Canadian junior gold miners are thriving

By Scott Wright
Zeal Speculation and Investment

canmap160Canada’s prolific Abitibi greenstone belt is one of the world’s top jurisdictions for gold mining. And by far its most productive district is the famous Timmins district. Timmins has produced in the neighborhood of 70m ounces of gold over the course of its storied history. And with Lake Shore Gold’s Timmins West mine now firing on all cylinders, this district is still going strong.

Lake Shore Gold is one of the few bright spots in the currently beaten-down gold-mining industry. On the production front its 2014 midpoint guidance of 170k ounces represents a year-over-year increase of 26%. And with cash operating costs guided at $725 per ounce, they’ll come in lower than the previous year’s.

Production growth and cost declines are certainly countertrend to what we’ve been seeing amongst Lake Shore’s peers. And to make things even sweeter, Lake Shore has so far greatly outperformed its guidance measures. Through the first half of this year it has produced 96,900 ounces, at cash costs of only $600.

On an annualized basis this would lead to a 44% increase in year-over-year production volume, and a 22% drop in cash costs. And with H1’s all-in sustaining costs estimated at only $890, Lake Shore’s total costs are easily in the lower quartile of industry average. This has allowed it to generate net free cash flow, which has served to build up its treasury and aggressively pay down debt.

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