LAKE SHORE GOLD CORP company history: the story so far

History

A Timmins gold miner that reached production in 2011, paid off its secured debt from cash flow, found a new deposit beside its own mine, and was bought by Tahoe Resources in 2016.

2011: Building the Timmins base

Lake Shore Gold was already producing gold near Timmins, Ontario, and listed on the TSX, when the record held here begins. In June 2011 it filed its first formal resource estimate for the Vogel/Schumacher deposit, part of the Bell Creek Complex. In July, drilling at Thunder Creek extended the deposit and picked up a possible new zone 500 m southwest, the corridor later drilled as the 144 Gap. Trading in the US began on 1 August 2011 on NYSE Amex.

The same month the company bought Barrick Gold's Fenn-Gib and Guibord Main properties, 60 km east of Timmins, for 14.9 million shares (3.9% of the company) and no cash. Drilling backed up the inherited data, and in November the company filed maiden resources: Thunder Creek at 521,600 ounces indicated plus 510,000 inferred, and Fenn-Gib at 1.30 million ounces indicated plus 0.75 million inferred. Fenn-Gib met the 2 million ounce target management had set.

2012: Paying for the ramp-up

In February 2012 Franco-Nevada agreed to pay US$35 million for a 2.25% royalty on the Timmins West Complex, plus C$15 million for 10,050,591 shares at C$1.49. The deal closed in March, taking pro-forma cash to about C$95 million. Also in February, the company updated its Timmins West resource to 1,914,000 ounces, and in March it published a preliminary economic assessment envisioning about 1.4 million ounces over 10 years, replacing a 2007 study. In April Timmins West received its first reserve, 823,848 ounces probable, and Bell Creek's measured and indicated resources rose more than 150%.

Funding came through debt as well. A Sprott Resource Lending facility of up to $70 million, made up of a $35 million gold-linked loan and a $35 million standby line, was agreed in April and made definitive in June. That month the company also cut 2012 capital spending by $15 to $20 million while holding production guidance. In September it closed C$90 million of 6.25% convertible debentures due 2017, with net proceeds of C$86.4 million, and used them to repay a US$50 million UniCredit revolving facility. In December the first stage of the Bell Creek mill expansion lifted capacity 25% to 2,500 tonnes a day.

2013: Tidying up

Drilling in the 144 Gap found new mineralisation 850 m south of Thunder Creek. The company agreed to sell its Mexican properties to Revolution Resources for 20 million Revolution shares, and the sale closed in May, leaving Lake Shore Gold with 22.4% of Revolution. In February it drew the full $35 million Sprott standby line, mainly to keep headroom under debt covenants, paying the fee in 885,964 shares. It also warned of a non-cash write-down of its Timmins and Mexican assets. By December it had repaid about $20 million of debt over the year, won Sprott's agreement to spread the standby repayments from June 2015 to November 2016, and issued 2014 production guidance of 160,000-180,000 ounces.

2014-2015: A discovery and the secured debt cleared

In April 2014 the Timmins West reserve was restated at 492,246 ounces, down from the 823,848 first booked after two years of mining. Operations then improved sharply. Nine-month 2014 production was 142,500 ounces, 72% above a year earlier, and full-year cash cost of about US$595 an ounce beat guidance. In June the company prepaid $10 million of its Sprott debt.

In October 2014 the first hole of a new programme at the 144 property cut 5.37 g/t gold over 46.0 m, 770 m southwest of Thunder Creek, confirming mineralisation first found in 2012 drilling and reachable from existing Thunder Creek infrastructure. Further drilling, with up to six surface rigs and then an underground drift, expanded the zone to 400 m along strike and 400 m of height by April 2015. On 29 May 2015 the company made the final payment on the Sprott debt, leaving only the convertible debentures. In July first-half production was 95,600 ounces and guidance was raised to at least 180,000 ounces. The company then bought Temex Resources, and with it Temex's 60% of the Whitney joint venture next to Bell Creek, for about 20 million shares, under 5% of its own count. Temex shareholders approved in September.

