LAKE SHORE GOLD CORP 6.25 PCT DEBS T.LSG.DB

FYI

[HARJAY]

TD precious metals outlook this morning Lakeshore one of TD ;s yop picks with at $1.40 target Precious Metals Outlook Q1/14 Preview: Expect Muted Margins with Costs Largely Stabilizing The Q1/14 earnings season for precious metal producers begins this week with Alamos and Newmont reporting. The average gold price was slightly higher in Q1; while increasing a modest +1.6% q/q, it was the first quarterly increase since Q4/12. Silver was slightly lower (-1.6%) and base metals were mixed with zinc up 6.4% and copper and lead falling 1.8% and 0.9% respectively. Currencies in most major gold producing countries were weaker against the USD, particularly in Argentina with the ARS depreciating almost 26% versus the dollar. We estimate that average Q1 gross margins should stabilize at ~$590/oz with a slightly higher gold price offsetting slightly higher cash costs. In our view 2014 cost guidance was somewhat disappointing - after the Q4 results, our average forecast 2014 AISC increased by ~$50/oz from the average we expected at the beginning of the year. We suspect that management guidance could be conservative at this point given the challenges in the sector over the past couple of years and we hope to see some evidence of this with the Q1 results. Production is largely expected to decline across our universe with Q1 traditionally representing a weaker quarter as companies position for sequential growth throughout the year. We see notably weaker production from the large cap producers with 5 of 8 large caps expected to show q/q declines – as a whole we expect production to be down ~7% for this group. We expect mixed production results from the mid/small cap producers with Primero and Detour leading the pack with expected double digit growth. Our top picks are Eldorado Gold Corp. (ELD-T), Goldcorp Inc. (GG-N), B2Gold Corp. (BTO-T), Primero Mining (P-T) and Lake Shore Gold Corp. (LSG-T).