lsg2015 q2 conferencecall_2015-07-30
TRANSCRIPT
TSX, NYSE MKT: LSG
Lake Shore Gold TSX: LSG
NYSE MKT: LSG
1
L A K E S H O R E G O L D C O R P.
First Half and Second Quarter 2015
Conference Call & Webcast
July 30, 2015
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Information included in this presentation relating to the Company's expected production levels, production growth, costs, cash flows, economic returns, exploration
activities, potential for increasing resources, project expenditures and business plans are "forward-looking statements" or "forward-looking information" within the meaning
of certain securities laws, including under the provisions of Canadian provincial securities laws and under the United States Private Securities Litigation Reform Act of
1995 and are referred to herein as "forward-looking statements." The Company does not intend, and does not assume any obligation, to update these forward-looking
statements. These forward-looking statements represent management's best judgment based on current facts and assumptions that management considers reasonable,
including that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts, labour disturbances, interruption in
transportation or utilities, or adverse weather conditions, that there are no material unanticipated variations in budgeted costs, that contractors will complete projects
according to schedule, and that actual mineralization on properties will be consistent with models and will not be less than identified mineral reserves. The Company
makes no representation that reasonable business people in possession of the same information would reach the same conclusions. Forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by the forward-looking statements. In particular, delays in development or mining and
fluctuations in the price of gold or in currency markets could prevent the Company from achieving its targets. Readers should not place undue reliance on forward-looking
statements. More information about risks and uncertainties affecting the Company and its business is available in the Company's most recent Annual Information Form
and other regulatory filings with the Canadian Securities Administrators, which are posted on sedar at www.sedar.com, or the Company’s most recent Annual Report on
Form 40-F and other regulatory filings with the Securities and Exchange Commission.
QUALITY CONTROL
Lake Shore Gold has a quality control program to ensure best practices in the sampling and analysis of drill core. A total of three Quality Control samples consisting of 1
blank, 1 certified standard and 1 reject duplicate are inserted into groups of 20 drill core samples. The blanks and the certified standards are checked to be within
acceptable limits prior to being accepted into the GEMS SQL database. Routine assays have been completed using a standard fire assay with a 30-gram aliquot. For
samples that return a value greater than three grams per tonne gold on exploration projects and greater than 10 gpt at the Timmins mine and Thunder Creek underground
project, the remaining pulp is taken and fire assayed with a gravimetric finish. Select zones with visible gold are typically tested by pulp metallic analysis on some projects.
NQ size drill core is saw cut and half the drill core is sampled in standard intervals. The remaining half of the core is stored in a secure location. The drill core is
transported in security-sealed bags for preparation at ALS Chemex Prep Lab located in Timmins, Ontario, and the pulps shipped to ALS Chemex Assay Laboratory in
Vancouver, B.C. ALS Chemex is an ISO 9001-2000 registered laboratory preparing for ISO 17025 certification.
QUALIFIED PERSON
Scientific and technical information related to mine production and reserves contained in this presentation has been reviewed and approved by Natasha Vaz, P.Eng., Vice-
President, Technical Services, who is an employee of Lake Shore Gold Corp., and a “qualified person” as defined by National Instrument 43-101 – Standards of
Disclosure for Mineral Projects (“NI 43-101”).
Scientific and technical information related to resources, drilling and all matters involving mine production geology, as well as exploration drilling, contained in this
presentation, or source material for this presentation, was reviewed and approved by Eric Kallio, P.Geo., Senior Vice-President, Exploration. Mr. Kallio is an employee of
Lake Shore Gold Corp., and is a “qualified person” as defined by NI 43-101.
