Indicated                                | 
|Inferred                                                                   | 
|Fenix Pit                                                                  | 
|Measured                                                                   | 
|Indicated                                                                  | 
|Total Fenix Pit Measured &
      Indicated                                 | 
|Inferred                                                                   | 
|Summary - Measured & Indicated                                             | 
|Total Measured  El
      Cubo and Las Torres                              | 
|Total Indicated  El
      Cubo and Las Torres                             | 
|Total Measured &
      Indicated  El Cubo and Las Torres                  | 
|Summary  Inferred                                                         | 
|Total Inferred  El
      Cubo and Las Torres                              | 

Guadalupe y Calvo Estimate of Inferred
Resources(3)(4)(5)(7)(10)(11)

| | 17 | 
| | -- | 

---

|2010ANNUAL INFORMATION FORM
|---------------------------

|Deposit Location                                       |  | Tonnes
      (000s) |  |  | Gold
      (g/t)(6) |  |  | Silver
      **(g/t)(6)** |  |  | Gold
      Equivalent **(g/t)(6)** |  |  | Gold Ounces
      **(000's)** |  |  | Silver
      Ounces **(000's)** |  |  | Gold Equivalent
      Ounces (000)(2) | 
|------------------------------------------------------ |  | -------------------- |  |  | ------------------- |  |  | ------------------------- |  |  | ---------------------------------- |  |  | ----------------------------- |  |  | ------------------------------- |  |  | ------------------------------------- | 
|Rosario Bulk Tonnage (at 75% of available tonnes)      |  | 10,700               |  |  | 1.60                |  |  | 96                        |  |  | 3.35                               |  |  | 566                           |  |  | 33,100                          |  |  | 1,168                                 | 
|Rosario Underground (at 33% of available
      tonnes) |  | 700                  |  |  | 18.50               |  |  | 435                       |  |  | 26.41                              |  |  | 393                           |  |  | 9,200                           |  |  | 560                                   | 
|Rosario                                                |  |                      |  |  |                     |  |  |                           |  |  |                                    |  |  |                               |  |  |                                 |  |  |                                       | 
|Total Rosario Inferred                                 |  | 11,400               |  |  | 2.64                |  |  | 117                       |  |  | 4.77                               |  |  | 959                           |  |  | 42,300                          |  |  | 1,728                                 | 
|Nankin Underground (at 33% of available
      tonnes)  |  | 400                  |  |  | 9.25                |  |  | 260                       |  |  | 13.98                              |  |  | 118                           |  |  | 3,300                           |  |  | 178                                   | 
|Nankin                                                 |  |                      |  |  |                     |  |  |                           |  |  |                                    |  |  |                               |  |  |                                 |  |  |                                       | 
|Total Nankin Inferred                                  |  | 400                  |  |  | 9.25                |  |  | 260                       |  |  | 13.98                              |  |  | 118                           |  |  | 3,300                           |  |  | 178                                   | 
|Summary  Inferred                                     |  |                      |  |  |                     |  |  |                           |  |  |                                    |  |  |                               |  |  |                                 |  |  |                                       | 
|Total Rosario and
      Nankin Inferred                |  | 11,800               |  |  | 2.84                |  |  | 120                       |  |  | 5.02                               |  |  | 1,077                         |  |  | 45,600                          |  |  | 1,906                                 | 

|Total Summary of Measured, Indicated and
      Inferred Resources(3)(4)(5)(7)(8)(10)(11) | 
|---------------------------------------------------------------------------------------- | 
|Mineral Category                                                                         | 
|Summary - Measured & Indicated                                                           | 
|Total Measured                                                                           | 
|Total Indicated                                                                          | 
|Total Measured &
      Indicated                                                         | 
|Summary  Inferred                                                                       | 
|Total Inferred                                                                           | 

Notes to Mineral Resources and Reserves Tables:

|1. | Gold equivalent calculations use the Reserve metal prices
      of $1025/oz for gold and $16.60/oz for silver for a gold-to-silver ratio
      of 61.75:1 . Individual process recoveries are not factored into the
      gold-to-silver ratio calculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Gold equivalent calculations use the Resource metal
      prices of $1250/oz for gold and $22.75/oz for silver for a gold-to-silver
      ratio of 55.00:1. Individual process recoveries are not factored into the
      gold-to-silver ratio calculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | These Mineral Resources are in addition to Mineral
      Reserves. Mineral Resources that are not Mineral Reserves do not have
      demonstrated economic viability when estimated using Mineral Reserve
      assumptions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4. | Reserves have been estimated in accordance with NI
      43-101, as required by Canadian securities regulatory authorities. In
      addition, while the terms Measured, Indicated and Inferred Mineral
      Resources are required pursuant to NI 43-101, the SEC does not recognize
      such terms. Canadian standards differ significantly from the requirements
      of the SEC, and Mineral Resources disclosed in accordance with the
      requirements of the SEC. Investors should understand that Inferred
      Mineral Resources have a great amount of uncertainty as to their existence
      and great uncertainty as to their economic and legal feasibility. In
      addition, investors are cautioned not to assume that any part or all of
      Gammons Mineral Resources constitute or will be converted into
      Reserves.
|5. | Mineral Reserves and Resources have been estimated as at
      December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|6. | Grade represents an average, weighted by reference to
      tons of ore type where several recovery processes apply.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7. | The metallurgical recovery applicable at each property
      and the cut-off grades used to determine Reserves as at December 31, 2010
      are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Mine
    Au Metallurgical Recovery (%)
    Ag Metallurgical Recovery (%)
    Cut-off Grade g/tOcampo Open-Pit Mill
    95
    82
    >1.70Ocampo Open Pit Leach
    82
    72
    >0.17-1.70Ocampo Underground
    95
    82
    1.80El Cubo
    90
    88
    1.86


All ores at Ocampo demonstrate similar
metallurgical recoveries regardless of whether oxides are sulfides.

|8.  | The Ocampo Open Pit strip ratio is 2.7:1.                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|9.  | The basis for the Reserve estimation is the Whittle pit
      optimization methodology.                                                  
|10. | Sums may not add to totals due to rounding.                                                                                              
|11. | The following are the Qualified Persons responsible for
      Mineral Reserve and Mineral Resource estimates as at December 31,
    2010:

Property
    Qualified PersonEl
      Cubo
    Glenn R. Clark, P.Eng, Principal, Glenn R. Clark &
      AssociatesOcampo
    Ramon Luna, P. Geo, Director, Servicios y Proyectos Mineros de
      México S.A. de C.V.Guadalupe y
      Calvo
    Barton
      G. Stone, C.P.G., Chief Geologist, Pincock Allen & Holt, Mark G.
      Stevens, C.P.G, former Pincock, Allen & Holt employee, Clarence J.
      Wendt, P. Geo, Consulting Geologist, former Pincock, Allen & Holt
      employee


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Sampling and Analysis, Data Verification

An analytical quality assurance program has been established
for all of the Companys mineral properties to control and assure the analytical
quality of assays in all of the Companys exploration programs. This program
includes the systematic addition of blank samples, duplicate samples and
certified standards to each batch of samples sent for analysis to commercial
accredited laboratories. Blank samples are used to check for possible
contamination in laboratories, duplicate samples quantify overall precision,
while certified standards determine the analytical accuracy. The split core
samples are sent directly from the project sites to ALS Chemex, an ISO
accredited laboratory with facilities in Hermosillo, Mexico (or another
internationally certified laboratory) that performs gold and silver analyses at
its laboratory in Vancouver, British Colombia, Hermosillo, Mexico, or Reno,
Nevada. The Company also uses its onsite laboratory at Ocampo for the analysis
of mine channel samples, ore-control samples, and some exploration drilling
samples. Standard quality assurance programs are performed at the Ocampo
laboratory, and in addition, check samples are sent to commercial accredited
laboratories for additional confirmation.

Uses of Gold

Product fabrication and bullion investment are two principal
uses of gold. The introduction of more readily accessible and more liquid gold
investment vehicles (such as gold exchange traded funds) may further facilitate
investment in gold. Within the fabrication category, there are a wide variety of
end uses, the largest of which is the manufacture of jewelry. Other fabrication
purposes include official coins, electronics, miscellaneous industrial and
decorative uses, dentistry, medals and medallions.

Markets, Sales and Refining

Gold and silver can be readily sold on numerous markets
throughout the world and it is not difficult to ascertain its market price at
any particular time. Since there are a large number of available purchasers, the
Company is not dependent upon the sale of gold or silver to any one customer or
group of customers. The Company currently does not have any long term refining
sales contracts in place.

Employees and Labour Relations

As at December 31, 2010, the Company had approximately 101
direct full-time employees, and 2,063 individuals employed on a contract
basis.

Despite generally good labour relations, recent increased
demand for skilled workers in the resource industry has led to employee turnover
at certain of the Companys operations. This competition for qualified employees
may lead to workforce shortages.

Cycles

As a mid-tier mining Company and a growing producer of gold and
silver, the Company, in general, is subject to the cyclical nature of gold,
silver and the metals markets.

Competitive Conditions

Competition in the precious metals mining industry is primarily
for mineral-rich properties that can be developed and produced economically; for
technical expertise to find, develop, and mine such properties; for the labour
to operate the properties; and for the capital to finance development of such
properties. Many competitors not only explore for and mine precious metals, but
also conduct refining and marketing operations on a world-wide basis, and some
companies have much greater financial and technical resources than the Company.

The Company competes with other mining and exploration
companies in connection with the acquisition of mining claims and leases and in
connection with the recruitment and retention of qualified employees; see
Employees and Labour Relations. There is significant competition for
mining claims and leases and, as a result, the Company may be unable to continue
to acquire attractive assets on terms it considers acceptable.

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|2010ANNUAL INFORMATION FORM
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Environmental Protection

There are no known environmental issues that may impact the
mineral properties. The Company will be obliged to carry out site reclamation on
its current properties at the end of their mine life, and expects to be able to
finance the same from the revenues generated by such projects.

Foreign Operations

The Companys mineral properties are located in Mexico and
California, United States.

MINERAL PROPERTIES

The Ocampo Mine

Property Description and Location

The Ocampo Mine is located approximately 235 kilometres west
southwest of the state capital, Chihuahua, within the Ocampo Municipio, in the
State of Chihuahua, Mexico.



The Ocampo property is currently comprised of 6 exploitation
concessions covering a total of 11,245 hectares. The concessions have various
expiration dates ranging from December 04, 2015 to October 17, 2057. During
2009, two more new concessions were acquired totaling 1,008 hectares. During
2010, an additional concession of 84 hectares was acquired.

Seven of the concessions (covering 120.6 hectares) are subject
to a royalty and certain contingent payments under an agreement with Compania
Minera Brenda, S.A. de C.V. (Brenda) dated February 21, 2003 (the
Minera Fuerte Buy-Out Agreement) and 13 of the concessions (covering
211.8 hectares) are subject to a contingent payment owed to Compania Minera
Global, S.A. de C.V. (Global); see Royalties and Contingent
Payments.

| | 20 | 
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Forty-seven of the concessions (covering approximately 3,566
hectares), including the ones referred to above, are subject to a pledge in
favour of The Bank of Nova Scotia that guarantees the obligations acquired by
the Company and Mexgold deriving from a credit agreement dated October 14, 2005
and its amendments.

In April 2010, Gammon Lake de Mexico signed an exploration
contract with Mexicana de Cananea, known as Venus, for 4 concessions (covering
4,491 hectares) near Ocampo, with a 4 year purchase option for $7,000,000.

In August 2010, Gammon Lake de Mexico signed an exploration
contract with Minera Valdez Gold, known as Los Jarros, for 8 concessions
(covering 43,258 hectares) near Ocampo, with a 4 year purchase option for
$2,500,000.

All of the concessions are held by the Companys indirect
wholly-owned subsidiary, Gammon Lake de Mexico.

The concessions are for mineral rights only and the Company has
secured the surface rights in the current areas of interest. On March 20, 2002,
Gammon Lake de Mexico and Minerales de Soyopa, S.A. de C.V. (Soyopa)
entered into a surface rights lease with the Common Land (Ejido) Commissariat
covering the mining concessions of Gammon Lake de Mexico and Soyopa. This
agreement covered approximately 2,000 hectares. The agreement was to be in
effect for 30 years for the initial and only payment of $20,000.

In May 2009, Gammon Lake de Mexico obtained surface control of
4,275 hectares through a land acquisition expropriation procedure validated by
both the Ejidos and the Mexican authorities; this was finalized by the Company
successfully obtaining the Presidential decree of expropriation. The total price
paid for this land was approximately $1,000 per hectare. As a result of this
acquisition, the surface rights lease mentioned above has since been nullified
as Gammon Lake de Mexico is the new owner.

Outside of the Ocampo project area, Gammon Lake de Mexico has
control of 4 concessions located in the vicinity of Chinipas, South of Ocampo,
that covers 1,242 hectares.

It should be noted that some small concessions held by others
exist within the Companys concession blocks. These concessions are not in areas
of significant mineralization and are not expected to materially and adversely
impact the Ocampo Mine.

The Company currently has all necessary permits for exploration
and for commercial mining activity on these concessions.

Minimum Investment / Assessment Work 2010

To keep the concessions in good standing, a minimum investment
or assessment work (MI) must be made or filed (as the case may be) each
year. The amount of the MI varies based on the size, age and type of the
concession. The required MI changes annually with the Department of Mines
publishing a new list at the end of each year and it varies with the consumer
price index.

It is possible to group concessions together and carry forward
the excess work from previous years. The current work programs coupled with the
past work by the Company should satisfy the minimum requirements for many
years.

For exploitation concessions, the annual amount of MI only
varies with the size of the concessions. The smallest concessions of up to 30
hectares only have a requirement of 49.02 pesos per hectare or approximately
$3.97 per hectare. Thirty-four of the concessions are in that category. As the
size of concessions increase, the MI increases. For 30 to 100 hectares, the
annual MI is 98.05 pesos or approximately $7.94 per hectare. Five of the
concessions fall into that category. The concessions that are greater than 100
hectares have a fixed fee per concession plus an amount per hectare. Gammon has
2 concessions just over 100 hectares and the average MI is 203.87 pesos per
hectare for the 105 hectares concession or approximately $16.52 per hectare and
203.65 pesos per hectare for the 108 hectares concession or approximately $16.50
per hectare. The largest concession of 1,657.92 hectares has an MI of 787.13
pesos per hectare or approximately $63.77 per hectare.

The average MI on the Companys 3,563 hectares of exploitation
concessions is currently 472.80 pesos or approximately $38.31 per hectare
totaling $136,485.

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| | -- | 

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|2010ANNUAL INFORMATION FORM
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MINIMUM INVESTMENT / ASSESSMENT WORK FOR EXPLOITATION
CONCESSIONS

SURFACE RANK(HECTARES)
    FIXED
      ANNUAL FEE(PESOS)
    ADDITIONAL ANNUAL FEEPER HECTARE(PESOS PER HECTARE)Up to 30
    0.00
    49.02>30 up to 100
    0.00
    98.05>100 up to 500
    817.05
    196.09>500 up to 1,000
    2,451.15
    392.18>1,000 up to 5,000
    4,902.30
    784.37More than 5,000
    17,158.05
    1,568.74


Mining Duty (Tax)

The rate of the mining duty (MD) depends exclusively
on the age of the concession. The following are the current rates of mining
duties and could be changed by the Government at the beginning of any year
depending mostly on the existing economic situation and such variations shall be
published at the Official Gazette of the Federation. The MD is due twice each
year in both January and July.

MD RATES 2010(in Mexican Pesos per Hectare):During the first
      year and 2nd year
    
    5.08For the 3rd and 4th year
    
    7.60For the 5th and 6th year
    
    15.72For the 7th and 8th year
    
    31.62For the 9th and 10th year
    
    63.22From the 11th year
    
    111.27


The rates are effective if paid during January and July;
however if the payment is delayed, penalties and actualizations are accrued
every month as published in the Official Gazette of the Federation of the
Mexican government.

Most of the Ocampo Mine mining concessions are subject to the
highest rate of 111.27 pesos per hectare; however, there are some others,
including new ones that are subject to different rates. The average rate of MD
for the exploitation concessions is 55.20 pesos per hectare.

The total MD for the Ocampo Mine concessions was approximately
1,407,844 pesos or $114,063 for 2010.

Royalties and Contingent Payments

Compania Minera Global, S.A. de C.V. (Global)

On July 17, 2000, the Company entered into an agreement with
Global for consulting services to assist in the negotiations of an agreement
with Soyopa to secure the right to acquire the then remaining fifty-one percent
(51%) interest in the Ocampo property. As part of the consideration for the
successful negotiation and execution of the agreement between the Company and
Soyopa, the Company agreed that if it should subsequently sell the lands, claims
and concessions described in the agreements, the Company shall be required to
pay Global $1,000,000.

Minera Fuerte Mayo, S.A. de C.V. (Minera Fuerte) /Compania
Minera Brenda, S.A. de C.V. (Brenda)

During the year ended December 31, 2008, a contract addendum
was signed which eliminated the clause containing the percentage of profits
payable up to a maximum of $2,000,000, and instead the Company agreed to pay
Brenda a total of $2,000,000 for the group of claims. The Company had previously
paid $1,205,000 and during the current year, the Company paid a further $795,000
resulting in a balance payable at December 31, 2010 of $Nil.

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

The property can be accessed by two highways, Federal Highway
16, a major transportation route through the northern Sierra Madre Mountains, of
which the last 27 kilometres of road is a government maintained gravel road from
Cahuisori, or Highway 16, a government maintained gravel road from Mycoba to
Morris then east to Ocampo. The State of Chihuahua has two international airports located at the cities of Ciudad Juarez and Chihuahua.
A railhead is present at La Junta, approximately 125 kilometres east of
Ocampo.

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The required water for the mining operations is supplied by a
combination of rainfall runoff water catchments and ground water wells. Power
for the mining operations is 100% supplied by 7 MW and 13MW, 33KV power lines
coming into the property. The 13 MW power line was commissioned in July 2009.
Incoming power is supplied by CFE, the government generator and distributor of
electricity. In addition to the grid lines, the Company has standby diesel
generators capable to supplying all of its production requirements should there
be a loss of power on one of the incoming lines. The town of Ocampo is in the
eastern portion of the project area. It has an estimated population of 500
people and is the seat of the municipal government and has recently been
connected to the National Electrical grid. An adequate workforce that is
familiar with mining is present in the State of Chihuahua.

Mining and forestry are the major industries in the area.

The cool winters and mild summers are typical of the temperate
climate in the area. The rainfall is erratic and mainly occurs during the summer
rainy season. Snow does occur sporadically in the winter. The average annual
precipitation is approximately 845 millimetres. The weather conditions should
not affect the planned operations.

The Ocampo property is within the Sierra Madre Occidental (the
SMO) physiographic province. This province is mountainous; however,
there are features that suggest an incised plateau rather than a true mountain
range. The property area ranges in elevation from 1,600 metres to 2,200 metres
and is located near the eastern edge of the barranca (canyon) country.

The steep sided canyon at the Town of Ocampo limits the area
available for town expansion.

There was adequate space on Gammons mining concessions for the
plant, tailings pond and other necessary facilities at the Ocampo Mine.

