07/19/2011 01:45 EDT | Updated 09/18/2011 05:12 EDT

Lake Shore Gold Shares Drop As Q2 Output Lower Than Expected

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THE CANADIAN PRESS -- TORONTO - Shares of Lake Shore Gold Corp. (TSX:LSG) fell 15 per cent in trading Tuesday after the company reported lower than expected output in the second quarter.

Lake Shore stock dropped 49 cents to $2.90 in heavy trading of more than 6.5 million shares on the TSX, making it one of the more actively traded issues on the senior market.

Before markets opened Tuesday, Lake Shore said it sold 18,988 ounces and produced 17,615 ounces during the quarter ended in June.

The company said it had to process lower grade ore at its mine in Timmins in northern Ontario.

"Production in the second quarter of 2011 was lower than expected mainly due to a change in mining sequence in the higher grade UM1 zone of the Timmins Mine caused by development and backfill delays, which caused the advancement of lower grade sources earlier than anticipated," president and CEO Tony Makuch said in a release.

"The change in mine sequence shifted planned mining in the UM1 Zone initially to near the end of the second quarter and then into the second half of the year, with mining now planned to resume in July."

Makuch also said ore grades "were also adversely affected by the milling of low-grade stockpiles from Bell Creek Mine, which had been accumulated as part of the advanced exploration program at the project."

The CEO also noted the company expects its cash mine operating costs in the second quarter will be significantly higher than expected "given lower grades and production levels as well as the completion of considerable development and silling work for mining in the UM1 Zone."

The miner will issue its mine costs when it reports its quarterly financial results Aug. 9.

Lake Shore Gold explores and operates mineral properties in the Abitibi Greenstone belt in northern Ontario and Quebec.

In northern Ontario, the company operates the Timmins Mine and is developing the nearby Thunder Creek deposit and is advancing an underground advanced exploration program at its Bell Creek project east of Timmins,