Lake Shore Gold readies for growth – by Liz Cowan (Northern Ontario Business – May 10, 2013)

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Lake Shore Gold in Timmins is expecting 2013 to be a breakout year. “We are on track now to really transition from junior exploration company to a producer,” said president and CEO Tony Makuch at a presentation in April. He was addressing an audience of more than 150 at a luncheon put on by the Canadian Institute of Mining’s (CIM) Northern Gateway Branch in North Bay.

“We built everything from scratch, starting with greenfield discoveries. We have raised and invested close to $650 million since 2008. And, we are building a mine. We have had a lot of challenges but some big successes,” he said.

With 525 employees, and about 200 contractors, the company operates the Timmins West Mine, which is about 20 kilometres west of Timmins; the Bell Creek Mine, about 20 kilometres northeast of the city; and the Bell Creek mill. The Fenn-Gibb Project, 60 kilometres east of Timmins, has the potential to become an open-pit operation.

“Since 2008 we have discovered seven million ounces. Our challenge is not just to discover, but to show we are profitable. We know there is still a lot of gold there and we can find it, but we have to demonstrate how to turn it into a profitable business,” he said.

Last year, the company met its guidance, achieved a lot of development success, mined and processed 720,000 tons of ore, developed more than 2,000 metres of mine ramps and produced 86,000 ounces of gold.

“In terms of the success, we are going to have significant growth coming into 2013. We expect to produce a minimum of 120,000 ounces, and the actual plan is showing much more than that, we are just trying to be conservative,” Makuch said.

“We will have at least a 40 per cent growth in production. And it is not just about producing more gold but producing at a lower cost. The way we are set up, in terms of infrastructure, we can be a low-cost producer.”

He told the audience the company is well financed, and there is a full pipeline of projects within Lake Shore’s own portfolio.

“We don’t have to buy or do any acquisitions. We just have to figure out what we have and go ahead and build a fairly large company,” he said.

It is aiming to produce 140,000 ounces in 2014, and is limiting growth to pay down its debt.

“We have a number of projects that if they all come together, over the right time and the right gold market, we can be producing over half a million ounces of gold from what we have.”

Its strategy is to generate cash flow, and prove it is a plausible business.

“We know we can discover gold, we know we can develop it and we know we can manage it and prove that we can make money,” Makuch said.

Currently, the sole focus is bringing the Timmins West Mine into full production, and to have the mill running at 3,000 tones per day by June.

The mill’s phase one expansion is complete, and its new capacity of 3,000 tonnes per day is to be completed in the second quarter this year.

“It’s been a high cost plant for us, and even this winter, we faced a lot of challenges trying to process ore there because everything is outside. When we finish the expansion, there will no longer be any outside storage. But, its metallurgical performance has been well over 95 per cent,” he said.

Lake Shore is targeting 120,000 to 135,000 ounces this year, which is significant growth from from 2012.

“Capital spending in 2013 will decline from approximately $170 million to $80 million for projects and $10 million for exploration, mainly in-mine drilling. With our projects we can build a very large company,” Makuch said.

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