Mining Industry: Cash Flow Is Key to Quality in 2008

Source:

We believe that companies with good fundamentals should provide the greatest value in the coming year. These are characterized by solid management, with ramping production opportunities fully exposed to metal prices.

The combination of increasing costs in the mining industry and tax loss selling has created an opportunity for investors in 2008. This follows an entire industry being taken down by profit taking following peaks in metal prices and concerns over jittery credit markets. Moving beyond December, the markets should be less distracted with tax strategies and year-end window dressing. Investors are likely to resume rational stock picking by focusing on fundamentals, seeking lower risk and higher return opportunities.

A great many investors are frustrated by metal equities falling during a period of record metal prices. . .

High cost levels should persist as long as investment bankers pump capital into the mining sector. This activity, reminiscent of the recent technology boom, may now be coming to an end. Companies are likely to spend down their treasuries, hoping for success relative to competitors for capital. Those unable to persuade markets to invest will economize on exploration and development, leading to shelving or spinning off projects. . .

We believe that companies with good fundamentals should provide the greatest value in the coming year. These are characterized by solid management, with ramping production opportunities fully exposed to metal prices. . .

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe