Despite its reputation for being volatile and high risk, I believe a little exposure to the resources sector can help diversify a portfolio.
Three shares which investors might want to look closer at today are listed below. Here's why I have my eyes on them:
Fortescue Metals Group Limited (ASX: FMG)
Whilst I'm not a buyer of its shares myself due to being bearish on iron ore prices, I think investors that are bullish on the base metal should consider an investment in Fortescue today. The low cost iron ore producer continues to impress with its cost cutting program, which will likely mean bumper profit growth and a generous dividend if Chinese demand can prop up current iron ore prices for the next 12 months.
Galaxy Resources Limited (ASX: GXY)
Both France and the United Kingdom recently announced plans to ban the sale of petrol and diesel vehicles by 2040. These two are just the latest in a number of countries which are cracking down on pollution and pushing for the usage of electric vehicles. As these vehicles currently operate with lithium batteries, demand for the metal has been incredibly strong and is expected to grow even stronger over the next decade. I believe this will keep lithium prices high, allowing Galaxy and its world class Mt Cattlin operation to profit greatly.
Western Areas Ltd (ASX: WSA)
This nickel producer's shares may be up 14% in the last 30 days, but they are still down almost 22% since the turn of the year. Subdued nickel prices and an equally weak outlook had been the catalyst for this decline. But with prices improving and the company working hard to reduce its costs, Western Areas could arguably be the next turnaround story in the resources sector. Because of this I think it is well worth taking a closer look at the miner.
