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

RE:RE:Debenture repayment planning

[JRaffles]

My comment on your options are in red below:-

1. Completely pay off the debentures?  (Is this the best way to use the money? Why?). The debentures are at a 6.5% yield.  If cheaper debt could be found to replace debentures, then this debt could be rolled over. When the debentures were issued, LSG was not a highly rated company. If performance continues, then a new facility could be negotiated in 2017. 

2. Roll them forward? As above, but in order to reduce dilution, they could be bought back with non convertible debt.  The share price may dictate whether some Deb holders exercise their convertion option, but there may be a residue that could be replace by non convertible debt.

3. Take the money and  really fast track the 144?  Their is probably an optimum development plan for 144, but it is probably best to increase production with 144 ore.

4. Expand the mill (you don't have to sell all the extra gold produced)  If existing capacity is reduced when 144 comes on stream, then mill should be expanded to cope with unexpected new ore for processing. McEwen's Goldcorp used to hoard gold production and sell it at opportune times.  A tax advantage is that tax does not become payable until the gold is sold.  Gold in stock is valued at cost of production.  At the present time, the balance of probabilities is that gold stock could appreciate more than Canadian $'s. 

5. Spend $50 million on Fenn Gib and get Barrick to pay $100 million for 51% if it goes over
     5 million oz. - That or LSG gets the entire amount. (Remember this is an open pit type of
    deposit that does great in a low price oil environment) Use the money from Barrick to
    build a mill there - should pay for the 49% that LSG would owe? Depending on Deb repay / roll over plans, this would ideally be started up if oil costs were low for a number of years.  with low grade output, a concentrator could be the way forward.  The ore would be concentrated, maybe 20 times, for trucking.  How far is Fenn Gibb from a mill?

6.  Increase the shaft dept at Bell Creek?  No view on this at the moment.

7.  Buy companies like EXS and those along the 144 strike? This could be a means of increase SH value in long term.  Care should be taken not to commit too much capital to many exploration projects, if predator companies could take LSG before benefits can be generated.

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