Lake Shore Gold Corp.
(TSX: LSG)
Tony Makuch, CEO, and Mark Utting, VP of Investor Relations
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Corporate Profile:
Lake Shore Gold is a rapidly growing mining company with a goal to become a North American mid-tier gold producer through the successful exploration, development and operation of three wholly owned mines in Timmins, Ontario: Timmins Mine, Thunder Creek and Bell Creek Complex. The Company is currently carrying out an underground advanced exploration program at the Timmins Mine project, where it has both a shaft and a ramp, and has accessed mineralization at the adjacent Thunder Creek property through an underground drift from the Timmins Mine ramp. Progress is also being made with an underground advanced exploration program at its Bell Creek Complex, located on the east side of Timmins. The Bell Creek Mill has been refurbished and is being expanded incrementally to a total capacity of 3,000 tonnes per day by late 2011. The Company continues to invest aggressively in exploration primarily in Timmins and in select other areas of Northern Ontario and Quebec, and owns a large land position in Mexico. The Company’s common shares trade on the TSX under the symbol LSG.
TRANSCRIPT:
WSR: Good day from Wall Street. This is Juan Costello, Senior Analyst with The Wall Street Reporter. Joining us today is Tony Makuch, CEO and President of Lake Shore Gold Corp. as well as Mark Utting, VP of Investor Relations. The company trades on the Toronto Stock Exchange, and their ticker symbol is LSG. Thanks for joining us today, gentlemen.
Tony Makuch: Thanks so much, Juan.
WSR: Starting out talk about the recent expansion at the 100% owned Thunder Creek Zone?
Tony Makuch: The Thunder Creek Zone is a discovery we’ve made, which is about 800 meters to the Southwest of our Timmins West Deposit. And, recently, just at the end of June, we actually intersected the mineralization from an underground drift from the Timmins Mine. It’s at the 290-meter level. We also recently put out some recent drill results from that work. I guess the exciting part about it is our drill results both helped to confirm the interpretation we’ve had of the mineralization from previous surface drilling, and expanded and discovered new zones of mineralization. We’re beginning to develop on the zone now and we’re actually planning on sending some bulk samples for processing. We’re very excited about the growth potential of the Rusk Zone and the Thunder Creek project in general. We’ve explored it with surface drilling down to about 1,100 meters and we’re only at around 290 meter level with our first intersections into the Zone with underground development.
WSR: Bring us up to speed on the company’s other operations, I know you have the Bell Creek Complex, as well as having announced high-grades at the Vogel property earlier in the year?
Tony Makuch: At Lake Shore Gold, our goal is to build a mid-tier gold company and we’re progressing with that. We are building the company with good exploration, not only with good people, but also having good places to explore. And also with development and production, developing some of our discoveries and then bringing them into production. We’re currently developing three concurrent projects. We talked about Thunder Creek earlier, we also have our Timmins Mine, and we have our Bell Creek Complex. At the Timmins Mine, we’re planning to go into commercial production this year. We mentioned earlier about Thunder Creek where we have accessed the mineralization underground and where we’re trying to advance that with ongoing development in underground drilling.
Then we have our Bell Creek Complex, a past producer, which we’ve reopened for an advanced underground program. We’ve come up with a new discovery at depth there effectively proving that the mineralized zone that was originally mined from surface down to about 300 meters continues at depth. We’ve actually intersected the mineralization down to 1,300 meters. We have now accessed the mineralization with a drift now at 320 meters and another one at 300 meters. We’re pretty excited about what we’re finding here and we’re working towards completing a formal resource estimate, which is a National Instrument 43-101 resource, within a few months.
On top of that, we have a new zone that we discovered in the south portion of our Timmins West Complex called the Gold River Trend. We think the Gold River Trend is going to be a whole new project for us on top of our Timmins Mine, Thunder Creek and Bell Creek Complex projects. We have had excellent drill results, which show the potential for both open pit and underground bulk mining.
WSR: Well, great. Definitely a lot of stuff going on. I’m sure you get asked this question every day, but can you talk to us about some of the trends right now in your sector, obviously with gold, and how well positioned you believe the company is to capitalize on them right now?
Tony Makuch: We believe we’re in a strong gold price environment, and we feel strongly that this gold price environment will be here for a long time. We think this because, in today’s environment, it really represents the minimum fair price you need to get for the gold you produce. And, because of that, we’re also at a position where we’re taking advantage of this cycle and advancing our three projects to production as quickly as we can. Timmins Mine will be the first one into commercial production, which we expect to achieve later this year. The timing of production at Timmins Mine will allow us to get high margins for our ore, which will help us to advance our other projects and really build Lake Shore Gold into a mid-tier gold company.