History

Gold and silver have been produced from the Ocampo area since
the second half of the 19th century. In 1912, shortly before the Mexican
Revolution, the chief engineer of Sierra Consolidated, Robert Linton, estimated
that up until that time, the total production of gold and silver from Ocampo had
exceeded $100,000,000. More up to date estimates are not available. Major
production gave way to small scale operators and gambesinos from the 1940's to
the 1990's. With the easing of foreign ownership restrictions for the mining
sector in the late 1990's, the Ocampo area saw exploration by the joint venture
partners of Soyopa (Mogul Mining NL with 59 drill holes and 6,288 metres drilled
in 1997 and Augusta Resources Corporation with 11 drill holes and 1,677 metres
drilled in 1999). In 1999, the Company entered into its first agreement with
Soyopa and proceeded to consolidate its holdings in the area over the subsequent
years.

Geological Setting

The Ocampo property is located in the Sierra Madre Occidental
(SMO) physiographic / geologic province. The SMO is an extensive physiographic
province that is composed largely of volcanic rocks that have been intruded by
plutonic rocks, which overlie a Precambrian through Cretaceous basement. The
basement rocks are rarely exposed and poorly known. This province extends from
the center of Mexico to the border of the United States.

Volcanic stratigraphy in the SMO has been broken into two main
groups consisting of the Eocene  Oligocene Lower Volcanic Group (LVG)
and the Oligocene  Miocene Upper Volcanic Group (UVG). LVG rocks
dominate the project area and consist of a basal continental conglomerate,
overlain by a calc-alkaline series of volcanic rocks: andesite  dacite 
rhyodacite  rhyolite, although not deposited in that order. These rocks have
been intruded locally by diorite dikes and rhyodacite domes. The LVG
stratigraphic sequence consists of, from oldest to youngest:

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|2010ANNUAL INFORMATION FORM
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|Navosaigame Formation:    | Clast-supported conglomerate with lesser sandstone and
      arkose, and minor dacite lavas.                                                                            
|------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                          |                                                                                                                                                                         
|Victoria Formation:       | Flow-banded rhyodacite lavas and monolithologic breccias
      believed to be correlated to similar lithology at the Pinos Altos District
      12 kilometres to the NE.
|                          |                                                                                                                                                                         
|El Salto Formation:       | Greater than 300 metres thick sequence of
      plagioclase-hornblende dacitic volcanic breccia and lithic tuff.                                                        
|                          |                                                                                                                                                                         
|Ocampo Andesite:          | Greater than 250 metres thick
      plagioclase-hornblende-pyroxene andesite with many textural varieties and
      possible high-level intrusions.                     
|                          |                                                                                                                                                                         
|San Ramon Formation:      | Up to 50m thick epiclastic sandstones, feldspathic
      arenites, and sedimentary breccias overlying the Ocampo Andesite.                                              
|                          |                                                                                                                                                                         
|Santa Eduviges Formation: | Up to 200 metres thick unit of non-stratified dacitic
      porphyritic flow breccia.                                                                                   

The Ocampo Andesite, San Ramon Formation, and Santa Eduviges
Formation are the major hosts to mineralization within the Ocampo district.

The LVG is overlain by rhyolite and rhyodacite tuffs of the
Upper Volcanic Group, and are believe to be post-mineral in age. These are
predominantly ash-flow tuff units deposited by vast eruptions in late Oligocene
to Miocene time.

The major structural feature of the Ocampo camp is brittle
transtensional faulting that has tilted the LVG as well as the UVG gently to the
east in repeated domino-like fashion. The major faults strike NW, with conjugate
faults striking WNW, NE, and N-S. All of these fault directions have been found
to be mineralized with gold-silver at least locally.

Mineralization

Mineralization at Ocampo consists of low sulfidation epithermal
veins that are common in the SMO gold-silver province. Until this year the
operations at Ocampo were centered in two general areas: the Northeast area (the
Northeast Area) which has the underground mine, and the Plaza de Gallos
- Refugio Trend (the PGR Trend) that contains the open pit mines.
During this year a third operation, the Santa Eduviges Mine began production -
this lies below the open pits in the PGR trend. The property is characterized by
mountainous terrain that contains numerous veins, within which there are
high-grade ore shoots, often of very high grade. Gold-silver mineralization has
been documented over a vertical extent of over 800 metres, although no one ore
shoot has a vertical dimension greater than 350 metres. The highest outcrop of
mineralization, at the PGR area, occurs at an elevation of 2,150 metres; and the
lowest drill intersection of mineralization, on the San Juan Veins at 1,360
metres elevation.

The PGR trend mineralization consists of a major west-northwest
trending vein system that cuts a series of conjugate northwest trending veins
and hydrothermal breccias. The intersections of these veins are the locus of
wide zones of mixed bonanza-grade and low-grade gold-silver mineralization that
occur in a geometry, favorable for open-pit mining. The Northeast Area is a
complex zone with veins striking in numerous directions: northwest, north-south,
and northeast. To date the northeast-striking veins have the highest grades (San
Juan, Balvanera, and San Amado being examples). The geometry and grades of
mineralization in the Northeast Area are favorable for underground mining.

Exploration & Drilling

The Company has been actively exploring the Ocampo area
properties since 1999. Exploration activities have consisted of geological
mapping, sampling both on surface and underground, diamond drilling and reverse
circulation drilling from the surface, diamond drilling from underground, and
test mining. The Company completed extensive drilling at the Ocampo Mine
property during the year, completing 751 drill holes for a total of 137,393
metres. The drilling at Ocampo was divided into 400 surface holes for 73,266
metres, and 351 underground drill holes for 64,127 metres. All but one surface
drill hole was diamond drill core. The one exception was one 250 metre-deep
reverse circulation hole. At the beginning of the year, it was determined that
the reverse circulation drilling that had been used in much of the previous work
was becoming less cost-effective, and considering that it provides less geologic
detail, a decision was made to drill only core during 2010. By the end of 2010,
the entire drill database from Ocampo consisted of 2,954 drill holes for 523,889
metres, of which 510,658 (97%) was drilled by Gammon Gold, and 13,231 metres
(3%) was drilled by other parties.

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The primary goal of the underground drilling was to extend
known vein resources in the North East underground mine, both along strike and
down dip below existing ore shoots, and to delineate resources in the Santa
Eduviges vein directly under the operating pits. The drilling information from
the underground workings are compiled digitally and used to create
three-dimensional volumes to constrain the mineralization, and thereafter a
geostatistician estimates the resources and reserves from these volumes. The
numerous additions to the Companys reserves at Ocampo is a direct result of
this work. The aggressive drilling program is planned to continue in 2011, as
many of the known ore deposits in the district are open to expansion, and there
are numerous new areas to expand drilling where new resources or reserves might
be delineated in the future. This ongoing program is normal in-mine exploration
and development that is to be expected in an underground mine.

The 2010 Ocampo surface brownfields exploration program
(exploration on Company properties beyond the existing Resources) had the
following objectives during the year:

| | 1. | To complete a high-quality detailed geologic mapping over
      areas of interest that were identified by the project-scale work completed
      last year, as well as on exploration targets identified by the ongoing
      surface geochemical program;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | To complete extensive exploration geochemistry to define
      veins and alteration features with anomalous metals that could be
      considered targets for exploration drilling;                                                                       
| | 3. | To drill any known and any newly-defined exploration
      targets defined by these programs; and                                                                                                                                                         
| | 4. | To produce three-dimensional resource models of
      mineralization discovered during the year.                                                                                                                                                          

Ocampo surface exploration included some in-fill drilling in
the open pits, and extensive new discovery drilling on targets outside of
present resources. Surface drilling was directed at 26 distinct targets over the
year, although 14 of these comprise over 82% of the meterage, as shown
below:

|TARGET                       | HOLES | METRES | PERCENTAGE
|---------------------------- | ----- | ------ | ----------
|SANTA JULIANA                | 53    | 11,972 | 16%       
|ALTAGRACIA                   | 33    | 8,659  | 12%       
|SANTA LIBRADA                | 34    | 7,708  | 11%       
|PICACHO DEEPS / SAN RAMON    | 14    | 5,834  | 8%        
|BELEN                        | 26    | 4,925  | 7%        
|LAS MOLINAS incl. MOLINAS SW | 21    | 4,260  | 6%        
|EL RAYO                      | 12    | 2,935  | 4%        
|POLVORIN                     | 15    | 2,724  | 4%        
|STOCKWORK HILL               | 13    | 2,641  | 4%        
|BALVANERA                    | 20    | 1,893  | 3%        
|LOS MONOS                    | 12    | 1,633  | 2%        
|AVENTURERO                   | 17    | 1,234  | 2%        
|LA LEONA                     | 6     | 1,156  | 2%        
|RESURECCION                  | 9     | 1,098  | 1%        
|OTHER                        | 115   | 14,594 | 18%       

As a result of this work, new resources and reserves were
identified, drilling discovered mineralization at numerous areas that merit
further work, and the surface mapping and geochemistry program had identified
numerous new exploration targets over large parts of the Ocampo Mine properties.
These results have been published in public news releases on March 30, 2010, May
5, 2010, December 9, 2010, and February 7, 2011. Based on this success in
identifying new target areas, the Company has planned an aggressive surface
exploration drilling program at Ocampo in 2011; see Current Exploration and
Development Activities.



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Sampling Methods, Analysis, Quality Control and Quality
Assurance

Underground channel samples are generally collected every 1.5
metres along exploration and development drifts. Samples are collected from the
backs or roofs of workings, and generally consist of 6 to 8.5 kilograms for each
1 metre of sample. Maximum sample length is generally 1.5 metres and minimum
sample length is generally 0.5 metres except when unusual conditions are
encountered. The samples are collected in heavy-gauge plastic bags and
sealed.

Core samples from drilling are delivered in standard core boxes
with the core runs marked therein. Samples are photographed, logged and marked,
and then split using a hydraulic splitter to obtain half of the core in
potentially mineralized zones. Maximum core length of samples is 2.5 metres and
minimum core length is 0.3 metres. The split samples are collected in
heavy-gauge plastic bags and sealed.

The Company sends exploration drilling samples to ALS Chemex
laboratories in Hermosillo, Mexico, and also to the Companys on-site laboratory
depending on availability. Underground channel samples are normally sent to the
Companys on-site laboratory for analysis. For samples processed at the
Companys on-site laboratory, the samples are transported by Company personnel
to the laboratory where the samples are crushed, split, and a 300 gram subsample
is ground to -100 microns in a ring-and-puck pulverizer. From the pulverized
pulp, a 30 gram subsample is split and used for fire assay with gravimetric
finish to determine gold and silver content.

Samples sent to ALS Chemex laboratory in Hermosillo are
packaged in rice bags, sealed with wire, and either picked up by the
laboratorys truck, or shipped via private courier. The analytical procedure
used by ALS Chemex for gold is to crush the entire sample to -2mm, split out a
200 gram subsample, then pulverize the split to -75 microns. From this
pulverized pulp, a 30 gram subsample is split and then assayed for gold by
conventional fire assay with an atomic absorption finish, and for silver using a
four-acid digestion with an atomic absorption finish. These procedures are
standard industry practice for these types of ores.

During the year, the Company added staff to improve its quality
control and quality assurance programs, especially the monitoring of assays from
the commercial laboratory. As part of the program, control pulp samples,
analytical blanks and duplicates are inserted at a rate of one of every 20 drill
samples as a check on laboratory accuracy and drift. A monthly report on quality
control and quality assurance is prepared, and review of the control samples has
shown the lab work to be reliable and reproducible.

Mining Operations

The Ocampo property consists of (i) two underground mines, the
Northeast operation and the Santa Eduviges operation, which each use standard
underground mining equipment and are designed to produce a combined 2,000 tonnes
of ore per day and (ii) an open pit mine producing approximately 12,000 tonnes
per day of mill and heap leach ore.

The Open Pit Mine

Open pit mining at Ocampo utilizes 6 metre benching, with
excavation in 3 metre lifts (split benching) in select ore areas. The mining
operation currently consists of three open pits mined in sequence. Over the mine
life, five pits will be mined. High grade ore is crushed and sent to the mill
(described below). Lower grade ore is crushed then stacked on the heap leach
pad. Ore on the heap is leached with barren cyanide solution, and pregnant heap
solution is pumped back for processing in the recovery plant, which uses the
Merrill Crowe process for extracting the gold and silver from the leach
solution.

The open pit mine was originally expected to have a mine life
of seven years, with reduced production in the seventh year. Based on the
updated Mineral Resource and Mineral Reserve estimate disclosed in this Annual
Information Form, the Company estimates that the open pit mining and leaching
complex, after four years of production, is expected to have a mine life of over
ten years.

The Underground Mine

The Company is utilizing a combination of long hole and cut and
fill mining methods at the Ocampo underground mine. Engineering, design and
construction was completed for a 550,000 tonne per year (1,500 tonnes per day)
conventional Merrill Crowe precious metals recovery plant, including two stage
crushing and screening, fine ore storage, rod and ball mill grinding,
thickening, leaching and recovery systems, and tailings impoundment.The
underground mine is operated using standard trackless underground mining
equipment and is ramping up to a production level of 2,000 tonnes of ore per
day. The mill has since been expanded to approximately 3,200 tonnes per day,
with the addition of another ball mill, crushing capacity, two additional filter presses, and additional leaching and
thickening capacity. Gold and silver concentrate recovered from the recovery
plant are poured into doré bars. Bars are cooled, cleaned, and then moved to a
storage vault pending sale and shipment to a third party refiner.

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The underground mine was originally expected to have a mine
life of six years, with reduced production in the sixth year. Based on the
updated Mineral Resource and Mineral Reserve estimate disclosed in this Annual
Information Form, the Company estimates that the underground mine will have
additional mine life of ten years, after already having completed four years of
production.

Current Exploration and Development Activities

Based on the results received during 2010, the Company has
planned to complete 7,900 metres of exploration drifting and 120,450 metres of
underground core drilling in the main Ocampo underground mine. The Company has
had six core drill rigs drilling underground during the first quarter of the
year.

The 2011 Ocampo surface exploration program plan includes
drilling a minimum of 14 identified exploration targets using five surface core
rigs, for planned meterage of 38,600 metres for the year. This work is planned
for both near-mine exploration targets (such as Balvanera, Aventurero, and
Belen), as well as new targets beyond present mine infrastructure (such as
Altagracia, Los Monos, and Cerro Colorado targets). The intent of this work is
to expand known vein deposits, as well as to test new exploration targets that
have not been drilled.

The El Cubo Mine

Property Description and Location

The El Cubo Mine is located adjacent to the village of El Cubo
in central Mexico. El Cubo is approximately 10 kilometres east of the City of
Guanajuato, which is the capital city of the State of Guanajuato, approximately
275 kilometres northwest of Mexico City.



Minera El Cubo holds a 100% interest in 61 mining concessions
covering approximately 8,144 hectares. The concessions have various expiration
dates ranging from September 8, 2011 to March 8, 2057.

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The concessions are free of liens or encumbrances, except that:
(i) one of the concessions (covering 374.46 hectares) is subject to a right of
way agreement with Minera Las Torres (Las Torres), a subsidiary of
Industrias Peñoles which is now under lease by Minera El Cubo; and (ii) 4 of the
concessions (covering approximately 31 hectares) are subject to a lease contract
since 1941.

In addition, El Cubo leases the Las Torres Mine complex that is
adjacent to the El Cubo Mine; see Las Torres Leasesection below. The
Las Torres property consists of 47 mining concessions covering 5,999 hectares
and surrounds the main operating portions of the El Cubo property. The Peregrina
Mine portion of the Las Torres property (consisting of 12 concessions covering
approximately 1,410 hectares), and covers the extensions of the mineral trend
that is being mined at El Cubo. The Las Torres complex consists of the Los
Cedros Mine, positioned on the southwest end of the Veta Madre and the Peregrina
Mine, located on the northwest end of the La Sierra Structure. The Las Torres
concessions have various expiration dates ranging from September 22, 2011 to
September 29, 2053. The concessions are for mineral rights only. El Cubo and Las
Torres have secured the surface rights in the current areas of interest.

In order to engage in exploration and commercial mining
activities, an environmental permit is required. Minera El Cubo currently has
all necessary environmental permits for exploration and for commercial mining
activity on these concessions.

Las Torres Lease

Pursuant to the lease agreement with Las Torres, Minera El Cubo
has the right to explore, develop and mine the Las Torres property for a period
of 5 years, which expired in September 2009. In September 2009, this contract
was renewed for 3 years expiring September 2012, with the right to renew at that
time. Annual lease payments total $720,000. In addition, Minera El Cubo is
required to pay a 3.5% net smelter return on all gold and silver sales equal to
or above $350 per ounce of gold, $5.50 per ounce silver, with a minimum annual
royalty of $240,000 for production from the Las Torres properties. The royalty
declines on a sliding scale to a 3.0% net smelter return for sales of gold and
silver at or below $300 per ounce gold and $5.00 per ounce of silver.

In addition, the Company is required to pay $20.00 per gold
equivalent ounce for each ounce processed at the Las Torres mill from existing
El Cubo claims. This payment, combined with the annual rent and minimum royalty
payment discussed above must total a minimum of $2,000,000 per year. In
connection with the agreement, the Company has issued a letter of credit in the
amount of $1,000,000 to Las Torres.

Minimum Investment and Mining Duty (Tax) 2010

All concessions are subject to an annual minimum investment and
an annual mining tax that must be paid to keep the concessions in good standing.
The amount of the minimum investment or assessment work varies based on the
size, age and type of the concession, and changes each year with the Department
of Mines publishing a new list at the beginning of the year, and varies with the
consumer price index. The rate of the mining duty depends on the concession type
and the age of the concession. The rate changes each semester with the
Department of Mines publishing the new rates in January and July. The mining
duty is due in both January and July. The following table sets out the total
mining duty required annually to keep the El Cubo and Las Torres concessions in
good standing:

Concessions
    Mining Duty (US$)El Cubo mining
      concessions (8,144 hectares)
    110,543.39Las Torres leased mining concessions (5,999 hectares)
    98,517


Minera El Cubo will be able to satisfy the minimum investment
and assessment work requirements based on its current work programs and past
work completed.

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

El Cubo is approximately 10 kilometres east of the City of
Guanajuato, which is the capital city of the State of Guanajuato. Guanajuato
City is approximately 275 kilometres northwest of Mexico City.

The area is accessible by daily plane service to the Leon
airport (45 kilometres west of Guanajuato), directly from the United States and
many parts of Mexico. The Village of El Cubo surrounds the vacated El Cubo Mine
offices and the Level 4 adit. This village supplies some of the work force;
however, the majority of the workers come from Guanajuato and other surrounding
villages. An adequate workforce that is familiar with mining and the necessary
support facilities are present in the region. The El Cubo Mine is connected to the national electrical grid. The
required water is supplied from the mine, recycled water from the tailings
impoundment facilities, and from Minera Las Torres water rights.

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The city of Guanajuato, and its surrounding mines, is located
in an arid, mountainous area at an elevation of approximately 1,996 metres
(6,550 feet) above sea level. Although it is the capital of the State of
Guanajuato, it is only the fifth-largest city in the State. Based on the 2005
census, the population of Guanajuato is 70,798, though there are larger,
contiguous, communities. The cool winters and mild summers are typical of the
temperate climate in the area. The rainfall mostly occurs during the summer
season, June to September. The annual precipitation is approximately 726
millimetres. Winter night temperatures from mid-December through January fall to
7-10°C with the daytime temperature in the low 20°C range. Snow rarely falls in
the area although it has been known to occur in the higher elevations of this
mountainous area. Local wildlife includes rabbits, squirrels, snakes, lizards,
skunks, deer, and a variety of birds. Cows, horses, and burros commonly roam the
hills. Typical vegetation includes various types of cactus and shrubs,
eucalyptus and pine trees.

