This year Australia's resources shares have continued to outperform the market average.
As of yesterday's close the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) had gained 9.7% since the turn of the year, building on the massive 38% gain it made in 2016.
I believe this demonstrates why having a little exposure to the resources sector can help boost the returns of your portfolio.
With that in mind, are these three resources shares in the buy zone?
Fortescue Metals Group Limited (ASX: FMG)
I've been very surprised at the resilience of the iron ore price this year. Instead of crumbling down to US$40 a tonne as many had expected, the base metal has been riding high all year. According to Metal Bulletin, on Thursday iron ore 62% fines closed at US$75.61 a tonne and the 58% fines finished the day at US$63.53 a tonne. I'm still reasonably bearish on iron ore price despite its good form this year, so I'll be avoiding Fortescue for now. But if you are bullish on iron ore then Fortescue could be a great option at the current share price.
Orocobre Limited (ASX: ORE)
With governments across the world cracking down on pollution and taking aim at internal combustion engine cars, I believe the sales of electric vehicles will grow significantly over the next couple of decades. As lithium carbonate is used in the batteries of these electric vehicles, I expect demand for the element will continue to rise strongly. This could put Orocobre and its lithium miners in a great position to profit.
Santos Ltd (ASX: STO)
Whilst this oil and gas giant is no longer the absolute bargain buy it was around three months ago, I still believe that it could be a good investment if oil prices continue to remain favourable. After all, thanks to the hard work that management has done to reduce costs, Santos is now free cash flow breakeven at a lowly US$33 per barrel.