Lake Shore Gold scores rich hits, Richmont Mines PEA points to lower costs

POSTED ON October 28, 2015 BY James Fraser
CATEGORY Lake Shore Gold, Richmont Mines, Stories,

Lake Shore Gold pour, February 2015 (Image: Lake Shore Gold)

This morning I take a look at some drill results from Lake Shore Gold and a PEA from Richmont Mines.

Lake Shore Gold - (LSG:TSX) - Timmins producer Lake Shore is out with 60 assays and 11 wedge cuts from the 144 trend. The assay results look very promising with some nice high grade intercepts. The first resource for the 144 Gap Zone is expected in early 2016.

Highlights

First underground hole into western portion of 144 Gap Zone intersects 6.85 gpt over 59.2 m
Additional underground delineation holes in northeast portion of 144 Gap Zone intersect 79.52 gpt/8.3 m, 10.91 gpt/11.9 m, 5.19 gpt/13.3 m, 5.29 gpt/18.1 m, 5.36 gpt/ 28.1 m, 6.98 gpt/36.1 m, 6.05 gpt/31.5 m, 11.64 gpt/8.9 m and 4.39 gpt/37.9 m
Surface delineation holes targeting top portion of 144 Gap Zone intersect 12.13 gpt/13.8 m, 6.58 gpt/28.1 m, 5.76 gpt/24.5 m, 4.96 gpt/20.4, 4.78 gpt/13.9 m, 4.06 gpt/21.7 m, 4.29 gpt/15.1 m, 4.78 gpt/13.0 m and 3.23 gpt/ 16.9 m
Surface drilling at 144 South discovers new zones of gold mineralization 450 metres below and northeast of previous drilling (Key intercepts: 3.11 gpt/19.1 m, 5.38 gpt/3.6 m, 4.27 gpt/7.3 m, and 9.59 gpt/ 3.0 m)

Tony Makuch, President and CEO of Lake Shore Gold, commented: "Today's drill results are very significant and include additional high-grade intercepts from delineation drilling at the 144 Gap Zone and the discovery of new zones of mineralization at 144 South, approximately 1.6 km further away. As with our initial underground drill results in the 144 Gap area released in September, the holes released today are similar to, and in some cases better than, the results from earlier surface drilling in the same areas. We are also very pleased with initial results from our surface exploration program, which continues to demonstrate our ability to identify new zones of gold mineralization as we move to the southwest from the 144 Gap Zone and highlights the considerable potential of the 144 Trend to host multiple gold deposits. With our exploration drift completed, we now have six underground drills operating at the 144 Gap Zone and remain on track to achieve our objective of releasing a first resource early in 2016."

Lake Shore has had a great year as the mine is generating free cash flow and exciting drill results from the 144 zone have pushed the share price higher. Shares are up more than 8% in early trading this morning.

LSG remains one of my favourite junior gold producers to follow.

Read: Lake Shore Gold Reports Continued Drilling Success at 144 Gap, Discovers New Gold Mineralization at 144 South

Richmont Mines - (RIC:TSX) - Richmont Mines is out with a PEA for a portion of the deeper resources at the currently producing Island Gold Mine. The PEA is good news for shareholders and shows potential for higher production and lower costs. A cash cost of $552 per ounce is expected in years 2017-2022 which would be among the lowest quartile in the industry. In the second quarter of this year, Richmont's cash costs were $974.

PEA Highlights:

The PEA considers a phased approach with Phase 1 consisting of the development and extraction of the resources from a depth of 450 metres to 860 metres over three long-hole mining horizons.
Following the 2015 to 2016 transitional period, a Base Case scenario using average productivity levels of 800 tonnes per day estimates potential average production of approximately 78,000 gold ounces per year from 2017 to 2022, at an expected average diluted mined grade of 8.67 g/t.
In the first half of 2017, it is expected that production will be extracted from three mining horizons, with 80% of the mineralized material located in the lower two horizons (50% in the third mining horizon).
The Base Case scenario considers that project capital expenditures related to underground development and infrastructure, and milling and tailings facilities will be completed in 2016 with only sustaining capital investment requirements over the six year period from 2017 to 2022.
The Base Case estimates average cash costs of approximately $552 per ounce for the period 2017 to 2022.
For the Base Case, total sustaining capital costs are expected to be $40.5 million for the period 2017 to 2022 with the majority of the capital expenditures in the first three years.
The PEA shows that once mining activities reach the third mining horizon in the first half of 2017, mining productivity could potentially be increased to 1,150 tonnes per day.

"Our growing confidence in the potential of the Island Gold Mine underpins our long-term vision for this core asset with the study being just the first step in unlocking that potential. Phase 1 evaluated the most cost effective extraction of a portion of the Mineral Resources located below the 450 metre level under a Base Case scenario of 800 tonnes per day, as well as a potential Expanded Case from 2017. Implementation of a dedicated haulage ramp scenario would leverage the accelerated underground development program underway in 2015 and into 2016" commented CEO Renaud Adams. "To best position the operation for long-term shareholder value creation, we have taken a very disciplined and phased approach when evaluating potential near-term growth opportunities to ensure we also maintain optimal flexibility for future production growth opportunities. Accordingly, while the potential 1,150 tonne per day expansion scenario indicates the utilization of a dedicated haulage ramp as the preferred option, we also see potential for additional Mineral Resources below the 1,000 metre level and as such, we will continue to evaluate the potential for an internal shaft system in conjunction with the ramp system as we gain additional information from our drilling programs."

Richmont is an often-overlooked name in the small producer space, having produced over 1.5 million ounces in the last 25 years.

The float is only 58.3 million shares and with a $4.27 share price, you have a market cap of just under $250 million.

A webcast is being held this morning for more details from management on the PEA and can be found here. I listened in to the first part of the call and management is very focused on creating shareholder value.

Richmont was profitable in each of the first 2 quarters this year. Third-quarter results are scheduled to be released on Nov. 5.

Read: Richmont Mines Announces Results of a Preliminary Economic Assessment for a Portion of the Deeper Resources of the Island Gold Mine

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James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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