Four back-nine birdies helped Australia's two-time major champion to a third-round two-under-par 70 to leave her three strokes behind the tournament's leading trio.
Lee is at 14 under alongside lurking world No.1 Nelly Korda and well within striking distance of Japan's Akie Iwai (64), in-form American Lauren Coughlin (66) and rising Swede Ingrid Lindblad (68).
It could have been much better ... or much worse after Lee endured a rollercoaster round at El Cabarello Country Club on Saturday.
With two birdies in her first four holes, Lee grabbed a share of the lead at 14 under before her short-range putting once again deserted her.
Her troubles began with a missed five-foot par attempt on the sixth hole.
Then Lee turned a likely birdie into a shocking bogey with a three-putt from four foot on the par-5 seventh.
Another crushing lip-out from inside three feet on No.8 left Lee cursing herself after three dropped shots in three holes as the trusty broomstick that has mostly been her friend in 2025 betrayed her.
The one-time world No.2 found the water on the ninth as her game continued to unravel.
But a scrambling bogey seemed to steady Lee, who rebounded resiliently with birdies on 10, 11, 16 and 18 to reach the clubhouse in a tie for fifth alongside Korda.
Korda herself mixed seven birdies and an eagle with four bogeys, including a three-putt blunder at the last in her round of 67.
Thailand's world No.2 Jeeno Thitikul (68) is one shot further back in equal sixth at 13 under on a star-studded leaderboard.
After notching two top-10s and a tie for 11th in her first three starts this year, Lee is chasing a first win since October of 2023.
Fellow Australian major winner Hannah Green, the two-time defending champion, gave herself a fighting chance of landing a title hat-trick with a third-round 69 to be 11 under and six shots off the pace in an eight-way share of 12th.
In promising signs for the Australians ahead of the season's first major starting next Thursday, Steph Kyriacou (70) is one stroke further back in joint 20th.
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