Resource World Magazine

42 www.resourceworld.com j u n e / j u l y 2 0 1 5 miNiNg Lake Shore Gold Corp. [LSG-TSX] could be a case study on how to build a gold mining company and deliver growth. Operating two producing gold mines (Timmins West and Bell Creek) and a central processing facility in the Timmins gold camp of Northern Ontario, the company has demonstrated a remarkable ability to excel both at exploration and mine operations. Recently reported first quarter operating numbers have driven home this point, with record gold output of 53,000 ounces for the period. Cash flow was up, and costs came in below full year target levels. In 2014, Lake Shore Gold reported record production of 185,600 ounces of gold. It was the third year in a row the com- pany exceeded its production guidance. This contributed to strong cash flow generation and enabled the repayment of $45 million in debt, well ahead of schedule. In 2014, The Timmins West Mine produced just over 140,000 oz gold while the Bell Creek Mine produced over 40,000 oz. The recent success builds on past achievements. In October 2013, the company completed an expansion of its processing plant to allow throughput of more than 3,000 tonnes per day. Sustaining higher processing rates has also helped to lower unit costs and improve operating results. Lake Shore Gold has demonstrated a steady trend of lower operating costs and strong margins. This has afforded the company with capital spending options, in contrast to some of its peers that have been forced to curtail spending. A significant exploration program is underway to expand on a large, high-grade, gold discovery dubbed the 144 Gap Zone. Seven drills are turning on surface to advance exploration and expand the deposit area, which remains open both laterally and to depth. This work has paid off since the program started in 2014, yielding wide zones of gold with robust grades. However, recent drill results have been among the most encouraging yet. In late April, the company announced further drill results that included 55 metres averaging 5.74 g/t gold (including 21.1 metres that averaged 11.79 g/t gold) from a target within a higher grade core of the emerging deposit. Several other impressive drill holes were reported in the same news, and the company has now defined a strike length of more than 400 metres for the 144 Gap Zone. A resource estimate is expected to be presented for this new zone early in 2016. This discovery is located just a short distance from the operating Timmins West Mine. The company is currently working to drive an exploration drift from the lower levels of existing underground infrastructure towards the 144 Gap Zone. When completed, this will enable underground drilling work to commence, allowing a much more efficient means to perform infill drilling. Meanwhile, the company is also active with ongoing drilling at each of the two currently producing mines, providing further definition and upgrading the confidence of the mineral inventory at each project. Exploration drilling is also underway beyond the limits of the current deposits. And the promising 144 South and 144 North exploration targets will also be getting attention with drilling programs. All of this work is establishing the foundation for longer term growth. For a smaller producer, an expansion of mine out- put requires success at the end of the drill bit to replace mined resources lest the company hasten the depletion of its mineral inventory. In addition to the exploration work on the front burner, Lake Shore Gold controls several other exploration properties in the district that may eventually furnish additional rounds of mine development. The most advanced of these is the Fenn-Gib Project, hosting a large, shallow, gold deposit that may be suitable for an open pit mine. A resource estimate was presented for this project in 2011 that documented nearly 1.3 million ounces of lower grade gold in the indicated category, plus 750,000 ounces of inferred resources within a proposed pit shell. While the overall market environment has not been kind for smaller gold producers in recent years, Lake Shore Gold has been able to post some impressive numbers. More importantly, the company has now built a foundation that will provide the clout to generate further growth in the years ahead, perhaps under much better circumstances for the sector as a whole. The combination of a capable management team, a strong balance sheet, and a suite of excellent property assets, has opened the potential to develop a new, large scale gold mining centre in the Timmins Camp. n Two surface diamond drills testing the 144 Gap Zone. Photo courtesy Lake Shore Gold Corp. Lake Shore Gold's improved operating results pave the way for strong growth

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