Lower selling, general and admin costs as % of revenue has been shown to have a positive impact on share price
SmallCapPower | August 26, 2016: In the face of low commodity prices, investors should give more preference to miners with lean cost structures. Ultimately, investors should leave a margin of safety in case commodity prices have a negative effect on revenues of producers. That way, the miner can still have a chance of staying profitable. With that in mind, we take a look at a metric, as so advertised by a friend of ours, Portfolio Manager Frank Holmes. One of the ratios he favors when finding good mining stories is SG&A Expense as a % of Revenues. Thus, the companies on our list today exhibit a low ratio (below 5%), whereas the industry as a whole averages 30%.
Imperial Metals Corp. (TSE:III) – $6.80
Imperial is an exploration, mine development and operating company based in Vancouver, British Columbia, with a focus on base and precious metals. The Company owns the Red Chris and Mount Polley mines in British Columbia, and holds a 50% interest in the Huckleberry mine and the Ruddock Creek property.
- SG&A % of Revenue: 1.3%
HudBay Minerals Inc. (TSE:HBM) – $5.69
HudBay Minerals Inc. is a Canada-based mining company engaged in the production of copper concentrate, consisting of copper, gold, silver and zinc metal. The Company has assets in North and South America. Through its subsidiaries, it owns approximately four polymetallic mines, four ore concentrators and a zinc production facility in northern Manitoba and Saskatchewan (Canada) and Cusco (Peru), and a copper project in Arizona (the United States).
- SG&A % of Revenue: 2.6%
IAMGOLD Corp. (TSE:IMG) – $5.05
IAMGOLD is engaged in the exploration, development and production of mineral resource properties across the world. The Company’s mining activities in Canada include Doyon Division with Westwood Mine in Quebec and Cote Gold Project development project in Ontario. Its mining activities in Africa include Burkina Faso- Essakane mine and Mali – Sadiola Mine, and in South America include Suriname – Rosebel Mine.
- SG&A % of Revenue: 4.2%
Nevsun Resources Ltd. (TSE:NSU) – $3.90
Specialty Mining & Metals
The Company’s principal property is the Bisha Property, which hosts a gold, copper and zinc deposit, and includes satellite volcanogenic massive sulfides deposits at Harena, Northwest, Hambok, Aderat and Asheli. The Company’s principal mining operation is the Bisha Mine, which is located on the Bisha Property.
- SG&A % of Revenue: 4.3%