Cash flow is king as investors weed through murky markets for opportunities in the mining sector, says Wellington West analyst Catherine Gignac.

In particular, Ms. Gignac likes low-cost producers who are cashed up during these uncertain times.

“Those [producer] companies with cash flow and low cash costs, low capital spending programs and manageable debt service levels stand to benefit the most as the market high grades names in a flight to quality,” she said in a note to clients.

She said she likes gold producers, Yamana Gold Inc., Iamgold Corp. and Western Goldfields Inc., that all have low cash costs compared to peers and very low price-to-cash flow multiples. As for royalty companies, she likes Franco Nevada Corp. that offers exposure to metal price movements with reduced management and cost risks.

Iberian Minerals Corp. is one of her favourite base metal producers. The copper/zinc/silver company is poised to deliver both low cash costs and price-to-cash flow multiple, assuming ramp-up to full production proceeds as planned, she wrote.

Ms. Gignac, added that cash balances are also critical to the survival of exploration companies in the current market climate.

“While our preference is for producers, those exploration-stage companies with cash and modest burn rates may be able to weather the storm. The burn rates for the exploration programs are modest enough that existing cash balances should carry them through the coming year.

Inter-Citic Minerals Inc. and Rainy River Resources Ltd. are two of her “buy” recommended explorers.

source : NationalPost - Financial Post

Find More Other News : Company, Mining Finance, Mining Investment, Mining Top News