Five Factors to Consider When Choosing Mining Producers

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As far as picking mining stocks that are producers go, I have a few criteria that I look for. They are: management; variety in metals being mined; cash costs; mine life; and exploration properties.

As far as picking mining stocks that are producers go, I have a few criteria that I look for. They are: management; variety in metals being mined; cash costs; mine life; and exploration properties.

Just like with the explorers, management is the most important thing you need to look at with producers. You want to know the company has top notch management so you can feel assured (as much as you can) that the management is out to build shareholder value first and thus their own personal wallet.

Next, I'm big on having a variety of metals being mined at a project (polymetallic projects). The reasons are diversification and cash costs of mining the primary metal are reduced. If you are mining more than one metal, then the value you get out of mining the same amount of ore increases. A good example of this is the Alumbrera project that is operated by Xstrata, Goldcorp (GG), and Yamana Gold. Alumbrera is a producing gold and copper mine in Argentina. The cost of mining an ounce of gold there is negative because of the credits received from mining the copper...

As for exploration projects, I love producers who are still actively "internally" exploring for new projects. This is a rarity these days. Most big producers rely on junior exploration companies to find and develop projects to the point where the producer buys the project...

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