West Timmins Mining Inc.

West Timmins Mining Inc.
Lake Shore Gold Corp.

Lake Shore Gold Corp.

August 27, 2009 11:29 ET

Lake Shore Gold and West Timmins Agree to Business Combination

Analyst and Investor Conference Call at 1pm EDT Today

TORONTO, ONTARIO--(Marketwire - Aug. 27, 2009) - Lake Shore Gold Corp. (TSX:LSG) ("Lake Shore Gold" or the "Company") and West Timmins Mining Inc. (TSX:WTM) ("West Timmins") today announced that they have signed a definitive business combination agreement under which Lake Shore Gold has agreed to acquire all of the outstanding common shares of West Timmins. The business combination will create the new large-scale, wholly-owned Timmins West Gold Mine Complex on the western Timmins mining trend, an extension of the world-class Timmins mining trend where approximately 70 million ounces of gold have been produced over the last century. The Timmins West Gold Mine Complex will consist of the Company's adjacent 100%-owned Timmins Mine, with existing mine infrastructure, the Thunder Creek Joint Venture ("Thunder Creek"), where high-grade intercepts have been reported within 800 metres of the Timmins shaft, and an extensive land package of adjacent exploration properties, giving Lake Shore Gold a dominant position in this highly prospective area.

Under terms of the agreement announced today:

- West Timmins shareholders will receive 0.73 of a Lake Shore Gold share per West Timmins share

- Pro forma the transaction, Lake Shore Gold will be owned 67% by current Lake Shore Gold shareholders and 33% by current West Timmins shareholders

- The transaction values West Timmins at approximately C$319 million based on current shares outstanding

- Three of 13 seats of the Lake Shore Gold Board will go to West Timmins

- Transaction was unanimously approved by the Boards of both companies, with the commitment of votes representing 5.3% of West Timmins common shares having been secured

- Transaction to be completed by way of a court-approved plan of arrangement

Tony Makuch, President and CEO of Lake Shore Gold, commented: "This is an exciting time for the shareholders of both Lake Shore Gold and West Timmins as we take a very important step towards building Canada's next mid-tier gold producer. Through this combination we are creating a dominant land position which covers about 130 square kilometers along the Timmins gold structure west of the Mattagami River Fault, where the geologic setting is very similar to the geology of past producing mines in Timmins. The discoveries at Timmins Mine and Thunder Creek confirm the exploration potential of this large land package and suggest that the potential for additional discoveries is excellent. We are also consolidating Thunder Creek and the Timmins Mine into one property, creating a wholly-owned mining complex with the potential for large-scale, long-life operations, well beyond what was originally envisioned at the Timmins Mine. We can also potentially expedite production from Thunder Creek by at least three years, and realize significant synergies, through the use of the Timmins Mine infrastructure, permits, closure plans, management and workforce. We may also realize the reserve and resource scale to justify a dedicated mill, providing the potential for further synergies."

Lake Shore Gold and West Timmins currently own 60% and 40% of Thunder Creek, respectively, with Lake Shore Gold's other Timmins assets comprised of projects nearing production, including the 100%-owned Timmins Mine and Bell Creek Complex (Bell Creek Mill and Mine and Vogel and Schumacher Properties). Lake Shore Gold is the operator of Thunder Creek. In addition to its 40% interest in Thunder Creek, West Timmins has approximately 120 square kilometres of prospective wholly-owned exploration property in close proximity to Thunder Creek. Among these properties are the Thorne Property, with a near 450,000 ounce inferred resource and recent encouraging drill results including 11.15 gpt over 7.30 metres on July 6, 2009, and the 144 Property, with 4.0 kilometres of the same volcanic/ultramafic, intrusive/sedimentary contact which hosts the Timmins and Thunder Creek deposits. In Mexico, West Timmins owns 100% of the high-grade Lluvia de Oro gold-silver and Montana de Oro projects.

