Mr. Tony Makuch reports

LAKE SHORE GOLD ANNOUNCES RESULTS OF PRELIMINARY ECONOMIC ASSESSMENT FOR TIMMINS WEST MINE, PEA HIGHLIGHTS POTENTIAL FOR POSITIVE ECONOMICS, SUBSTANTIAL CASH FLOW AND ATTRACTIVE RETURNS

Lake Shore Gold Corp. has released results from a preliminary economic assessment for the company's Timmins West mine located 18 kilometres west of Timmins, Ont. Timmins West mine is envisioned as an underground mining operation targeting the extraction of material from two adjacent deposits, the Timmins deposit and Thunder Creek deposit. The PEA takes into consideration the initial resource at Thunder Creek, released on Nov. 16, 2011, and the updated resource at Timmins deposit, released on Feb. 15, 2012, and represents the first time the resources at the Timmins and Thunder Creek deposits have been evaluated as a fully integrated, long-term mining operation. Prior evaluations, including a prefeasibility study released in 2007, considered only the Timmins deposit and are no longer considered valid. The PEA does not consider potential production, costs or economics from the company's Bell Creek mine project. This PEA is preliminary in nature. It includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

Tony Makuch, president and chief executive officer of Lake Shore Gold, commented: "With the establishment of a large resource at Thunder Creek, updated resources at Timmins Deposit and the combination of the two deposits into a single mining operation, the project has changed considerably since we released the initial prefeasibility study. The purpose of the PEA is to assist us in long-term planning for the development and exploitation of the Timmins West mine deposits, and to demonstrate, on a preliminary basis, the economic potential of the Timmins West mine. The work performed will also support further studies to complete an updated reserve statement. An in-depth review of the resources, including inferred resources, was completed for conversion into a potential mining plan using conservative production, and capital and operating cost assumptions. The study sets a benchmark for the Timmins West mine and there are many opportunities to improve the economics. Over all, the PEA indicates that Timmins West mine has the potential to generate substantial cash flow and attractive returns for shareholders."

This PEA was developed through the combined efforts of the company's internal projects team and independent consultants at Stantec. Operational input, and experience gained from mining and exploration development at both the Timmins and Thunder Creek deposits over the last year have been reflected in this work.

A National Instrument 43-101 technical report incorporating the results of the PEA will be filed on SEDAR before the end of March, 2012.

The PEA assumes the extraction of approximately 1.4 million ounces of gold over 10 years at an average grade of 5.2 grams per tonne. The ounces to be extracted include the majority of indicated resources at the two deposits as well as a portion of the inferred resources. Current National Instrument resources at Timmins West mine include 1,122,500 ounces (5,826,000 tonnes at an average grade of 5.99 grams per tonne) in the indicated category and 791,500 ounces (4,272,000 tonnes at an average grade of 5.76 g/t) in the inferred category. The PEA study does not take into consideration the significant exploration potential of both the Timmins and Thunder Creek land positions.

Highlights of the PEA

• Potential to produce approximately 1.4 million ounces over 10 years;
• Assumed average head grade to mill of 5.2 g/t;
• Anticipated annual production averaging 140,000 ounces, with average production in years three to nine of 160,000 ounces and peak production of 175,000 ounces;
• Anticipated annual cash operating costs averaging $625 (U.S.) per ounce, with cash operating costs during years three to nine averaging $590 (U.S.) per ounce (assumes exchange rate at par) (royalties to add $30 (U.S.) to $50 (U.S.) per ounce of costs);
• Based on current market conditions: undiscounted cash flow of $1.14-billion, a pretax net present value of $880-million (5-per-cent discount rate), an internal rate of return of 115 per cent and a payback period of 1.25 years (current prices include a gold price of $1,775 (U.S.) per ounce and an exchange rate at par);
• Based on analyst consensus pricing: undiscounted cash flow of $730-million, a pretax NPV of $570-million, an internal rate of return of 100 per cent and an estimated payback period of 1.25 years (analyst consensus prices include gold prices starting at $1,744 (U.S.)/ounce in 2012, declining to a long-term price of $1,200 (U.S.)/ounce in 2018 and an average exchange rate of $1.00 (U.S.) equals $1.07);
• Growth capital of $160-million, including $67-million for a 50-per-cent expansion of the Bell Creek mill and other mill infrastructure;
• Sustaining and other capital of $225-million.

Mr. Makuch added: "We believe there is significant upside to the results provided in the PEA. One key area for improvement involves costs, where we expect to improve on the operating and capital cost assumptions included in the study. Also, underground gold mines in the Abitibi greenstone belt have a very strong track record of growing their ounces considerably once in production, and we fully expect to continue to build our resource base at Timmins West mine going forward. We will also continue to work towards growing our throughput levels beyond 3,000 tonnes per day at both the mine and mill."

              TIMMINS WEST MINE -- OPERATING SUMMARY                   

Year     Tonnes          Grade     Recovered  Cash operating costs
                          (g/t)           oz           ($(U.S.)/oz)(i) 

1        586,000           4.5        82,000                   840 
2        800,000           5.2       130,000                   695 
3        1,015,000         5.2       160,000                   615 
4        1,050,000         5.0       165,000                   600 
5        1,050,000         5.0       160,000                   600 
6        1,050,000         5.4       175,000                   555 
7        1,050,000         5.3       175,000                   565 
8        970,000           5.3       160,000                   590 
9        680,000           5.6       115,000                   610 
10       390,000           5.3        65,000                   840 

(i) Assumes Canadian dollar at par to U.S. dollar.                           
 