Forward-Looking Statements
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Gold sales 98,500 oz
Revenue $146.6M
H1/15 – Record Half-Year Performances
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(1) Example of non-GAAP measure, see Slide 19 for more information
(2) All-in sustaining costs
Cash operating costs(1) US$551/oz
(Based on production costs of $67.2M)
All-in sustaining costs(1)(2) US$809/oz
H1/15 – Record Half-Year Performances
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(1) Example of non-GAAP measure, see Slide 19 for more information
Cash earnings from mine operations(1)
$79.6M
Earnings from mine operations $37.6M
Cash flows from operating activities
$62.3M
H1/15 – Record Half-Year Performances
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0
10
20
30
40
50
60
70
80
90
Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 July 29/15
15.2
34.0 39.1
53.4
67.3 61.5
77.1
83.8
Strong Growth in Cash and Bullion
Cash & Bullion of Approx. $83.8 Million at July 29/15
Cash & Bullion(1) increased $22.3M YTD 2015
(1) Bullion valued at market prices at period end
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7% Increase in Revenue
5% increase in C$ gold price vs
H1/14 (C$1,488/oz vs C$1,416/oz
Higher price reflected weaker
C$ (US$0.81:C$1.00 vs
US$0.91:C$1.00 in H1/14)
2% increase in sales volumes
(98,500 oz vs 96,500)
Revenues
Sales
(Ounces)
Price
(US$/oz)
Price
(C$/oz)
Revenues
($ millions)
H1/15 98,500 1,208 1,488 146.6
H1/14 96,500 1,291 1,416 136.6
H1/15 – Higher C$ Price Drives Revenue Growth
136.6 146.6
2.9 7.1
40
60
80
100
120
140
160
H1/14 Production Price H1/15
Change in Revenue
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H1/15 – Net Earnings of $13.8 Million
17.5 4.8
10.0
3.6
2.7 0.6 0.3
11.5
4.0 0.6
13.8
0
5
10
15
20
25
30
35
40
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Completed repayment of senior secured debt in May
Debt servicing costs reduced >$1.0M per month
Continued progress at 144 Gap Zone
Expenditures of $11.4 million
85,400 metres drilled from surface
Exploration drift extended 940 m
Underground drilling commencing – 40,000 m in H2/15
Second gold discovery announced – 144 Gap SW Zone
H1/15 – Other Highlights
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Multiple Targets Along 144 Trend
Timmins West Mine
144 Gap Zone Discovery (Within 500 m of Thunder Creek)
Near-Term Exploration
Targets
Gold River Trend
TC–144 Trend
Gold River Project M&I: 690k tonnes @ 5.3 gpt (117k oz)
Inferred: 5.3M tonnes at 6.1 gpt (1.0M oz)
Timmins
Deposit
Thunder
Creek
144
North
144 South
144 Gap SW Zone Discovery (Within 200 m of 144 Gap Zone)
144 Gap
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400m 200m 125m
Thunder Creek 144 GAP 144 GAP SW
HWY-15-116
3.30/40.8m
Incl. 6.12/9.5m
Incl. 4.16/6.8m
Incl. 5.18/2.90m
HWY-15-125
3.22/14.7m
HWY-15-123
3.73/10.2m
HWY-15-126
6.24/3/3.3m
6.40/1.20m
HWY-15-127
6.02/1.5m
13.87/16.5
3.15/11.4m
HWY-14-48
5.37gpt/46.00m
4.06gpt/5.10m
5.76gpt/1.20m
HWY-15-78W1
6.75/2.50m
2.78/17.1m
HWY-15-58W1
5.43/4.5m
5.06/3.2m
HWY-15-134
5.92/7.0m
10.14/2.10m
3.37/3.5m
3.74/12.6m
4.12/3.50m
HWY-15-128
3.29/6.0m
5.38/6.5m
144 Gap SW Zone Second Zone Discovered 200M from 144 Gap Zone
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Gold sales 45,900 oz
(Production 42,600 oz)
Revenue $67.4M
Q2/15 – Solid Quarter Following Record Q1/15
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Cash operating costs US$597/oz (based
on production costs of $33.8M)
All-in sustaining costs US$877/oz
Q2/15 – Solid Quarter Following Record Q1/15
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Cash earnings from mine operations $33.7M
Earnings from mine operations $14.2M
Cash flows from operating activities $26.4M
Q2/15 – Solid Quarter Following Record Q1/15
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Revenue
14% reduction in ounces sold
reflects impact of sequencing on
grades (4.2 gpt in Q2/15 vs 5.4
gpt in Q2/14)
5% increase in C$ gold price
partially offset volume impact
(C$1,470/oz vs C$1,404/oz)
Higher price reflected weaker
C$ (US$0.81:C$1.00 vs
US$0.92:C$1.00 in Q2/14) Revenues
Sales
(Ounces)
Price
(US$/oz)
Price
(C$/oz)
Revenues
($ millions)
Q2/15 45,900 1,197 1,470 67.4
Q2/14 53,500 1,289 1,404 75.1
Q2/15 – Revenue Reflects Lower Volumes
75.1
67.4
(10.6)
3.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
80.0
Q2/14 Production Price Q2/15
Change in Revenue
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12.9
