Lake Shore Gold Corp.
TSX : LSG

Lake Shore Gold Corp.

August 28, 2007 18:47 ET

Lake Shore Reports Mineral Reserves and Positive Pre-Feasibility Study Results for Timmins West

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 28, 2007) - All figures in Canadian dollars except where noted.

Lake Shore Gold Corp. (TSX:LSG) ("Lake Shore" or "the Company") has received a report on mineral reserve estimates from SRK Consulting (SRK) and the results from the pre-feasibility study (PFS) at its 100%-owned Timmins West property in Ontario. The mineral reserves and associated preliminary mine plan conducted by SRK were successful in converting over 90% of the available resources into a mineral reserve.

Watts, Griffis and McOuat Limited ("WGM"), a firm of consulting geologists and engineers based in Toronto, reviewed the PFS results and makes following statement:

"WGM has reviewed the advanced exploration program proposed by Lake Shore for its Timmins West property and we are of the opinion that this program should provide sufficient information on which to make a production decision. WGM agrees with the concepts proposed by Lake Shore and believes this program is warranted and achievable."

With this basis, and after the completion of the planned advanced underground exploration program and associated expenditures, the PFS shows excellent economics for production starting as early as July 2009, including a 52% IRR and $80 million NPV using an 8% discount rate and a US$600 per ounce gold price assumption. The PFS is based on an underground mining operation producing an average of 71,000 ounces of gold per year over an 11-year mine life, starting in mid-2009. Capital costs are estimated at $96 million and cash operating costs are projected at US$319 per ounce of gold.

Lake Shore President and CEO Brian Booth said: "The PFS proves that Timmins West is positioned to become an excellent project with strong economics under a wide range of gold price assumptions. Timmins West is our flagship property and will be the foundation for the company to move from being a pure exploration play to become a significant producer in the Timmins camp. We are now in a position to complete the advanced exploration program and move toward a full feasibility study, with the objective of reaching a production decision by early 2009. As part of the future Timmins West feasibility study we will review all alternative mining methods, mine optimization and opportunities for internal and/or external feed to fill the Bell Creek mill to its 1,500 tonne per day capacity."

The mine plan includes a mineral reserve estimate that is based on the cut gold grade totaling 3.4 million tonnes at 7.59 grams per tonne containing 0.83 million ounces (cut) in the probable category. The mineral resource estimate, which includes mineral reserves, totals 0.9 million ounces (cut) in the indicated category and an additional 174,700 ounces (cut) in the inferred category, as outlined in the table below.



Mineral Reserve Estimates (cut grades)

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Grams per Contained
Category Tonnes tonne Gold (ounces)
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Probable 3,386,000 7.59 826,000
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Mineral Resource Estimates
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Gold (cut grade) Gold (uncut grade)
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Category Tonnes Grams per Contained Grams per Contained
tonne Gold (ounces) tonne Gold (ounces)
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Indicated 3,268,000 8.62 905,000 12.29 1,287,000
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Inferred 968,000 5.54 174,700 6.62 205,000
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Mining

The SRK mine plan anticipates underground mining methods will be trackless cut and fill and longhole stoping utilizing ramp access from main levels. Minimum mining widths of two metres for cut and fill and 3.5 metres for longhole stoping were arrived at by considering safety, equipment selection and ventilation needs. Stopes were designed based on wireframe models of individual mineralized zones. Dilution rates average 12% for cut and fill and 27% for longhole stoping, including fill and external dilution. The ore will be hauled by scoop trams or trucks, depending on haul distance, to an orepass. The broken ore will be hoisted to surface and temporarily stored in a 500 tonne bin before trucking to the Bell Creek mill. Overall mining recovery is expected to be 96% for planned stopes and 75% for crown pillars. Some mineralized zones were not included in the mine plan due mainly to high capital costs involved in accessing them. Lake Shore will be evaluating bulk sample data as it comes in and reviewing factors influencing mine design, mineabilities and cutting of the anomalous assays. Lake Shore and SRK continue to work on optimizing the mine plan with a goal of reducing costs and increasing the production rate.

