Lake Shore Gold (LSG) Offers Prelim. Economic Assessment for Timmins West Mine
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Lake Shore Gold Corp. (AMEX: LSG) today announced results from a preliminary economic assessment ("PEA") for the Company's Timmins West Mine located 18 kilometres west of Timmins, Ontario. Timmins West Mine is envisioned as an underground mining operation targeting the extraction of material from two adjacent deposits, the Timmins Deposit and Thunder Creek Deposit. The PEA takes into consideration the initial resource at Thunder Creek, released on November 16, 2011, and the updated resource at Timmins Deposit, released on February 15, 2012, and represents the first time the resources at the Timmins and Thunder Creek deposits have been evaluated as a fully integrated, long-term mining operation. Prior evaluations, including a pre-feasibility study released in 2007, considered only the Timmins Deposit and are no longer considered valid. The PEA does not consider potential production, costs or economics from the Company's Bell Creek Mine Project. This PEA is preliminary in nature. It includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.
Tony Makuch, President and CEO of Lake Shore Gold, commented: "With the establishment of a large resource at Thunder Creek, updated resources at Timmins Deposit and the combination of the two deposits into a single mining operation, the project has changed considerably since we released the initial pre-feasibility study. The purpose of the PEA is to assist us in long-term planning for the development and exploitation of the Timmins West Mine deposits, and to demonstrate, on a preliminary basis, the economic potential of the Timmins West Mine. The work performed will also support further studies to complete an updated reserve statement. An in-depth review of the resources, including inferred resources, was completed for conversion into a potential mining plan using conservative production and capital and operating cost assumptions. The study sets a benchmark for the Timmins West Mine and there are many opportunities to improve the economics. Overall, the PEA indicates that Timmins West Mine has the potential to generate substantial cash flow and attractive returns for shareholders."
This PEA was developed through the combined efforts of the Company's internal Projects Team and independent consultants at Stantec. Operational input and experience gained from mining and exploration development at both the Timmins and Thunder Creek deposits over the last year has been reflected in this work.
A National Instrument ("NI") 43-101 technical report incorporating the results of the PEA will be filed on SEDAR at www.sedar.com before the end of March 2012.
The PEA assumes the extraction of approximately 1.4 million ounces of gold over 10 years at an average grade of 5.2 grams per tonne ("gpt"). The ounces to be extracted include the majority of Indicated resources at the two deposits as well as a portion of the Inferred resources. Current National Instrument ("NI") resources at Timmins West Mine include 1,122,500 ounces (5,826,000 tonnes at an average grade of 5.99 grams per tonne ("gpt")) in the Indicated category and 791,500 ounces (4,272,000 tonnes at an average grade of 5.76 gpt) in the inferred category. The PEA study does not take into consideration the significant exploration potential of both the Timmins and Thunder Creek land positions.
Highlights of the PEA
Tony Makuch, President and CEO of Lake Shore Gold, commented: "With the establishment of a large resource at Thunder Creek, updated resources at Timmins Deposit and the combination of the two deposits into a single mining operation, the project has changed considerably since we released the initial pre-feasibility study. The purpose of the PEA is to assist us in long-term planning for the development and exploitation of the Timmins West Mine deposits, and to demonstrate, on a preliminary basis, the economic potential of the Timmins West Mine. The work performed will also support further studies to complete an updated reserve statement. An in-depth review of the resources, including inferred resources, was completed for conversion into a potential mining plan using conservative production and capital and operating cost assumptions. The study sets a benchmark for the Timmins West Mine and there are many opportunities to improve the economics. Overall, the PEA indicates that Timmins West Mine has the potential to generate substantial cash flow and attractive returns for shareholders."
This PEA was developed through the combined efforts of the Company's internal Projects Team and independent consultants at Stantec. Operational input and experience gained from mining and exploration development at both the Timmins and Thunder Creek deposits over the last year has been reflected in this work.
A National Instrument ("NI") 43-101 technical report incorporating the results of the PEA will be filed on SEDAR at www.sedar.com before the end of March 2012.
The PEA assumes the extraction of approximately 1.4 million ounces of gold over 10 years at an average grade of 5.2 grams per tonne ("gpt"). The ounces to be extracted include the majority of Indicated resources at the two deposits as well as a portion of the Inferred resources. Current National Instrument ("NI") resources at Timmins West Mine include 1,122,500 ounces (5,826,000 tonnes at an average grade of 5.99 grams per tonne ("gpt")) in the Indicated category and 791,500 ounces (4,272,000 tonnes at an average grade of 5.76 gpt) in the inferred category. The PEA study does not take into consideration the significant exploration potential of both the Timmins and Thunder Creek land positions.
Highlights of the PEA
- Potential to produce approximately 1.4 million ounces over 10 years
- Assumed average head grade to mill of 5.2 gpt
- Anticipated annual production averaging 140,000 ounces, with average production in Years 3 to 9 of 160,000 ounces and peak production of 175,000 ounces
- Anticipated annual cash operating costs averaging US$625 per ounce, with cash operating costs during Years 3 to 9 averaging US$590 per ounce (assumes exchange rate at par) (royalties to add US$30 to US$50 per ounce of costs)
- Based on current market conditions: undiscounted cash flow of $1.14 billion, a pre-tax NPV of $880 million (5% discount rate), an IRR of 115% and a payback period of 1.25 years (Current prices include a gold price of US$1,775 per ounce and an exchange rate at par)
- Based on analyst consensus pricing: undiscounted cash flow of $730 million, a pre-tax NPV of $570 million, an internal rate of return of 100% and an estimated payback period of 1.25 years (Analyst consensus prices include gold prices starting at $US 1,744/oz in 2012, declining to a long-term price of $US 1,200/oz in 2018, and an average exchange rate of $US 1.00 = $CDN 1.07)
- Growth capital of $160 million, including $67 million for a 50% expansion of the Bell Creek Mill and other mill infrastructure
- Sustaining and other capital of $225 million.
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