History

Silver and gold have been mined in the Guanajuato area for
approximately 450 years, starting in 1548 with the discovery of the La Luz
Structure. The El Cubo property has been active since the 17th century. The
total production from the Guanajuato District is estimated at approximately
6,000,000 ounces of gold and 1,200,000,000 ounces of silver. The Sierra
Structure, which includes the El Cubo Mine and the adjacent Peregrina Mine (part
of the Las Torres complex), accounts for a large part of the gold that has been
mined in the district  in the order of 2,000,000 ounces of gold and 80,000,000
ounces of silver.

In their current form, the El Cubo Mine and the adjacent Las
Torres complex were acquired and leased, respectively, by Mexgold in 2004.

Geological Setting and Mineralization

The Guanajuato mining district encompasses an area of 20
kilometres x 16 kilometres with the city lying within the district. There are
three main northwest trending vein systems that from west to east are known as
La Luz, Veta Madre and La Sierra systems. These systems are generally silver
rich with gold-to-silver ratios typically ranging from 1:30 to 1:400 and average
1:200 over the history of the district. The Sierra vein system is anomalous in
the district in that the gold-to-silver ratio is on the order of 1:40,
suggesting that this vein system actually tapped different ore solutions than
the Veta Madre and La Luz systems. The known vertical extent of the economic
grade mineralization varies from vein to vein, with the greatest extents being
on the order of 700 metres.

The eastern part of the Guanajuato Mining District, where El
Cubo is located, is underlain by a volcanic-sedimentary sequence of Mesozoic to
Cenozoic age rocks. Mesozoic rocks consist of the Jura-Cretaceous Esperanza
Slate, and the Cretaceous La Luz Andesite. These are the main host rocks for the
La Luz Vein in the NW part of the Guanajuato district, but are only exposed in
the lowermost levels of the Peregrina Mine workings on the Sierra Vein
system.

The Mesozoic rocks are overlain by the Guanajuato Conglomerate
 a >1,000 metres thick body of continental molasse deposits, and thereafter
by a sequence of calc-alkaline volcanics that from bottom to top consist of:

|Loseros Tuff:         | 30 metre bed of green andesitic tuffs;                                                                           
|--------------------- | -----------------------------------------------------------------------------------------------------------------
|                      |                                                                                                                  
|Bufa Rhyolite:        | Up to 300 metres thick rhyolite  rhyodacite
      ash flow tuffs;                                               
|                      |                                                                                                                  
|Calderones Fm:        | Up to 250 metres thick andesitic airfall,
      volcaniclastic, and less ash-flow tuff with epiclastic interbeds;
|                      |                                                                                                                  
|Cedros Andesite:      | Up to 250 metres of andesite flows with less
      tuffs;                                                        
|                      |                                                                                                                  
|Chichindero Rhyolite: | Up to 300 metres thick rhyolite flows and
      domes.                                                           

These volcanic rocks have been intruded by a rhyodacite
lacolith  sill complex called the Peregrina Intrusive, as well as minor
intermediate dikes and sills.

The veins at El Cubo and the Veta Madre are found in all of the
formations from the Calderones Fm. downward, but the most productive ore-bodies
are generally hosted by the Guanajuato Conglomerate and Bufa Rhyolite. The
deposits occur as open-space fillings in fracture zones or impregnations in the
locally porous wall rocks. Highest grades are statistically associated with fine
collaform banding and bladed calcite texture replaced by quartz, both textures
indicative of boiling.

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There are over 56 individual veins within the El Cubo complex
that are included within the mineral resource estimations. Within the El Cubo
Mine area, these mineralized veins are known to occur from an elevation of 2,650
metres down to an elevation of 1,825 metres. In the adjacent Las Torres Mine,
the veins are developed down to an elevation of approximately 1,600 metres.

The principal productive structure of the Sierra System is the
Villalpando Vein. It strikes NW and is generally steeply dipping on the order of
75°, and varies from approximately 0.7 metres to 12 metres in width with an
average width of 1.2 metres. However, there are many other veins in the El Cubo
Mine, and the Company has reserves on 45 individual vein segments throughout the
property. Vein splits off Villalpando are locally important and there are
important veins striking E  W and ENE. The Dolores Vein is a parallel
NW-striking vein that occurs some 400 metres west of the Villalpando and was the site
of one of the first discoveries in the Sierra Vein system. Another NW-striking
feature is the El Cubo Fault, which consists of a 45o - westward dipping fault
subparallel to, and about one km west, of the Villalpando Vein  this fault is
locally mineralized with Au-Ag and has shown drill intercepts above present mine
cut-off grade in some historic drill holes. Another important vein in the
districts history is the Veta San Nicolas which was discovered in the 1980s.
This vein strikes E  W, nearly perpendicular to the Villalpando and produced
very high grade ores on the magnitude of 10 gpt Au + 200 gpt Ag. Although this
vein is nearly mined-out at present, exploration continues to search for similar
E-W striking veins that could be similarly productive. The Villalpando Vein has
an average gold-to-silver of 1:100 while the cross veins average a
gold-to-silver ratio of 1:20 or 1:40, making them attractive targets for higher
gold production.

Exploration and Drilling

To date, all drilling completed at El Cubo has been diamond
core. Surface diamond drilling was suspended at El Cubo from 2008 until
mid-2009, while a major geologic mapping and lithogeochemical sampling program
was undertaken to develop new exploration drill targets. The work led to
development of a clear exploration model, and application of this model to the
mapping and geochemical work had identified over 15 lineal kilometres of
favorable structures by July of 2009. After prioritizing these targets, the
Company planned an aggressive 44,000 metres drill program for 2009 and 2010, to
test the ore potential of these exploration targets and began drilling in
September 2009 with one core rig. During 2009, the Company completed 11,649
metres of core drilling. In 2010, the drilling rate was increased and eventually
the company had five surface core drill rigs working until the operations were
shut down by a labor action in the first week of June. At the time of shut-down,
the surface exploration program had completed 18,388 metres of drilling and had
tested targets at Dolores, Capulin, Villalpando Sur, Villalpando Gap,
Puertocito, and La Cruz. All of these targets, except the Villalpando Gap
target, produced drill intercepts that would meet current underground cut-off
grades. The drilling results at the Dolores and Capulin targets were converted
into Measured and Indicated Resource for the Company. Based on the success of
this program, the Company will resume the exploration drilling program in
2011.

Sampling Methods, Analysis, Quality Control and Quality
Assurance

Channel samples are collected generally every 2 metres along
exploration and development drifts. Samples are collected from the backs and
generally consist of 1 kilogram for each 1 metre of sample. The maximum sample
length is generally 1 metre and minimum sample length is generally 0.2 metres.
The samples are collected in plastic sample bags and sealed. Mine channel
samples are transported to the Companys assay laboratory at the mine site by
Company personnel.

Core samples for exploration drilling are delivered in standard
core boxes with the core runs marked therein. Samples are photographed, logged
and marked and then split using a core saw to obtain half of the core in
potentially mineralized zones. Maximum core length of samples is 2.5 metres and
minimum core length is 0.2 metres. The split samples are collected and sealed in
plastic sample bags and then picked up the the commercial laboratorys truck,
which transports the samples to the lab.

During 2010, the Company used SGS Laboratories (an
international testing facility based in Mississauga, Ontario) facility in
Durango for drill core assays from El Cubo. For primary samples, the split core
is sealed and trucked to the SGS lab via an SGS truck then submitted to
crushing, pulverizing and splitting of a 200 gram pulp, and subsequently fire
assayed for gold with an atomic absorption finish and four-acid digestion with
an atomic absorption finish for silver.

As part of the program, control pulp samples, analytical blanks
and duplicates are inserted at a rate of one of every 20 drill samples as a
check on laboratory accuracy and drift. A monthly report on quality control and
quality assurance is prepared and reviews of the control samples have shown the
lab work to be reliable and reproducible.

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Mining Operations

During 2010, the El Cubo Mine produced its ore from underground
operations from January to June only, due to an illegal work stoppage which
commenced on June 2, 2010. On October 2, 2010, the Labour Court released its
ruling that has declared the strike action illegal. On February 23, 2011, the
Company announced that it had successfully resolved the labour disruption at the
El Cubo mine. The Company has now secured a new two year collective agreement
which has been unanimously approved by the union. In March, 2011, employees were
rehired and commenced training at the University of Guanajuato.

The El Cubo Mine employs conventional drill and blast mining
methods to extract the ore. The principal mining method is narrow vein
cut-and-fill with resuing and waste backfill. Resuing is a process by which only
the vein is blasted and removed in order to minimize dilution, followed by the
blasting of the remaining non-ore material. This second step creates sufficient
width for entry of the mechanized equipment and also creates broken waste that
is left in place as backfill. This method gives a high percentage of recovery,
that is estimated at 95%. Low-grade sections can be left behind as pillars or
blasted and left on the stope floor for backfill. Access to the mining areas is
by adits, ramps and shafts. Ore is cleaned from the stopes and development
headings by scoop trams (low-profile, front-end loaders) and dumped into ore
passes or loaded into low-profile trucks for haulage to main ore passes. While
some ore is trucked to the surface, most ore is dropped through ore passes down
to the 600 level, which is a 5.4 kilometre drift connecting the Peregrina Mine
and the Los Cedros Mine. It is then loaded into rail cars and trammed by rail to
the Guanajuato Shaft, located next to the Las Torres Mill.

Mining dilution is a significant factor in the mill-head
grades. Minera El Cubo is constantly working to reduce dilution to a minimum.
Geologists paint the paying zone of the vein, based on sample assays, so that
only this portion of the vein is blasted and sent to the mill. Horizontal
control lines are painted so that scoop operators will remove only the blasted
ore and not dig down into the waste backfill.

El Cubo ore is treated by conventional means. Crushing and
grinding is followed by flotation and cyanidation with the dissolved gold and
silver recovered from solution by the Merrill-Crowe process.
Performance-improvement programs, that began in the last quarter of 2007,
concentrated ore processing in the two larger milling facilities during the
first half of 2008. The Las Torres Mill, leased from Peñoles, concentrates the
ore by milling and standard flotation. The concentrate is then treated with
cyanide at El Cubos El Tajo Mill. During the second half of 2008, a gravity
concentrator was installed in the Las Torres Mill and an existing regrind mill
was reconnected to the circuit. These changes have raised the precious metal
recovery in the Las Torres Mill and the finer grind of the concentrate is now
giving higher recovery in the El Tajo Mills cyanide circuit. The recovered gold
and silver is smelted into bars of doré and sold to Peñoles' Met-Mex
facility.

Development during 2010 averaged 1,135 metres per month from
January to May as opposed to an average of 1,414 metres per month in 2009. This
includes both development for production and capital development for
exploration. Development metres were adversely affected due to the seven month
labour dispute.

During 2010, El Cubo processed 233,006 tonnes of ore at a mill
head grade that averaged at 1.63 g/t Au and 83 g/t Ag, with overall recoveries
of 89% for Au and 86% for Ag. Mined and processed tonnages were adversely
affected due to the seven month labour dispute.

Based on the updated Mineral Resource and Mineral Reserve
estimate disclosed in this Annual Information Form, the Company estimates that
the El Cubo Mine will have a mine life of 10 years.

Current Exploration and Development Activities

The Company is planning to renew exploration at El Cubo in
2011. This work is planned to consist of 12,000 metres of diamond drilling on
the three major targets including the Dolores  Capulin discovery, infill
drilling at the Puertocito discovery, and drilling the southern extension of the
Villalpando Vein system.

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Guadalupe y Calvo

Property Description and Location

The Guadalupe y Calvo gold-silver exploration project is in a
previously mined area adjacent to the town of Guadalupe y Calvo in the southwest
corner of the State of Chihuahua in Mexico. It is approximately 300 kilometres
southwest of the city of Chihuahua and is accessible by paved highways.



The Company controls 4 contiguous concessions totalling 436
hectares in the central portion of the property and has a much larger concession
of 18,392 hectares surrounding these and competitor concessions. The total area
of titled concessions is 18,392 hectares. In addition, the Company has applied
for a large concession to the NW of its titled concessions that covers an
additional 36,025 hectares, and expects the formal title to be issued in the
coming months. The titled concessions have various expiration dates, ranging
from November 25, 2023 to November 17, 2055.

The Company currently has an agreement in place with the owners
of Guadalupe y Calvo, whereby the Company has permission from the owners to
drill and explore the property in exchange for the Company making road
reparations.

Minimum Investment and Mining Duty (Tax) 2010

All concessions are subject to an annual minimum investment and
an annual mining tax that must be paid to keep the concessions in good standing.
The amount of the minimum investment or assessment work varies based on the
size, age and type of the concession, and changes each year with the Department
of Mines publishing a new list at the beginning of the year and varies with the
consumer price index. The rate of the mining duty depends on the concession type
and the age of the concession. The rate changes each semester with the
Department of Mines publishing the new rates in January and July. The mining
duty is due in both January and July.

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Guadalupe y Calvo will be able to satisfy the minimum
investment and assessment work requirements based on its current work programs
and past work completed.

The total MD for the Guadalupe y Calvo concessions was
approximately 21,124 pesos or $1,711 for 2010.

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

Access to Guadalupe y Calvo from Parral, the nearest major
city, is via Federal Highway 24, a paved two-lane road, and approximately 271
kilometres to the town of Guadalupe y Calvo, which is located at the south
eastern edge of the project area and has an estimated population of 5,000
people. The project lies immediately to the southwest of the town. An airstrip
is also present near the town of Guadalupe y Calvo. The necessary infrastructure
and a local workforce are both available.

On site facilities consist of a hacienda with offices, housing
and dining facilities. The hacienda is currently connected to the national power
grid and telephone lines are available for installation. A 40 tpd mill with
flotation recovery circuit is present along with various storage facilities.

Elevations at the property range from 1,900 metres to 2,300
metres and consist of rolling to moderately steep hills incised with small
streams that cut through a mixture of pine forests and meadows. The climate is
typical of the higher elevations of the Sierra Madre Occidental, with cool
winters freezing at times and mild days. Temperatures rarely drop below -5
degrees Celsius in winter, nor rise above +35 degrees Celsius in summer.

History

Gold has been mined in the area from 1835, when what is now
called the Rosario vein was discovered, until 1940. While accurate production
records are not available for the period from 1835 to 1940, it is postulated
that 2,000,000 ounces of gold and 28,000,000 ounces of silver were mined. From
1978 and into the 1980s, Compania Minera Los Maple, S.A. de C.V. owned the
property and installed a mill with a flotation circuit, and used a Merrill Crowe
recovery system for a small heap leach in the 1980s. Limited mapping, sampling
and exploration were done in the area by Glamis Gold Ltd., V-Fund Investments
and Augusta Resource Corp. from 1994 to 1998. Gammon Gold acquired the Guadalupe
y Calvo property as part of the August 8, 2006 business acquisition of
Mexgold.

Geological Setting and Mineralization

As with the Ocampo Mine, Guadalupe y Calvo is located in the
SMO physiographic province. Volcanic stratigraphy has been broken down into two
main groups, the LVG and the UVG. LVG rocks are the host of nearly all of the
low-sulfidation epithermal gold and silver deposits that have been found in the
Sierra Madre to date.

Within the Guadalupe y Calvo project area an erosional window
of LVG rock is exposed, surrounded by UVG rhyolitic flows and tuffs. The limited
exposure of the LVG rocks makes interpretation of the structural fabric in
regional terms difficult. The main structural feature in the project area is the
Rosario fault complex, a complex fault system containing multiple fault segments
with the intervening ground being highly fractured. These multiple fault
segments host classic ribbon veins and quartz breccias.

Guadalupe y Calvo is a low-sulfidation epithermal gold-silver
district, and contains quartz veins, quartz breccias and stockworks that host
the economically significant gold-silver mineralization. The mineralization
commonly exhibits open-space filling textures and is associated with volcanic
related hydrothermal to geothermal systems. Total width of the mineralized zone
within the Rosario fault complex is up to 50 metres. Historic underground mining
widths of high-grade gold-silver mineralization were up to 10 metres. Historic
operations were hindered by water problems when the valley floor water table was
reached. The inability of past operations to deal with water inflow is believed
to be the reason mining was not pursued down dip, rather than the absence of
high grade gold-silver mineralization.

Drilling, Metallurgy and Exploration

During 2010, the Company completed drilling on two target areas
on the project, contracted metallurgical tests, and initiated a preliminary
economic assessment. The Company drilled 29 holes for 18,579 metres on the
project. The tops of some drill holes were drilled using reverse circulation
drilling (total 966 metres), but all mineralized rock was drilled using core.
The drilling was split into 24 holes for 17,025 metres on the Northwest Rosario
Vein Extension in the core 436 hectare concessions, and 5 holes for 1,554 metres
on a new target called the Northwest Stockwork on the San Luis concession. At
the end of the year, the total drilling in the Companys database from the
central project consisted of 215 holes for 68,908 metres on the 436 hectare
property.

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Results of drilling on the Northwest Rosario Vein Extension in
the core area were positive and show that the Rosario Vein extends some 500
metres northwest of the previous drilling underneath a thick series of
post-mineral rocks. Some of the drill results are very high grade, giving
encouragement that there could be commercial ores amenable to underground mining
in this volume. Results of this drilling have been published in two press
releases, one in August 17, 2010 and the other in March 7, 2011. Based on these
positive results, the Company has planned to continue drilling this extension in
2011.

Results from the NW Stockwork target on the San Luis concession
were not positive and as a result, no further work is planned here.

The Company contracted a series of cyanide metallurgical tests
through Mountain States R & D International, Inc. during the year to
determine if the ores are potentially treatable with a cyanide milling and heap
leaching operation. Bottle roll tests were conducted on crushed and pulverized
ores, and these tests showed that recoveries for gold on -100 Mesh ores are
excellent, ranging from 88% to 97% and averaging 94%. Recoveries for silver are
lower, ranging from 72% to 89% and averaging 80%. There appears to be a rough
correlation between grade and recoveries. These recoveries indicate that the
ores should be treatable using a conventional cyanide mill.

Product
    Agitation Leach at  100m
      Grind
    AverageComp 1
    Comp 2
    Comp 3
    Comp 4Gold Recovery %
    95.8
    95.6
    97.1
    88.1
    94.2Silver Recovery %
    88.9
    79.1
    79.1
    72.5
    79.9Gold Head ppm
    2.40
    1.36
    6.17
    0.76
    2.67Silver Head ppm
    54.63
    33.42
    90.72
    44.67
    55.86


Ninety-day column leach tests were also conducted to determine
the potential amenability of the ores to heap leach recovery. Results of this
work indicate that average recoveries on ores crushed to -1/4 are 60% for gold
and 50% for silver.

Product
    Gold Recovery Column Leach 90
      Days
    Silver Recovery Column Leach 90
      DaysComposite 1-1/4
    59.5
    50.3Composite 2-1/4
    54.9
    47.4Composite 3-1/4
    65.1
    47.9Composite 5-1/4
    60.4
    53.9


Sampling, Analysis, Quality Control and Quality
Assurance

Core samples for exploration drilling are delivered in standard
core boxes with the core runs marked therein. Samples are photographed, logged
and marked and then split using a core saw to obtain half of the core in
potentially mineralized zones. Maximum core length of samples is 2.5 metres and
minimum core length is 0.2 metres. The split samples are collected and sealed in
plastic sample bags and then picked up by the commercial laboratorys truck
which transports the samples to the lab.

During 2010, the Company used SGS Laboratories (an
international testing facility based in Mississauga, Ontario) facility in
Durango for drill core assays from the Guadalupe y Calvo project. For primary
samples, the split core is sealed and trucked to the SGS lab via an SGS truck,
then submitted to crushing, pulverizing and splitting of a 200 gram pulp and
subsequently fire assayed for gold with an atomic absorption finish and
four-acid digestion with an atomic absorption finish for silver.

