I don't own any resource shares, but if I were to build a resources portfolio I'd start with BHP Billiton Limited (ASX: BHP) shares, Northern Star Resources Ltd (ASX: NST) shares, Rio Tinto Limited (ASX: RIO) shares, Santos Ltd (ASX: STO) shares and Senex Energy Ltd (ASX: SXY) shares.
BHP Billiton
The mighty BHP Billiton is Australia's largest mining company, with a focus on iron ore, copper, coal and oil. BHP is a $125 billion business operating in many countries. Since it produces many different commodities, with competitively low costs, it is often considered a defensive investment. However, as can be seen by looking at a five-year share price chart even it is not immune from falling commodity prices.
Rio Tinto
Rio is the other big Australian mining company. Like BHP, it is listed on both the ASX and the London Stock Exchange (LSE). Rio Tinto produces iron ore, copper, aluminium, diamonds, and coal. The company is more reliant upon iron ore prices than BHP, with 76% of operating profit coming from the steelmaking ingredient.
Northern Star
In terms of gold miners, it would be a toss up between Newcrest Mining Limited (ASX: NCM) and Northern Star Resources in my opinion. Northern Star is a smaller and nimbler gold producer, with high-quality mines in Western Australia and a market capitalisation of $2.3 billion. It pays a dividend and has a net cash position of over $250 million.
Santos
Santos could be somewhat of a comeback kid, with the business returning from the brink of bankruptcy following the huge falls in the oil price last year. The $7 billion oil company could be on the mend. After oil plummeted to less than $US 30 per barrel (from over $US 100 per barrel), Santos made a goal of breaking even at a market price of just $US35 a barrel. At the end of 2016, it achieved a breakeven price of $36.50 per barrel and positive free cash flow.
Senex Energy
Moving down the market again we have Senex Energy, a mid-cap oil and gas producer with assets in South Australia's Cooper basin and the Surat Basin in Queensland. Following a recent capital raising the company appears primed to continue its natural gas push. If its development is successful, the company's shares could look very cheap at today's prices.
Foolish Takeaway
Resources investments are high risk, make no mistake. I don't own any in my portfolio because I prefer to focus on reliable dividend paying stocks (see below). However, if you think the rally in commodity prices can continue in 2017 and beyond, I think each of these companies should be on your watchlist.