2016: The Tahoe takeover

Preliminary 2015 costs were about US$580 an ounce cash and US$870 all-in. On 8 February 2016 Tahoe Resources agreed to buy Lake Shore Gold for 0.1467 Tahoe shares per share, worth C$1.71 a share and implying equity value of C$945 million, a 14.8% premium to the 5 February close. The same day the company released its first 144 Gap resource: 301,700 ounces indicated and 319,200 inferred. In March it reported Timmins West reserves of 391,800 ounces and Bell Creek reserves of 309,300 ounces. Shareholders approved all matters at the 31 March special meeting, and the deal closed on 1 April 2016. Tahoe issued 69,239,629 shares, leaving former holders with 23.32% of Tahoe. The $103,181,000 of debentures became convertible into Tahoe shares, and Tahoe elected to redeem them.

Written from the 50 story beats below (2011 to 4 Apr 2016), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2016

4 Apr
Lake Shore Gold and Tahoe completed their business combination on 1 April 2016, with Tahoe acquiring all Lake Shore Gold shares. Lake Shore Gold also announced it would redeem all of its outstanding 6.25% convertible unsecured debentures.
business combination
31 Mar
Lake Shore Gold shareholders approved all matters put to them at the special meeting held on 31 March 2016, and the voting results were reported.
business combination
11 Mar
Lake Shore Gold announced updated mineral resource and reserve estimates for its operating mines. It also filed a technical report on the Timmins West Mine.
resource reserve update
8 Feb
Lake Shore Gold announced a first resource estimate for its 144 Gap Zone. It comprised Indicated resources of 1,734,000 t at 5.41 g/t gold and Inferred resources of 1,914,000 t at 5.19 g/t.
resource reserve update
8 Feb
Tahoe Resources agreed to acquire all of Lake Shore Gold's shares, with each share exchanged for 0.1467 of a Tahoe share. Lake Shore Gold holders would own about 26% of the combined company and Tahoe holders about 74%.
business combination
4 Feb
Lake Shore Gold reported results from the first 13 holes (1,600 m) of an exploration programme at its Whitney Project. It said they showed potential to expand the near-surface resource to the west, north and to depth.
drilling result
20 Jan
Lake Shore Gold announced preliminary production costs for the full year and fourth quarter of 2015, including cash operating costs and all-in sustaining costs per ounce sold.
production update

