LSG - Lake Shore Gold (TSX) - Page 2

TORONTO, ONTARIO--(Marketwire - May 10, 2012) -Lake Shore Gold Corp. (TSX:LSG)(NYSE Amex:LSG) ("Lake Shore Gold" or the "Company") today announced financial and operating results for the first quarter 2012. During the first quarter, the Company achieved better than expected production levels and operating costs, completed significant development and continued making operating improvements, announced strong growth in resources, and released an updated reserve and Preliminary Economic Assessment ("PEA") for the Timmins West Mine.

Tony Makuch, President and CEO of Lake Shore Gold, commented: "We are pleased with our performance in the first quarter, which included beating our targets for both production and operating costs while at the same time remaining on schedule with a very extensive development program. Through this program we are positioning the Company for significantly higher levels of production beginning later in the year to coincide with the scheduled completion of our mill expansion to a capacity of 3,000 tonnes per day.

"Based on our plans and the progress we are making, we see Lake Shore Gold fast approaching a major turning point. Looking out just a few months, we expect to be producing at a rate of 25,000 to 30,000 ounces of gold per quarter, with further growth coming. Also, we will be well advanced with the capital program for the Timmins West Mine, including the work related to our mill expansion. We will have significantly de-risked the Timmins West Mine project and be looking towards 2013 positioned for strong production growth and for the Mine to begin generating positive free cash flow."

First Quarter 2012 Highlights

• Significant development, ore delineation and stope preparation work performed with the capital program for development of Timmins West Mine on track for completion by late 2012, positioning the Mine for strong production growth and positive free cash flow in 2013.
  • 2,900 metres of total capital development completed
  • 33,000 metres of definition and delineation drilling completed.
     
• Gold poured in the first quarter of 2012 totaled 16,180 ounces, higher than the Company's target of 15,000 ounces. The level of production in the first quarter 2012 largely reflected the Company's work plan, which included extensive development work Gold poured in the first quarter of 2011 totaled 25,900 ounces.
   
• Processed gold in the first quarter 2012 was 16,680 ounces (160,510 tonnes grading 3.40 grams per tonne) compared to 22,328 ounces (148,400 tonnes grading 4.89 grams per tonne) during the first quarter of 2011.
   
• Total gold sales in the first quarter of 2012, including sales capitalized to mining properties, totaled 18,474 ounces (including 14,437 ounces related to commercial production) compared to total sales of 33,954 ounces (14,635 ounces related to commercial production) in the same quarter a year earlier.
   
• Cash operating costs⁽¹⁾ were US$1,048 per ounce, better than the Company's target of US$1,450 per ounce due to higher production levels and lower than expected mining costs which averaged $109 per tonne.
   
• Cash earnings from mine operations⁽¹⁾ in the first quarter of 2012 were $9.4 million which compared to cash earnings from mine operations of $11.4 million in the first quarter of 2011, reflecting higher cash operating costs in 2012 due to planned extensive development in the quarter.
   
• Net loss in the first quarter 2012 totaled $3.0 million or $0.01 per common share compared to net earnings of $2.2 million or $0.01 per common share in the first quarter 2011. The net loss in the first quarter 2012 largely related to higher non-cash charges, including depletion, depreciation and the Company's share of loss of equity investments, and the impact of higher levels of mine development on operating costs in the first quarter 2012 compared to the first quarter 2011.
   
• Approximately $50.0 million of capital was raised through royalty and equity investment transactions with Franco-Nevada Corporation, with an agreement reached with Sprott Resource Lending Partnership for a $70 million credit facility (expected to close in May 2012).
   
• Capital expenditures totaled $39.0 million, with an additional $4.5 million of expenditures for exploration.
   
• Cash, cash equivalents and gold bullion inventory totaled $71.4 million at March 31, 2012 ($65.7 million of cash and cash equivalents, net of outstanding cheques, and $5.7 million of gold bullion inventory).

Outlook

In 2012, Lake Shore Gold is focused on completing the capital program for growing the Timmins West Mine, including expanding its mill to 3,000 tonnes per day, which will position the Company for strong production growth and positive free cash flow from Timmins West Mine starting in 2013.

Significant planned development, ore delineation and stope preparation activities early in the year affected the Company's production and operating costs during the first quarter of 2012. As the year progresses and the Timmins West Mine capital program nears completion, production levels, supported by higher grades, are expected to increase at improved cash costs. Second quarter 2012 production is estimated at 20,000 to 25,000 ounces of gold poured. The Company's full-year targets for 2012 remain unchanged, including production of 85,000 to 100,000 ounces poured at average cash costs of US$825 to US$875 per ounce.

At the end of the first quarter of 2012, the Company remained on track for capital spending of $160.0 million during the year to complete the growth capital program for Timmins West Mine, of which $93 million relates to development work at Timmins West Mine and $67.0 million to the mill expansion and other milling costs. The Company also expects capital spending during the year of approximately $18.0 million to advance Bell Creek Mine and an additional $15.0 million for exploration.

Based on existing cash resources, the Company is positioned to fund the $160.0 million of expenditures relating to Timmins West Mine and the Mill. Following the closing of the Sprott Credit Facility, expected in late May 2012, the Company will be positioned to fund all of its planned expenditures while maintaining a strong treasury.

All cash flow and other financial projections for 2012 are based on an assumed average gold price for the year of US$1,650 per ounce and a C$/US$ exchange rate of 0.98.

Conference Call & Webcast

Lake Shore Gold will also host a conference call and webcast on Friday, May 11, 2012 at 10:00 am EST to discuss the Company's first quarter 2012 financial and operating results. Those wishing to access the call can do so using the telephone numbers that follow. The call will also be webcast and available on the Company's website.

About Lake Shore Gold

Lake Shore Gold is a gold mining company that is in production and pursuing rapid growth through the successful exploration, development and operation of three wholly owned, multi-million ounce gold complexes in the Timmins Gold Camp. The Company is in commercial production at both the Timmins West and Bell Creek mines, with material being delivered for processing to the Bell Creek Mill. A 50% mill expansion, to 3,000 tonnes per day is progressing and is targeted for completion by late 2012. The Company continues to have an active drilling program aimed at supporting current operations and evaluating high-priority exploration targets around the Timmins Camp. The Company's common shares trade on the TSX and NYSE Amex under the symbol LSG.