Lake Shore Gold Reports Timmins West on Schedule for Production in First Quarter 2009: Financial News

Lake Shore Gold Reports Timmins West on Schedule for Production in First Quarter 2009
Monday November 10, 2008 8:30 am ET

TORONTO, ONTARIO--(MARKET WIRE)--Nov 10, 2008 -- Lake Shore Gold Corp. (Toronto:LSG.TO - News) ("Lake Shore Gold" or "the Company") today reported that the Company remains on track to achieve its key objective of commencing production from the Timmins West ramp during the first quarter of 2009. Project spending during the first nine months of 2008 totaled $51.9 million ($15.6 million in the third quarter), with full-year expenditures expected to be in line with the previously announced 2008 project budget of $75.0 million, excluding corporate costs. At September 30, 2008, the Company's cash position stood at $101.9 million.

During the third quarter of 2008, the Company began driving a ramp as part of an advanced exploration program to access ore above the 400 Level at Timmins West. To date, the ramp has advanced approximately 160 metres and is expected to intersect ore in the Vein 2 Zone before the end of the year. Sinking of the Timmins West shaft commenced at the end of July and is progressing ahead of schedule. The shaft is currently at the 225 metre level, with the 200 Level shaft station having been completed at the end of October. The 710 metre shaft is expected to be completed during the third quarter of 2009, to be followed by a program of bulk sampling and underground diamond drilling. Pending favourable results, pre-production development from the Timmins West shaft could begin late next year. Ore from Timmins West will be processed at the Bell Creek mill, where refurbishing work is nearing completion, with the mill on track to be operational during the fourth quarter of 2008.

Tony Makuch, President and CEO of Lake Shore Gold, commented: "Work at Timmins West is going very well, with our average daily rates of advance exceeding our targets for both the ramp and the shaft. With the Bell Creek mill nearly ready for operation, we are exactly where we want to be in terms of moving towards production. In addition, with about $100 million of cash and no debt, we have a strong balance sheet to support our operations and currently planned development and exploration activities, and also plan to assess, on an ongoing basis, acquisitions and other opportunities to accelerate our production growth."

 

                                Three months ended       Nine months ended
                              September 30, 2008(i)   September 30, 2008(i)
Resource Property and                       ($'000)                 ($'000)
 Deferred Exploration
 Expenditures
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Bell Creek mill              $               1,635   $               3,845
Timmins West                                 5,795                  28,396
Bell Creek Mine and
 Vogel/Schumacher properties                 1,731                   3,341
Thunder Creek Joint
 Venture (Company's share)                     328                     633
Blakelock - Little
 Abitibi properties                            255                     740
Casa Berardi                                    95                     929
Ti-pa-haa-kaa-ning
 (Company's share)                           1,186                   3,405
Other projects                                 339                     739
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Total expenditures           $              11,365   $              42,029
---------------------------------------------------------------------------
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- Resource property expenditures represent the change in the carrying value
  of the resource properties and deferred exploration for the respective
  periods (for details refer to note 7 to the interim consolidated
  financial statements for the three and nine month periods ended September
  30, 2008).
- In addition to the above expenditures, the Company spent $4.2 million
  and $9.9 million, respectively, during the three and nine months ended
  September 30, 2008, on field equipment for Timmins West, recorded as
  property, plant and equipment.

Timmins West

Total expenditures at Timmins West during the first nine months of 2008 were $38.3 million (including $28.4 million of resource properties under development and deferred exploration expenditures and $9.9 million of property, plant and equipment expenditures). Of the $38.3 million of expenditures at Timmins West, $29.4 million is related to the advanced exploration program (including $5.7 million recorded in property, plant and equipment). Shaft sinking commenced at Timmins West at the end of July, with the shaft having been sunk to the 150 metre level by the end of the third quarter. Currently, the shaft is down 225 metres, with the 200 Level shaft station having been completed as of the end of October. The shaft remains on track for completion to the 710 metre level during the third quarter of 2009, to be followed by a program of level development, bulk sampling and underground diamond drilling. Management expects the expenditures for Timmins West (excluding ramp and exploration) for the full year to be in line with the previously announced budget of $38.2 million.

In early September, the Company commenced development of a ramp as part of an advanced exploration program to access mineral reserves at Timmins West above the 400 Level. The ramp is being driven from surface to facilitate development in the Veins and Main zones, with initial ore deliveries to the Bell Creek mill expected to begin during the first quarter of 2009. At September 30, 2008, the ramp had advanced approximately 45 metres and has currently been driven approximately 160 metres. The Company expects to access Vein 2 ore and begin bulk sample testing before the end of the year. Expenditures related to the ramp project during the first nine months of 2008 totalled $7.4 million, of which $4.1 million were recorded as property, plant and equipment. Total expenditures in 2008 for the Timmins West ramp project are expected to be somewhat lower than the budget amount of $14.3 million.

