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Bullboard - Stock Discussion Forum LAKE SHORE GOLD CORP 6.25 PCT DEBS T.LSG.DB

TSX:LSG.DB - Post Discussion

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Post by JRaffles on Nov 27, 2012 7:37am

Undervalued stock

I bought this company’s shares in Sep 2009 for $3.09, at the time of the take over of West Timmins gold. Since the SP increased so rapidly to $4.10 three months later, I sold it.  I did the same again in 2010 from $2.62 to $3.12, but then decided to switch to Metanor, which I considered had a more attractive upside potential.  Metanor, lurched from one problem to another, but has not fallen as much in percentage terms as LSG. 

I revisited LSG, since I am a non professional trustee of a fund seeking a gold exposure. I resisted professional investor advice for any South American operations and suggested a look at LSG.  However, the professional was in LSG at about $0.80 in another fund and exited at $1.00, due to “expensive financing”.   However, the Sprott interest rates do not seem too high at circa 6%, whereas Metanor has recently raised working capital finance at over 10%, with conversion options.

A quick review of LSG’s numbers shows that:-

  • Cash and gold bullion stocks are more than long term debt at September 2012. Therefore, with issued capital at over $1bn, the company is not over leveraged.
  • The company has over 3.6m ounces of gold reserves.
  • The Market cap is about 33% of the book value of assets.    

At 2012 production, gold reserves give a 36 LOM and at the budgeted 150 once production this would give 24 years LOM.  There seems to be a possibility that management sought reserve expansion at the cost of delaying production on existing reserves?

This looks to be a much undervalued prospect at todays and I will continue to monitor it, particularly as the high short position may have to cover quickly.

Comment by Golfcar72 on Nov 27, 2012 11:20am
I do agree that, through the right lens, the company is undervalued.  Your quick analysis in bullet #1 does not accurately reflect their leverage, as the short-term debt is not included.  Cash & Equivalents are .65 of Debt (long & short term), or a $60 million deficiency.  Given their operating results, proven operational history, and necessary capital for development, that ...more  
Comment by JRaffles on Nov 27, 2012 11:48am
Your quick analysis in bullet #1 does not accurately reflect their leverage, as the short-term debt is not included. Read more at https://www.stockhouse.com/bullboards/messagedetail.aspx?p=0&m=31827987&l=0&r=0&s=lsg&t=LIST#6edGG6thvycqzSeA.99 That’s interesting – if the short term debts are not in the 2012 Q3 balance sheet, then neither can be the cash ...more  
Comment by geoffs13 on Nov 27, 2012 12:12pm
JRaffles appreciated your comments ---thank you Please feel free to post again Your answer clearly shows good reasoning
Comment by Golfcar72 on Nov 27, 2012 12:13pm
What I was saying is that the debt as indicated on the Q3 Balance Sheet is not $114 million as you stated (LT debt only), but $173 million (ST + LT debt, $59 + $114, respectively).  It's not a matter of accounting wizardry, but just a number that wasn't included.  That's all...
Comment by basemetal on Nov 27, 2012 1:16pm
Talk about ST and LT debt is confusing, particularly if the company has the option to settle the convertible  debenture with common shares.  Am I correct in thinking that the ST debt you refer to is the gold loan from Sprott, and the LT debt is the convertible debenture ?  Aren't convertible debentures usuallly considered part of equity ?
Comment by JRaffles on Nov 27, 2012 1:53pm
What I was saying is that the debt as indicated on the Q3 Balance Sheet is not $114 million as you stated (LT debt only), but $173 million (ST + LT debt, $59 + $114, respectively). It's not a matter of accounting wizardry, but just a number that wasn't included. That's all... Read more at https://www.stockhouse.com/bullboards/messagedetail.aspx?p=0&m=31828533&l=0&r=0 ...more  
Comment by Golfcar72 on Nov 27, 2012 2:04pm
The short term debt in total is roughly $59 million @ Q3 end, comprised of:  - $37 million:  General obligations (operating expenses, wages, etc.)  - $14.3 million:  Current portion of Sprott loan (< 1 year)  - $7.5 million:  Current portion of leases, capital obligations   The long term debt in total is roughly $114 million @ Q3 end, comprised of:  - $23 ...more  
Comment by goldhappy on Nov 27, 2012 5:05pm
Hi golfcar72. I like seeing the numbers plain and simple. Your numbers comfort me greatly. Mining companies are not moma papa operations selling groceries and hardware. They are giant cash generating machines making big money when they get all the dominos line up. LSG is at 100,000 ozs soon heading upward and onward. They stand to earn $1000 per oz or $100 million dollars per 100,000 oz ...more  
Comment by idlefreebird on Nov 27, 2012 5:28pm
goldhappy , need not to worry my friend rumour has it they got system sarted this morning .Therefore Lakeshore is back to pouring gold.Therefore 2500 tpd  it is.Let the golden bars be poured.This should help them guarantee to meet the 85,000 mark keeping in mind 8 days of downtime in this quarter.GLTAL
Comment by bosse on Nov 27, 2012 6:10pm
By the way, I send them an email this morning asking if the shut down was a thing of the past. I made a suggestion asking them to issue a small news release on the subject. If I have a return on my email I let you know.
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