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

Reuters update...

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Lake Shore shares jump on Franco-Nevada deal

TORONTO, Feb 9 (Reuters) - Shares of Lake Shore Gold were among the top gainers on the Toronto Stock Exchange on Thursday after the gold miner struck a deal for a $50 million cash injection from royalty firm Franco-Nevada .

The junior miner, whose shares rose more than 17 percent in midday trading, was also the most actively traded stock on the Toronto Stock Exchange. Shares of Lake Shore were up 24 Canadian cents at C$1.62 at 12.20 p.m. (1720 GMT).

Lake Shore, which owns a number of properties in northern Ontario, struggled last year as production cuts and expansion delays led to a more than 60 percent decline in its share price.

Late on Wednesday, Franco-Nevada said it would pay C$15 million to buy 10.05 million shares of Lake Shore. The firm also agreed to pay $35 million for a 2.25 percent net smelter return royalty on the sale of minerals from Lake Shore’s Timmins West complex in northern Ontario.

Analysts said that although the deal is slightly dilutive to existing Lake Shore shareholders, the proceeds would help fund most of the miner’s near-term project development needs.

"We believe Lake Shore is fully funded to execute its 2012 growth plan," said National Bank analyst Paolo Lostritto in a note to clients. "Further clarity is expected with the release of its 2012 budget within the fourth-quarter 2011 financials."