Once again the resources sector has been one of the best performing areas of the market this year.
As of yesterday's close, the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) had put on a gain of almost 9% since the start of the year.
Despite this strong gain, I don't believe it is too late to invest in the sector. Here are two resources shares to consider:
Mineral Resources Limited (ASX: MIN)
The shares of this diversified miner and mining services company may have risen 45% year-to-date, but they still change hands at just under 14x estimated forward earnings. I think this is a fair price to pay for a company that is a great alternative to lithium miners such as Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE). I believe the company's Mount Marion and Wodgina lithium projects have a lot of potential and could ultimately generate significant amounts of free cash flow.
Santos Ltd (ASX: STO)
Although it is no longer the bargain buy it was a few months back, I still think that this oil and gas producer's shares are good value. Thanks to a sharp reduction in its costs, Santos is now free cash flow breakeven at an oil price of US$33 a barrel. So with oil prices well above US$50 a barrel again and looking likely to stay north of this level due to increasing demand and OPEC's production cuts, I expect Santos to deliver bumper profits in FY 2018. This could potentially put the company in a position to consider the resumption of its dividend.
