LSG One Of My Favorite Miners Had A Record Breaking 2nd QTR.
Lake Shore Gold Reports Record Production and Lower Operating Costs in Second Quarter 2013, Commissioning of Mill Expansion Progressing
08/12/2013
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TORONTO, ONTARIO -- (Marketwired -- August 12, 2013) -- Lake Shore Gold Corp. (TSX:LSG) (NYSE MKT:LSG) ("Lake Shore Gold" or the "Company") today announced financial and operating results for the second quarter of 2013. Key highlights of the results include:
Record gold poured of 31,800 ounces in the second quarter of 2013, with record gold production of 30,800 ounces and gold sales totaling 27,600 ounces at an average sale price of US$1,409 ($1,441) per ounce.
Cash operating cost per ounce(1) sold during the second quarter of 2013 averaged US$908, including US$28 per ounce related to royalties. Excluding inventory movements involving higher cost ounces from previous periods, cash operating cost per ounce(1) sold averaged US$798 during the second quarter of 2013 before royalties.
Total all-in sustaining cost ("AISC")(2) during the second quarter and first six months of 2013 of US$1,257 and US$1,398, respectively.
Capital investment during first six months of 2013 totaling $66 million, representing close to three-quarters of target capital investment for the year.
Excellent progress advancing mill expansion towards completion, with commissioning starting near end of July and new crushing/grinding circuit now operational and ramping to 3,000 tonnes per day.
Earnings from mine operations for the second quarter and the first six months of 2013 of $1.8 million and $5.7 million respectively, compared to $3.2 million and $4.5 million, respectively, in same periods in 2012. Year-to-date increase reflects 36% growth in commercial sales, which more than offset impact of lower gold prices.
2013 guidance maintained, including production of between 120,000 and 135,000 ounces of gold, cash operating cost per ounce(1) sold in a range of US$800 - US$875 and capital investment of approximately $90 million.
Tony Makuch , President and CEO of Lake Shore Gold, commented: "We are very encouraged by our results in the second quarter, which included record production, improved unit operating costs and excellent progress advancing our mill expansion towards completion. Commissioning of the expansion commenced late last month with our new crushing and grinding circuit now ramping up towards the new design capacity of over 3,000 tonnes per day, which is expected by early September. When we achieve this level of throughput, our production will increase, our unit operating costs will improve and our capital requirements will decline dramatically. At that point, we expect our AISC(2) to improve to around US$1,000 per ounce, with the Company on track to generate net free cash flow during the fourth quarter at current gold prices.
"Looking at our cost performance more closely, we were particularly pleased with the progress that was made in the second quarter. Higher throughput levels and the impact of cost management initiatives helped us to pull our costs down with mining costs during the quarter averaging $74 per tonne, trucking costs averaging $5 per tonne and processing costs averaging $22 per tonne. On an ounces sold basis, our cash operating costs(1) were increased by inventory movements that included higher costs of production from previous periods capitalized in opening inventory balances. Excluding inventory movements and royalty payments, cash operating cost per ounce(1) for the second quarter averaged US$795 per ounce. Given that we produced 3,200 ounces more than we sold during the quarter, unit costs on ounces produced would be even lower. Our AISC(2) in the first half of 2013 averaged US$1,398 per ounce and, as indicated above, this number is expected to improve following completion of our mill expansion."
Second Quarter 2013 - Key Performance Indicators
Record quarterly production
The Company achieved record gold poured of 31,800 ounces in the second quarter of 2013, with record production of 30,800 ounces (230,920 tonnes at an average grade of 4.3 grams per tonne). Production in the second quarter of 2013 increased 26% from the same quarter a year earlier and 33% from the first quarter of 2013.
The Company poured 52,300 ounces of gold during the first six months of 2013 and produced 54,000 ounces of gold (428,560 tonnes at an average grade of 4.1 grams per tonne).
Mill throughput exceeds 2,500 tonnes per day
Throughput at the Company's mill averaged 2,540 tonnes per day during the second quarter of 2013 (including over 2,600 tonnes per day in both May and June). Mill throughput averaged 2,370 tonnes per day during the first six months of 2013.
Improved gold grade
The average grade of ore mined from the Company's mines improved to 4.3 grams per tonne in the second quarter of 2013 from 3.8 grams per tonne in the first quarter of 2013. The grade at Timmins West Mine increased to 4.4 grams per tonne in the second quarter of 2013 from 3.7 grams per tonne in the first quarter of the year, with grades at Bell Creek averaging around 4.3 grams per tonne in both periods. The combined grade from both Timmins West and Bell Creek in the first six months of 2013 averaged 4.1 grams per tonne.
