Lake Shore Q2 earnings meet expectations

Highly anticipated second-quarter results are in, and Lake Shore Gold (TSX: LSG; NYSE-Arca: LSG)­ ­delivered.

The company announced record quarterly production from its Timmins West and Bell Creek mines of 30,800 oz. gold — a 26% increase over what it produced this time last year.

That higher production came on the back of throughput of 230,920 tonnes, or 2,540 tonnes per day, at an average grade of 4.3 grams gold per tonne with average mill recoveries of 95.7%.

And things were only getting better as the quarter progressed at the two mines near Timmins, Ont., with an average throughput of 2,800 tonnes per day during most of June.

Average grades were also trending higher, coming in at 3.9 grams gold in April, 4.5 grams gold in May and 4.6 grams gold in June.

Gold sales for the quarter totalled 27,600 oz. at an average price of US$1,409 per oz.

The nearly 31,000 oz. production beat BMO Capital Markets’ estimate of 27,000 oz. gold, thanks to higher tonnage and realized grades.

But analyst Brian Quast expects that the impact on BMO’s earnings estimate would likely be minimal, given that the 27,000 oz. sales were lower than production, and in line with BMO’s estimate.

Lake Shore also reaffirmed its full-year guidance of 120,000 to 135,000 oz. gold production at cash costs of US$800 to $875 per oz.

It expects capex to ring in at $90 million for the year, as it expands the Bell Creek mill’s capacity to 3,000 tonnes per day from its current 2,500. The expansion will be finished by September. Once the mill is fully expanded, annual production is expected to reach 140,000 oz. per year, while costs should fall below US$700 per oz.

The production results had a positive effect on Lake Shore’s stock price, as it was up a cent to 34¢, on 1.4 million shares traded.

The upward movement continues recent positive momentum since losing a chunk of its market cap in mid-June. After a 45% decline in less than a week, the company’s stock roared back to life late in the month, after Lake Shore said it expected stronger production and lower costs in the second quarter.

In the first quarter the company produced 23,200 oz. gold averaging 3.8 grams, with cash-operating costs of US$982 per oz., including royalties.