Lake Shore Gold Exceeds Expectations

May 7, 2014 

Lake Shore Gold Corp

  Ingots gold

Lake Shore Gold held its Annual Meeting today and it was a positive presentation. If you wish to read the transcript of the presentation by CEO Tony Makuch, you can find it here.  If you wish to see the slide presentation, you can find it here.

 The stock LSG-TSX closed today at $0.90 CDN.  As you can see from the chart, it has had a tremendous rise. But the best is yet to come.

May 2014

 

Highlights

Cash operating costs

As we told readers when we made the suggestion, the company was on track to reduce their cash operating costs dramatically. The csah operating cost when we picked this stock was over $1,000 per ounce, which was much too high. Every quarter since then, the cash operating cost has dropped, and the last quarter of 2013, it was $609 per ounce. This is turning into an extremely profitable operation. Management feel that that more reduction in cost are coming.

 

Gold Production 

In the 1st qtr of 2103, the company was newly into production and produced 23,200 ounces of gold. By 4th qtr 2013, the company produced 51,700 ounces of gold.  Guidance for 2014 is between 160,000 & 180,000 ounces of gold. In the 1st qtr of 2014, the company produced 44,600 ozs Au. On an annualized basis, this would be 178,000, but as production seems to grow larger every successive quarter, we expect this number to increase.

 

Cash Position

The company started the year with $50+ million cash, but this was from a loan from Sprott of $70 million. The net cash therefore was negative.  By today’s date, the company had $48 million cash, and had paid down Sprott to $45 million – a dramatic positive reversal. LSG is now a CASH GENERATING MACHINE.

The company generated cash flow in the 1st qtr of 2014 of $24.9 million.

 

Gold Reserves

The company now has a mine life of 7 years, but this ignores the many discoveries and prospectives in deposits being explored in close proximity to the the existing operation. It now appears that the mine life will be dramatically extended, the number of M&I ounces of gold will dramatically rise, and the the company is poised to continue its growth. 

If the reader wishes details of these additional discoveries and reserves, I encourage you to read the company’s presentation.

 

Outlook

The stock price has taken a bit of a rest after a dramatic increase. With everything the company has achieved, and the prospects that are now reality, the stock has a very large upside.

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By Larry Cyna

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and continues as a strategic consultant to selected clientele. He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC’s with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section. He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder’s Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants. He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm. Mr. Cyna is well known in the Canadian Investing community. He is invited to, and attends presentations given by public companies usually 3 or 4 times each week. These presentations are intended by the various hosting companies to present their inside story to sophisticated parties and Investment Managers for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being a part of this keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.