It has been a great start to the year for ASX-listed gold miners.

Low oil prices have been helping to reduce variable production costs on one end, while at the other end, the current up-turn in the price of gold will likely contribute to higher revenues. Combined, the two factors can result in higher margins for miners, and higher margins make happy investors!

Among the top performing gold stocks has been EVOLUTION FPO (ASX: EVN). Shares in Evolution have jumped 28% so far in 2016, while Newcrest Mining Limited (ASX: NCM) is up 24%.

One reason for Evolution’s strong performance is the company’s growing gold production outlook, but flat cost profile. This is a trend which started to take off last year and we can see it clearly on the chart below:

160211 RP - EVN

The chart shows Evolution’s quarterly gold production (in ounces) in blue and quarterly reported All-In Sustaining Costs (AISCs) per ounce in red.

The company has grown production strongly over the last three quarters and is building towards a rosie full year outlook. In the last two years, Evolution has grown annual production from 428,000 ounces in Financial Year 2014 (FY14) to expected production of up to 820,000 ounces in FY16.

The company’s most recent quarterly report also lowered guidance on costs for the full year, anticipating AISCs at between $970 and $1,020 per ounce. Although the chart shows costs creeping up over the first two quarters of FY16 (September and December 2015), based on the company’s guidance this is expected to flatten over the next two quarters.

Increasing production while maintaining (or reducing) costs is no easy task. So what’s Evolution’s secret? The ore being mined appears to be especially high grade (containing lots of gold) and management describes it as significantly out-performing estimates. This means higher production volumes for the same amount of ore mined, milled and processed.

Will Evolution keep winning?

Evolution is certainly on track for a great year. Strong cash flows have been used towards paying down debt, while the recent acquisition of Phoenix Gold will help sustain Mineral Resources.

Based on the company’s cost guidance, at the current gold price of AU$1,682, Evolution should be making attractive margins heading into the second half of the company’s financial year. However the fickle nature of gold prices means conditions can change quickly, impacting even well positioned miners like Evolution and I personally would restrict any investment to a only a small allocation of a total portfolio.

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Motley Fool contributor Regan Pearson has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.