As part of the program, control pulp samples, analytical blanks
and duplicates are inserted at a rate of one of every 20 drill samples as a
check on laboratory accuracy and drift. A monthly report on quality control and
quality assurance is prepared, and review of the control samples has shown the
lab work to be reliable and reproducible.

Current Exploration and Development Activities

The Company began 2011 with three core rigs drilling at the
project and plans to drill the NW Rosario Extension to approximately 100 metre
centers, and to complete minor infill drilling on the ore shoots defined in the
2008 work. A Preliminary Economic Assessment study is in process that will
determine the steps forward on this project.

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New Exploration Projects

During 2010, the Company substantially expanded its exploration
program to include four new projects in Mexico. These include the Venus Project
in Chihuahua, the Los Jarros Project in Chihuahua, the Mezquite Project in
Zacatecas, and the Fraile Norte Project in San Luis Potosí. In December 2010,
the Company signed a letter of intent to option into a joint venture in the La
Bandera properties in Durango State as well, and the definitive agreement for
this project was later executed in 2011. None of these new projects have
existing resources or reserves, and for the present are not material to the
Company; however all provide the potential to discover new orebodies that could
benefit the Company in the future. Exploration programs are planned on all of
these projects in 2011. The scientific and technical information relating to
these mineral properties was prepared by Peter Drobeck, Registered Geologist,
Senior Vice President of Exploration and Business Development of Gammon Gold
Inc.

Venus Project, Chihuahua

Property Description and Location

The Venus property consists of two options to purchase
contracts on a group of mineral properties north of the Ocampo Mine properties.



Mexicana de Cananea S.A. de C.V. Agreement

On April 9, 2010, the Company executed an option agreement that
allows the Company to purchase the rights of Mexicana de Cananea S.A. de C.V.,
covering four mineral concessions that total 4,491 hectares in area. This option
agreement allows the Company to purchase these mineral rights by paying Mexicana
de Cobre S.A. de C.V. $7,000,000 over a period of four years and completing
$3,000,000 in exploration works over a period of three years.

Pedro Murillo Montanez Agreement

On July 28, 2010, the Company executed an option agreement that
allows the Company to purchase the rights of Pedro Murillo Montanez, covering
one mineral concession that totals 84 hectares in area. This option agreement
allows the Company to purchase these mineral rights by paying the owner $750,000
over a period of four years

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Minimum Investment and Mining Duty (Tax) 2010

All concessions are subject to an annual minimum investment and
an annual mining tax that must be paid to keep the concessions in good standing.
The amount of the minimum investment or assessment work varies based on the
size, age and type of the concession, and changes each year with the Department
of Mines publishing a new list at the beginning of the year, and varies with the
consumer price index. The rate of the mining duty depends on the concession type
and the age of the concession. The rate changes each semester with the
Department of Mines publishing the new rates in January and July. The mining
duty is due in both January and July.

Venus will be able to satisfy the minimum investment and
assessment work requirements based on its current work programs and past work
completed.

The total MD for the Venus concessions was approximately 76,325
pesos or $6,184 for 2010.

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

The Venus project is located just one kilometre north of the
Ocampo Mine properties. The project is cut by a river with a deep canyon running
northeast  southwest. This canyon divides the projects access into two parts.
From the north, access is via the paved highway connecting Chihuahua to
Hermosillo, then 20 kilometres southward from the town of Yepachic on a
secondary unimproved road to the small town of Jesus del Monte, 30 houses lie
within the north portion of the project. From the south, one can drive on
unimproved dirt roads to the southern border of the project. There are no roads
within the southern portion of the project. Supplies for the project come from
the Ocampo Mine or the town of Cahuisori, approximately 12 kilometres east of
Yepachic.

History

The project has no significant mining history, however there is
a small working mine located on one of the Companys, concessions called the
Roncessvalle Mine. No history of production is available from this mine, but it
does not appear to have produced more than a few thousand tonnes of ore from two
levels. From 1987 to 1991, Mexicana de Cananea, S.A. de C.V. carried out
sampling programs, geologic surveys and topographic surveys in the Roncesvalle
and Balleza veins consisting of eleven core drill holes for 2,053 metres and
collected 770 surface and mine samples. The drilling was divided into seven
holes for 1,642 metres on the Roncessvalle target, and four holes for 411 metres
on the La Balleza target. According to data provided by the vendor of the
property, of the seven core holes drilled on the Roncessvalle vein, three cut
gold-silver values that would exceed present underground cut-off grades at the
Ocampo Mine just to the south.

Geological Setting and Mineralization

The geological setting of the Venus project is very similar to
that of Ocampo. The project covers the same volcanic formations, divided into
the LVS and UVS groups, and these are then deformed by numerous northwest and
west-northwest striking faults. The property covers the general westward trend
of the vein systems being exploited by the Pinos Altos Mine, just seven
kilometres southeast of the Venus properties. The known mineralization detected
on surface to date consists of typical low sulfidation epithermal veins and
local zones of sheeted veining with anomalous contents of gold and silver.

Exploration & Drilling

The Company began exploration work on the project soon after
executing the agreement. This work has consisted of 1:10,000 scale geologic
mapping to define the basic geologic setting of the property, detailed 1:2000
scale mapping over specific exploration targets, collection of 2,431 surface
geochemical samples, and in December drilling three core holes for 866 metres.
Results of the surface geochemistry have defined some highly prospective targets
for discovery of epithermal gold-silver veins. The results of the geochemical
work were published in a press release on August 17, 2010. Results of the first
three holes completed in 2010 were not positive, but the Company intends to
complete a much more extensive program of approximately 10,000 metres of
drilling in 2011.

Sampling, Analysis, Quality Control and Quality
Assurance

Samples from the Venus Project have been processed by ALS
Chemex laboratories in Hermosillo, Mexico. Samples sent to ALS Chemex laboratory
in Hermosillo are packaged in rice bags, sealed with wire, and either picked up
by the laboratorys truck, or shipped via private courier. The analytical
procedure used by ALS Chemex for gold is to crush the entire sample to -2mm, split out a 200 gram subsample and then pulverize the split to
-75 microns. From this pulverized pulp, a 30 gram subsample is split and then
assayed for gold by conventional fire assay with an atomic absorption finish,
and for silver using a four-acid digestion with an atomic absorption finish.
These procedures are standard industry practice for these types of ores.

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All drilling for the Venus Project is subject to the Companys
Quality Control and Quality Assurance policy, whereby control pulp samples,
analytical blanks and duplicates are inserted at a rate of one of every 20 drill
samples as a check on laboratory accuracy and drift. A monthly report on quality
control and quality assurance is prepared, and review of the control samples has
shown the lab work to be reliable and reproducible.

Current Exploration and Development Activities

The Company began 2011 with one diamond drill working at the
Venus Project, on the north portion of the property. The work is planned to test
four gold-silver vein targets; the Boleta, Balleza, Santo Nino, and Roncessvalle
vein systems.

Los Jarros Project, Chihuahua

Property Description and Location

The Los Jarros Project (see map in Venus Project section)consists of one purchase option agreement with Valdez Gold Inc. of Canada
and includes eight mineral concessions covering 43,225 hectares surface area.
The purchase agreement was executed August 26, 2010 and allows the Company to
purchase the entire property package for $2,500,000 over a four-year term.

Minimum Investment and Mining Duty (Tax) 2010

There are no MD payment requirements for the Los Jarros
concessions.

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

The project covers a very large area, thus accessibility varies
through the project. The properties optioned essentially cover ground to the
north and east of Ocampo (partly covering ground between Ocampo and Venus), as
well as ground to the east of Ocampo, extending to the northeast where the
property surrounds the holdings of Agnico Eagle Gold Mines, Pinos Altos Mine,
and Frisco Minings Concheno Mine. The main road from Chihuahua to Hermosillo
transects this property, but there are portions of the project that consist of
remote canyons with no roads. There is another isolated block of one concession
to the south of the main project called the Gaby Target that is much more
remote.

History

Valdez Gold Inc. has held the property since 1997, and
subsequently completed regional stream-sediment geochem sampling, detailed
geologic mapping and rock-chip sampling over the Gaby target, and drilling. In
1999 they completed a six-hole diamond drill program for 1,224 metres and
discovered anomalous gold mineralization in all five holes. Valdez returned to
the project in 2009 and drilled another five diamond holes for 844 metres,
bringing the project total to 2,068 metres. The 2009 drilling was focused on the
northwest side of the target area, not as follow-ups to the mineralization
discovered in 1999, but discovered only weakly anomalous mineralization that
resulted in the owner deciding not to proceed with the project.

Geological Setting and Mineralization

The general geology of the project is similar to that of the
Ocampo and Venus projects, in that it is underlain by two basic sequences of
Tertiary volcanic rocks, consisting of the LVS and UVS groups. The large
northern part of the project has been subjected to stream-sediment geochem
sampling, but no outcropping mineralization has been defined to date. The Gaby
target in the south is distinct from the Companys other projects, in that it
covers portions of a large high-sulfidation epithermal gold mineralizing
environment. Deposits of this type consist of mixtures of clay and sulfate
minerals formed in very acidic conditions, by the presence of rocks leached by
acid and replaced by quartz (vuggy silica), and by varying amounts of iron
sulfides, oxides, and sulfates. The Gaby mineralization occurs in the margins of
a rhyolite dome, and in part within a complex breccia zone on the south side of
the dome. The environment is considered very favorable for large disseminated
gold deposits.

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Exploration & Drilling

During November and December of 2010, the Company completed
five diamond drill holes for 2,000 metres of drilling in the Gaby target zone in
the south. This drilling was directed at extending the mineralization,
discovered by Valdez 1999 drilling in the breccia zone, on the south side of
the dome. This work was successful in discovering substantially anomalous gold
values over many tens of metres of drilled length.

Sampling, Analysis, Quality Control and Quality
Assurance

Samples from the Companys Los Jarros drilling have been
processed by ALS Chemex laboratories in Hermosillo, Mexico. Samples sent to ALS
Chemex laboratory in Hermosillo are packaged in rice bags, sealed with wire, and
either picked up by the laboratorys truck, or shipped via private courier. The
analytical procedure used by ALS Chemex for gold is to crush the entire sample
to -2mm, split out a 200 gram subsample, then pulverize the split to -75
microns. From this pulverized pulp, a 30 sub sample is split and then assayed
for gold by conventional fire assay with an atomic absorption finish, and for
silver using a four-acid digestion with an atomic absorption finish. These
procedures are standard industry practice for these types of ores.

All drilling for the Los Jarros project is subject to the
Companys Quality Control and Quality Assurance policy, whereby control pulp
samples, analytical blanks and duplicates are inserted at a rate of one of every
20 drill samples as a check on laboratory accuracy and drift. A monthly report
on quality control and quality assurance is prepared, and review of the control
samples has shown the lab work to be reliable and reproducible.

Current Exploration and Development Activities

After completing a preliminary drill program at Los Jarros in
late 2010, the Company now plans to begin more detailed geologic mapping,
surface geochemical sampling, and preliminary metallurgical studies on the Gaby
discovery. In addition a detailed reconnaissance program is planned for the
remainder of the property.

Mezquite Project, Zacatecas

In March 2010, Gammon signed definitive purchase option
agreements on a group of properties called the Mezquite Project (Mezquite) in
Zacatecas State, Mexico. The option agreements include a series of option
payments that totals $1,400,000 over a three year period. The project lies in a
highly mineralized region that includes deposits such as Penasquito and Camino
Rojo of Goldcorp Mining, and the Aranzanzu Mine of Aura Minerals Inc.

Property Description and Location

Mezquite consists of two definitive purchase option agreements,
referred to as the Mezquite Agreement and the Peridotita Agreement. The
Mezquite Agreement covers two mineral concessions with a surface area of 420
hectares.



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The Mezquite agreement allows the Company to purchase 100% of
the rights by paying the owner $1,000,000 over a period of three years.

The Peridotita Agreement covers one mineral concession with an
area of 40 hectares, and the agreement allows the Company to purchase 100% of
the rights by paying the owner $400,000 over a period of three years.

Both agreements allow the Company to terminate the contract
with 30 days notice.

Minimum Investment and Mining Duty (Tax) 2010

All concessions are subject to an annual minimum investment and
an annual mining tax that must be paid to keep the concessions in good standing.
The amount of the minimum investment or assessment work varies based on the
size, age and type of the concession, and changes each year with the Department
of Mines publishing a new list at the beginning of the year, and varies with the
consumer price index. The rate of the mining duty depends on the concession type
and the age of the concession. The rate changes each semester, with the
Department of Mines publishing the new rates in January and July. The mining
duty is due in both January and July.

Mezquite will be able to satisfy the minimum investment and
assessment work requirements based on its current work programs and past work
completed.

The total MD for the Mezquite concessions was approximately
13,484 pesos or US$1,092 for 2010.

Accessibility, Climate, Local Resources, Infrastructure and
Physiography

Mezquite is located along a four-lane paved highway that
connects Mexico City to Monterrey, approximately 20 kilometres south of the
mining town of Concepcion del Oro, which is the local supply center for many
mines and has all services necessary for exploration and mining activities. A
powerline runs across the east side of the property.

History

There is no known mining or exploration history on the
property.

Geological Setting and Mineralization

The project occurs within the Mexican fold - thrust belt which
consists of Jurassic and Cretaceous platform sedimentary rocks that have been
deformed into complex folds and thrust faults, and has been intruded by Eocene 
Oligocene calc-alkaline stocks. The property occurs along a major north
north-east striking lineament running from the Concepción del Oro mining
district to the Camino Rojo discovery that terminates a series of curvilinear
thrust-belt related mountain ranges. The Mezquite property includes Cerro La
Llorona, a hill that consists of an altered intrusive with two adjacent breccia
pipes cutting into skarn-altered and silicified Caracol Formation. The Companys
initial geochemical sampling from skarns on La Llorona showed values up to 0.14
grams per tonne gold, 0.75% lead and 0.58% zinc from the skarn alteration.
Samples from the felsic breccia pipe showed values up to 0.35 grams per tonne
gold, 0.14% lead and 0.41% zinc in outcrop. The intrusive and related breccias
pipes occur along the south side of the hill, suggesting that the alteration
system is open to the south.

Exploration & Drilling

During 2010, the Company completed two geophysical programs on
the project, a ground magnetic survey and ground induced polarization survey.
The geophysical surveys identified a volume likely to contain an intrusive rock,
that has a halo of sulfide-bearing rock  a pattern considered favorable for the
occurrence of skarn and replacement style mineralization, as well as peripheral
breccia pipe mineralization. The Company then drilled nine diamond drill holes
for a total of 3,931 metres to test these anomalies. This drilling discovered
high-grade gold mineralization in one hole close to surface and weakly anomalous
gold-zinc mineralization in the breccia pipe. One drill hole also discovered
silver  lead  zinc mineralization just inside the contact of a quartz diorite
intrusive. Results of this drilling were published in a press release on January
12, 2011.

Sampling, Analysis, Quality Control and Quality
Assurance

Samples from the Companys Mezquite drilling have been
processed by ALS Chemex laboratories in Hermosillo, Mexico. Samples sent to ALS
Chemex laboratory in Hermosillo are packaged in rice bags, sealed with wire, and
either picked up by the laboratorys truck, or shipped via private courier. The
analytical procedure used by ALS Chemex for gold is to crush the entire sample
to -2mm, split out a 200 gram subsample, then pulverize the split to -75
microns. From this pulverized pulp a 30 gram subsample is split and then assayed
for gold by conventional fire assay with an atomic absorption finish, and for
silver using a four-acid digestion with an atomic absorption finish. These
procedures are standard industry practice for these types of ores.

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All drilling for the Mezquite project is subject to the
Companys Quality Control and Quality Assurance policy, whereby control pulp
samples, analytical blanks and duplicates are inserted at a rate of one of every
20 drill samples as a check on laboratory accuracy and drift. A monthly report
on quality control and quality assurance is prepared, and review of the control
samples has shown the lab work to be reliable and reproducible.

Current Exploration and Development Activities

A soil geochemistry program was completed in the first month of
2011 around the discovery hole BMXT-07 to test for potential extensions to this
discovery and a follow-up drill program of 3,800 metres is planned
thereafter.

TAXES

There are four taxes that are applied to the Companys
operations in Mexico that are of primary concern: the tax on corporate profits,
the Single Rate tax, the value added tax (IVA using the Spanish acronym), and
the diesel fuel tax (IEPS). The general Mexican tax rates applicable to the
Company have increased from 28% in 2009 to 30% in 2010 that continues through
2012, before decreasing to 29% and 28% in 2013 and 2014, respectively. The
Companys Mexican subsidiaries pay a 17.5% tax on the Companys revenues less
certain deductions that are all determined on a cash basis. The Company pays the
single rate tax to the extent that it exceeds its income tax otherwise
determined pursuant to the pre-existing income tax system in each taxation year.
IVA is administered at various rates depending upon the materials or services
purchased. Generally speaking, the IVA rate most applicable to the Ocampo Mine
was 16% in 2010. The Ocampo Mine will be eligible for a refund of all IVA taxes
paid, both on imports and for domestic expenses. Mexico levies a general tax on
the use of diesel fuel that varies monthly and by region. If the fuel is used
off-road and in a qualifying project, the tax is refundable, as is the case with
the Ocampo Mine.

LEGAL MATTERS

Litigation

Set out below is a summary of material legal proceedings to
which Gammon Gold is a party:

Capital Gold Inc. Stockholders

Thirteen punitive proposed shareholder class action suits have
been commenced to date which name Capital Gold and Gammon Gold as defendants.
Six were filed in the Supreme Court of the State of New York (the "New York
state court actions"), six were filed in the Delaware Court of Chancery (the
"Delaware actions"), and one was filed in the United States District Court for
the Southern District of New York (the "New York federal action").

The plaintiffs generally claim that the directors of Capital
Gold breached their fiduciary duties by failing to maximize shareholder value
and failing to conduct an appropriate sale process with Gammon Gold. The
plaintiffs also allege that Capital Gold, Gammon Gold and Capital Gold AcquireCo
aided and abetted these alleged breaches of fiduciary duties. The plaintiff in
the New York federal action also alleges that Capital Gold and its directors
violated Section 14(a) and Section 20(a) of the Securities Exchange Act by
issuing or causing to be issued a registration statement containing material
misleading statements and omissions.

The plaintiffs generally seek: i) to have the actions certified
as class actions: ii) an injunction to stop the closing of the transaction; iii)
rescissory damages in the event the transaction is closed prior to a final
judgment; iv) an order that the Capital Gold Board members exercise their
fiduciary duty to obtain a transaction in the best interests of Capital Gold
through an appropriate process; v) damages in the amount of any benefits
improperly received by the defendants; and vi) counsel fees and other costs and
disbursements.

On November 12, 2010, the Delaware Court of Chancery
consolidated all of the Delaware actions1, and those plaintiffs filed
an amended and consolidated class action complaint on November 16,
2010. On March 10, 2011, the parties in the Delaware action informed the court
that they had signed a Memorandum of Understanding intending to settle the
action that as at the date of this Annual Information Form has not yet been
approved by the Court. The plaintiff in the New York federal action filed an
amended complaint on February 18, 2011. On March 14, 2011, the court in the New
York federal action denied (as withdrawn) the plaintiff's motion for a
preliminary injunction, stayed the case in favour of the Delaware proceeding and
denied plaintiff's request for attorneys' fees. The New York state court actions
have also been consolidated and those plaintiffs filed a Consolidated Amended
Class Action Complaint on March 2, 2011. The defendants must answer, move or
otherwise respond to the Consolidated Amended Class Action Complaint by April
16, 2011. Gammon Gold will continue to vigorously defend these matters, although
no assurances can be given with respect to the outcome of any proceedings.

