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Miners lead the pack in spades for the year

ANY doubt that the mining and resources sector underwrote the resilient Australian economy last year and filled the pockets of canny investors was put to rest yesterday when miners and explorers came home comfortably as the best-performing stocks of 2010-11.

ANY doubt that the mining and resources sector underwrote the resilient Australian economy last year and filled the pockets of canny investors was put to rest yesterday when miners and explorers came home comfortably as the best-performing stocks of 2010-11.

A steady flow of positive economic news during the financial year from the sector's biggest customer, China, as well as rising commodity prices and a particularly strong first half ensured that mining companies were the best place to park your money over the past 12 months.

Nine of the 10 best share-price gains in the S&P/ASX 200 Index were mining or mining services companies. Bathurst Resources posted the biggest gain, a return of 585.6 per cent.

Bathurst benefited from the excitement over coal and is developing a high-quality hard coking coal project at the Buller Coalfield in the South Island of New Zealand.

The odd man out in the top 10 was a biotechnology company, Mesoblast, which returned 367.57 per cent. It hit the headlines and sizzled the portfolios of investors with its adult stem-cell technology, which promises to repair damaged heart muscles and combat other degenerative conditions.

Old-world businesses and manufacturers populated the worst performers. Uranium miner ERA racked up the biggest loss, down 69.17 per cent. Other notable losers were OneSteel (-37.92 per cent), Seven West Media (-38.07 per cent), Hills Holdings (-44.42 per cent) and Gunns (-55.74 per cent).

The benchmark S&P/ASX 200 Index rose 7.13 per cent for the year, compared with a gain of 24.3 per cent by the Dow Jones Industrial Average and 25.5 per cent by the S&P 500 Index.

Richard Coppleson of Goldman Sachs said that in US-dollar terms the Australian market rose 35.78 per cent.

Evans & Partners chief investment officer Mike Hawkins said old-world companies involved in sectors outside the mining sector faced several challenges in the new financial year.

"They are still operating in an extremely challenging environment domestically in Australia, if you take the Reserve Bank at its word. There are structural issues, a tough cycle," he said.

Mr Hawkins said a large part of the miners' positive performance had been in the December half rather than the June half, and tightening policies from China could hurt returns this year.

Morningstar Australia senior resources analyst Matthew Hodge said Iluka (the fifth best stock, up 260.86 per cent) exploited China's strong demand for ceramics.

"Now prices are high enough so the industry is profitable, people want to get in on it, but it's going to take a few years before they're in a position to have new projects," he said. "So, Iluka is in a position to make really good money for the next few years at least. The zircon price went up from $1500 at the end of 2010 and now it's $2200 a tonne. That's in the space of six months. So, that's basically pure profit."

Best performing companies

Bathurst Resources

Mesoblast

Aurora Oil and Gas

Lynas Corp

Iluka Resources

Linc Energy

NRW Holdings

Intrepid Mines

Regis Resources

Sundance Resources

Worst performing companies

Energy Resources Australia

Murchison Metals

Gunns

Infigen Energy

Hills Holdings

BlueScope Steel

White Energy

Seven West Media

OneSteel

OM Holdings


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