2015

28 Oct
Lake Shore Gold reported results from 60 surface and underground drill holes and 11 wedge cuts, totalling 39,050 metres, at its 144 Gap Zone.
drilling result
14 Oct
Lake Shore Gold produced 136,200 ounces in the first nine months of 2015, 40,600 of them in the third quarter. Preliminary cash operating costs were US$567 and all-in sustaining costs US$844 per ounce sold for the nine months.
production update
17 Sept
The first ten underground holes (4,771 m) from the new exploration drift into the 144 Gap returned 7.81 g/t over 10.4 m, 6.29 g/t over 36.8 m, 7.83 g/t over 18.8 m and 10.97 g/t over 14.4 m, with the drift over 90% complete and a first resource still targeted for early 2016.
drilling result
14 Sept
Temex shareholders approved the arrangement with about 88% of votes cast in favour, clearing the way to close on the court's final order. Lake Shore Gold would issue roughly 20 million shares, under 5% of its own count, to take all of Temex.
business combination
3 Aug
Signed a binding arrangement agreement with Temex on the 16 July terms, after Temex terminated an agreement it had signed with Oban Mining on 29 June. Lake Shore Gold lent Temex the money to pay Oban its $691,856 break fee - it funded the exit from the rival deal to get the asset.
business combination
16 July
Two announcements in one filing. Preliminary first-half cash operating cost of US$551 an ounce sold and all-in sustaining cost of US$810. And a binding proposal to buy Temex Resources at 0.105 Lake Shore Gold shares per Temex share, worth $0.13 on the 15 July close - the target being Temex's 60% of the Whitney joint venture with Goldcorp next door to Bell Creek (218,100 ounces measured at 7.02 g/t, 490,500 indicated at 6.77 g/t, 170,700 inferred at 5.34 g/t) plus 100% of the Juby project.
business combination
8 July
First-half 2015 production of 95,600 ounces from 627,000 t at 4.9 g/t and 96.7% recovery, with 98,500 ounces sold at US$1,208. Full-year guidance was raised to at least 180,000 ounces and unit cost targets cut to below US$650 cash and US$950 all-in sustaining; cash and bullion stood at about $82.0 million.
production update
29 May
Made the final payment on the Sprott senior secured debt, clearing the $70 million facility arranged in mid-2012 to fund the Bell Creek mill expansion. Three years from first drawdown to no secured debt at all, with the C$90 million of convertible debentures due September 2017 still outstanding.
debt financing
4 May
Expanded the 144 Gap drill programme, opened new exploration along the 144 trend to the southwest and added an underground programme at Bell Creek. Management framed it as the turn from stabilising and deleveraging to spending on growth, after debt repayment and cost targets had been met.
drilling result
27 Apr
Twenty-two holes and five wedges (29,089 m) took the 144 Gap to 400 m along strike and 400 m of vertical height, with the high-grade core now at least 300 m tall. Intercepts included 11.79 g/t over 21.1 m within a broader 5.74 g/t over 55.0 m, 8.81 g/t over 8.2 m and 8.14 g/t over 15.1 m.
drilling result
31 Mar
Filed an updated Bell Creek reserve at 31 December 2014 of 1,792,295 t grading 4.6 g/t for 263,608 ounces mined to surface, of which 172,228 t at 4.5 g/t is proven, using a US$1,100 gold price and a 0.90 exchange rate.
resource reserve update
25 Feb
Ten holes and a wedge (11,092 m) defined a thick, high-grade core inside the 144 Gap over 250 m of vertical height, 75-100 m wide and 50-75 m along strike, with 5.36 g/t over 47.0 m (including 9.70 g/t over 18.4 m), 4.09 g/t over 56.9 m and, near the northeast limit, 78.44 g/t over 1.9 m.
drilling result
27 Jan
Tripled the 144 Gap's minimum strike length, taking the zone to 350 m along strike and 350 m down dip, and pushed mineralisation 200 m northeast to within 500 m of Thunder Creek (3.68 g/t over 18.0 m, 6.56 g/t over 12.4 m, and 100.00 g/t over 0.40 m). Six surface rigs were on site with 90,000 m planned for 2015.
drilling result
15 Jan
Preliminary 2014 cash operating cost of about US$595 an ounce sold beat guidance of US$675-775 and was 22% better than 2013, with all-in sustaining cost at US$875 against a US$950-1,050 target and total production costs of about $120 million versus $128 million guided. This is the year the mine turned into a free-cash-flow generator.
production update

2014

13 Nov
Four more holes (4,898 m) at the 144 Gap returned 7.18 g/t over 24.0 m including 12.61 g/t over 11.5 m, 5.09 g/t over 24.8 m and 5.92 g/t over 20.7 m, confirming minimum dimensions of 100 m along strike by 250 m down dip. The programme was expanded from 10,000 to 15,000 m with a fourth rig.
drilling result
7 Oct
The first hole of a new 10,000 m surface programme at the 144 Property cut 5.37 g/t over 46.0 m, including 21.87 g/t over 6.0 m and 12.54 g/t over 4.4 m, 770 m southwest of Thunder Creek. It confirmed the mineralisation first found in 2012 drilling, and the zone is reachable from existing Thunder Creek infrastructure.
drilling result
3 Oct
Nine-month 2014 production of 142,500 ounces was 72% above the same period of 2013, with the third quarter at 45,600 ounces from 320,800 t at 4.6 g/t and 96.7% recovery, about 3,490 tonnes a day. Cash and bullion reached about $67.0 million and the company expected to meet or beat the top of its 160,000-180,000 ounce guidance.
production update
5 June
Prepaid $10 million of debt outstanding under its credit agreement with Sprott Resource Lending Partnership, which acts as agent for the lenders.
debt financing
9 Apr
Updated Timmins West reserve of 3,332,164 t at 4.6 g/t for 492,246 ounces - Timmins deposit 227,707 ounces, Thunder Creek 264,539 ounces - with a life-of-mine plan averaging about 2,800 tonnes a day through 2016 and ending in the third quarter of 2017. That is down from the 823,848 ounces first booked in April 2012 after two years of mining, and leaves roughly three and a half years of reserve life ahead of the mine.
resource reserve update