________________________________1 One of the
Delaware actions was withdrawn prior to entry of the Chancery Courts
consolidation order.

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Ed J. McKenna

Ed J. McKenna issued a Notice of Action against the Company and
certain other parties on February 5, 2008. A statement of claim was filed on
March 6, 2008 and an amended statement of claim on July 11, 2008, in the Ontario
Supreme Court of Justice, Canada. The plaintiff alleges that the Companys short
form prospectus dated April 19, 2007 contained a misrepresentation and other
misstatements with respect to production rates from the Company's gold mines in
Mexico, as did certain disclosure documents during the class period of October
10, 2006 to August 10, 2007, and also alleged that the Company manipulated grant
dates of stock options. On March 16, 2010, the class action was certified in
respect of investors who purchased securities through underwriters in Canada
under its April 2007 prospectus. The Court did not certify the claim in respect
of secondary market purchases. Additionally, the Court did not certify the claim
in respect of persons who purchased securities outside Canada. The plaintiff
seeks $150,000,000 in special and general damages and $10,000,000 in punitive
damages on behalf of the class. Certification is a procedural step in the
litigation and no determination has been made of the merits of the claim. Gammon
will continue to vigorously defend the matter, although no assurances can be
given with respect to the outcome of any proceedings.

RISK FACTORS

An investment in any securities of the Company is speculative
and involves a high degree of risk due to the nature of the Companys business
and the present stage of exploration and development of its mineral properties.
The following risk factors, as well as risks not currently known to the Company,
could materially adversely affect the Companys future business, operations and
financial condition and could cause them to differ materially from the estimates
described in forward-looking statements relating to the Company. Before deciding
to invest in any securities of the Company, investors should consider carefully
the risks included herein.

Reserves and Resources are Estimates

The figures for the Companys Reserves and Resources are
estimates based on interpretation and assumptions and may yield less mineral
production under actual conditions than is currently estimated.

Unless otherwise Indicated, Mineral Resource and Reserve
figures presented herein are based upon estimates made by Company personnel and
independent geologists. These estimates are imprecise and depend upon geological
interpretation and statistical inferences drawn from drilling and sampling
analysis, which may prove to be unreliable. There can be no assurance that:

- these estimates will be accurate;
- Reserves, Resources or other mineralization figures will be accurate; or
- this mineralization could be mined or processed profitably.

Mineralization estimates for the Companys properties may
require adjustments or downward revisions based upon further exploration or
development work or actual production experience. In addition, the grade of ore
ultimately mined, if any, may differ from that indicated by drilling results.
There can be no assurance that minerals recovered in small scale tests will be
duplicated in large scale tests under on-site conditions or in production
scale.

The Reserve and Resource estimates contained herein have been
determined and valued based on assumed future prices, cutoff grades and
operating costs that may prove to be inaccurate. Extended declines in market
prices for gold, silver and copper may render portions of the Companys
mineralization uneconomic and result in reduced reported mineralization. Any
material reductions in estimates of mineralization, or of the Companys ability
to extract this mineralization, could have a material adverse effect on the
Companys results of operations or financial condition.

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The Company May Not Achieve Its Production Estimates

The figures for the Companys future production are
estimates based on interpretation and assumptions and actual production may be
less than is currently estimated.

The Company prepares estimates of future gold and silver
production for its operating mines. The Company cannot give any assurance that
it will achieve its production estimates. The failure of the Company to achieve
its production estimates could have a material and adverse affect on any or all
of its future cash flows, profitability, results of operations and financial
condition. These production estimates are dependent on, among other things, the
accuracy of mineral reserve estimates, the accuracy of assumptions regarding ore
grades and recovery rates, ground conditions, physical characteristics of ores,
such as hardness and the presence or absence of particular metallurgical
characteristics and the accuracy of estimated rates and costs of mining and
processing.

The Companys actual production may vary from its estimates for
a variety of reasons, including, actual ore mined varying from estimates of
grade, tonnage, dilution and metallurgical and other characteristics; short-term
operating factors such as the need for sequential development of ore-bodies and
the processing of new or different ore grades from those planned; mine failures,
slope failures or equipment failures; industrial accidents; natural phenomena
such as inclement weather conditions, floods, droughts, rock slides and
earthquakes; encountering unusual or unexpected geological conditions; changes
in power costs and potential power shortages; shortages of principal supplies
needed for operation, including explosives, fuels, chemical reagents, water,
equipment parts and lubricants; labour shortages or strikes; civil disobedience
and protests; and restrictions or regulations imposed by government agencies or
other changes in the regulatory environments. Such occurrences could result in
damage to mineral properties, interruptions in production, injury or death to
persons, damage to property of the Company or others, monetary losses and legal
liabilities. These factors may cause a mineral deposit that has been mined
profitably in the past to become unprofitable forcing the Company to cease
production. It is not unusual in new mining operations to experience unexpected
problems during the start-up phase. Depending on the price of gold or other
minerals, the Company may determine that it is impractical to commence or, if
commenced, to continue commercial production at a particular site.

Mining Risks and Insurance

Mining is inherently dangerous and subject to conditions
or events beyond the Companys control, which could have a material adverse
effect on the Companys business.

Mining involves various types of risks and hazards, including,
but not limited to:

- environmental hazards;
- industrial accidents;
- metallurgical and other processing problems;
- unusual or unexpected rock formations;
- structural cave-ins or slides;
- seismic activity;
- flooding;
- fires;
- periodic interruptions due to inclement or hazardous weather conditions;
- variations in grade, deposit size, density and other geological problems;
- mechanical equipment performance problems;
- unavailability of materials and equipment including fuel;
- labour force disruptions;
- unanticipated or significant changes in the costs of supplies including,
  but not limited to, petroleum; and
- unanticipated transportation costs.

These risks could result in damage to, or destruction of,
mineral properties, production facilities or other properties, personal injury
or death, loss of key employees, environmental damage, delays in mining,
increased production costs, monetary losses and possible legal liability.

Where considered practical to do so, the Company maintains
insurance against risks in the operation of its business in amounts which it
believes to be reasonable. Such insurance, however, contains exclusions and
limitations on coverage. There can be no assurance that such insurance will
continue to be available, will be available at economically acceptable premiums
or will be adequate to cover any resulting liability. Insurance against certain
environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products
occurring from production, is not generally available to the Company or to other
companies within the mining industry. The Company may suffer a material adverse
effect on its business if it incurs losses related to any significant events
that are not covered by its insurance policies. Payment of such liabilities
would reduce funds available for acquisition of mineral prospects or exploration
and development and would have a material adverse affect on the financial
position of the Company.

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Uncertainty of Exploration and Development Projects

Exploration and development projects are uncertain and
consequently it is possible that actual cash operating costs and economic
returns will differ significantly from those estimated for a project prior to
production.

Because mines have limited lives based on Proven and Probable
Mineral Reserves, the Company will be required to continually replace and expand
its Mineral Reserves as its mines produce gold. The life-of-mine estimates
included in this annual information form may not be correct. The Companys
ability to maintain or increase its annual production of gold and silver in the
future will be dependent in significant part on its ability to identify and
acquire additional commercially viable mineral properties, bring new mines into
production and to expand Mineral Reserves at existing mines.

Mineral Resource exploration and development is a highly
speculative business, characterized by a number of significant risks including,
among other things, unprofitable efforts resulting not only from the failure to
discover mineral deposits but also from finding mineral deposits that, though
present, are insufficient in quantity and quality to return a profit from
production. There can be no assurance that the Company will successfully acquire
additional mineral rights. While discovery of additional ore-bearing structures
may result in substantial rewards, few properties which are explored are
ultimately developed into producing mines. Major expenses may be required to
establish reserves by drilling and to construct mining and processing facilities
at a particular site. It is impossible to ensure that the current exploration
and development programs of the Company will result in profitable commercial
mining operations. The profitability of the Companys operations will be, in
part, directly related to the cost and success of its exploration and
development programs which may be affected by a number of factors.

Development projects are subject to the completion of
successful feasibility studies and environmental assessments, issuance of
necessary governmental permits and receipt of adequate financing. They typically
require a number of years and significant expenditures during the development
phase before production is possible. The economic feasibility of development
projects is based on many factors such as:

- estimation of reserves;
- anticipated metallurgical recoveries;
- environmental considerations and permitting;
- future gold prices; and
- anticipated capital and operating costs.

Estimates of Mineral Resources and Reserves and cash operating
costs are, to a large extent, based upon the interpretation of geologic data
obtained from drill holes and other sampling techniques, and feasibility studies
which derive estimates of cash operating costs based upon anticipated tonnage
and grades of ore to be mined and processed, the configuration of the orebody,
expected recovery rates of metals from the ore, estimated operating costs,
anticipated climatic conditions and other factors. As a result, it is possible
that actual cash operating costs and economic returns will differ significantly
from those currently estimated for a project prior to production.

Any of the following events, among others, could affect the
profitability or economic feasibility of a project:

- unanticipated changes in grade and tonnage of ore to be mined and
  processed;
- unanticipated adverse geotechnical conditions;
- incorrect data on which engineering assumptions are made;
- costs of constructing and operating a mine in a specific environment;
- availability and costs of processing and refining facilities;
- availability of economic sources of power;
- adequacy of water supply;
- adequate access to the site, including competing land uses (such as
  agriculture);
- unanticipated transportation costs;

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- government regulations (including regulations regarding prices, royalties,
  duties, taxes, permitting, restrictions on production, quotas on exportation
  of minerals, as well as the costs of protection of the environment and
  agricultural lands);
- title claims, including aboriginal land claims;
- fluctuations in prices of precious metals; and
- accidents, labour actions and force majeure events.

Anticipated capital and operating costs, production and
economic returns, and other estimates contained in feasibility studies, if
prepared, may differ significantly from the Companys actual capital and
operating costs. In addition, delays to construction schedules may negatively
impact the net present value and internal rates of return of the Companys
mineral properties as set forth in the applicable feasibility studies.

The future development of the Companys properties that are
found to be economically feasible, including the expansion of the Ocampo Mine,
the El Cubo Mine and Guadalupe y Calvo, if new reserves are discovered, will
require the expansion and improvement of existing mining operations, as well as
the construction and operation of additional mines, processing plants and
related infrastructure. As a result, the Company is subject to all of the risks
associated with establishing and expanding mining operations and business
enterprises including:

- the timing and cost, which will be considerable, of the construction of
  additional mining and processing facilities;
- the availability and costs of skilled labour, power, water, transportation
  and mining equipment;
- the availability and cost of appropriate smelting and/or refining
  arrangements;
- the need to obtain necessary environmental and other governmental
  approvals and permits, and the timing of those approvals and permits; and
- the availability of funds to finance construction and development
  activities.

The costs, timing and complexities of mine construction and
development are increased by the remote location of some of the Companys mining
properties. It is not unusual in new mining operations to experience unexpected
problems and delays during the construction and development of a mine. In
addition, delays in the commencement or expansion of mineral production often
occur and once commenced or expanded, the production of a mine may not meet
expectations or estimates set forth in feasibility or other studies.
Accordingly, there are no assurances that the Company will successfully develop
and expand mining operations or profitably produce precious metals at its
properties, including the Ocampo Mine and the El Cubo Mine.

Integration of New Acquisitions

The Company may experience problems integrating new
acquisitions into existing operations, which could have a material adverse
effect on the Company.

The Company may make selected acquisitions in the future. The
Companys success at completing any acquisitions will depend on a number of
factors, including, but not limited to:

- identifying acquisitions which fit the Companys strategy;
- negotiating acceptable terms with the seller of the business or property
  to be acquired; and
- obtaining approval from regulatory authorities in the jurisdictions of the
  business or property to be acquired.

If the Company does make further acquisitions, any positive
effect on the Companys results will depend on a variety of factors, including,
but not limited to:

- assimilating the operations of an acquired business or property in a
  timely and efficient manner;
- maintaining the Companys financial and strategic focus while integrating
  the acquired business or property;
- implementing uniform standards, controls, procedures and policies at the
  acquired business; as appropriate; and
- to the extent that the Company makes an acquisition outside of markets in
  which it has previously operated, conducting and managing operations in a new
  operating environment.

Acquiring additional businesses or properties could place
increased pressure on the Companys cash flow if such acquisitions involve cash
considerations or the assumption of obligations requiring cash payments. The
integration of the Companys existing operations with any acquired business will
require significant expenditures of time, attention and funds. Achievement of
the benefits expected from consolidation would require the Company to incur
significant costs in connection with, among other things, implementing financial
and planning systems. The Company may not be able to integrate the operations of
a recently acquired business or restructure the Companys previously
existing business operations without encountering difficulties and delays. In
addition, this integration may require significant attention from the Companys
management team, which may detract attention from the Companys day-to-day
operations. Over the short-term, difficulties associated with integration could
have a material adverse effect on the Companys business, operating results,
financial condition and the price of the Companys Common Shares. In addition,
the acquisition of mineral properties may subject the Company to unforeseen
liabilities, including environmental liabilities.

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Market Price of Gold and Silver

Changes in the market price of gold and other metals,
which in the past has fluctuated widely, will affect the profitability of the
Companys operations and financial condition.

The Companys profitability and long-term viability depend, in
large part, upon the market price of gold and other metals and minerals produced
from the Companys properties. The market price of gold and other metals is
volatile and is impacted by numerous factors beyond the Companys control,
including:

- expectations with respect to the rate of inflation;
- the relative strength of the US dollar and certain other currencies;
- interest rates;
- global or regional political or economic conditions;
- supply and demand for jewellery and industrial products containing metals;
- costs of substitutes;
- changes in global or regional investment or consumption patterns; and
- sales by central banks and other holders, speculators and producers of
  gold and other metals in response to any of the above factors.

There can be no assurance that the market price of gold and
other metals will remain at current levels or that such prices will improve. A
decrease in the market price of gold and silver could adversely affect the
profitability of the Companys existing mines and the Companys ability to
finance the exploration and development of additional properties, which would
have a material adverse effect on the Companys financial condition and results
of operations. A decline in the market price of gold or silver, or both, may
also require the Company to write-down its Mineral Reserves which would have a
material and adverse affect on its earnings and profitability. Further, if
revenue from gold or silver sales, or both, declines, the Company may experience
liquidity difficulties.

Foreign Operations

The Companys Mexican property interests and operations
are subject to the political risks and uncertainties associated with investment
in a foreign country.

All of the Company's property interests are located in Mexico
and are subject to Mexican federal and state laws and regulations. As a result
the Companys mining investments are subject to the risks normally associated
with the conduct of business in foreign countries. The Company believes the
present attitude of the governments of Mexico and of the States of Chihuahua and
Guanajuato (where the Companys projects are located) to foreign investment and
mining to be favourable; however, investors should assess the political risks of
investing in a foreign country. Any variation from the current regulatory,
economic and political climate could have an adverse effect on the affairs of
the Company.

The risks of conducting business in a foreign country may
include, among others, labour disputes, invalidation of governmental orders and
permits, corruption, uncertain political and economic environments, sovereign
risk, war (including in neighbouring states), civil disturbances and terrorist
actions, arbitrary changes in laws or policies of particular countries, the
failure of foreign parties to honour contractual relations, corruption, foreign
taxation, delays in obtaining or the inability to obtain necessary governmental
permits, opposition to mining from environmental or other non-governmental
organizations, limitations on foreign ownership, limitations on the repatriation
of earnings, limitations on gold exports, instability due to economic
under-development and inadequate infrastructure and increased financing costs.
In addition, the enforcement by the Company of its legal rights to exploit its
properties may not be recognized by the government of Mexico or by its court
system. These risks may limit or disrupt the Companys operations, restrict the
movement of funds or result in the deprivation of contractual rights or the
taking of property by nationalization or expropriation without fair
compensation.

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Any variation from the current regulatory, economic and
political climate could have an adverse effect on the affairs of the
Company.

Property Rights, Permits and Licensing

The Company requires various property rights, permits and
licenses in order to conduct its current and anticipated future operations and
delays or a failure to obtain such property rights, permits and licenses, or a
failure to comply with the terms of any such property rights, permits and
licenses that the Company has obtained, could have a material adverse effect on
the Company.

The Companys current and anticipated future operations,
including further exploration, development activities and expansion or
commencement of production on the Companys properties, require certain permits
and licenses from various levels of governmental authorities. The Company may
also be required to obtain certain property rights to access, or use, certain of
its properties in order to proceed to development. There can be no assurance
that all licenses, permits or property rights which the Company requires for the
expansion and construction of mining facilities and the conduct of mining
operations will be obtainable on reasonable terms or in a timely manner, or at
all, that such terms may not be adversely changed, that required extension will
be granted, or that the issuance of such licenses, permits or property rights
will not be challenged by third parties. Delays in obtaining or a failure to
obtain such licenses, permits or property rights or extension thereto,
challenges to the issuance of such licenses, permits or property rights, whether
successful or unsuccessful, changes to the terms of such licenses, permits or
property rights, or a failure to comply with the terms of any such licenses,
permits or property rights that the Company has obtained, could have a material
adverse impact on the Company.

In order for the Company to carry out its mining activities,
the Company's exploitation licences must be kept current. There is no guarantee
that the Company's exploitation licences will be extended or that new
exploitation licences will be granted. In addition, such exploitation licences
could be changed and there can be no assurances that any application to renew
any existing licences will be approved. The Company may be required to
contribute to the cost of providing the required infrastructure to facilitate
the development of its properties. The Company will also have to obtain and
comply with permits and licences which may contain specific conditions
concerning operating procedures, water use, waste disposal, spills,
environmental studies, abandonment and restoration plans and financial
assurances. There can be no assurance that the Company will be able to comply
with any such conditions.

Uncertainties of Title

Title to the Companys mineral properties cannot be
guaranteed and may be subject to prior unregistered agreements, transfers or
claims and other defects.

The Company cannot guarantee that title to its properties will
not be challenged. Title insurance is generally not available for mineral
properties and the Companys ability to ensure that it has obtained secure claim
to individual mineral properties or mining concessions may be severely
constrained. The Companys mineral properties may be subject to prior
unregistered agreements, transfers or claims, and title may be affected by,
among other things, undetected defects. A successful challenge to the precise
area and location of these claims could result in the Company being unable to
operate on its properties as permitted or being unable to enforce its rights
with respect to its properties.

Impact of Regulatory Requirements

Regulatory requirements significantly affect the
Companys mining operations and may have a material adverse impact on its future
cash flow, results of operations and financial condition.

Mining operations, development and exploration activities are
subject to extensive laws and regulations governing prospecting, development,
production, exports, taxes, labour standards, occupational health, waste
disposal, environmental protection and remediation, protection of endangered and
protected species, mine safety, toxic substances and other matters. Mining is
subject to potential risks and liabilities associated with pollution of the
environment and the disposal of waste products occurring as a result of mineral
exploration and production. The costs of discovering, evaluating, planning,
designing, developing, constructing, operating and closing mines and other
facilities in compliance with such laws and regulations are significant.

Failure to comply with applicable laws and regulations may
result in enforcement actions thereunder, and may include corrective measures
requiring capital expenditures, installation of additional equipment or remedial
actions. Parties engaged in mining operations may be required to compensate those suffering loss
or damage by reason of the mining activities and may have civil or criminal
fines or penalties imposed for violations of applicable laws or regulations.

