Australian gold producers generated record free cash flows in the March quarter despite higher capital spending on growth projects, Euroz Hartleys said in a note on Wednesday.

Cash flows were helped by higher prices, with gold averaging roughly at AU$6,998 per ounce, even as production remained largely flat.

According to the investment firm, around 21 companies collectively generated free cash flow of about AU$2.7 billion, up from AU$1.53 billion in the December quarter.

"We believe it is important to keep one eye on the real total costs of production, otherwise you risk buying a producer with more leverage than you bargained for," analysts at the brokerage said.

The firm added that concerns related to diesel supply are largely a pricing issue rather than a shortage and are already reflected in valuations.

Euroz Hartleys said West African Resources (ASX:WAF) was the cheapest gold stock on a cashflow yield basis, while Greatland Resources (ASX:GGP) was the lowest-cost producer.