As far as picking mining stocks that are producers go, I have a few criteria that I look for. They are:
2. Variety in Metals being Mined
3. Cash Costs
4. Mine Life
5. 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 (NYSE:GG), and Yamana Gold (NYSE:AUY). 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.
Next is Mine Life. It's great that cash costs are low, but if your mine life is short, then your cash flow won't be around for very long. Thus, I look at companies that either have mines with a long mine life (around 8 years or longer) or have exploration projects in their portfolio that will make up for the drop off in production.
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. I like the warm and fuzzy feeling of a producing company having the ability to speed up or slow down their internal exploration projects so that they can meet future production goals. A gold/copper producer that has done a great job of managing their production and exploration projects is Yamana Gold. Between their Alumbrera and Chapada projects, Yamana will be looking at great cash flow for years to come. Also their strong exploration portfolio will help them in achieving their goal of sustainable annual gold production of 2.2 million ounces by 2012.