Summary
- Lake Shore Gold recently announced it will raise C$15 million through a brokered private placement.
- This is bullish news for a few reasons: first, the equity raise was at a premium, and second, the money will be used for exploration.
- I remain bullish on Lake Shore Gold.
Lake Shore Gold (NYSEMKT:LSG) recently announced that it will offer 12.9 million shares of stock at a price of $1.17 per share, for total gross proceeds of $15.09 million. The money will be used for general exploration expenses, including investments to follow up on recent drill results at the company's 144 Gap Zone, a new zone of gold mineralization recently identified.
Previously, I argued that shares of Lake Shore were a buy, as the company is well on track to reach the top ends of its 2014 production guidance of 180,000 ounces of gold. In addition, cash costs continue to plummet, with all-in sustaining costs down to $858 an ounce in the most recent quarter, from last year's high of $1,813 an ounce. But with 6+ million ounces of high-grade gold in one of the best mining jurisdictions in the world, and further exploration upside, I argued that the company was just getting started and is a great way to gain leverage to the price of gold.
I like this news for a few reasons. First, the money will be raised at a significant premium to the current share price of $.88, which means less dilution for current shareholders and more funds for Lake Shore. Next, Lake Shore Gold will have more than enough money to continue exploration at the exciting 144 Gap Zone, which is immediately southwest of the producing Thunder Creek deposit, and has returned gold values as high as 11.13 grams per tonne gold over lengths as long as 25 metres. Further exploration success will likely result in an larger resource base, higher production levels and an extended life of mine at Thunder Creek.
For these reasons, I remain bullish on shares of Lake Shore Gold, and will look to initiate a position in the coming weeks.