Increased gold sales
Commercial gold sales increased to 27,600 ounces in the second quarter of 2013 at an average price of US$1,409 ($1,441) per ounce from 24,900 ounces at an average price of US$1,605 ($1,632) per ounce in the second quarter of 2012 and 26,100 ounces at an average price of US$1,630 ($1,642) per ounce in the first quarter of 2013.
The Company sold 53,700 ounces of gold at an average price of US$1,516 ($1,539) per ounce during the first six months of 2013, an increase of 36% from commercial sales of 39,400 ounces at an average price of US$1,641 ($1,658) per ounce for the same period in 2012 (total gold sales in the first half of 2012, including pre-production ounces, were 43,400 ounces).
Improved production costs
Cash operating cost per ounce(1) sold during the second quarter of 2013 averaged US$908 (including US$28 per ounce related to royalties). Cash operating cost per ounce(1) for the quarter was increased by inventory movements in the quarter that included higher costs of production from previous periods capitalized in opening inventory balances. Excluding inventory movements and royalty payments, the cash operating cost per ounce(1) sold was US$795 during the second quarter of 2013.
Cash operating cost per ounce(1) of gold sold in the first six months of 2013 averaged US$944, (including US$35 per ounce for royalties).
Total production costs in the second quarter and first half of 2013 were $26.0 million and $52.1 million, respectively, compared to $24.2 million and $39.5 million in the same periods in 2012. The increase in production costs in 2013 reflects higher ounces sold partially offset by lower cash operating cost per ounce(1).
All-In-Sustaining Cost (2)
The total all-in-sustaining cost ("AISC") per ounce during the second quarter of 2013 and first six months of 2013 averaged US$1,257 and US$1,398, respectively, significantly lower than US$1,557 and US$1,806 for the same periods in 2012.
Completed majority of 2013 capital program
The Company invested $66.0 million for mine development, mill expansion and exploration drilling (mainly in-mine drilling) in the first six months of 2013, representing close to three quarters of targeted capital investments for all of 2013 of approximately $90 million.
Increased earnings from mine operations in first half of 2013 despite lower gold prices
The Company generated earnings from mine operations for the second quarter of 2013 and the first six months of 2013 of $1.8 million and $5.7 million respectively, compared to $3.2 million and $4.5 million, respectively, for the same periods in 2012. Lower earnings from mine operations in the second quarter of 2013 compared to the same period in 2012 largely reflected a $191 per ounce decrease in the average Canadian dollar gold price, which resulted in a reduction in revenue of $5.3 million. This reduction more than offset the favourable impact of an 11% increase in gold sales compared to the prior year's second quarter and lower depreciation and depletion costs following the impairment charge recorded in the fourth quarter of 2012. For the first six months of 2013, increased earnings from mine operations compared to a year earlier was due mainly to a 36% increase in commercial gold sales, which more than offset a $119 per ounce reduction in the average Canadian dollar selling price of gold.
Net loss reflected lower gold prices and increased interest and other financing costs
The Company recorded a net loss in the second quarter of 2013 of $5.4 million (or $0.01 per common share) and $6.1 million (or $0.01 per common share) for the first six months of 2013 which compared to a net loss of $2.0 million (or $0.00 per common share) for the second quarter of 2012 and $4.9 million (or $0.01 per common share) for the first six months of 2012. The higher net loss in both the second quarter and first six months of 2013 largely reflected the impact of lower gold prices, mainly in the second quarter, as well as a $2.8 million increase in interest and other financing costs, the latter due to increased debt since the second quarter of 2012.
Cash position at June 30, 2013
Cash and bullion at June 30, 2013 totaled $28.1 million compared to $52.1 million at March 31, 2013.
Outlook
At the end of the second quarter of 2013, Lake Shore Gold was approaching a significant milestone, completing a mill expansion to a design capacity exceeding 3,000 tonnes per day. Commissioning of the expansion commenced in late July 2013 with the new increased design rate expected to be achieved by early September 2013.
Following completion of the expansion, the Company is targeting:
Mining and milling rates that will support annual production levels of at least 140,000 ounces of gold;
Cash operating costs(1) averaging around US$700 per ounce;
Total AISC improving to approximately US$1,000 per ounce in the second half of 2013;
Capital investment levels significantly lower than the $66.0 million invested during the first half of 2013 (full-year target for 2013 remains at around $90 million); and,
Net free cash flow to be generated during the fourth quarter at current gold prices (approximately $1,350 per ounce).
Based on the progress being achieved, the Company remains committed to achieving its previously stated guidance for 2013, including production growth of at least 40%, to a range of 120,000 to 135,000 ounces, cash operating costs(1) in the range of US$800 to US$875 per ounce and capital investment for the year of approximately $90 million.
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