An investigation on behalf of investors of Capital Gold Corporation (AMEX:CGC) over potential breaches of fiduciary duty by the Capital Gold Corp. board of directors in connection with the proposed takeover of Capital Gold Corporation (AMEX:CGC) by Gammon Gold Inc was announced.

The investigation by a law firm concerns whether Capital Gold Corporation and its Board breached their fiduciary duties owed to Capital Gold Corporation (AMEX:CGC) investors in connection with the proposed takeover.

On Friday, October 1, 2010, Capital Gold Corporation (TSX and NYSE AMEX: CGC) and Gammon Gold Inc. (NYSE: GRS, TSX: GAM) have entered into a merger agreement pursuant to which Gammon Gold will offer to acquire all of the issued and outstanding common shares of Capital Gold Corp. (CGC) in a cash and share transaction. The total consideration for the purchase of 100% of the fully diluted in-the-money shares of Capital Gold is approximately US$288 million or US$4.57 per Capital Gold Corp. share based on Gammon Golds closing price on September 24, 2010 on the NYSE. According to Capital Gold Corporation based on the September 24, 2010 closing price of Capital Golds shares on the NYSE AMEX, the acquisition price represents a 20% premium to the close on September 24th and a 30% premium to the 20-day volume weighted average price on the NYSE AMEX ending on that date.

But the investigation by a law firm concerns whether the sale process and the offered price are unfair to the shareholders of Capital Gold Corporation (AMEX:CGC) since shares of Capital Gold Corp. traded before the announcement as high as $4.98 per share on Friday Oct. 01, 2010 and then declined to as low as $4.68 per share. CGC shares closed on Friday at $4.82 per share still above the current offer and at least one analyst set a target price for the Company of approximately $9 per share. Capital Gold Corporation 12month revenue went from $33.10million reported on July 31, 2008 to $42.76million reported on July 31, 2009. Its Net Income went within the same time frame from $6.36million to $10.41million. Furthermore, the Company's net revenues for the third quarter of 2010 increased 41.1% from the same period last year, to $17.53 million. Therefore the investigation concerns whether the Capital Golds Board of Directors undertook an adequate and fair sales process to obtain fair consideration for all shareholders of Capital Gold Corporation (AMEX:CGC) and breached their fiduciary duties to Capital Gold Corp (CGC) shareholder by failing to adequately shop the Company before entering into the transaction with Gammon Gold Inc.