Lake Shore Gold (LSG.TO, NYSEMKT:LSG) has announced it produced 51,700 ounces of gold in the fourth quarter of 2014 which brings the total production for the year at 134,600 ounces which is at the top end of the earlier guidance. This production increase was mainly caused by a huge bump in the amount of tonnes milled and the average grade which jumped to 5.2g/t. The production in December alone was 17,500 ounces of gold, as the mill was able to run at an average rate of just over 3,500 tonnes per day.
The company was free cash flow positive in Q4, and the management team thinks it should continue to be free cash flow positive as the production is expected to increase in 2014 whilst the capital expenditures should decrease. Based on a production of 160,000 ounces of gold in 2014 (which is the lower end of the guidance) and an All-In Sustaining Cost (AISC) of $1000/oz, Lake Shore Gold should generate approximately $35M in cash flow at the current gold price. As its market capitalization is C$262M, the company isn’t trading terribly expensive.
Disclosure: The author holds no position in Lake Shore Gold. Please see our disclaimer for current positions.