Lake Shore and Holmer Gold plan merger (October 20, 2004)

Vancouver – Terms of agreement have been reached between Lake Shore Gold (LSG-V) and Holmer Gold Mines (HGM-V) on a planned merger.

The marriage will combine the joint venture interests in the Timmins Gold Project, that has seen a significant resource increase over the past year, and the company’s other mineral properties in the Abitibi Greenstone Belt gold-camp of northeastern Ontario and northwestern Quebec.

The deal, having been anticipated by the investment market, will be consummated by Lake Shore issuing one share for every 1.5 Holmer Gold common shares. The valuation was reached by independent analysis and will be put to vote to each company’s shareholders and is also subject to regulatory approval. Consolidation of ownership interests will most likely garner positive reaction from investors and reduce joint financial operating costs for both companies.

Since optioning the Timmins Gold Project in mid-2003, Lake Shore has aggressively drilled over 31,000 metres of core, resulting in a 200% increase (using uncut grades) in resource figures over a 2002 Watts, Griffis McOuat calculated resource.

The project now has an indicated resource estimate of 1.4 million tonnes averaging 11 grams gold per tonne, with a 6-gram gold cut-off grade. An additional 200,000 tonnes of inferred resource at 8.7 grams gold has been outlined.

The latest figures from Lakeshore Gold show 34.5 million shares outstanding with it recently trading in the $1.00-1.10 per share range. Holmer Gold shows 48.8 million shares outstanding and the issue saw a jump of about a dime, to the 60-65 per share range, on the announcement with volume of almost 1.1 million shares.