What Happens When Costs Match the Selling Price Of Gold ?

Map of Timmins, Ontario (Photo credit: Wikipedia)

LAKE SHORE GOLD

(T-LSG) $0.325 n/c

From $ 4.00 two years ago
One look at the two-year chart of Lake Shore Gold shows you how bad things are in the natural resource sector, if you didn’t know already. Lake Shore Gold is not the only story trading at nearly one-tenth of where it was.
The bad part of that is much of the company’s current building and mine development was financed with issues nearly ten times today’s price.
Hard to believe the Timmins Times featured an article on January 22nd with the headline, “Glittering year ahead for Lake Shore Gold says VP Dan Gagnon.”

Well at least their production numbers appear to be going up as their Timmins West Mine is the centre of three mines expected to be in operation
having done 85,000 ounces last year. The article quotes Gagnon is expecting 120,000 to 135,000 this year and  150,000 ounces in 2014. But can they make any money at it?
The suggestion these days is that there’s many mines with costs of production way up at $1250 to $1450 and that doesn’t leave a lot left. According to the Timmins Times article, the suggestion is that their costs of production is between $800 and $875 an ounce. As one looks at the share price, one wonders wouldn’t one? Or is it just that most people have given up on the precious metals sector. Not precious at all anymore.
Lake Shore is important to the folks of Timmins and area as the company has 500 full-time employees, 200 contractors at the mine and 125 other employees working on the expansion projects. And this work tends to pay well, or at least it did.
The very low stock price makes one wonder if there are some tidbits of bad news about to happen. Higher production costs, write-downs or even losses that will be coming out tomorrow at their annual meeting. For sure, it won’t be a bunch of happy people around if anyone even bothers to
show up.
Meanwhile one service suggests that several analysts follow the stock with the average target being $1.17. Really?
When was the last time a speculator made a buck in the precious metals market listening to analysts?

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