Darin Wagner, President of West Timmins said: "This merger allows our shareholders to rapidly transition from an exploration to a near-term production scenario and still participate in the exploration upside of the combined assets of the two companies moving forward. The marriage of Thunder Creek with the Timmins Mine infrastructure, the Bell Creek Complex and the exploration potential of our assets in Timmins are all a natural fit. Through this transaction we reduce our effective interest in the Thunder Creek joint venture from 40% to 33%, in the combined company, and in doing so we add a significant interest in the Timmins Mine, the Bell Creek Complex and additional exploration potential. This business combination will allow for a rapid pace of development at Thunder Creek which provides an excellent opportunity to significantly increase the resource base and future production profile of the new company. The Board of Directors of West Timmins recommends that shareholders vote in favour of the transaction and the creation of a new aggressive, growth focused gold company."

Mr. Makuch added: "Once the transaction has been completed, we plan to commence an aggressive underground advanced exploration program at Thunder Creek, accessing mineralization at the 240 metre level (where results have included 24.61gpt over 7.0 metres) from the Timmins Mine ramp and deeper mineralization at the 650 metre level (where results have included 12.75gpt over 83.4 metres) from the Timmins Mine shaft. Based on our current schedule, we expect to be into the Thunder Creek mineralization by the fourth quarter of 2010 and to be bulk sampling before the end of the year. The Timmins Mine shaft has been designed to support a much larger operation than originally envisioned in the pre-feasibility study. We are also considering deepening the shaft from 710 metres to 1,200 metres. Furthermore, over the next year we will be deciding whether to undertake an expansion of our wholly-owned Bell Creek Mill from 1,500 tonnes per day currently to 3,000 tonnes per day, or to construct a new, stand-alone mill west of Timmins to process ore from our Timmins West Gold Mine Complex. We have made excellent progress with our growth plans to date, and by completing this transaction have taken another important step towards becoming Canada's next mid-tier gold producer."

Benefits to Lake Shore Gold Shareholders

- Creates new wholly-owned Timmins West Gold Mine Complex

- Establishes dominant land position covering approximately 130 square kilometers along western extension of Timmins mine trend

- Unlocks significant synergies for development of Thunder Creek through use of Timmins Mine infrastructure, permits, closure plans, management and workforce - potentially expedites development by three years

- Creates portfolio of quality exploration assets in Timmins, along Casa Berardi fault and in Mexico

- Delivers value to both current and new shareholders of the company

- Strong balance sheet, debt-free, and approximately C$115 million in pro forma cash

Benefits to West Timmins Shareholders

- Provides West Timmins shareholders with near-term gold production potential on multiple fronts

- All-share transaction allows West Timmins shareholders to continue to participate in the exploration upside of a major land position in a rapidly evolving gold district

- Provides for significant synergies in exploring and developing Thunder Creek using Timmins Mine infrastructure

- Leverages Lake Shore Gold's highly experienced and successful exploration and mine development team

- Provides for participation in cash flows from producing assets with strong, diversified asset base

Summary of Transaction

The proposed business combination between West Timmins and Lake Shore Gold is expected to be completed by way of a court approved plan of arrangement whereby each West Timmins common share will be exchanged for 0.73 of a Lake Shore Gold share and West Timmins will become a wholly-owned subsidiary of Lake Shore Gold. The number of Lake Shore Gold shares received upon exercise, and the exercise price, of West Timmins' outstanding options and warrants will be adjusted proportionately to reflect the share exchange ratio. After giving effect to the transaction, current West Timmins shareholders will own approximately 33% of Lake Shore Gold (calculated on a fully-diluted basis). The transaction will be subject to the approval of holders of not less than 66 2/3% of the West Timmins common shares voted at a special meeting of shareholders that will be called to approve the transaction. Full details of the transaction will be included in the Management Information Circular to be filed with the regulatory authorities and mailed to West Timmins shareholders in accordance with applicable securities laws.

A Special Committee comprised of independent members of West Timmins' Board was formed to consider the transaction. At meetings of the Special Committee and Board of Directors of West Timmins held after the close of markets on August 26, 2009, RBC Capital Markets delivered an oral fairness opinion to the effect that as of the date thereof the consideration to be received under the transaction is fair from a financial point of view to the shareholders of West Timmins. The West Timmins directors and officers have also agreed to vote their shares in favour of the transaction under the terms of an agreement with Lake Shore Gold.

The definitive business combination agreement entered into in connection with the transaction includes a commitment by West Timmins not to solicit or initiate discussions concerning alternative transactions to the proposed transaction. If the transaction is not completed, West Timmins has agreed to pay a termination fee to Lake Shore Gold, under certain circumstances, of C$9 million. West Timmins has also provided Lake Shore Gold with certain other customary rights, including a right to match competing offers.