WSR: Well, good. And so, what would you guys say makes Lake Shore Gold unique right now from some of the other players in the sector?
Tony Makuch: We’re a junior exploration company that has achieved significant success in terms of what we’ve been building and discovering in our Timmins properties with very good geology, good people and good infrastructure. And, with good discoveries, we’ve advanced from exploration to developing our properties, bringing them towards production. We also own a processing plant, which we purchased with the Bell Creek Mine in late 2007. It is perfectly amenable to our ores. Another unique factor is that we have advanced our projects very quickly. For example, Timmins Mine is expected to achieve commercial production just over two years after we commenced development. We expect to mine around 65,000 ounces this year from all sources, exit the year producing around 10,000 ounces per month, and then grow in 2011 to something over 120,000 ounces.
So, we’re at a stage where we’re going to be growing our production over the next few years. We’re advancing two other projects concurrently with Timmins Mine, Thunder Creek and our Bell Creek Complex projects. And, on top of all that, we’re exploring aggressively, looking for new discoveries. We have the Gold River Trend, which is a new discovery. We have considerable potential for additional discoveries within our land holdings in Timmins, as well as through our Casa Berardi joint venture with Aurizon and through other properties that we own.
Mark Utting: Just to pick up from what Tony was saying, I think from an investor standpoint, there is always concern with news flow. I think we have a terrific opportunity right now to have significant news flow over the next few months. From a production standpoint, as Tony said, we’re going from having very little production at this stage to be producing something around 10,000 ounces a month from all sources by the end of this year, and then we will grow production significantly next year. So, we should have some very important production milestones to announcement over the next year. We also have a lot of exploration potential. We’ve got about 20 drills turning today. Some of that drilling is confirming and expanding what we already have; but some of it is also looking at new discoveries and new areas. There are going to be new deposits for us in the future, so you can expect the release of exciting exploration results as well. And, with that many drills turning, some of that news could be in the short-term.
Tony Makuch: Yes, so we do see a lot of exciting news flow over the next few months on the exploration front. And one other point actually that we should emphasize is we’re also in the process right now of completing new resource statements for 43-101 resources for both our Thunder Creek property and our Bell Creek Complex. With these new resource statements, we expect to at least double our current resources over the next year and possibly triple them.
WSR: Certainly. And, perhaps you guys can walk us through your background and experience, and talk a little bit more about the strength of the management for some of our listeners that are new to the Lake Shore Gold story?
Tony Makuch: In terms of myself, I’m originally a graduate in geological engineering and then transferred that to mining engineering. I also have an MBA. My work experience has been at the exploration and operating levels in various gold mines over 30 years, involving both the construction and operation of mines.
Within our management team we have a strong group of people who have worked both in exploring, developing and operating mines. On top of that, there is a big part of our team who are originally from Timmins. I have a background in the Timmins Camp. I’m from Timmins and have worked with gold mines in Timmins. We have quite a few other people who have worked at gold mines in Timmins. We have somewhat of a knowledge base from an operating side and exploration and development. We have an understanding of the deposits when we drill them off and how to take them front being drilled off to production. Mark and I worked together with Dynatec. Dynatec was a mine contracting company. Mark has substantial experience in investor relations and in the mining industry.
Mark Utting: I think one of the big advantages for us is that we have a number of people on our team that have worked together before. As Tony said, he and I worked together in previous jobs. Also, many of us have a background in mine contracting, which tends to give you a very strong background to move projects like ours forward. Contractors generally get to know many people across the industry and gain a lot of experience working on different projects and in different environments concurrently. Given our aggressive growth strategy, this experience helps us a great deal.
Tony Makuch: We have within our group Eric Kallio, who is our VP of Exploration, extensive experience in gold exploration throughout North America and Asia. In particular, he has extensive operating experience in gold exploration and operations within the Timmins Camp. There are other people that work in our exploration group, most notably Keith Green and some of our other senior geologists, who have considerable experience working in Timmins. On the operating side, we have a very strong VP of Operations, Mike Kelly, with a lot of experience in underground gold mining and development. We also have a strong group within health, safety, environment.
People skills are very important, because building a company is all about people and it’s the people that make things – they turn drill holes into resources, resources into reserves, and reserves into mines. And, speaking of going from drill holes to mines, that in itself is a unique fact about Lake Shore Gold versus a lot of other junior companies; we’re not just drilling for discoveries, we’re drilling for deposits that we can turn into mines. We only drill when we think we can find a sizeable enough resource that we can mine it ourselves. We have the people; we have a mill; we have the infrastructure. We’re sinking our own shafts and developing our own ramps. We’re serious about where we’re trying to go and we are making good progress getting there. We also recently completed a financing, making us fully funded to carry out our goal of building a mid-tier gold producer.
