Should you buy these beaten up resources shares?

Although the shares of mining giants BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have been on fire this year, not all shares in the resources sector have been so lucky.

The two resources shares listed below have come under significant selling pressure recently. Is now the time to invest?

Orocobre Limited (ASX: ORE)

Another decline on Tuesday means that the Orocobre share price has now fallen over 20% during the last three weeks. The lithium miner’s shares have come under pressure despite there being no news out of it during this time. However, short sellers have been increasing their positions in recent months and this could be weighing on its share price performance. At the end of February Orocobre had short interest of less than 7%, whereas today it has risen to approximately 12%. But with lithium prices remaining positive, the reason for the rise in short interest is a bit of a mystery. Though, with weather conditions having a major impact on its Olaroz operation in Argentina, some investors may be concerned that the weather hasn’t been favourable enough for production again. This time last year the company downgraded its production forecasts on the back of bad weather. I would suggest investors hold out for the company’s next quarterly update which should be released next month before considering an investment.

Syrah Resources Ltd (ASX: SYR)

A series of terrorist attacks close to the district of Palma in the north east region of Cabo Delgado Province in northern Mozambique have led to this graphite miner’s shares falling 20% during the last three weeks. The company tried to quash concerns yesterday by advising that the attacks were 500 kilometres away from its Balama project and operations continue without disruption. One broker that doesn’t appear to be concerned is Credit Suisse. It recently retained its outperform rating and massive $6.60 price target on Syrah’s shares despite news of the attacks. While at this stage things appear to be okay at Balama, I am concerned that things could spiral out of control very quickly and put the project at risk in the future. Because of this, I wouldn’t be investing in Syrah until the situation eases.

For now, I would skip Orocobre and Syrah and focus on quality growth shares like these.

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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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