Is this beaten-down FTSE 250 stock the buy of a lifetime?

At FTSE 250 have three high quality mining companies that I am considering for my portfolio.

According to metals researcher Olivier Vidal, of the University of Savoy Mont Blanc, “Humans are using mineral resources at an unprecedented rate. Demand will continue to grow over the next few decades...”

Vidal considers this “economic development of the country’s population and energy and digital transition“.

This looks like an unstoppable macro trend to me. But which FTSE 250 mining stocks should I buy to take advantage of these tailwinds for commodities?

Three ore-migos

• Centamine is a gold mining company with half a century of experience, known for its flagship Sukari mine, which operates one of the largest gold-producing in Egypt. Apart from Sukari, Centamin also has exploration projects in West Africa.

• Ferrexpo is an iron ore producer with assets in Ukraine. Three iron ore mines in the war-torn eastern European country could produce 6.1 million tonnes of iron ore pellets by 2022 despite the conflict. Still, there is a year-on-year decrease of almost 70%. The mining operation is located in Ukraine’s Poltava region, which is located in the central part of the country and is relatively unaffected by the ongoing conflict in eastern Ukraine.

• Hochschild Mining is a precious metal mining company located in America. The FTSE 250 miner has a portfolio of silver and gold operations in South America.

Pick from the litter

Here are some metrics I use to help me find the best mining companies out there.

First, there is the total debt to actual book value ratio. Lower ratios are generally better. According to natural resource investment expert Rick Rule, this is an important measure of “balance sheet flexibility”. In volatile commodity markets, having less debt and long-term obligations can help weather miners.

Another metric I consider is the price-to-free-cash-flow ratio. It tells how much cash the company has available to give back to shareholders or invest in new projects, relative to market value.

Digging into the digits

Based on the latest figures available, I worked out the ratio and found Ferrexpo as the most attractive option by the depth of mine shaft.

Ferrexpo’s debt is negligible compared to its actual asset value, and it’s valued at a very low price-to-free-cash-flow ratio of just 1 (even based on free cash-flow figures from before the Russian invasion of Ukraine).

Centamin and Hothschild Mining figures don’t look half bad, either:

FTSE 250 miners	Total debt to actual book value	Price / FCF
Centamine	0.4%	18
Ferrexpo	0.3%	1
Hochschild Mining	47%	3

Still, all that glitters is not gold. I want to dig into the risks each company faces before buying any of them. For example, Ferrexpo operates in war-torn Ukraine, which affects access to transportation, staff, and raw materials. As long as the conflict continues, production capacity and profitability will be severely limited. That explains the bargain-basement price tag.

Still, this exercise has earned me a mining cart as I continue to look for FTSE stocks to ride a potential commodity supercycle.