                                                                                                                                                       
                   TIMMINS WEST MINE -- SENSITIVITIES (i)                              

                       Average annual      Total cash                        
                       cash flow           flow         NPV at 5%  IRR   Payback 
Case                 (full production)  (undiscounted)        (M)   (%)   (years) 
                                   (M)             (M)

Current prices                  $ 165          $1,140     $  880   115      1.25 
Analyst                                                                    
consensus                       $ 110          $  730     $  570   100      1.25 
$1,500 (U.S.)/oz gold           $ 120          $  770     $  580    70      2.00 
$2,000 (U.S.)/oz gold           $ 200          $1,443     $1,130   175      0.75 

(i) All numbers are before income taxes.                                     

In providing the initial evaluation of the fully integrated Timmins West mine, the PEA leverages existing infrastructure. Much of the site infrastructure at Timmins West mine was completed prior to 2012, and work envisioned in the PEA effectively represents extensions to the existing operations. The production shaft, all surface infrastructure, utilities and the ventilation system are all in place and fully operational.

The PEA envisions year-on-year production increases toward a steady state production rate of 3,000 tonnes per day (from 2012 levels of 1,600 t/d). Roughly 60 per cent of the planned production comes from long-hole bulk mining operations at Thunder Creek, with the remaining tonnage coming from a mixture of long-hole bulk, and mechanized cut and fill operations at Timmins deposit. Backfill will be primarily a mixture of pastefill augmented with rockfill as available. Access to each of these deposits is planned through continued development of internal ramps and raises. Mine utilities and the ventilation system will be extended from the existing infrastructure.

Mining methods were assigned to regions of the block models depending on overall geometry and expected grade continuity. A cut-off grade of three g/t was used to guide the mine design process. Generalized mining shapes were then applied to each of the mineralized shapes to determine the recoverable tonnage and grade from mining by each method. A full accounting of internal dilution was included in the mining blocks. Internal dilution was applied for each area depending on specific stope geometries, mining methods, exposure to backfilled stopes and expected continuity. External dilution ranged from 10 per cent to 20 per cent depending on the specifics of the mining plan for that area. A final recovery factor of 90 per cent was then applied to the minable tonnes.

Production, mine development and construction activities have been identified for the entire 10 years of operation and have been linked through schedules based on current performance parameters.

The PEA envisions that all material will be hauled to, and processed at, the company's milling facility at the Bell Creek site, which is located approximately 42 kilometres from Timmins West mine. This mill is currently being upgraded and expanded to a capacity of 3,000 t/d from its current capacity of 2,000 t/d. This project was initiated in mid-2011 and is on track for completion in the fourth quarter of 2012. Costs in 2012 to complete the mill expansion and for other mill infrastructure are estimated at $67-million, including contingency, with all costs being allocated to the Timmins West mine. Gold recoveries have been excellent for all the mineralization in the company's portfolio, and significant historical data support a recovery of 96.5 per cent. Recoveries have been verified by significant laboratory analysis and reconciliations of actual plant performance throughout 2011. The plant uses a conventional and well-understood crushing, grinding, gravity and carbon-in-pulp (CIP) process. Dore bars are poured at the Bell Creek facility.

Both the Timmins West complex and the Bell Creek facilities are permitted for current activities, and all adjustments to permits required for continued operation are in process. Tailings and water management facilities are presently being expanded to allow increased throughput and disposal capacity. The company has agreements in place with first nations groups at all sites and continues to build its working relationships with these groups.

Mineral resources

An updated NI 43-101 resource estimate for the company's Timmins West mine was released on Feb. 15, 2012. The updated resource includes 1,122,500 ounces gold (5,826,000 tonnes grading 5.99 g/t in the indicated category) and 791,500 ounces Au (4,272,000 tonnes at an average grade of 5.76 g/t) in the inferred category. The new resource statement includes updated resources for the Timmins deposit from the previous estimates issued in September, 2009, as well as the initial resource for the Thunder Creek deposit that was first released on Nov. 16, 2011. For more information about the current resource estimate please see the press release entitled, "Lake Shore Gold Confirms Large-Scale Resource for Timmins West Mine," available at the company's website.

Mineral reserves

This preliminary economic assessment does not include any reserves. The company expects to release a new NI 43-101 reserve estimate for Timmins West mine before the end of the first quarter of 2012.

Qualified persons

The PEA was prepared by the company's projects team with support from Stantec. Stantec's involvement included providing the mining designs, production and development schedules, capital and operating cost estimates, and also integrated the work of the company's projects team. The projects team prepared the specific mine designs for Thunder Creek, provided all budget/plan information and completed the detailed work on geological resource modelling. All work for the PEA was performed under the direct supervision of Brian Buss, PEng. Mr. Buss is vice-president, projects, and is an employee of Lake Shore Gold. Mr. Buss is a qualified person as defined by NI 43-101 and has reviewed the technical information included in this press release.

In addition, mineral resources included in the PEA were announced in a press release issued on Feb. 15, 2012. As stated in that release, the company's overall qualified person for geology at Timmins West mine is Dean Crick, PGeo, director of geology, while the qualified persons for the updated resource estimate are Bob Kusins, PGeo, chief resource geologist, and Ralph Koch, PGeo, chief mine resource geologist. Mr. Crick, Mr. Kusins and Mr. Koch are all considered qualified persons according to the definitions of NI 43-101 and are all employees of Lake Shore Gold. As qualified persons, they prepared or supervised the preparation of the scientific or technical information in the resource estimate, and have verified the data disclosed in the Feb. 15, 2012, press release and the resource information included in this press release. The resource estimate was also reviewed by Michel Dagbert, PEng, of SGS Canada Inc. Mr. Dagbert is independent of Lake Shore Gold.

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