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Miners leave the rest behind as year's top stocks

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

ANY doubt the mining and resources sector underwrote the resilient Australian economy last year - and filled the pockets of canny investors - was clearly 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 and rapacious 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 last 12 months.

Nine of the top 10 biggest share price gains in the S&P/ASX 200 Index were mining or mining services companies with Bathurst Resources posting the biggest gain of a 585.6 per cent return for the just completed financial year.

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

Odd man out in the top 10 was Mesoblast (2010-11 return of 367.57 per cent), a biotechnology company which has hit the headlines and sizzled the portfolios of investors with its adult stem-cell technology that promises to repair damaged heart muscles and combat other degenerative conditions.

But not everyone went home a winner last financial year. Old-world businesses and manufacturers populated the worst performing stocks. Although it was uranium miner ERA that racked up the biggest loss, down 69.17 per cent, with Murchison Metals also a big loser, but companies like Onesteel (-37.92 per cent), Seven West Media (-38.07 per cent), Hills Holdings (-44.42 per cent) and timber group Gunns (-55.74 per cent) made up the pack.

More broadly, the benchmark 200 index rose 7.13 per cent for the year, against 24.3 per cent for the Dow Jones and 25.5 per cent for the US S&P 500. According to Richard Coppleson of Goldman Sachs, in US dollar terms the Australian market actually rose 35.78 per cent.

Evans & Partners chief investment officer Mike Hawkins said old-world companies involved in sectors outside the mining sector faced a number of 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 proportion of the positive performance for the miners came in the December half rather than the June half, and tightening policies from China could hurt returns this year.

"The marginal investor is probably not going to be as enthusiastic for commodities and resources, particularly as we may yet see broader evidence of a slow down in China as we move into the latter part of the year."

A senior resources analyst at Morningstar Australia, Matthew Hodge, said Iluka (5th best stock, up 260.86 per cent) exploited China's strong demand for ceramics.

"Now that prices are high enough so that the industry is profitable people want to get in on it but it's going to take them a few years before they're going to be in a position to have new projects.

"So Iluka is in a position to make really good money for the next few years at least."


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