2013

20 Dec
Sprott agreed to stretch the standby line's repayment into 18 equal monthly instalments running from 30 June 2015 to 30 November 2016, instead of the whole $35 million falling due on 1 January 2015, and Lake Shore Gold prepaid $5 million to cut the balance to $30 million. This was maturity relief, not tightening; 2013 debt repayments totalled about $20 million.
debt financing
10 Dec
Issued 2014 production guidance of 160,000 to 180,000 ounces of gold, with cash operating cost of US$675-775 per ounce sold and all-in sustaining cost of US$950-1,050 per ounce sold.
production update
13 May
Closed the Mexico sale: the subsidiary holding the portfolio, carried at about $2.2 million, went to Revolution Resources for 20 million shares, taking Lake Shore Gold to 26,713,740 Revolution shares or 22.4%, locked up for 18 months, with rights to at least two Revolution board seats. The same filing carried amendments to the option plan and by-law being put to the 15 May shareholder meeting, including a new 1%-of-shares cap on options to non-executive directors.
asset acquisition disposition
26 Feb
Warned that its 2012 year-end accounts would carry a write-down of the Timmins and Mexican assets, a non-cash impairment whose size was not yet known, reflecting the gap between book value and market capitalisation as mining assets were being repriced. Guidance for 2013 was reaffirmed at 120,000 to 135,000 ounces, at least 40% growth.
other
4 Feb
Drew the full $35 million Sprott standby line and paid the drawdown fee in 885,964 shares. Management said the draw was mainly to keep headroom under covenants attached to other debt, with the year having opened at about $61 million of cash and bullion - a defensive draw rather than a funding need.
debt financing
31 Jan
Agreed to sell its whole Mexican portfolio (Universo, Montaña de Oro, La Bufa and Lluvia de Oro, over 400,000 hectares) to Revolution Resources for 20 million Revolution shares, net smelter royalties and C$5 million in cash or shares by 2017. The deal replaces the option agreement of July 2012.
asset acquisition disposition
22 Jan
The 2012 programme of 35 holes and two extensions (27,411 m) found new mineralisation 850 m south of Thunder Creek in the 144 Gap (13.54 g/t over 2.0 m, 6.07 g/t over 3.0 m), doubled the 144 North plunge length to 800 m depth and hit shallow gold at 144 South (14.76 g/t over 3.0 m). The company later dated the 144 Gap discovery to this 2012 drilling.
drilling result

2012

13 Dec
Completed the first stage of the mill expansion, lifting Bell Creek processing capacity 25% to 2,500 tonnes a day, with the second stage to 3,000 t/d due in the second quarter of 2013. Fourth-quarter grades were running 4.2 g/t overall and 4.4 g/t at Timmins West.
production update
7 Sept
Closed the C$90 million convertible debenture offering for net proceeds of C$86.4 million and used them to repay and extinguish the US$50 million three-year senior secured revolver with UniCredit Bank AG; the debentures began trading on the TSX as LSG.DB. Cheaper and longer-dated than the undrawn C$35 million Sprott standby line it left in place.
capital raising announcement
17 Aug
Launched a bought-deal offering of C$75 million of 6.25% convertible senior unsecured debentures due 30 September 2017, convertible at C$1.40 a share. The proceeds were earmarked to repay and extinguish a US$50 million three-year revolving facility that had not appeared anywhere earlier in this filing record.
capital raising announcement
14 June
Two announcements in one filing. The Sprott facility went definitive on terms largely as announced in April - a $35 million gold-linked note to 31 May 2015 and a $35 million standby line available from 1 November 2012 - subject to ministry, third-party and exchange consents. The day before, the company said it would cut 2012 capital spending by $15 to $20 million by deferring Timmins West development and re-timing the mill expansion, while holding production guidance at 85,000 to 100,000 ounces.
debt financing
3 May
Twenty-six holes (15,846 m) at Fenn-Gib returned 1.93 g/t over 241.2 m, 1.26 g/t over 324.0 m, 0.89 g/t over 260.5 m and 0.73 g/t over 284.0 m, extended mineralisation up to 200 m below the resource and pushed the Main Zone at least 200 m east. Silver assays averaged 1 to 2 g/t and were not in the resource at all.
drilling result
13 Apr
Agreed a facility of up to $70 million with Sprott Resource Lending, but the committed money was the $35 million gold loan - repayable in 29 monthly cash payments tied to the gold price, about 924 ounces a month at the then US$1,650 spot, maturing 31 May 2015. The other $35 million was a standby line available until end-2014, not cash in hand. Management framed it as funding Timmins West to full production with little dilution.
debt financing
3 Apr
Two announcements in one filing. Bell Creek measured and indicated resources rose more than 150% to 646,431 ounces (4,249,451 t at 4.73 g/t) with 953,845 ounces inferred (6,088,506 t at 4.87 g/t), reflecting roughly 425,000 ounces converted from inferred and 185,000 ounces newly added. And Timmins West got its first reserve: 823,848 ounces probable (4,922,180 t at 5.21 g/t), a 73% conversion of indicated resources and enough for five years of production.
resource reserve update
8 Mar
Closed the Franco-Nevada transaction announced on 8 February: the US$35 million royalty payment and the C$15 million share purchase were both received, taking pro-forma cash to about C$95 million at the end of February.
material agreement
2 Mar
Lake Shore published a preliminary economic assessment for Timmins West (Timmins and Thunder Creek deposits together), which envisions about 1.4 million oz over 10 years, average cash operating costs of US$625/oz, and a mill expansion from 2,000 to 3,000 t/d costing $67 million. It is preliminary and includes inferred resources; it replaces the 2007 pre-feasibility study, which the company said is no longer valid. A notice of the annual general meeting was also attached.
regulatory community update
16 Feb
Updated the Timmins West resource to 1,914,000 ounces in total - 1,122,500 ounces indicated (5,826,000 t at 5.99 g/t) and 791,500 ounces inferred at 5.76 g/t - across the Timmins and Thunder Creek deposits, with the Timmins deposit alone at 882,400 ounces. A preliminary economic assessment and first reserve were promised for the quarter.
resource reserve update
10 Feb
Franco-Nevada agreed to pay US$35 million for a 2.25% net smelter royalty over the Timmins West Complex and a further C$15 million for 10,050,591 shares at C$1.49, a 5% premium to the 10-day average. About C$50 million of funding ahead of the mine ramp-up, for roughly 3% dilution plus a permanent revenue slice.
material agreement

