Over the last 12 months the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) has put on a gain of almost 16% compared to a gain of just 3.1% by the benchmark S&P/ASX 200.
I believe this demonstrates why having a little exposure to the resources sector can put a portfolio in a position to outperform the market return.
With that in mind, I thought I would take a look at three resources shares to see if there's an investment opportunity. They are as follows:
Resolute Mining Limited (ASX: RSG)
This gold miner has two operations in Africa and one in Queensland. Its main asset is its Syama operation in Mali which is expected to account for approximately 73% of production in FY 2018. It currently has a 12-year mine life but this could be extended greatly if recent exploration activities are anything to go by. Which would be a big win for the company, especially with management ultimately targeting an all-in sustaining cost of US$881 per ounce. This would make it highly profitable if gold prices remain favourable. However, as much as I like Resolute, I am bearish on the gold price and wouldn't be a buyer at this point. But if you're bullish on gold then Resolute could be a good option.
Syrah Resources Ltd (ASX: SYR)
This graphite miner is currently the most shorted share on the Australian share market with over 20% of its shares being held short. Syrah appears to have been targeted over concerns that the increased supply from its massive Balama project in Mozambique could disrupt the supply and demand balance, leading to a decline in prices. Although I think Syrah could be a quality investment, the high level of short interest makes me a little uneasy. In light of this, I would hold off an investment until short selling reduces to more normal levels.
Whitehaven Coal Ltd (ASX: WHC)
I think this coal miner would be a good option for investors if rumours that it plans to acquire the coal assets of Rio Tinto Limited (ASX: RIO) turn out to be true. According to a note out of UBS, if the assets were picked up for US$2 billion then they would be highly accretive to the coal miner's earnings in FY 2019. The broker appears to believe this could happen and has placed a price target of $5.35 on its shares.