Bell Creek Mill

At September 30, 2008, refurbishing work was continuing at the Bell Creek mill and was on track for completion during the fourth quarter of 2008, in advance of receiving ore from Timmins West. The operating permit for the mill was returned to active status (from inactive) as of the end of October.

The 2008 budget, released in May, included mill expenditures of $10.0 million, including $3.8 million for the refurbishing of the mill, $2.0 million for a new surge pond and the remainder covering carrying costs and mill improvements. Expenditures during the first nine months of 2008 at the mill totaled $3.8 million, with work during the third quarter focused on completing the refurbishment of various holding tanks, replacing screens and reconditioning the screen deck in the screening plant as well as continuing with refurbishment work on the secondary regrind mill. Expenditures for all of 2008 are now forecast to total $8.0 million.

Vogel and Bell Creek Mine

At the Bell Creek mine, an internal study is continuing for an advanced underground exploration program that would include dewatering the mine and undertaking underground development and diamond drilling. Expenditures for 2008 for the Bell Creek mine are expected to be in line with the budget of $0.4 million.

During the first nine months of 2008, the Company continued to assess the optimal means of mining mineral resources above the 320 metre level at the Vogel property. Based on work completed to date, this assessment is now focusing on driving a ramp from Bell Creek, through mineralization on that property, to Vogel which is situated approximately 800 metres away. Expenditures related to the Vogel project are expected to be somewhat lower than the $0.8 million budget for 2008.

Exploration Expenditures

Total exploration expenditures during the first nine months of 2008 were $11.0 million, of which $3.4 million related to the Company's share of expenditures for the Ti-pa-haa-kaa-ning project, $3.1 million to Bell Creek, Vogel and Schumacher, $1.5 million to Timmins West, $0.9 million to Casa Berardi, $0.7 million to Blakelock and Little Abitibi, $0.6 million to Thunder Creek and $0.8 million to other projects.

In July 2008, the Company reported encouraging results from the first five holes of its ongoing resource expansion drill program at Bell Creek. Included in the results was the discovery of a new gold zone (the "South Zone"), with intersections of 5.39 grams per tonne gold over 6.05 metres (including 11.70 grams per tonne gold over 1.7 metres) on hole BC-08-02, and the extension of the known Bell Creek gold mineralization by approximately 350 metres below the existing Bell Creek resource and by approximately 175 metres to the west, with intersections of 5.95 grams per tonne gold over 8.1 metres (including 8.65 grams per tonne gold over 0.45 metres, 9.28 grams per tonne gold over 0.70 metres and 33.26 grams per tonne gold over 0.80 metres) on hole BC-08-05.

On August 5, 2008, the Company announced the commencement of a 36-hole, 22,000 metre diamond drill program at Thunder Creek in order to further expand and infill the recently discovered, high-grade Rusk Zone, and to test the sediment-ultramafic contact as well as a number of other high priority gold targets. The Rusk Zone has been traced for 260 metres down plunge and remains open both up and down plunge. Recent intercepts were announced on March 31, 2008, and included 8.57 grams per tonne gold over 9.00 metres, 27.21 grams gold per tonne over 0.90 metres, 8.52 grams gold per tonne over 2.05 metres and 6.33 grams gold per tonne over 2.60 metres.

On August 6, 2008, Northern Superior announced the results of the winter-spring drill program at the Ti-pa-haa-kaa-ning project and the launch of a new exploration program involving overburden and bedrock mapping to be followed by a second phase of drilling. The exploration programs are aimed at gaining the information required to identify the source of gold grains associated with the highly-prospective, two kilometer long dispersal apron, first announced in the fourth quarter of 2007.

On October 23, 2008, the Company announced results from the first phase of its 2008 drill program at Casa Berardi. The results included the discovery of a new gold zone, with the best intercept being 13.03 grams per tonne gold over 6.45 metres within a broader intersection of 8.58 grams per tonne gold over 10.4 metres ("Hole CE-08-03"). Hole CE-08-03 was the deepest mineralized intersection at a vertical depth of 247 metres and is located approximately 90 metres below a historic intercept of 11.11 grams per tonne gold over 2.24 metres. The new intercept is open both at depth and laterally.