1.0 1.7
1.8 1.1
0.9 0.5
7.7
6.5
0.3 0
2
4
6
8
10
12
14
16
18
20
Q2/15 – Net Earnings of $1.7 Million
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2015 Targets Revised 2015 Initial 2015 Q2/15 H1/15
Targets Targets (Actual) (Actual)
Ounces produced (in thousands) 180.0 170.0 –180.0 42,600 95,600
Cash operating costs (US$/oz) <650 650 – 700 597 551
All-in sustaining costs (US$/oz) <950 950 – 1,000 877 809
Total production costs ($ millions) 125 125 33.8 67.2
Key Assumptions in Targets
Average gold price (US$/oz) 1,170 1,170 1,197 1,208
US$/C$ exchange rate (US$) 0.81 0.90 0.81 0.81
2015 Guidance
Positive Revisions Announced July 8th
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Additional drill results from 144 Trend
Completion of exploration drift
40,000 metres underground drilling H2/15
@ 55,000 metres surface drilling
• 144 Gap SW Zone
• 144 North
• 144 South
Underground exploration program at Bell Creek Mine
32,500 metres underground drilling in H2/15
H2/15 – Other Catalysts
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(1) The Company’s MDA”s for the first half and second quarter of 2015 and 2014 are posted at www.sedar.com and on the Company’s website at www.lsgold.com.
Non-GAAP Measures(1)
Cash Operating Costs per Ounce
Cash operating cost per ounce is a Non-GAAP measure. In the gold mining industry, cash operating cost per ounce is a common performance measure
but does not have any standardized meaning. Cash operating costs per ounce are based on ounces sold and are derived from amounts included in the
Consolidated Statements of Comprehensive Income and include mine site operating costs such as mining, processing and administration, but exclude
depreciation, depletion and share-based payment expenses and reclamation costs. The Company discloses cash cost per ounce as it believes this
measure provides valuable assistance to investors and analysts in evaluating the Company’s performance and ability to generate cash flow. This
measure should not be considered in isolation or as a substitute for measures prepared in accordance with GAAP such as total production costs. A
reconciliation of cash operating costs and cash operating cost per ounce sold to total production costs for the three and six months ended June 30, 2015
is set out on page 19 of the Company’s Management Discussion and Analysis (“MD&A”) for the first half and second quarter 2015.
All-In Sustaining Costs per Ounce
AISC is a Non-GAAP measure. The measure is intended to assist readers in evaluating the total costs of producing gold from current operations. While
there is no standardized meaning across the industry for this measure, the Company’s definition conforms to the AISC definition as set out by the World
Gold Council in its guidance note dated June 27, 2013. The Company defines all-in sustaining cost as the sum of cash costs from mine operations,
sustaining capital (capital required to maintain current operations at existing levels), corporate general and administrative expenses, in-mine exploration
expenses and reclamation cost accretion related to current operations. All-in sustaining cost excludes growth capital, growth exploration expenditures,
reclamation cost accretion not related to current operations and interest and other financing costs. A reconciliation of all-in sustaining costs and all-in
sustaining cost per ounce to total production costs for the three and six months ended June 30, 2015 is set out on page 20 of the Company’s MD&A for
the first half and second quarter 2015 .
Cash Earnings from Mine Operations
Cash earnings from mine operations is a Non-GAAP measure and does not have any standardized meaning. The Company discloses cash earnings from
mine operations as it believes this measure provides valuable assistance to investors and analysts in evaluating the Company’s ability to finance its
ongoing business and capital activities. The most directly comparable measure prepared in accordance with GAAP is earnings from mine operations.
Cash earnings from mine operations represent the earnings from mine operations prior to deducting non-cash expenses, and is calculated by adding
depletion, depreciation and share-based payments in production costs to earnings from mine operations. A reconciliation of cash earnings from mine
operations to earnings from mine operations for the three and six months ended June 30, 2015 is set out beginning on page 20 of the Company’s MD&A
for the first half and second quarter 2015