Not a lot of gold mining companies were able to positively surprise us in the past two years, but Lake Shore Gold (LSG.TO; LSG) is one of the very few companies who did so. As promised by the management team, the production rate increased substantially to 45,600 ounces of gold in Q3 2014 and in excess of 140,000 ounces in the first nine months of the year.
More importantly, Lake Shore’s production cost structure is still under control as the AISC dropped to $858/oz in the third quarter, resulting in a very impressive free cash flow which will be used to strengthen the balance sheet. Furthermore, Lake Shore’s exploration efforts are definitely paying off and several high-grade mineralized zones have been discovered this year. This could lead to a higher overall resource estimate and a longer mine life.
With its decent production rate and low production cost, Lake Shore Gold could be on the radar of a few larger companies looking to acquire another project in a safe political jurisdiction. We wouldn’t be surprised if Lake Shore would be ‘in play’ this winter as right now, the company has everything a mining company would be looking for.
Disclosure: The author holds no position in Lake Shore Gold. Please see our disclaimer for current positions.