LONDON (ShareCast) - Canaccord Genuity has kept its 'buy' rating for Rio Tinto and turned more positive on Antofagasta, highlighting the two mining majors as 'quality names at discount prices'.

"Recent underperformance has opened up attractive entry points for mining names with good quality assets that should generate solid cash flows under most plausible metal price scenarios," said analyst Peter Mallin-Jones.

The broker has reduced estimates and target prices after cutting commodity price forecasts, however exchange rate benefits have partially offset these losses.

Rio Tinto remains Canaccord's preferred stock and is the cheapest among the large-cap mining sector.

Mallin-Jones said: "We expect strong volume growth in iron ore particularly to see 2014 swing the company to positive free cash flow generation."

He said that the shares are currently pricing in an iron ore price of only $57 per tonne, "some 45% of the current spot price".

As for Antofagasta, Canaccord has upgraded its rating from 'hold' to 'buy', saying it expects steady underlying growth in earnings before interest, tax, depreciation and amortisation (EBITDA) from 2013 lows.

"Our expectations of ongoing investment as spending on Antucoya shifts to investment in Esperanza Sur mean that we expect ANTO can grow EBITDA steadily despite the expected headwind of gently falling copper price averages over the next four years."

Among small- to mid-cap miners, Canaccord has highlighted Kenmare Resources, African Minerals, Central Asia Metals and Beacon Hill Resources as 'buys'. These "should provide positive catalysts over the next six months, which should also see substantial uplifts to earnings and cash flows relative to the current positions of each stock."

BC

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