Should you buy these 3 top resources shares?

As Australia is home to some of the biggest deposits of natural resources in the world, it will come as no surprise that a great number of companies listed on the Australian share market are either explorers or producers of commodities.

But with so many to choose from it can be hard to decide which ones to buy. To help you on your way I’ve picked out three top resources shares to see if there is an investment opportunity.

They are as follows:

Fortescue Metals Group Limited (ASX: FMG)

I think that this low cost iron ore producer’s shares look dirt cheap at the moment and could be a good option for investors looking to gain exposure to the resources sector. However, the iron ore price has been on a horrendous run and fallen during each of the last seven trading days according to Metal Bulletin. It might be best to wait to see if prices rebound before investing in Fortescue.

Orocobre Limited (ASX: ORE)

One metal that certainly is in demand is lithium. Such is the demand, battery makers and car manufacturers have been signing multi-year off-take agreements directly with producers for all planned production. I think this bodes well for the future growth of Orocobre and its fellow producers. However, some brokers believe that production will increase so much by 2021 that prices will halve. I don’t expect this to be the case and believe producers will be careful not to cause an oversupply. This could make Orocobre worth a look, though it is a higher risk investment.

Western Areas Ltd (ASX: WSA)

It isn’t just lithium that will go into the batteries of electric vehicles. Most electric vehicle batteries also include nickel, which will be music to the ears of this leading nickel producer. With nickel futures close to a multi-year high, I believe Western Areas could be positioned to deliver a bumper profit result in FY 2018. I think that this could make it a good option for investors.

I think Western Areas could be a strong performer this year, but perhaps not as strong as these top growth shares which are kicking goals at the moment.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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