It has been a rocky start to 2014 for the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO). The index is down 2% so far in January and has been beaten by the price of gold which has increased almost 3%.
One company which has benefited hugely is gold producer Silver Lake Resources Limited (ASX: SLR), which after losing as much as 77% of its market capitalisation in 2013, has bounced back over 30% in the last month.
However Silver Lake's resurgence could be just getting started. The company's latest quarterly production update had some very positive signs including lower debt and higher production. It looks in a position to produce long-term profit for investors that can weather the volatile gold price movements expected in 2014.
Silver Lake announced a record quarterly production of 61,152 ounces of gold, up from 59,902 ounces in the September quarter as a result of targeting ore with higher concentrations of gold in it.
The result gave Silver Lake the confidence to increase its full-year production guidance from between 180,000 ounces to 200,000 ounces of gold, to 205,000 ounces to 220,000 ounces being driven entirely from the company's Mount Monger Operations. That will represent production growth of as much as 45% on 2013 production of 151,000 ounces.
Silver Lake also announced it had $17 million of cash and bullion on hand, while debt had been reduced from $20 million to $8 million.
The Mount Monger Operations which account for around 72% of forecast production had a minor increase in all-in sustaining costs for the quarter at $1,159 per ounce, slightly higher than Newcrest Mining Limited (ASX: NCM) at $921, while the average realised gold price was $1,371 per ounce. Murchison Gold Operations suffered from high costs and it is currently under strategic review.
Foolish takeaway
The increase in production is positive for investors and a reflection of Silver Lake's strategy to target higher grade ore to reduce costs. If this momentum can be maintained and Murchison operations can be utilised effectively, Silver Lake could drive a positive performance which may see it smash the market in 2014.