Milling

The PFS contemplates using the Bell Creek mill to process Timmins West ore. Bell Creek is a conventional mill utilizing cyanidation with carbon-in-pulp processing for recovery of gold. Gravity and flotation circuits are in place, but the current flow sheet for Timmins West ore does not use either circuit. Prior to being placed on care and maintenance, the mill operated at a daily capacity of 1,500 tonnes of ore. However, due to currently available data on work index and leach times for Timmins West ore, the planned mill modifications have been designed at a nominal 1,000 tonnes per day to match the maximum tonnage determined in the preliminary mine plan. Further modifications have been identified for possible expansion up to 1,500 tonnes per day of ore should the final mine plan result in higher mining rates. Because of the potential for increased grades (the capping factor applied in the current mineral resource estimate reduced the contained ounces in the ore mined in the second year by approximately 50%) modifications planned for the Bell Creek mill are based on a maximum capability of producing more than 100,000 ounces of gold per year. The processing parameters, including milling rate, will be reviewed with the material from the bulk sample, and the final mill circuit design will be optimized after bulk sample processing. Overall gold recoveries are expected to be 95%.

Lake Shore is in the final stages of acquiring the Bell Creek mill from the Porcupine Joint Venture (PJV). A Lake Shore crew is on site doing preliminary work in preparation for final transfer of the property from the PJV to Lake Shore.

Advanced Exploration

Lake Shore has commenced an advanced underground exploration (AE) program at Timmins West and work is under way to sink an exploration shaft to 635 metres. The shaft will provide a practical platform on 600 level for in-fill drilling in the area of current mineral reserves and resources and to explore the prospective areas outside the currently defined mineral resources. A representative bulk sample from several of the major mineralized zones will be excavated from this level. To prepare for site access and site preparation, a bridge crossing Thunder Creek and a portion of the site access road was completed. Work on a new access to Highway 101 required by the Ministry of Transportation is ongoing and will be completed during the fourth quarter. Site preparation started during the second quarter of 2007 and will be completed in the third quarter. Work on the shaft collar started in August and is expected to be complete in October. The Company sourced and purchased a suitable hoist and associated equipment for the advanced exploration program, which will be delivered to the site during the third and fourth quarters. Work on various agreements required to have the site connected to the Hydro One electrical grid continues and all major agreements have been completed. The remaining documentation required for the connection will be put in place during the third quarter. Electrical equipment needed to make the connection will be ordered for delivery during the fourth quarter. Detailed planning is ongoing in order to prepare for other major commitments associated with the implementation of the advanced exploration program. The AE shaft sinking is scheduled to be complete by August, 2008 which would allow the AE drilling program to be completed by the end of 2008.

Total costs of the Timmins West AE program are estimated at approximately $50 million. These costs are not included in the PFS economics summarized above but will be nearly fully utilized to prepare the mine for production. The present-day overall economics for Timmins West includes all the AE costs and are sufficiently positive to warrant the planned AE expenditures.

Production

Utilizing the facilities put in place for the AE program, including significant underground drifting to access exploration drill stations and the main ore zones for bulk sample extraction, Lake Shore's production plan is robust.



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Year 1 2 3 4 5 6
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Startup Production
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44,000 oz 86,000 73,000 71,000 73,000 87,000
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7 8 9 10 11
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78,000 69,000 69,000 69,000 62,000
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Year one is targeted as 2009 with startup in July.

Operating Costs

Average mine operating costs are estimated at $51.51 per tonne, including trucking costs of $4.75 per tonne to transport the ore to the Bell Creek mill. At a throughput rate of 1,000 tonnes per day, milling costs at Bell Creek amount to $25.72 per tonne, including $2.34 per tonne to amortize $10 million for re-commissioning of the mill. General and administrative costs are estimated at $5.35/tonne, bringing total project costs to $82.58 per tonne of ore. This results in cash operating costs of US$319 per ounce and total operating costs of US$427 per ounce.

Tailings/Environmental

Lake Shore is in the process of purchasing equipment allowing it to take over the upkeep and maintenance of Bell Creek tailings and water treatment system from the PJV. Lake Shore is also working with outside consultants to review the tailings water management. Reconnection of utilities independent of the PJV has commenced and will be completed when the property transfer takes place.

At the Timmins West site, Lake Shore has received design plans for water handling facilities from Golder Associates and is currently preparing a tender for construction.