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New laws and regulations, amendments to existing laws and
regulations, administrative interpretation of existing laws and regulations, or
more stringent enforcement of existing laws and regulations, could have a
material adverse impact on our future cash flow, results of operations and
financial condition.

Impact of Environmental Laws and Regulations

The Companys activities are subject to environmental
laws and regulations that may increase the Companys costs of doing business and
restrict its operations.

The Companys exploration and production activities in Mexico
are subject to regulation by governmental agencies under various environmental
laws. These laws address emissions into the air, discharges into water,
management of waste, management of hazardous substances, protection of natural
resources, antiquities and endangered species and reclamation of lands disturbed
by mining operations. Environmental legislation in many countries is evolving
and the trend has been towards stricter standards and enforcement, increased
fines and penalties for non-compliance, more stringent environmental assessments
of proposed projects and increasing responsibility for companies and their
officers, directors and employees. Compliance with environmental laws and
regulations may require significant capital outlays on behalf of the Company and
may cause material changes or delays in the Companys intended activities. There
can be no assurance that future changes in environmental regulations will not
adversely affect the Companys business, and it is possible that future changes
in these laws or regulations could have a significant adverse impact on some
portion of the Companys business, causing the Company to re-evaluate those
activities at that time.

The Company cannot give any assurance that, notwithstanding its
precautions, breaches of environmental laws (whether inadvertent or not) or
environmental pollution will not materially and adversely affect its financial
condition and its results from operations. There is no assurance that future
changes in environmental regulation, if any, will not adversely affect the
Companys operations. Environmental hazards may exist on the properties on which
the Company holds interests which are unknown to the Company at present and
which have been caused by previous or existing owners or operators of the
properties. Reclamation costs are uncertain and planned expenditures may differ
from the actual expenditures required.

Land reclamation requirements may be
burdensome.

Although variable depending on location and the governing
authority, land reclamation requirements are generally imposed on mineral
exploration companies (as well as companies with mining operations) in order to
minimize long term effects of land disturbance, and the Company is subject to
such requirements at its mineral properties.

Reclamation obligations include requirements to:

- control dispersion of potentially deleterious effluents; and
- reasonably re-establish pre-disturbance land forms and vegetation.

In order to carry out reclamation obligations arising from
exploration and potential development activities, the Company must allocate
financial resources that might otherwise be spent on further exploration and
development programs. If the Company is required to carry out unanticipated
reclamation work, its financial position could be adversely affected.

Capital Investment

The Company may require significant external financing to
continue its exploration and development activities on its mineral
properties.

The ability of the Company to continue exploration and
development of its property interests will be dependent upon its ability to
increase revenues from its existing production and planned expansions, and to
raise significant additional financing hereafter. The sources of external
financing that the Company may use for these purposes include project debt
and/or debt or equity offerings. There is no assurance that the financing
alternative chosen by the Company will be available to the Company, on
favourable terms or at all. Depending on the alternative chosen, the Company may
have less control over the management of its projects. There is no assurance
that the Company will successfully increase revenues from existing and expanded
production.

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Should the Company not be able to obtain such financing and
increase its revenues, it may become unable to acquire and retain its mineral
concessions and carry out its development plan, and its property interests may
be lost entirely.

Conflicts of Interest

Certain of the Companys directors and officers serve in
similar positions with other public companies which put them in conflict of
interest positions from time to time.

Certain of the directors and officers serve as directors,
officers, promoters and members of management of other public companies and
therefore ,it is possible that a conflict may arise between their duties as a
directors or officers of the Company and their duties as a directors, officers,
promoters or members of management of such other companies.

The directors and officers of the Company are aware of the
existence of laws governing accountability of directors and officers for
corporate opportunity and requiring disclosures by directors of conflicts of
interest and the Company will rely upon such laws in respect of any directors
and officers conflicts of interest or in respect of any breaches of duty by any
of its directors or officers. All such conflicts will be disclosed by such
directors or officers in accordance with the Canada Business Corporations
Act and they will govern themselves in respect thereof to the best of their
ability in accordance with the obligations imposed upon them by law.

Dependence on Key Personnel

The Company may experience difficulty attracting and
retaining qualified management and technical personnel to meet the needs of its
anticipated growth, and the failure to manage the Companys growth effectively
could have a material adverse effect on its business and financial
condition.

The success of the Company is heavily dependent on its key
personnel and on its ability to motivate, retain and attract highly skilled
persons. The competition for qualified personnel in the mining industry is
currently intense. In order to attract and retain its key personnel, the Company
has sought to provide its personnel with challenging work and a variety of
opportunities for advancement through growth and expansion of the Company's
business, and through equity participation.

In addition, the Company anticipates that, as it expands its
existing production and brings additional properties into production, and as the
Company acquires additional mineral rights, the Company will experience
significant growth in its operations. The Company expects this growth to create
new positions and responsibilities for management personnel and to increase
demands on its operating and financial systems, as well as to require the hiring
of a significant number of additional operations personnel. There can be no
assurance that the Company will successfully meet these demands and effectively
attract and retain additional qualified personnel to manage its anticipated
growth and hire enough additional operations personnel. The failure to attract
such qualified personnel to manage growth effectively could have a material
adverse effect on the Companys business, financial condition or results of
operations.

Labour and Employment Matters

Production at the Companys mining operations is
dependent upon the efforts of the Companys employees and the Companys
relations with the employees and the labour unions that represent the
employees.

The Company experienced a strike at the El Cubo Mine between
June 3, 2010 and February 23, 2011. Although this strike was settled, there can
be no assurance that there will not be further action taken by employees in the
future. In addition, relations between the Company and its employees may be
affected by changes in the scheme of labour relations that may be introduced by
the Mexican governmental authorities in whose jurisdictions the Company carries
on business. Changes in such legislation or in the relationship between the
Company and its employees may have a material adverse effect on the Companys
business, results of operations and financial condition.

Increased Competition and Costs

Increased competition could adversely affect the
Companys ability to acquire suitable producing properties or prospects for
mineral exploration in the future. Recent high metal prices have increased
demand for, and cost of, exploration, development and construction services and
equipment.

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The international mining industry is highly competitive. The
Company's ability to acquire properties and add reserves in the future will
depend not only on its ability to develop its present properties, but also on
its ability to select and acquire suitable producing properties or prospects for
mineral exploration. The Company may be at a competitive disadvantage in
acquiring additional mining properties because it must compete with other
individuals and companies, many of which have greater financial resources,
operational experience and technical capabilities than the Company. The Company
may also encounter increasing competition from other mining companies in its
efforts to hire experienced mining professionals. Competition for exploration
resources at all levels is currently very intense, particularly affecting the
availability of manpower, drill rigs and helicopters. Increased competition
could adversely affect the Companys ability to attract necessary capital
funding or acquire suitable producing properties or prospects for mineral
exploration in the future.

Recent increases in gold prices have encouraged increases in
mining exploration, development and construction activities, which have resulted
in increased demand for, and cost of, exploration, development and construction
services and equipment. Increased demand for services and equipment could cause
project costs to increase materially, resulting in delays if services or
equipment cannot be obtained in a timely manner due to inadequate availability,
and increase potential scheduling difficulties and cost increases due to the
need to coordinate the availability of services or equipment, any of which could
materially increase project exploration, development or construction costs,
result in project delays or both.

Stock Price Volatility

The trading price for the Companys securities is
volatile.

The trading price of the Companys common shares may be subject
to large fluctuations. The trading price of the Companys common shares may
increase or decrease in response to a number of events and factors,
including:

- the price of gold and other metals;
- the Companys operating performance and the performance of competitors and
  other similar companies;
- the publics reaction to the Companys press releases, other public
  announcements and the Companys filings with the various securities regulatory
  authorities;
- changes in earnings estimates or recommendations by research analysts who
  track the Companys common shares or the shares of other companies in the
  resource sector;
- changes in general economic conditions;
- the number of the Companys common shares to be publicly traded after an
  offering;
- the arrival or departure of key personnel; and
- acquisitions, strategic alliances or joint ventures involving the Company
  or its competitors.

In addition, the market price of the Companys shares are
affected by many variables not directly related to the Companys success and are
therefore, not within the Companys control, including other developments that
affect the market for all resource sector shares, the breadth of the public
market for the Companys shares, and the attractiveness of alternative
investments. In addition, securities markets have recently experienced an
extreme level of price and volume volatility, and the market price of securities
of many companies has experienced wide fluctuations which have not necessarily
been related to the operating performance, underlying asset values or prospects
of such companies. The effect of these and other factors on the market price of
the common shares on the exchanges in which the Company trades has historically
made the Companys share price volatile and suggests that the Companys share
price will continue to be volatile in the future.

Dilution

The Company may raise funds for future operations through
the issuance of shares, debt instruments or other securities convertible into
shares and such financings may result in the dilution of present and prospective
shareholdings.

In order to finance future operations, the Company may raise
funds through the issuance of shares or the issuance of debt instruments or
other securities convertible into shares. The Company cannot predict the size of
future issuances of common shares or the issuance of debt instruments or other
securities convertible into shares or the effect, if any, that future issuances
and sales of the Companys securities will have on the market price of the
Companys common shares. Any transaction involving the issuance of previously
authorized but unissued shares, or securities convertible into shares, would
result in dilution, possibly substantial, to present and prospective security
holders.

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Currency

Because the Companys producing properties are located in
Mexico and will have production costs incurred in Mexican pesos, while gold and
other metals are generally sold in US dollars, the Mexican property results
could be materially adversely affected by an appreciation of the Mexican
peso.

Gold and other metals are sold throughout the world principally
in US dollars. The Companys operating costs for its Mexican projects are
incurred in Mexican pesos and certain costs are incurred and certain debt
obligations are owed in US dollars. As a result, any significant and sustained
appreciation of the Mexican peso against the US dollar, or of the US dollar
against the Canadian dollar, may materially increase the Companys costs and
reduce revenues, if any, on its Mexican operations. The Company currently uses
derivative products to mitigate a portion of this foreign exchange exposure.

Lack of Hedging of Exposure to Commodity Prices

Because the Company does not currently intend to use
forward sale arrangements to protect against low commodity prices, the Companys
operating results are exposed to the impact of any significant drop in commodity
prices.

The Company does not currently intend to enter into forward
sales arrangements to reduce the risk of exposure to volatility in commodity
prices. Accordingly, the Companys future operations are exposed to the impact
of any significant decrease in commodity prices. If such prices decrease
significantly at a time when the Company is producing, the Company would realize
reduced revenues. While it is currently not the Companys intention to enter
into forward sales arrangements, the Company is not restricted from entering
into forward sales arrangements at a future date.

Dividends

No dividends have been or will be paid in the foreseeable
future.

To date, the Company has paid no dividends on its common
shares. The Company intends to retain its earnings, if any, to finance the
growth and development of the business and does not intend to pay dividends on
the common shares in the foreseeable future. Any return on an investment in the
Companys common shares will come from the appreciation, if any, in the value of
the common shares. The payment of future dividends, if any, will be reviewed
periodically by the Companys directors of the Company and will depend upon,
among other things, conditions then existing, including earnings, financial
condition and capital requirements, restrictions in financing agreements,
business opportunities and conditions and other factors.

Failures in Internal Control Procedures

The Company failed and may, in the future, fail to
achieve and maintain the adequacy of internal control over financial reporting
as per the requirements of the Sarbanes-Oxley Act.

The Company documented and tested, during its most recent
fiscal year, its internal control procedures in order to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (SOX). SOX
requires an annual assessment by management of the effectiveness of the
Companys internal control over financial reporting and an attestation report by
the Companys independent auditors addressing this assessment.

During the preparation of the March 31, 2010 interim
consolidated financial statements, the Company identified an error relating to
its consolidated financial statements for the years ended December 31, 2008 and
2009 and the related interim periods. In those previously released financial
statements, the Company had not properly assessed the impact of changes in
foreign currency exchange rates affecting the future income tax liabilities
arising on the acquisition of Mexgold Resources Inc. on August 8, 2006. The
restatement gave effect to the adjustment of those future income tax liabilities
to properly reflect changes in currency exchange rates between the US dollar and
the Mexican peso, the currency of the country in which the future tax liability
arose. For the year ended December 31, 2009, the impact of this adjustment was
to decrease future income tax liabilities by $14,100,000 and decrease foreign
exchange losses by $6,500,000. Net earnings increased by $6,500,000 and basic
and diluted net earnings per share increased from $0.01 to $0.07 per share. For
the year ended December 31, 2008, the impact of this adjustment was to decrease
future income tax liabilities by $7,600,000, decrease opening deficit by
$8,900,000, and decrease foreign exchange gains by $1,300,000. Net earnings
decreased by $1,300,000 and basic and diluted net earnings per share decreased
from $0.34 and $0.33 to $0.33 and $0.32 per share respectively. There was no
income tax effect as a result of this adjustment.

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As a result, the Company incorrectly presented the consolidated
balance sheets, consolidated statements of operations and comprehensive income /
(loss), and shareholders equity for the periods discussed above, and corrected
such presentation in the amended and restated 2009 consolidated financial
statements. Further information on these adjustments and a reconciliation of
amounts previously reported is contained in note 2 of the Companys amended and
restated consolidated financial statements for the year ended December 31, 2009.
As a result of the aforementioned material weakness as of December 31, 2009,
management made changes in internal controls over financial reporting during the
second quarter of 2010. Management has concluded that, as of December 31 2010,
the Companys design and operating effectiveness of internal control over
financial reporting was effective.

During the preparation of its interim consolidated financial
statements for the quarter ended June 30, 2009, the Company determined that
certain items in its consolidated financial statements for the year ended
December 31, 2008 had been incorrectly translated into the Companys functional
currency, the United States dollar, and that upon initial adoption by the
Company of CICA Handbook Section 3031, Inventories, on January 1, 2008, a
reversal should have been recorded for previously recognized net realizable
value adjustments. The more significant effects of the restatement on the
Companys consolidated financial statements for the year ended December 31, 2008
were to increase net earnings for the period by $9,800,000, or $0.08 per share,
to $40,000,000, or $0.34 per share, and to increase balance sheet inventories by
$10,800,000, to $62,300,000.

These issues were corrected in August 2009 and the Companys
financial statements for the year ended December 31, 2008 were restated. As a
result of the financial statement restatement, the Company reassessed its
internal control over financial reporting and determined that a material
weakness existed at December 31, 2008 and concluded that, as of December 31,
2008 and June 30, 2009, the Companys internal control over financial reporting
was not effective. In addition, based on the material weakness, the Company
determined that its disclosure controls and procedures were not effective as of
December 31, 2008 and June 30, 2009.

The Company may fail to achieve and maintain the adequacy of
its internal control over financial reporting as such standards are modified,
supplemented, or amended from time to time, and the Company may not be able to
ensure that it can conclude on an ongoing basis that it has effective internal
controls over financial reporting in accordance with Section 404 of SOX. The
Companys failure to satisfy the requirements of Section 404 of SOX on an
ongoing, timely basis could result in the loss of investor confidence in the
reliability of its financial statements, which in turn could harm the Companys
business and negatively impact the trading price of the Companys common shares
or market value of its other securities. In addition, any failure to implement
required new or improved controls, or difficulties encountered in their
implementation, could harm the Companys operating results or cause it to fail
to meet its reporting obligations. Future acquisitions of companies may provide
the Company with challenges in implementing the required processes, procedures
and controls in its acquired operations. Acquired companies may not have
disclosure controls and procedures or internal control over financial reporting
that are as thorough or effective as those required by securities laws currently
applicable to the Company.

No evaluation can provide complete assurance that the Companys
internal control over financial reporting will detect or uncover all failures of
persons within the Company to disclose material information otherwise required
to be reported. The effectiveness of the Companys control and procedures could
also be limited by simple errors or faulty judgments. In addition, as the
Company continues to expand, the challenges involved in implementing appropriate
internal controls over financial reporting will increase and will require that
the Company continue to improve its internal controls over financial reporting.
Although the Company intends to devote substantial time and incur substantial
costs, as necessary, to ensure ongoing compliance, the Company cannot be certain
that it will be successful in complying with Section 404.

Litigation

Gammon Gold is currently subject to litigation and may be
involved in disputes with other parties in the future which may result in
litigation.

If Gammon Gold is unable to resolve these disputes favorably,
it may have a material adverse impact on Gammon Gold's financial performance,
cash flow and results of operations. See - Legal Matters.

Risk Factors Related to the Acquisition

Gammon Golds acquisition of Capital Gold is subject to
certain conditions to closing that could result in the Acquisition not being
completed or being delayed, either of which could negatively impact its stock
price and future business and results of operations.

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Completion of the Acquisition is subject to a number of
customary conditions, including, but not limited to, the approval of the
agreement and plan of Acquisition by the stockholders of Capital Gold. These
authorities may impose conditions on the completion of the Acquisition or
require changes to the terms of the Acquisition. While Gammon Gold and Capital
Gold do not currently expect that any such conditions or changes would be
imposed, there can be no assurance that they will not be, and such conditions or
changes could have the effect of imposing additional costs on or limiting the
revenues of Gammon Gold following the Acquisition, any of which may have an
adverse effect on Gammon Gold. In addition, if any action is taken or legal or
regulatory restrictions or conditions deemed applicable to the Acquisition that
would be reasonably likely to have a material adverse effect on Capital Gold or
Gammon Gold, Capital Gold may elect not to consummate the Acquisition. There is
no assurance that Capital Gold will receive the necessary approvals or satisfy
the other conditions necessary for completion of the Acquisition. If any of the
conditions to the Acquisition are not satisfied or, where waiver is permissible,
not waived, the Acquisition will not be consummated. Failure to complete the
Acquisition would prevent Gammon Gold from realizing the anticipated benefits of
the Acquisition. Gammon Gold has already incurred and expects to continue to
incur significant costs associated with transaction fees, professional services,
taxes and other costs related to the Acquisition. In the event that the
Acquisition is not completed, Gammon Gold will remain liable for these costs and
expenses. In addition, the current market price of Gammon Gold common stock may
reflect a market assumption that the Acquisition will occur, and a failure to
complete the Acquisition could result in a negative perception by the market of
Gammon Gold generally and a resulting decline in the market price of Gammon
Golds common stock. Any delay in the consummation of the Acquisition or any
uncertainty about the consummation of the Acquisition could also negatively
impact Gammon Golds stock price and future business and results of operations.
The Acquisition may not be consummated, there may be delay in the consummation
of the Acquisition or the Acquisition may be consummated on the terms
contemplated by the merger agreement.

Many of the anticipated benefits of combining Gammon Gold
and Capital Gold may not be realized.

Gammon Gold and Capital Gold entered into the merger agreement
with the expectation that the Acquisition would result in various benefits
including, among other things, synergies, cost savings and operating
efficiencies. The success of the Acquisition will depend, in part, upon Gammon
Golds ability to realize these anticipated benefits and cost savings from
combining the businesses of Gammon Gold and Capital Gold. However, to realize
these anticipated benefits and cost savings, Gammon Gold must successfully
combine the businesses of Gammon Gold and Capital Gold, including Capital Golds
recently acquired subsidiary, Nayarit Gold. If Gammon Gold is not able to
achieve these objectives, the anticipated benefits and cost savings of the
Acquisition may not be realized fully or at all or may take longer to realize
than expected.

