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

RE: Re. Goldhappy..wow look at Gold feilds costs

[goldhappy]

Lorn...What is happening is the supply and demand process. Gold demand is very high and in short supply. As a result we have the bidding driving prices ever higher. Gold price has stalled likely because of the USA controls you speak about.Higher gold prices drive miners searching and mining lower grade gold. Supplies,  material,labour and fuel etc. have gone up and will hurt producing companies with low grades. Check out my little chart below. I placed a mining cost of $95 per ton...that is for your cash costs of material,supplies,labour,fuel etc. As the grade increases the amount of tonnage mined to produce one oz of gold decreases. My grade example is roughly the current grade range of LSG. As capital spending is reduced LSG operating costs for the shallow ore should come in line with these costs. If the average operating cost is in the $750 range, the grades mined are very lean. Mining lower grades will give less value per year to the shareholder but will extend the life of the mine. (Roughly 31.1 grams per oz of gold) Mining lower grade material stops when the price of gold drops low for extended periods. If the USA is holding the price of gold from spiking higher that might be good. The reason it is good in my opinion is the price of gold should not drop too much.

Cost Per ounce varies according to grades mined Use $95 per ton for this example   
 3.5  grams  requires  8.88 tons per oz  $843.60
 4.5 grams requires   6.91 tons per oz  $656.45
 5.0 grams  requires  6.22 tons per oz  $590.90
 5.5  grams requires  5.65 tons per oz  $536.75