The transaction is subject to customary closing conditions including receipt of all necessary court and regulatory approvals, including the approval of the Toronto Stock Exchange. The West Timmins shareholder meeting is expected to be held on or before November 9, 2009 and the transaction is expected to close shortly thereafter.

Management Team and Board of Directors

Tony Makuch, President & CEO of Lake Shore Gold will continue to act in his current role within the new company. The Board of Directors of Lake Shore Gold will be comprised of 13 members, 10 from the Board of Lake Shore Gold and 3 from the Board of West Timmins.

Advisors and Counsel

Lake Shore Gold's financial advisor is BMO Capital Markets and its legal counsel is Cassels Brock & Blackwell LLP. The financial advisor to West Timmins' Special Committee is RBC Capital Markets and its legal counsel is Davies Ward Phillips & Vineberg LLP. Legal counsel to West Timmins is Gowling Lafleur Henderson LLP. In addition, West Timmins retained Roscoe Postle Associates Inc. as an advisor.

Conference Call

A conference call will be held on August 27, 2009 at 1pm EDT to discuss this transaction. To listen to this conference call, please dial:

Local access: 416-641-2140 or 800-766-6630

A webcast will also be available at Lake Shore Gold's website: www.lsgold.com

For more information see www.westtimminsmining.com

The call will be recorded and can be played back by dialing:

Local access: 416-695-5800 or 800-408-3053

Passcode: 6615122

The webcast will also be available for replay at www.lsgold.com

About Lake Shore Gold

Lake Shore Gold is a mineral development and exploration company that is moving towards gold production through its wholly owned Timmins Mine project, where the Company is sinking a shaft and driving a ramp to access shallow mineralization. The wholly-owned Bell Creek Mill, located on the east side of Timmins, was refurbished to a capacity of 800 tonnes per day as of the end of 2008, with the Mill's capacity currently being increased to 1,500 tonnes per day. The Company recently commenced an underground advanced exploration program at its Bell Creek Complex, including the Bell Creek Mine, Schumacher and Vogel properties, which have the potential to become the Company's second mining project in the Timmins Camp, and is pursuing a number of other highly prospective exploration properties in Northern Ontario and Quebec. Lake Shore Gold's common shares trade on the TSX under the symbol LSG.

About West Timmins

West Timmins is focused on the exploration and development of district-scale gold projects in the major gold camps of North America. Recent drill results have continued to expand the high-grade Rusk and Porphyry Gold discoveries on the Company's Thunder Creek joint venture in Timmins, Ontario. Drilling also continues to expand a number of zones of gold mineralization along the Golden River Trend on West Timmins' adjacent wholly owned Thorne Property. West Timmins is based in Vancouver, British Columbia, Canada and trades on the Toronto Stock Exchange under the symbol WTM.

Forward-looking Statements

Certain statements in this press release relating to the proposed transaction and the companies' exploration activities, project expenditures and business plans are "forward-looking statements" within the meaning of securities legislation. The companies do not intend, and does not assume any obligation, to update these forward-looking statements. These forward-looking statements represent management's best judgment based on current facts and assumptions that management considers reasonable, including that the required approval will be obtained from the shareholders of West Timmins, that all third party regulatory and governmental approvals to the transactions will be obtained and all other conditions to completion of the transaction will be satisfied or waived, that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts, labour disturbances, interruption in transportation or utilities, or adverse weather conditions, that there are no material unanticipated variations in budgeted costs, that contractors will complete projects according to schedule, and that actual mineralization on properties will not be less than identified mineral reserves. The companies make no representation that reasonable business people in possession of the same information would reach the same conclusions. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In particular, fluctuations in the price of gold or in currency markets could prevent the companies from achieving their targets. Readers should not place undue reliance on forward-looking statements. More information about risks and uncertainties affecting the companies and their business is available in Lake Shore Gold's and West Timmins' most recent annual information forms and other regulatory filings which are posted on sedar at www.sedar.com.

There is no guarantee that drill results reported in this news release will lead to the identification of a deposit that can be mined economically, and further work is required to identify a reserve or resource.

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