January 25, 2011 / 11:54 AM / in 7 years

UPDATE 2-Lake Shore Gold says 2011 production to triple

* Says to increase exploration spending in 2011

* Expects to mine 140,000 ounces of gold from all sources

* Sees mill production of 125,000 ounces

* Expects capital expenditures of C$75 mln (Rewrites; adds details)

Jan 25 (Reuters) - Canadian gold miner Lake Shore Gold Corp LSG.TO said it will nearly triple production in 2011, driven mainly by its Timmins mine in Ontario, and will also raise its exploration spending for the year.

The company, which explores and develops gold properties in northern Ontario and Quebec, last year filed a closure plan for commercial production for its Timmins mine.

The company expects to mine 140,000 ounces of gold from all sources in the year and forecast mill production of 125,000 ounces.

It expects capital expenditures of C$75 million, with costs mainly related to development of its Thunder Creek and Timmins mines.

In August 2010, the company had said it would raise up to C$76.9 million in a bought deal and use the proceeds to expand operations at its Ontario mines. [ID:nSGE67H0L6]

The Toronto, Ontario-based company will focus on processing material from the Timmins mine, where cash operating costs are estimated to be $575 per ounce during the mine’s first year of commercial production.

However, the company said costs are likely to come down to about $400 per ounce over the next three years as the Timmins mine reaches full production and Thunder Creek and Bell Creek achieve commercial production.

Though spot gold firmed on Monday, U.S. gold futures for February delivery GCG1 were down 1.3 percent at $1,326.80 an ounce on Tuesday. [ID:nL3E7CO042]

Lake Shore is also looking at a staged expansion of its Bell Creek mill, which is located on the east side of Timmins, to 3,500-5,500 tons per day (tpd) from the current 2,000 tpd.

The company also said drill results showed that there are multiple areas of thick, high-grade mineralization at Thunder Creek.

Shares of Lake Shore, which has a market capitalization of about C$1.4 billion, closed at C$3.73 on Monday on the Toronto Stock Exchange. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila)

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