Gammon Gold and Capital Gold have operated and, until the
completion of the Acquisition, will continue to operate independently. It is
possible that the integration process could take longer than anticipated and
could result in the loss of key employees or the disruption of each companys
ongoing businesses, which could adversely affect Gammon Golds ability to
achieve the anticipated benefits of the Acquisition. Gammon Gold may have
difficulty coordinating the operations and personnel of the two companies and
addressing possible differences in corporate cultures and management
philosophies. Integration efforts between the two companies will also divert
management attention and resources. These integration activities could have an
adverse effect on the businesses of both Gammon Gold and Capital Gold during the
transition period. The integration process is subject to a number of
uncertainties. The uncertainties regarding the outcome of these integration
efforts are heightened by the recent completion by Capital Gold of a significant
acquisition, Nayarit Gold, on August 2, 2010. Capital Gold has not fully
integrated Nayarit Golds operations and personnel into Capital Gold and, as a
result, the integration efforts between Capital Gold and Gammon Gold will also
depend upon the ability of Gammon Gold to integrate both Capital Gold and
Nayarit Golds operations and personnel into Gammon Gold. Although Gammon Golds
plans for integration are focused on minimizing those uncertainties to help
achieve the anticipated benefits, no assurance can be given that these benefits
will be realized or, if realized, the timing of their realization. Failure to
achieve these anticipated benefits could result in increased costs or decreases
in the amount of expected revenues and could adversely affect Gammon Golds
future business, financial condition, operating results and prospects. In
addition, Gammon Gold may not be able to eliminate duplicative costs or realize
other efficiencies from integrating the businesses to offset part or all of the
transaction and acquisition-related costs incurred by Gammon Gold and Capital
Gold.

Any delay in completing the Acquisition may substantially
reduce the benefits that Gammon Gold expects to be obtained from the
Acquisition.

In addition to obtaining the required governmental clearances
and approvals, the Acquisition is subject to a number of other conditions beyond
the control of Gammon Gold and Capital Gold that may prevent, delay or otherwise
materially adversely affect its completion. Gammon Gold and Capital Gold cannot
predict whether or when the conditions required to complete the Acquisition will
be satisfied. The requirements for obtaining the required clearances and
approvals could delay the effective time of the acquisition for a significant period of time or prevent
it from occurring. Moreover, each of Gammon Gold and Capital Gold may terminate
the acquisition agreement if the acquisition is not consummated by July 1,
2011.

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Future results of the combined company may differ materially
from the Unaudited Pro Forma Condensed Combined Financial Information of Gammon
Gold and Capital Gold presented in the second supplement to the Registration
Statement filed by Gammon Gold.

The future results of Gammon Gold, as the combined company
following the acquisition, may be materially different from those shown in the
unaudited pro forma financial information presented in the second supplement to
the Registration Statement filed by Gammon Gold on March 21, 2011 with the SEC
that show only a combination of Gammon Golds and Capital Golds historical
results, after giving effect to the acquisition by Capital Gold of Nayarit Gold
and the Acquisition. Gammon Gold has estimated that Gammon Gold will record
approximately $7,000,000 of aggregate acquisition-related fees and expenses, as
described in the notes to the pro forma financial information included in the
second supplement to the Registration Statement. In addition, the final amount
of any charges relating to acquisition accounting adjustments that Gammon Gold
may be required to record will not be known until following the closing of the
Acquisition. These expenses and charges may be higher or lower than
estimated.

Whether or not the Acquisition is completed, the
announcement and pendency of the Acquisition could impact or cause disruptions
in Gammon Golds business, which could have an adverse effect on Gammon Golds
business and results of operations.

Whether or not the Acquisition is consummated, the announcement
and pendency of the Acquisition could cause disruptions in or otherwise
negatively impact Gammon Golds business and results of operations. Among
others:

- Gammon Golds employees may experience uncertainty about their future
  roles with the combined company, which might adversely affect Gammon Golds
  ability to retain and hire key personnel and other employees;
- the attention of Gammon Golds management may be directed toward the
  completion of the Acquisition and transaction-related considerations and may
  be diverted from the day-to-day operations and pursuit of other opportunities
  that could be beneficial to Gammon Golds business; and
- business partners may seek to modify or terminate their business
  relationships with Gammon Gold.

These disruptions could be exacerbated by a delay in the
completion of the Acquisition or termination of the merger agreement and could
have an adverse effect on Gammon Golds business, results of operations or
prospects if the Acquisition is not completed or on the business, results of
operations or prospects of the combined company if the Acquisition is
completed.

Several lawsuits have been filed against Capital Gold,
Gammon Gold and other parties challenging the proposed Acquisition, and an
adverse judgment in such lawsuits may prevent the Acquisition from becoming
effective or from becoming effective within the expected timeframe.

Capital Gold, the members of Capital Golds Board of Directors,
Gammon Gold, and in some instances Capital Golds CFO, or Capital Gold
AcquireCo, Inc. have been named as defendants in purported class action lawsuits
brought by Capital Gold stockholders challenging the proposed Acquisition,
seeking, among other things, to enjoin the defendants from consummating the
Acquisition on the agreed-upon terms.

On March 9, 2011, counsel to the parties to the Delaware
Actions entered into a Memorandum of Understanding that expresses an agreement
in principle to settle the Delaware Actions, subject to approval by the Delaware
Court of Chancery and on terms and conditions that include, among other things,
certain supplemental disclosures that were contained in the first supplement to
the Registration Statement and certain amendments to the terms of the merger
agreement, as discussed in the first supplement to the Registration Statement.
If the Delaware Court of Chancery approves the settlement contemplated in the
Memorandum of Understanding, the Delaware Actions will be dismissed with
prejudice. Subject to court approval of the settlement, counsel for the
purported class will apply to the Delaware Court of Chancery for attorneys fees
and expenses in connection with the actions. The settlement will not take effect
unless the merger between Gammon Gold and Capital Gold is consummated. The
material terms of the settlement will be described in a notice that will be
filed with the SEC at a later date.

The outcome of the pending and potential future litigation is
difficult to predict and quantify and the defense of such claims or actions can
be costly. In addition to diverting financial and management resources and
general business disruption, Gammon Gold may suffer from adverse publicity that
could harm Gammon Golds reputation, regardless of whether the allegations are valid or whether Gammon Gold are ultimately held liable. A
temporary or permanent injunction could delay or prevent completion of the
Acquisition and such delay or failure of the transaction could cause the adverse
results discussed above.

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A judgment or settlement that is not covered by or is
significantly in excess of Gammon Golds insurance coverage for any claims, or
Gammon Golds obligations to indemnify the individual defendants, could
materially and adversely affect Gammon Golds financial condition, results of
operations and cash flows.

Gammon Gold may pursue strategic transactions in the
future, which could be difficult to implement, disrupt its business or change
its business profile significantly.

Gammon Gold will continue to consider opportunistic strategic
transactions, which could involve acquisitions or dispositions of businesses or
assets. Any future strategic transaction could involve numerous risks,
including:

- potential disruption of Gammon Golds ongoing business and distraction of
  management;
- difficulty integrating acquired businesses, such as Capital Gold, or
  segregating assets to be disposed of;
- exposure to unknown and/or contingent or other liabilities, including
  litigation arising in connection with the acquisition, disposition and/or
  against any businesses Gammon Gold may acquire; and
- changing Gammon Golds business profile in ways that could have unintended
  consequences.

If Gammon Gold enters into significant strategic transactions
in the future, related accounting charges may affect its financial condition and
results of operations, particularly in the case of any acquisitions. In
addition, the financing of any significant acquisition may result in changes in
its capital structure, including the incurrence of additional indebtedness.
Conversely, any material disposition could reduce its indebtedness or require
the amendment or refinancing of a portion of its outstanding indebtedness.
Gammon Gold may not be successful in addressing these risks or any other
problems encountered in connection with any strategic transactions.

CAPITAL STRUCTURE

Set forth below is a description of The Companys share
capital. The following statements are brief summaries of, and are subject to the
provisions of, the articles of amalgamation and by-laws of the Company and the
relevant provisions of the

Companies Act (Quebec).

General

The Companys authorized capital consists of an unlimited
number of common shares without nominal or par value, an unlimited number of
Class A preferred shares and an unlimited number of Class B preferred shares. A
total of 138,909,657 common shares are issued and outstanding (146,745,405
common shares on a fully diluted basis) as at the date of this Annual
Information Form. There are no Class A or Class B preferred shares currently
outstanding.

Common Shares

Each common share ranks equally with all other common shares
with respect to dissolution, liquidation or winding-up of the Company and
payment of dividends. The holders of common shares are entitled to one vote for
each share of record on all matters to be voted on by such holders and are
entitled to receive pro rata such dividends as may be declared by the directors
of the Company of the Company out of funds legally available therefore and to
receive pro rata the remaining property of the Company on dissolution. The
holders of common shares have no pre-emptive or conversion rights. The rights
attaching to the common shares can only be modified by the affirmative vote of
at least two-thirds of the votes cast at a meeting of shareholders called for
that purpose.

Class A and Class B Preferred Shares The Class A and
Class B preferred shares are non-cumulative, non-participating, voting and
redeemable at their paid-in value. Dividends on the Class A and Class B
preferred shares are determined by the directors of the Company and are not to
exceed 12% in the case of the Class A preferred shares and 13% in the case of
the Class B preferred shares. The Class A and Class B preferred shares are
entitled to preference over the common shares and any other shares of the
Company ranking junior to the Class A and Class B preferred shares with respect
to the payment of dividends and the distribution of assets in the event of
liquidation, dissolution or winding-up of the Company, provided, however, that
the Class A preferred shares have priority over the Class B preferred shares.
Any amendment to the articles of the Company to vary any rights, privileges,
restrictions or conditions attaching to the Class A or Class B preferred shares must, in
addition to authorization by special resolution, be authorized by at least
two-thirds of the votes cast at a meeting of holders of Class A or Class B
preferred shares duly called for such purpose, each holder being entitled to one
vote for each preferred share held.

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MARKET FOR SECURITIES

Trading Price and Volume

The common shares of the Company have been listed and posted
for trading on the Toronto Stock Exchange (the TSX) since February 18,
2000, under the trading symbol GAM. The common shares of the Company have been
listed and posted for trading on the New York Stock Exchange (the NYSE)
since October 13, 2008, under the trading symbol GRS. The following table sets
forth the high and low trading prices and trading volume of the common shares as
reported by the TSX and NYSE for the periods indicated:

|Period             | TSX      | NYSE  
|------------------ | -------- | ------
|High (C$)          | Low (C$) | Volume
|March 1 - 22, 2011 | $9.04    | $7.99 
|February, 2011     | $9.48    | $7.53 
|January, 2011      | $8.30    | $7.05 
|December, 2010     | $8.32    | $6.72 
|November, 2010     | $7.20    | $6.30 
|October, 2010      | $7.52    | $6.75 
|September 2010     | $7.80    | $6.80 
|August 2010        | $7.78    | $5.97 
|July 2010          | $6.15    | $5.42 
|June 2010          | $8.37    | $5.78 
|May 2010           | $8.38    | $6.93 
|April 2010         | $7.83    | $6.75 
|March 2010         | $10.64   | $7.24 
|February 2010      | $10.91   | $9.01 
|January 2010       | $12.88   | $9.22 

Prior Sales

There have been no prior sales of securities of the Company
during the fiscal year ended December 31, 2010 and to the date of this Annual
Information Form.

ESCROWED SECURITIES

To the knowledge of the Company, there are no securities of the
Company held in escrow.

MATERIAL CONTRACTS

Except as disclosed in this Annual Information Form, and for
contracts entered into in the ordinary course of business, the Company has not
entered into any material contracts for the fiscal year ended December 31, 2010
and to the date of this Annual Information Form.

INTEREST OF MANAGEMENT & OTHERS IN MATERIAL
TRANSACTIONS

No director, executive officer, holder of securities of more
than 10% of any class of outstanding voting securities or any associate or
affiliate thereof of the Company has any interest, directly or indirectly, in
material transactions with the Company or any of its direct or indirect
wholly-owned subsidiaries, other than the following transactions, which were in
the normal course of operations:

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The Company paid or has payable the following amounts to
directors for services other than in their capacity as directors, and companies
controlled by or related to directors (noted in US$):

|                                        |   | December 31 |  |   | December 31 |  |   | December 31 | 
|--------------------------------------- | - | ----------- |  | - | ----------- |  | - | ----------- | 
|                                        |   | 2010        |  |   | 2009        |  |   | 2008        | 
|Production costs  labour(1)            | $ | -           |  | $ | 25,796,510  |  | $ | 33,761,686  | 
|Mining interests  labour(1)            |   | -           |  |   | 4,875,580   |  |   | 1,167,359   | 
|Production costs 
      consumables(2) |   | -           |  |   | 11,254,799  |  |   | 14,655,237  | 
|Capital assets(3)                       |   | -           |  |   | -           |  |   | 94,350      | 
|                                        |   |             |  |   |             |  |   |             | 
|                                        | $ | -           |  | $ | 41,926,889  |  | $ | 35,642,674  | 

Notes:

|1. | The Company pays a third party company owned by the
      brother of Mr. Fred George, a former director of the Company, for the
      provision of workers in the Mexican operations at cost plus
  6-10%.                         
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                    
|2. | The Company pays two third party companies owned by the
      father of Mr. Canek Rangel, a former director of the Company, for the
      provision of lime, lubricant and fuel, the prices of which are regulated
      in Mexico.
|   |                                                                                                                                                                                                                                    
|3. | The Company paid a former director, Mr. Canek Rangel and
      third party Company owned by the father of Mr. Canek Rangel, for the
      provision and construction of production and support
  facilities.                       

In September 2009, the Company announced the resignations of
the two members of the Board of Directors involved in the above transactions. As
a result, effective the date of their resignations, the above are no longer
considered related party transactions.

Directors and officers of the Company are entitled to hold
management incentive stock options. For this purpose, the Company has adopted a
Stock Option Plan for directors, officers, employees and consultants of the
Company and its subsidiaries.

The Company has also implemented a Deferred Share Unit Plan
which is intended to further align the interests of directors and senior
officers with shareholders interests and the Companys values of behaving like
an owner, continuously improving the Company and delivering results, so as to
increase the value of the shares going forward. The directors of the board may elect each year to
receive all or part of their annual retainer in deferred share units (DSUs)
having a market value equal to the portion of the retainer to be received in
that form, subject to such limits as the Board may impose. The directors of the board may also
grant, each year, DSUs to directors or senior officers having a market value not
greater than the annual retainer or base salary for each such director or senior
officer. The maximum number of common shares of the Company that may be issued
under the Deferred Share Unit Plan is 1,000,000. DSUs awarded to directors and
senior officers of the Company vest immediately, unless otherwise determined by
the directors of the Company.

TRANSFER AGENT AND REGISTRAR

The Companys transfer agent and registrar is Computershare
Trust Corporation of Canada (Computershare). Computershares register
of transfers for the Companys Common Shares is located at 1500 University
Street, Suite 700, Montreal, Quebec, H3A 3S8.

DIVIDENDS

The Company has not declared or paid any dividends on its
common shares since the date of its incorporation. The Company intends to retain
its earnings, if any, to finance the growth and development of its business and
does not expect to pay dividends or make any other distributions in the near
future. The directors of the Company will review this policy from time to time
having regard to the Companys financing requirements, financial condition and
other factors considered to be relevant.

INTERESTS OF EXPERTS

The following persons and companies have prepared or certified
a statement, report or valuation on behalf of the Company as follows during the
fiscal ended December 31, 2010, and to the date of this Annual Information Form:
(i) KPMG, LLP, Chartered Accountants, prepared an audit report as auditors of
the Company, in connection with the audit of the Companys audited annual
financial statements for the fiscal year ended December 31, 2010; (ii) Ramon
Luna, P. Geo, Gammon Gold Inc., for information relating to the Mineral Reserve
and Mineral Resource calculations for the Ocampo property; (iii) Glenn R. Clark,
P. Eng. of Glenn R. Clark & Associates Limited, for information relating to
the Mineral Reserve and Mineral Resource calculations for the El Cubo property
and for the technical report dated October 15, 2009 titled El Cubo Gold
Silver Mine, Guanajuato, Mexico; (iv) Clancy J. Wendt and Mark G. Stevens,
C.P.G., formerly of Pincock, Allen & Holt, prepared a report dated November
25, 2002 and titled Guadalupe y Calvo Gold-Silver Project, Chihuahua,
Mexico and (v) Peter Drobeck, Registered Geologist, Senior Vice President of Exploration and Business Development of Gammon Gold Inc.,
for information relating to the Venus, Los Jarros and Mezquite mineral
properties.

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KPMG, LLP confirmed that they are independent within the
meaning of the Rules of Professional Conduct of the Institute of Chartered
Accountants of Nova Scotia.

All registered or beneficial interests, direct or indirect, in
any securities or other of the Company or an affiliate/subsidiary of the Company
is less than 1% in a class of securities, include a general statement indicating
that the interest held by all experts is less than one per cent.

DIRECTORS AND OFFICERS

The management of the Company consists of seven (7) executive
officers and nine (9) directors as at March 23, 2011. The table presented below
provides the names of and related information concerning each executive officer
and director as at the date of this Annual Information Form. Each director holds
office until the close of the next annual meeting of shareholders or until his
successor is duly elected or appointed.

|Name, Position
      with the Company                                                                         | Director/Officer Since                                                                       | Common Shares | Stock Options | Deferred Share Units | Principal Occupation                                                                                                                                                         
|------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------- | ------------- | -------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Rene
      Marion(4)Toronto, Ontario, Canada President &
      Chief Executive Officer                        | Officer of the Company since October 2007 and Director of
      the Company since March 2008 | 150,001       | 604,000       | 71,845               | Chief Executive Officer, Gammon Gold Inc., previous
      occupation was Chief Operating Officer of Highland Gold Mining
      Limited.                                      
|Scott Perry Toronto, Ontario, Canada Executive Vice
      President & Chief Financial Officer                 | Officer of the Company since February 2008                                                   | 70,701        | 223,000       | 51,872               | Chief Financial Officer, Gammon Gold Inc.,
      previous occupation was Chief Financial Officer for Highland Gold
      Mining Limited.                                     
|Russell Tremayne Chihuahua City, Mexico Executive Vice
      President & Chief Operating Officer              | Officer of the Company since January 2008                                                    | 77,380        | 338,000       | 50,291               | Chief Operating Officer, Gammon Gold Inc.,
      previous occupation was Director of Operations for Highland Gold
      Mining Limited.                                      
|Chris Bostwick Toronto, Ontario, Canada Senior Vice
      President , Technical Services                      | Officer of the Company since January 2009                                                    | 8,692         | 130,000       | Nil                  | Senior VP, Technical Services, Gammon Gold
      Inc., previous occupation was Director of Capital Projects &
      Technical Services for Highland Gold Mining Limited.     
|Peter Drobeck Golden, Colorado, Unites States Senior
      Vice President, Exploration & Business Development | Officer of the Company since October 2008                                                    | 8,246         | 117,500       | Nil                  | Senior VP, Exploration & Business
      Development, Gammon Gold Inc., previous occupation was VP
      Exploration for Electrum USA Limited.                                
|Chris Richter Toronto, Ontario Vice President,
      Corporate Development                                    | Officer of the Company since April 2010                                                      | 8,755         | 50,000        | Nil                  | Vice President, Corporate Development, Gammon
      Gold Inc., previous occupation was Senior Manager, Capital Allocation,
      Strategy & Risk for Barrick Gold Corporation
|Luis Chavez Chihuahua City, Chihuahua, Mexico Director,
      Mexican Operations                              | Director and Officer of the Company since July 2007                                          | 22,197        | 87,500        | Nil                  | Director of Mexican Operations, Gammon Gold
      Inc., previous occupation was Secretary General for the Mexican Mining
      Directors                                     
|Ron Smith (1)(3)Dayton, Nova Scotia, Canada
      Independent Director                                        | Director of the Company since May 2009                                                       | 4,184         | 75,000        | 4,912                | Chartered Accountant                                                                                                                                                         
|George Elliott(2)(3)Toronto, Ontario, Canada
      Independent Director                                       | Director of the Company since August 2008                                                    | 10,099        | 75,000        | 1,637                | Barrister & Solicitor                                                                                                                                                        
|Terrence Cooper(1)(2)Halifax, Nova Scotia,
      Canada Independent Director                                  | Director of the Company since April 2009                                                     | 1,811         | 75,000        | 4,912                | Barrister & Solicitor                                                                                                                                                        
|Alan Edwards(3)(4)Golden, Colorado, USA
      Independent Director                                            | Director of the Company since May 2010                                                       | 7,308         | 75,000        | 1,637                | President and Chief Executive Officer, Copper
      One Incorporated                                                                                                         
|Colin Benner Vancouver, British Columbia, Canada
      Chairman of the Board, Independent                     | Director of the Company since April 2010, Chairman of the
      Board since May 2010         | 8,965         | 150,000       | 3,821                | Chairman, Capstone Mining Corporation                                                                                                                                        
|Richard Colterjohn(1)(2)Toronto, Ontario,
      Canada Independent Director                                   | Director of the Company since April 2010                                                     | 300,000       | 75,000        | 4,912                | Managing Partner and Principal, Glencoban
      Capital Management Incorporated                                                                                              
|Joseph Spiteri(4)Acton, Ontario, Canada
      Independent Director                                            | Director of the Company since May 2010                                                       | 4,154         | 75,000        | 2,030                | Independent Mining Consultant                                                                                                                                                

| | 57 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

Notes:

| | 1. | Member of the Audit Committee. See Audit Committee
      Information.
| | -- | -----------------------------------------------------------------------
| | 2. | Member of the Nominating & Corporate Governance
      Committee.       
| | 3. | Member of the Compensation Committee.                                  
| | 4. | Member of the Sustainability
Committee.                                