WSR: Certainly, and I know you already touched on them, but what are some of the other goals that the team is hoping to accomplish here over the next year?
Tony Makuch: The biggest goal is achieving commercial production at our Timmins Mine in the fourth quarter of this year. That’s important for us. Similarly, at our Bell Creek Complex, we expect to release a new 43-101 resource during the fourth quarter. At our Thunder Creek property, we intersected the mineralization around the 290 Level in the Rusk Horizon in June of this year. We expect to hit mineralization down on our 650 level in October, which is in the Porphyry Zone. With the combined progress from our underground development and exploration work and our aggressive drilling program over the next year, we expect to come up with an initial 43-101 resource for Thunder Creek by the middle of next year. So, those are three big milestones because they’re all key to gearing us towards achieving our goal of becoming a mid-tier gold producer. Some of the other milestones, some of the other things we’re really working on, is completing the expansion of our Bell Creek Mill to 2,000 tons per day this year. That’s something we should achieve in short order, sometime in October.
WSR: When it comes to investors and the financial community, do you guys believe that the company’s story, message, and ultimately the upside potential are completely understood and appreciated by members of the financial community?
Tony Makuch: I’ll let Mark answer that.
Mark Utting: As we’ve done more and more marketing, we’re certainly getting well known both domestically and internationally. Our shareholder base reflects that. It has transitioned to be more international and we expect that trend to continue. Having said that, a lot of opportunity does remains to get the story out and to get awareness amongst the investment community. Part of that has to do with the fact that, as we’ve discussed, we’re following a very aggressive growth program, developing three projects concurrently. We’re looking at growth that will take us from a million and half ounces of resource today to something like 3.5 million to 4.5 million ounces by this time next year. And, going through all the moving parts that get you there takes time and effort to communicate. It takes a concerted marketing program. We’re continuing to work away at that. And, we think we’ll continue to see progress reflected both in our shareholder base and our share price.
The other thing is, we’re really a company that believes we have a lot of strengths in all three key areas of the business, those being exploration, development, and production. And, we don’t want to be seen, and I don’t think it does us full justice to be seen, as an exploration play because, as we’ve said, we’re poised now to significantly ramp up production. But, having said that, we continue to have some of the best exploration assets certainly in North America if not the world. So, making sure that every piece of the puzzle is fully understood is a challenge, but we think we are making good progress.
WSR: Once again joining us today is Tony Makuch, CEO and President of Lake Shore Gold Corporation as well as their VP of Investor Relations, Mark Utting. The company trades on the Toronto Stock Exchange, ticker symbol is LSG currently trading at $3.51 a share. Before we conclude gentlemen, just to recap your key points, why do you believe that investors should consider Lake Shore Gold (LSG) as a good long-term investment opportunity?
Tony Makuch: I think the key thing is we’re going into commercial production. We’ll be ramping up production over the next three years. We’re going to achieve somewhere around 65,000 ounces this year. We expect to at least double that next year and continue to grow as we bring our three main projects online. In terms of exploration, we have considerable upside. We talk about targets like our Gold River Trend project and Casa Berardi, which we see as two areas that can add further growth as we continue to have exploration success. And then beyond that, we still have exploration upside. The key to the Lake Shore Gold story is that we are now poised to transition into production and to grow significantly as a producer over the next three to five years. Even when we achieve that, we will still an opportunity to add additional value through further exploration success.
WSR: We certainly look forward to continuing to track the company’s growth, progress, and production. I’d like to thank you guys for taking the time to join us today and update our investors on Lake Shore Gold; it’s always good to have you on.
Tony Makuch: One more thing Juan, I should also reference the fact that, with what we’re doing, geographically and politically, we’re located in a very favorable area. We’re located in Timmins, a known mining camp with a long history of mining, and with access to skilled labour, suppliers and infrastructure. It is a mining friendly area. We’ve been able to attract good people and now we have over 400 employees within Lake Shore Gold and we’ll continue to grow that. Those are some other key things that are really important in terms of people looking at Lake Shore Gold as an investment opportunity.
WSR: That’s certainly a very key point, and once again I’d like to thank you guys for joining us today to update our investors on the company, and we’ll see you guys at the next conference.
Tony Makuch: Okay. Thanks very much.