Lake Shore Gold Forecasts 2012 Cost Savings While Remaining on Track to Achieve Key Production Targets

Lake Shore Gold Corp

today announced plans to target a reduction in its 2012 capital spending program of $15 to $20 million while remaining on track to achieve its key production targets, including producing 85,000 to 100,000 ounces of gold in 2012 and achieving the production ramp up for the Timmins West Mine as outlined in the Preliminary Economic Assessment ("PEA") released earlier this year. Cost reductions during the year are expected to come from lower expenditures and the deferral of some work at Timmins West Mine, changes to the timing of the Company's mill expansion to be more aligned to the ramp up in mine production, and a reduction in planned exploration spending. Tony Makuch, President and CEO of Lake Shore Gold, commented: "In reviewing our 2012 business plans, we have identified a number of opportunities to reduce expenditures by realizing cost efficiencies and deferring work that is not essential in the near term. The changes we are making will allow us to reduce capital expenditures this year, while still achieving our key production targets. Looking at our 2012 production, we are in very good shape, having exceeded our target in the first quarter and, based on performance to date, the Company expects production at the upper half of our target range for the second quarter of 20,000 to 25,000 ounces." At Timmins West Mine, the Company expects to lower capital spending in 2012 by $5 to $10 million as a result of cost savings in underground development and deferral of non-critical capital programs that will not impact production guidance. The timing for the ongoing Bell Creek Mill expansion, where significant industry-wide cost pressures for materials and contract labour are being experienced, is being revised to be more closely aligned with the expected increase in mine production. As a result, the Company now plans to incrementally expand the processing capacity at the mill to 2,500 tonnes per day during the fourth quarter of 2012, with the 3,000 tonne per day capacity to be achieved in 2013. The revised schedule supports the Company's 2012 production targets as well as the production ramp up included in the Timmins West Mine PEA. According to the PEA, Timmins West Mine is expected to produce 130,000 ounces of gold in 2013, which equates to average mill throughput of approximately 2,300 tonnes per day, increasing to 160,000 ounces, or close to 3,000 tonnes per day, in 2014. The Company expects that the total cost to complete the mill expansion will exceed the previous estimate included in the Timmins West Mine PEA of $61 million by potentially 10% to 25%. The Company plans to spend approximately $56 million in 2012, with the remaining costs for the expansion to be incurred in 2013.