Each of the directors and officers has had the principal
occupation listed under his name above for the last five years.

As at the date of this Annual Information Form, the directors
and executive officers of the Company, as a group, beneficially own, directly or
indirectly, or exercise control or direction over an aggregate of 582,954 common
shares (2,930,362 common shares if all options and deferred share units held by
them are exercised), representing 0.4% of the currently outstanding common
shares (2.1% current outstanding common shares if all options held by them are
exercised) and 0.4% of the common shares on a fully diluted basis (2% current
outstanding common shares on a fully diluted basis if all options and deferred
share units held by them are exercised).

None of the directors or executive officers of the Company are,
at the date of the Annual Information Form, or was within 10 years before this
date, a director, CEO or CFO of a company subject to any cease trade order,
bankruptcy, penalty or sanction.

Board Effectiveness

In 2009, the Company established an assessment process to
determine the effectiveness of the Board, its Committees and the individual
Directors. This assessment is conducted annually by a confidential survey
prepared and administered by a third party, where the Board and its Committees
are assessed as a whole. In addition to the third party Board effectiveness
survey, the Audit Committee members also conduct a self assessment and a peer
assessment on an annual basis. The Company discloses Director Attendance at
Board and Committee meetings each year in its Management Information
Circular.

AUDIT COMMITTEE INFORMATION

Overview

The Audit Committee of the Companys Board of Directors is
principally responsible for:

| | a) | recommending to the Companys Board of Directors the
      external auditor to be nominated for election by the Companys
      shareholders at each Annual Meeting and negotiating the compensation of
      such external auditor;                                                                 
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | overseeing the work of the external auditor;                                                                                                                                                                                                                                                         
| | c) | reviewing the Companys annual and interim financial
      statements, Managements Discussion and Analysis and press releases
      regarding earnings before they are reviewed and approved by the directors
      of the Company and publicly disseminated by the Company; and                    
| | d) | reviewing the Companys financial reporting procedures to
      ensure adequate procedures are in place for the Companys public
      disclosure of financial information extracted or derived from its
      financial statements, other than disclosure described in the previous
      paragraph.

During fiscal 2010, the Audit Committee met seven (7)
times.

The purposes of the Audit Committee are to assist the board of
directors oversight of:

- the integrity of Gammon Golds financial statements;
- Gammon Golds compliance with legal and regulatory requirements relating
  to financial disclosure;
- the qualifications and independence of Gammon Golds independent auditors;
  and
- the performance of the independent auditors and Gammon Golds internal
  audit function.

In accordance with National Instrument 52-110 - Audit
Committees (NI 52-110), disclosure of audit fees and other matters
related to the composition and operation of the Companys Audit Committee is
found in this section of the Annual Information Form of the Company.

| | 58 | 
| | -- | 

---

|2010ANNUAL INFORMATION FORM
|---------------------------

The Audit Committees Charter

The directors of the Company have adopted a Charter for the
Audit Committee, which sets out the Committees mandate, organization, powers
and responsibilities. The complete Charter is attached as Schedule A to this
Annual Information Form.

Composition of the Audit Committee

The members of the Audit Committee are Ron Smith (Chair),
Terrence Cooper and Richard Colterjohn. All of the members of the Audit
Committee are independent and financially literate, as required by SEC Rule
10A-3, the NYSE Company Manual Section 303A.06  Audit Committee, Section
303A.07  Audit Committee Additional Requirements and NI 52-110.

Name of Member
    Independent (1)
    Financially Literate (2)(3)Ron Smith
    Yes
    YesTerrence Cooper
    Yes
    YesRichard Colterjohn
    Yes
    Yes


Notes:

| | 1. | To be considered independent, a member of the Audit
      Committee must not have any direct or indirect material relationship
      with the Company. A material relationship is a relationship which could,
      in the view of the directors of the Company, be reasonably expected to
      interfere with the exercise of a members independent judgment. In
      addition, in order to be considered independent, a member of the directors
      of the Company must meet the SEC, NYSE and OSC definition of independence,
      which is comparable to the foregoing definition. Each member completes a
      Director Confirmation Form annually to update the Company on its
      independent status.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | To be considered financially literate, a member of the
      Committee must have the ability to read and understand a set of financial
      statements that present a breadth and level of complexity of accounting
      issues that are generally comparable to the breadth and complexity of the
      issues that can reasonably be expected to be raised by the Companys
      financial statements.                                                                                                                                                                                                                                                                                                              
| | 3. | Each year, the members of the Audit Committee complete a
      Director Confirmation Form. It is in this document that each member
      provides annual updates on new financial programs or courses they have
      taken throughout the year to enhance their financial literacy
      experience.                                                                                                                                                                                                                                                                                                                                                                                                                    

Relevant Education and Experience

Each member of the Audit Committee of the Company has
sufficient experience to provide (i) an understanding of the accounting
principles used by the Company to prepare its financial statements, (ii) an
ability to assess the general application of such accounting principles in
connection with the accounting for estimates, accruals and provisions, (iii)
experience in analyzing and evaluating financial statements of the breadth and
complexity of issues reasonably expected to be raised by the Companys financial
statements, and (iv) an understanding of internal controls and procedures for
financial reporting.

- Mr. Smith brings over 20 years of practical financial and management
  experience, primarily in the financial, telecommunications and energy sectors,
  and is a Chartered Accountant.
- Mr. Cooper is a practicing crown attorney and has been practicing law for
  over 35 years, including employment with Legal Aid, the Government of Nova
  Scotia, as well as private practice.
- Mr. Colterjohn is a seasoned business leader with over 20 years of
  experience in the mining sector and corporate finance throughout a variety of
  industries.

Audit Committee Oversight

Since the commencement of the Companys most recently completed
financial year, there has not been a recommendation of the Audit Committee to
nominate or compensate an external auditor that was not adopted by the Companys
Board of Directors.

Reliance on Certain Exemptions

Since the commencement of the Companys most recently completed
financial year, the Company has not relied on any of the exemptions set out in
section 2.4 (De Minimis Non-audit Services), Section 3.2 (Initial Public
Offerings), Section 3.4 (Events Outside Control of Member), Section 3.5 (Death,
Disability or Resignation of Audit Committee Member), in subsection 3.3(2)
(Controlled Companies), in Section 3.6 (Temporary Exemption for Limited and
Exceptional Circumstances), or Section 3.8 (Acquisition of Financial Literacy)
of NI 52-110, or an exemption from this Instrument, in whole or in part, granted
under Part 8 (Exemptions) of NI 52-110.

| | 59 | 
| | -- | 

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|2010ANNUAL INFORMATION FORM
|---------------------------

Pre-Approval Policies and Procedures

The Audit Committee has adopted specific policies and
procedures for the engagement of non-audit services as described in the section
titled Responsibilitiesin the Charter of the Audit Committee attached
hereto as Schedule A.

External Auditor Service Fees (By Category, in Canadian
Dollars)

The following table discloses the fees charged to the Company
by its external auditor during the fiscal year ended December 31, 2010 and the
fiscal year ended December 31, 2009:

Financial Year Ending
    Audit Fees (1)
    Audit Related Fees (2)
    Tax Fees (3)
    All Other FeesDecember 31,
      2010
    $673,975
    $Nil
    $147,195
    $NilDecember 31, 2009
    $721,109
    $Nil
    $45,989
    $Nil


Notes:

| | 1. | The aggregate fees billed for audit services, including
      fees relating to the review of quarterly financial statements, statutory
      audits of the Companys subsidiaries and services associated with the
      filing of prospectuses.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | The aggregate fees billed for assurance and related
      services that are reasonably related to the performance of the audit or
      review of the Companys financial statements and are not disclosed in the
      Audit Fees column.    
| | 3. | The aggregate fees billed for tax compliance, tax advice
      and tax planning services.                                                                                                                                                       

DISCLOSURE PURSUANT TO THE REQUIREMENTS OF THE NEW YORK
STOCK EXCHANGE

As a Canadian issuer listed on the NYSE, the Corporation is not
required to comply with most of the NYSE corporate governance rules, so long as
the Corporation complies with Canadian requirements. However, the Corporation
must provide a brief description of any significant differences between its
corporate governance practices and those required to be followed by U.S.
companies listed on the NYSE. Gammon Gold Inc. has disclosed its Statement of
Corporate Governance Differences in the corporate governance section of its
website at http://www.gammongold.com/governance.php. Except as described
therein, the Corporation is in compliance with the NYSE corporate governance
standards in all significant respects.

ADDITIONAL INFORMATION

Additional information relating to the Company filed under its
continuous disclosure obligations is available on SEDAR (the System for
Electronic Document Analysis and Retrieval, which has been established by the
Canadian Securities Administrators) at www.sedar.com. This information is
also filed with the Securities and Exchange Commission on Edgar (the Electronic
Data Gathering, Analysis, and Retrieval system) (www.sec.gov). Upon request to
the Company, the Company will provide this information to any person or
company.

Additional information, including directors' and officers'
remuneration and indebtedness, principal holders of the Company's securities,
securities authorized for issuance under equity compensation plans, options to
purchase securities and interests of insiders in material transactions, where
applicable, is contained in the Company's Management Information Circular for
its most recent annual meeting of shareholders that involved the election of
directors, and additional financial information is provided in the Company's
Financial Statements and Management's Discussion and Analysis contained in the
Company's Annual Report for its most recently completed financial year.

A copy of such documents may be obtained, upon request, from
the Company. The Company may require the payment of a reasonable charge from a
person or Company who is not a holder of securities of the Company.

For additional copies of this Annual Information Form please
contact:

Gammon Gold Inc.
    Tel: 902-468-06141701 Hollis Street
    Fax: 902-468-0631Founders Square, PO Box 2067
    Email: info@gammongold.comHalifax, Nova Scotia B3J 2Z1
    Website: www.gammongold.com


| | 60 | 
| | -- | 

---

|SCHEDULE
      A | AUDIT COMMITTEE CHARTER
|------------------ | -----------------------

The Audit Committee (hereinafter referred to as the
Committee) has the responsibilities and duties as outlined below:

Mandate

| |  | To perform such duties as may be required by applicable
      legislation and regulations.                  
| |  | ------------------------------------------------------------------------------------------------------------
| |  | To assist the Board of Directors in fulfilling its
      oversight responsibilities for:                    
| |  |                                                                                                             
| |  |                                                                                                             
| |  |                                                                                                             
| |  |                                                                                                             
| |  |                                                                                                             
| |  |                                                                                                             
| |  | To perform such other duties as may from time to time be
      assigned to the Audit Committee by the Board.

Composition

The Committee shall be composed of three or more directors,
appointed by the Board on the recommendation of the Nominating and Corporate
Governance Committee. All members of the Committee shall not be an officer or
employee of the Company. All members must be independent. Independence of the
Board members will be defined with applicable legislation and at a minimum each
Committee member shall have no direct or indirect relationship with the Company
which in the view of the Board could reasonably interfere with the exercise of a
members independent judgment except as otherwise permitted by applicable
laws.

All members of the Audit Committee shall be financially
literate (as defined by applicable legislation).

If an Audit Committee member ceases to be independent for
reasons outside the members reasonable control, the member shall tender their
resignation to the Chair of the Nominating and Corporate Governance Committee
immediately upon the event which caused the member to not be independent. Any
non-independent directors can participate with the Committee as observers.

Members are reappointed annually by the Board, with such
appointments to take effect immediately following the Annual General Meeting of
shareholders. Members shall hold office until the earlier of the time which
their successors are appointed or they cease to be directors of the Corporation.
Vacancies of members of the Audit Committee may be filled for the remainder of
the current term of appointment by the Board, upon recommendation of the
Nominating and Corporate Governance Committee.

Authority

The Committee has authority to:

| | 1. | Conduct or authorize investigations into any matters
      within its scope of responsibility.                                                                                                                                               
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                              
| | 2. | Appoint, compensate, and oversee the work of any
      registered public accounting firm employed by the organization.                                                                                                                       
| |    |                                                                                                                                                                                                                                              
| | 3. | At the Corporations expense, as determined by the
      Committee, retain independent counsel, accountants, or others to advise
      the Committee or assist in carrying out its duties or assist in the
      conduct of an investigation.
| |    |                                                                                                                                                                                                                                              
| | 4. | Meet with management, external auditors, or outside
      counsel, as necessary.                                                                                                                                                             
| |    |                                                                                                                                                                                                                                              
| | 5. | Call a meeting of the Board to consider any matter of
      concern to the Audit Committee.                                                                                                                                                  

Meetings

Meetings of the Audit Committee may be called by:

- The Chair
- Any member of the Audit Committee
- The external auditor



| | 61 | 
| | -- | 

---

|SCHEDULE
      A | AUDIT COMMITTEE CHARTER
|------------------ | -----------------------

The time and place of meetings of the Committee and the
procedure at such meetings shall be determined from time to time by the members
thereof provided that:

| | 1. | A quorum for meetings shall be the majority of the
      members, present in person or by telephone or other telecommunication
      device that permits all persons participating in the meeting to speak and
      hear each other.                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2. | The Committee shall meet quarterly or more frequently as
      circumstances dictate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 3. | Notice of the time and place of every meeting shall be
      given in writing or by telephone, facsimile, email or other electronic
      communication to each member of the Committee at least 24 hours in advance
      of such meeting, provided however, that a member may in any matter waive a
      notice of meeting. Attendance of a member at a meeting is a waiver of
      notice of meeting, except where a member attends a meeting for the express
      purpose of objecting to the transaction of any business on the grounds
      that the meeting is not lawfully called.

The external auditors shall be invited to attend and be heard
at every Audit Committee meeting, and have the opportunity to discuss matters
with the Audit Committee without the presence of management at each meeting. The
Audit Committee will meet in-camera with the external auditors at each meeting.
The Secretary of the Company shall act as Secretary of the Audit Committee and
minutes of the Audit Committee shall be recorded and maintained by the
Secretary.

Responsibilities

| | 1. | As required by the Board, the external auditor reports
      directly to the Audit Committee.
| | -- | ---------------------------------------------------------------------------------------------
| |    |                                                                                              
| | 2. | The Audit Committee must recommend to the Board of
      Directors:                          

| | a. | the external auditor to be nominated for purposes of
      preparing or issuing an auditors report or performing other audit, review
      or attest services for the Company; and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                    
| | b. | the compensation of the external
  auditor.                                                                                                                                        

| | 3. | The Audit Committee is directly responsible for
      overseeing the work of the external auditor engaged for the purpose of
      preparing or issuing the Auditors Report or performing other audit,
      review or attest services for the Company, including the resolution of
      disagreements between management and the external auditor regarding
      financial reporting.                                                    
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 4. | The Audit Committee must pre-approve all non-audit
      services to be provided to the Company or its subsidiary entities by the
      Companys external auditor. The Audit Committee has delegated to the Chair
      of the Committee the authority to pre-approve the non-audit services, with
      such pre-approval presented to the Audit Committee at the next scheduled
      Audit Committee meeting following such
pre-approval.

De minimis non-audit services
satisfy the pre-approval requirement provided:

| | a. | the aggregate amount of all these non-audit services that
      were not pre-approved is reasonably expected to constitute no more that 5%
      of the total audit fees paid by the Corporation and its subsidiaries to
      the Companys external auditor during the fiscal year in which the
      services are provided;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                               
| | b. | the Company or subsidiaries of the Company, as the case
      may be, did not recognize the services as non-audit services at the time
      of the engagement; and                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                               
| | c. | the services are promptly brought to the attention of the
      Audit Committee of the Company and approved, prior to the completion of
      the audit, by the Audit Committee, who has been granted authority to
      pre-approve non-audit engagements.                                                                   

| | 62 | 
| | -- | 

---

|SCHEDULE
      A | AUDIT COMMITTEE CHARTER
|------------------ | -----------------------

| |    | The Audit Committee has instructed management that, to
      obtain pre-approval, management must detail the work to be performed by
      the external auditor and obtain the assurance from the external auditor
      that the proposed work does not impair their independence.                                                                                                                                                                                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 5. | The Audit Committee reviews and recommends to the Board
      approval of the Companys financial statements, MD&A and related
      annual and interim press releases prior to the disclosure of this
      information. It also ensures that adequate procedures are in place for the
      review of financial information extracted or derived from the Companys
      financial statements, contained in the Companys other financial
      disclosures and must periodically assess the adequacy of those
      procedures.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 6. | The Audit Committee must establish procedures
  for:                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | a. | the receipt, retention and treatment of complaints
      received by the Company regarding accounting, internal controls or
      auditing matters; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                        
| | b. | the confidential, anonymous submission by employees of
      the Company of concerns regarding questionable accounting or auditing
      matters.      

| | 7.  | The Audit Committee must review and approve the Companys
      hiring policies regarding partners, employees and former partners and
      employees of the present and former external auditor of the
  Company.                                                                                                                                                                                         
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | 8.  | The Audit Committee shall undertake a process to review
      all financial risks of the business and ensuring appropriate risk
      management techniques are in place. This will involve enquiry of
      management regarding how financial risks are managed as well as opinions
      from management and others regarding the degree of integrity of the
      financial risk mitigation strategies.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | 9.  | The Audit Committee shall report to the Board on the
      proceedings of each Audit Committee meeting and on the Audit Companys
      recommendations at the next regularly scheduled Board meeting.                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | 10. | The Audit Committee shall review the National Instrument
      52-110  Audit Committees disclosure required in the Companys Annual
      Information Form.                                                                                                                                                                                                                                               

| | 63 | 
| | -- | 

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