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WA mining stocks regain ground as commodities surge
  Release time: 2017/01/12 16:27:00  Author: 

After years in the doldrums, WA mining stocks are finally regaining ground with at least one company reporting a share price gain of more than 400 per cent in the past 12 months.

Broking firm CommSec has released end-of-year analysis that shows five WA-based mining companies made the list of the 10 top performers reaping the highest percentage gains on the Australian Stock Exchange (ASX).

They included Resolute Mining, Galaxy Resources and Fortescue Metals Group.

"It's basically because of the significant recovery that we've had in a lot of commodity prices," CommSec chief economist Craig James said.

"The iron ore price was up over 80-odd per cent. We saw coal prices up similarly and oil prices up in the order of 40 per cent.

"The higher prices certainly produced stronger interest in the mining sector."

Gold prices were also strong in the first half of 2016 and the price of zinc nearly doubled during the year.

Iron ore recovery unexpected

Financial analyst Tim Treadgold said the recovery was inevitable on the back of three to four bad years.

"The mining industry and to a lesser extent the oil and gas industry had a pretty good 2016, but that was largely because the previous three years had been so bad," Mr Treadgold said.

"The recovery in percentage terms looks spectacular in parts, but you've got to take yourself back to the point of just how bad it was in 2013, 2014 and 2015.

"The biggest surprise was in the recovery in the iron ore price, that was not expected.

"That was largely due to Chinese stimulation of its economy in infrastructure building and property development."

Mr Treadgold said while he did not expect to see the sharp gains again in 2017, the outlook was much better.

"It will be long and slow and far less damaging because it will have genuine growth to meet genuine market demand, not speculative demand which is what occurred in the boom," Mr Treadgold said.

"There's a process to go through which is get the money in from the higher commodities, pay back the banks, get your balance sheet in order, then give the shareholders a bit of a treat before you start looking at developing new projects."

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