Details of the PFS Production Phase are as follows:



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Production Summary
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Mining and milling rate 1,000 tonnes per day
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Mining recovery 96%
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Mine life 11 years
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Life of mine average grade 7.59 grams per tonne
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Mill recovery 95%
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Average production over mine life 71,000 ounces per year
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Peak production 87,000 ounces in year 6
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Gross revenue at US$600 per ounce gold $529 million
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Operating Costs
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Mining $154 million
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Milling $79 million
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General and administrative $20 million
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Total $283 million
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Cash costs per ounce of gold US$319
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Total costs per ounce of gold US$427
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Capital Costs
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Capitalized costs $96million
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Pre-production portion $17 million
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Ongoing portion $79 million
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Economic Evaluation
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Payback 3.2 years
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Net present value at 8% discount rate $80 million
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Internal rate of return (IRR) 56%
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Sensitivities to IRR
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Gold price
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+ $ 50 77% IRR
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- $ 50 34% IRR
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Cash operating costs
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+20% 28% IRR
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-20% 87% IRR
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Capital costs
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+20% 34% IRR
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-20% 92% IRR
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Higher Grades (i)
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50% Cut% 133% IRR
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0% Cut (uncut) 272% IRR
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(i) SRK also provided an uncut mineral reserve estimate, based on the uncut resources, solely for use in sensitivities of economics to higher grades which indicated 3.6 million tonnes at 10.4 grams per tonne uncut. These results are included in the above sensitivities and do show that the economics are very sensitive to grades. This will be a subject of further investigation and study in the AE program.

The consolidation of the Timmins West PFS is being finalized by SRK Consulting, an independent, international consulting practice. A technical report will be filed within 45 days and will be available for download from the Company's website at www.lsgold.com and on www.sedar.com.

Overview of Timmins West

The Timmins West gold property was acquired in 2004 through Lake Shore's acquisition of Holmer Gold Mines Limited. Timmins West lies at the west end of the Timmins gold camp, 18 kilometres west of the city of Timmins, Ontario, and north of the main Porcupine-Destor Fault Zone. The Timmins camp is one of the richest gold mining districts in North America, having produced more than 70 million ounces of gold since its discovery in the early 1900s.

The Timmins West property covers approximately 395 hectares and consists of a contiguous block of 23 claims. Of these, 12 are leased claims grouped into two 21-year leases and 11 individual patented claims. One claim is subject to a royalty. All of the 23 claims cover both mining and surface rights. The individual patented claims have no expiry date, provided a small annual fee of $4.00 per hectare is paid. The claims comprising the leases are subject to a $3.00 per hectare annual fee.

As of August 2007, Lake Shore has completed 220 diamond drill holes on the Timmins West property totaling more than 101,000 metres of drilling.

Quality Control

Lake Shore has implemented a quality-control program to ensure best practice in the sampling and analysis of the drill core. Assays have been completed using a standard fire assay with a 50g aliquot. For samples that return a value greater than three grams per tonne gold, another pulp is taken and fire assayed with a gravimetric finish. Zones with visible gold were conducted by pulp metallic analysis. NQ size drill core is saw cut and half the drill core is sampled in standard intervals. The remaining half of the core is stored in a secure location. The drill core is transported in security-sealed bags for preparation at ALS Chemex Prep Lab located in Timmins, Ontario, and the pulps shipped to ALS Chemex Assay Laboratory in Vancouver, B.C. ALS Chemex is an ISO 9001-2000 registered laboratory preparing for ISO 17025 certification.

The reserves and resources disclosed in this news release have been estimated using definitions and guidelines that conform to National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators.

The Company's Qualified Person ("QP") for the Timmins West property is Jacques Samson, P.Geo. As QP he has prepared or supervised the collection of the scientific or technical information for the property. Hannu Virtanen, P.Eng. and VP Project Development, is the Company's QP for the mineral reserve estimate and the PFS and has prepared or supervised the preparation of the scientific or technical information contained herein.

About Lake Shore

Lake Shore is a mineral exploration company engaged in the acquisition and exploration of mineral properties with prospects for hosting gold and base metal deposits. The Company is currently active in Canada and holds a number of mineral resource properties, either directly or through option agreements, in Ontario and Quebec. Lake Shore is a reporting issuer in British Columbia, Alberta, Manitoba, Ontario and Quebec, and trades on the Toronto Stock Exchange under the symbol LSG.

Lake Shore will host a conference call on Wednesday August 29 at 8:00am PDT to discuss this news release. You may join the call by dialing toll free 1-888-458-1598 or 416-883-0139 for calls from outside Canada and the US. The passcode is 89468#.

Forward-looking Statements

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the Company's periodic filings with Canadian securities regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume the obligation to update any forward-looking statements.

Contact Information

  • Lake Shore Gold Corp.
    Meghan Brown
    Manager Investor Relations
    (604) 669-3533
    (604) 688-5175 (FAX)
    Email: mbrown@lsgold.com
    or
    Lake Shore Gold Corp.
    Brian R. Booth
    President and CEO
    (705) 525-0992
    (705) 525-7701 (FAX)
    Email: info@lsgold.com
    Website: www.lsgold.com