February 19, 2008
Lake Shore Gold Announces Private Placement of $64.5 Million at 30% Premium and
Forms Strategic Alliance With Hochschild Mining
TORONTO, ONTARIO--(Marketwire - Feb. 19, 2008) - Lake Shore Gold Corp. (TSX:LSG) ("Lake Shore" or "the Company") is pleased to announce that it has completed a private placement financing at a 30% premium to market, raising $64.5 million for development of the Timmins West Mine and Bell Creek Mill. In addition, as part of this financing, Lake Shore is pleased to announce that it is entering into a strategic alliance with Hochschild Mining plc (LSE:HOC) ("Hochschild").
As part of the strategic alliance, Lake Shore will complete a private placement to Hochschild of 28,172,302 common shares at $2.30 per share for a total consideration of $64.5 million, subject to the approval of the Toronto Stock Exchange ("TSX"). The private placement will result in Hochschild holding 19.99% of Lake Shore's issued and outstanding shares. Following the private placement, Lake Shore has agreed, subject to approval of shareholders and the TSX, to issue additional common shares to Hochschild that will result in Hochschild owning approximately 35% of the issued and outstanding shares of Lake Shore.
"We are delighted that Lake Shore was able to complete this transaction to raise money for the development of the Company's assets at a 30% premium to the market and that Hochschild has chosen to work with Lake Shore in its first foray into Canada. This investment by Hochschild is a strong endorsement of Lake Shore's assets and management," said Lake Shore's Chairman, Alan Moon. "Forming the strategic alliance with Hochschild provides the Company with access to the investment dollars required to become a significant gold producer, and it also provides access to Hochschild's expertise and extensive networks of industry connections, all of which will help Lake Shore achieve its goals.
"With this commitment of funds from Hochschild, Lake Shore is now positioned to complete the advanced underground exploration program at Timmins West, the refurbishment of the Bell Creek Mill, dewatering and refurbishing the Bell Creek Mine. This investment and the investment contemplated to bring Hochschild to 35% will carry Lake Shore into production and allow an expansion of our exploration programs."
Eduardo Hochschild, Executive Chairman of Hochschild Mining plc, commented:
"At a time when gold companies are struggling to find profitable, high-grade gold resources, our strategic investment in Lake Shore allows Hochschild to capture significant exposure to a high-grade, long-life asset in a mining friendly jurisdiction, without the costs associated with establishing a greenfield operation. Lake Shore is a well run Canadian mining company with significant progress toward production and a strong portfolio of projects in a prolific gold mining region in Canada."
Hochschild will initially acquire 28,172,302 shares at a price of $2.30 per share, a premium of 30% to the volume weighted average price of Lake Shore's shares for the week of February 11 to February 15, for total proceeds of approximately $64.5 million. In connection with the subscription, Lake Shore has agreed to appoint two additional members to the board of directors, to be nominated by Hochschild.
Upon the closing of the private placement, Hochschild and Lake Shore will enter into a Strategic Alliance Agreement to govern their relationship going forward. The key terms of the Strategic Alliance include the following: Lake Shore agrees to seek shareholder approval for an additional financing that would allow Hochschild to increase its holdings to 35%; Hochschild will have a preemptive right to maintain its percentage interest in any future financings, will be Lake Shore's preferred partner for any future joint ventures and will have a first right to acquire any assets Lake Shore decides to sell, and will be entitled (if it so chooses) to board representation proportional to its shareholdings. As well, Hochschild agrees to a standstill with Lake Shore, with shareholdings limited to no more than 40% on a fully diluted basis, for 5 years, subject to certain exceptions.
About Lake Shore
Lake Shore is a mineral exploration company focused on the acquisition, exploration and development of mineral properties with prospects for hosting economic gold deposits in the Canadian Shield in Ontario and Quebec. The Company holds a number of 100% owned and joint ventured gold properties in Ontario and Quebec, including the Bell Creek Mine and Mill Complex and has commenced sinking a shaft on its 100%-owned Timmins West gold deposit near Timmins, Ontario. Lake Shore is a reporting issuer in British Columbia, Alberta, Manitoba, Ontario and Quebec, and trades on the Toronto Stock Exchange under the symbol LSG.
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L for Reuters / HOC LN for Bloomberg) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild currently operates five underground epithermal vein mines, four located in southern Peru and one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has one early stage development project in Mexico and fifteen long-term prospects throughout Latin America. Hochschild has over forty years experience in the mining of precious metal epithermal vein deposits.
Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the Company's periodic filings with Canadian securities regulators. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume the obligation to update any forward-looking statements.