Exploration spending for the full year 2008 is now projected at approximately $14.4 million, compared to an original budget of $11.4 million, with the higher amount reflecting encouraging results during the year from a number of the Company's exploration properties.

Outlook for 2009

On May 15, 2008, the Board of Directors of the Company approved a project budget for 2008 totaling $75.0 million and gave preliminary approval for a 2009 budget totaling $78.5 million, excluding corporate costs. Based on planned expenditures in the fourth quarter, project spending for the full year 2008 is forecast to be in line with the $75.0 million budget. Project spending in 2009 is now forecast at $82.0 million compared to the preliminary budget for the year of $78.5 million. Based on its current cash position, and the proceeds from planned production in 2009, the Company is positioned to finance its operations as well as currently planned development and exploration activities through to the end of 2009. The Company will, on an ongoing basis, assess capital funding opportunities in order to ensure continued balance sheet strength and to support future growth activities.

More information about the Company's 2008 budget is available in the Lake Shore Gold press release dated May 20, 2008 available on SEDAR at www.sedar.com and on the Company's website at www.lsgold.com.

Results of Operations - Third Quarter and Nine Months 2008

Net loss for the third quarter of 2008 totalled $1.1 million or $0.01 per basic and diluted share compared to net income of $0.3 million or $0.00 per basic and diluted share for the same period in 2007. For the nine month period ending September 30, the net losses for 2008 and 2007 were $3.2 million ($0.02 per basic and diluted share) and $1.4 million ($0.01 per basic and diluted share), respectively. The higher net losses in the three and nine month periods ended September 30, 2008 mainly resulted from increased office expense and travel, legal and accounting costs, largely reflecting the Company's growth as it advances towards production, as well as higher general exploration expenditures. These factors were partially offset by a higher future income tax recovery, increased interest and other income, reflecting higher cash balances, and no write-offs of resource properties in 2008 compared to $0.1 million and $0.4 million, respectively, in the three and nine months ended September 30, 2007.

As at September 30, 2008, the Company had cash of $101.9 million and working capital of $95.6 million.

More information about Lake Shore Gold's results of operations and financial condition and liquidity is available in the Company's consolidated financial statements and management's discussion and analysis, which are expected to be filed on sedar at www.sedar.com and posted to the Company's website at www.lsgold.com on Monday, November 10, 2008.

About Lake Shore Gold

Lake Shore Gold is a mining company engaged in the identification, acquisition, evaluation, exploration and development of gold properties in Northern Ontario and Quebec. The Company is currently conducting advanced exploration work at its 100% owned Timmins West property and, pending favourable results, is on track to commence production from Timmins West during the first quarter of 2009. Timmins West currently has 1.2 million ounces of identified mineral reserves (uncut), with shallow ore to be mined from a surface ramp being driven to the 400 metre level, and deeper ore to be accessed via a shaft currently being sunk to the 710 metre level as part of an advanced exploration program. Ore from Timmins West will be processed at the Bell Creek mill, which together with the Bell Creek mine, was acquired in December 2007. Refurbishing of the 1,500-tonne per day milling facility is on track for completion during the fourth quarter of 2008. The Company also has an ongoing exploration program, involving a number of prospective properties, through which it has announced the discovery of three new gold zones over the last 18 months. Lake Shore Gold is well financed to achieve its growth objectives, with $101.9 million of cash as at September 30, 2008. The Company is a reporting issuer in British Columbia, Alberta, Manitoba, Ontario and Quebec, and trades on the Toronto Stock Exchange ("TSX") under the symbol LSG.

Forward-looking Statements

Certain statements in this press release relating to the Company's project expenditures and business plans are "forward-looking statements" within the meaning of securities legislation. The Company does 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 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 Company makes 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 Company 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 Company from achieving its targets. Readers should not place undue reliance on forward-looking statements. More information about risks and uncertainties affecting the Company and its business is available in Lake Shore Gold's most recent Annual Information Form and other regulatory filings which are posted on sedar at www.sedar.com.

Qualified Persons

The Company's Qualified Persons ("QPs") (as defined in National Instrument 43-101, "Standards of Disclosure for Mineral Projects") for the Timmins West and Thunder Creek properties; Bell Creek, Schumacher and Vogel properties; and Casa Berardi optioned property are Jacques Samson, P. Geo., Richard Labine, P. Geo. and William Waychison, P. Geo., respectively. As QPs, Messrs. Samson, Labine and Waychison have prepared or supervised the preparation of the scientific or technical information for their respective properties as reviewed in this press release.