2011

18 Nov
One filing carried two maiden resources: Thunder Creek at 2,877,000 t grading 5.64 g/t for 521,600 ounces indicated plus 2,693,000 t at 5.89 g/t for 510,000 ounces inferred, and Fenn-Gib at 40.8 Mt grading 0.99 g/t for 1.30 million ounces indicated plus 24.5 Mt at 0.95 g/t for 0.75 million ounces inferred. Fenn-Gib met the 2-million-ounce target set when Barrick sold it about six months earlier.
resource reserve update
28 Oct
Fenn-Gib hole FG-11-04 cut 1.31 g/t gold over 414.0 m, including 1.54 g/t over 264.0 m, and ended in mineralisation 470 m below surface; shallow mineralisation was extended 200 m north. Three twin holes matched or beat the historic results and check sampling of about 200 core halves averaged 1.12 g/t against 0.91 g/t originally, so the inherited data was if anything understated.
drilling result
22 Aug
Completed the purchase of Barrick Gold's Fenn-Gib and Guibord Main properties, 60 km east of Timmins, for 14.9 million shares - 3.9% of the company and no cash. Management targeted a first resource of at least 2 to 3 million ounces there, making it the third gold complex Lake Shore Gold held along the Porcupine-Destor fault.
asset acquisition disposition
29 July
NYSE Amex approved a US listing, with trading to start 1 August 2011 under LSG alongside the existing TSX line. This is where the SEC filing record held here begins; the company was already producing in Timmins and had been TSX-listed for years.
listing compliance notice
26 July
Underground and surface drilling at Thunder Creek confirmed and extended mineralization above and below the 730 Level, with 7.57 g/t gold over 108.8 m, 7.01 g/t over 112.7 m, 4.70 g/t over 145.7 m and 10.19 g/t over 55.0 m. A surface hole 500 m southwest returned 8.07 g/t over 2.1 m, pointing to a potential new zone along the TC-144 trend.
drilling result
17 June
Lake Shore filed a technical report dated June 14, 2011 giving the first formal resource estimate for the Vogel/Schumacher deposit, part of the Bell Creek Complex near Timmins. The excerpt provided cuts off before the resource table, so no ounce or grade figures can be stated here; a 16 June 2011 drilling press release was also attached.
resource reserve update