Last year, the slowdown in China and the subsequent crash in commodity prices had left miners in a lurch. Miners saw millions being wiped out and, in the wake of falling demand, the only way to stay afloat was to cost control. Saddled with debt, most miners had to sell off underperforming assets. This year, the mining industry seems to be on a better footing, having staged a comeback.

What Has Turned the Tide This Year?

This year, gold and silver have been major movers. Worries over the global economy, Brexit-induced volatile equity markets, the Federal Reserve’s stance to maintain steady interest rates and the introduction of negative interest rates by several central banks boosted the growth of these safe-haven assets.

Gold prices are generally aided by retail demand for the metal in the latter part of the year, as it is a seasonally strong period in countries like India and China. Robust industrial demand and dwindling supplies for silver also set the stage for silver prices to rise further.

Copper prices have seen steady gains in 2016, halting the steady decline in prices over the past five years. Demand has been relatively robust with imports from China, responsible for nearly half of the global trade, hitting records during the first half of 2016. Demand for copper will remain strong, backed by its widespread use in transportation, manufacturing and construction, limited supplies from existing mines, and the absence of new significant development projects.

For aluminum, automotive, packaging and airline industries are anticipated to support demand. India appears promising given its currently low levels of aluminum consumption and high urban population growth. With demand being strong, the industry needs to pull the reins on supply, which will lead to deficits for a prolonged period and create the ground for higher aluminum prices, going forward.

The housing and construction sector is the largest consumer of steel today and, consequently, of iron ore. In the U.S., an improving job market and a strong housing sector will lead to 3.2% growth in steel demand this year.

What Does the Crystal Ball Predict?

As per the Zacks Industry classification, the mining industry is grouped under the Basic Material sector – one of the 16 broad Zacks sectors. Though sector growth will remain in the negative territory in the third quarter, a dip of 2.3% projected for the quarter which is not that steep compared to the previous drop.

However, a dramatic recovery is projected during the fourth quarter with an 18.8% growth. The sector will log growth of 14.7% and 8.4% in the first and second quarters of 2017 respectively. (For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trends report.)

Thus, a collusion of factors has prepared the ground for basic materials to win back the favor of investors after disappointing last year. It would be a prudent move to zero in on some momentum stocks in the materials space right now. These stocks exhibit all signs of healthy prospects.

Basic Materials Sector Price Index

(Click on image to enlarge)

Basic Materials Sector Price Index

How to Pick the Right Stocks?

Picking momentum stocks has now become a fairly simple task thanks to the Zacks Momentum Style Score which indicates the most favorable time to enter a stock to take advantage of the momentum with the highest probability of success. Our research shows that stocks with a Momentum Style Score of ‘A’ or ‘B’, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. These stocks have rallied considerably year to date and have also undergone positive estimate revisions.

Hecla Mining Co. (HL  - Free Report)

Hecla Mining is a leading low-cost U.S. silver producer with operating mines in Alaska and Idaho. Hecla Mining sports a Zacks Rank #1 and a momentum score of A. The stock has gained 191.53% year to date. The company has an expected long-term earnings growth rate of 1%.

The company has an average positive earnings surprise of 131.25% over the trailing four quarters. For 2016, the Zacks Consensus Estimate is pegged at 17 cents per share, an improvement from the loss of 9 cents per share in the prior year. The estimates have moved north over the past 60 days.

Pan American Silver Corp. (PAAS - Free Report)

Pan American Silver, along with its subsidiaries, engages in silver mining and related activities. Pan American Silver sports a Zacks Rank #1 and a momentum score of A. 

The stock has surged 160.31% year to date. The company has an expected long-term earnings growth rate of 4% and an average positive earnings surprise of 54.04% over the trailing four quarters.

The Zacks Consensus Estimate for 2016 is at 30 cents, an improvement from the loss of 38 cents per share in the prior year. The estimate has moved up over the past 60 days.

Endeavour Silver Corp. (EXK - Free Report)

Vancouver, Canada-based Endeavour is a mid-tier precious metals mining company with three high-grade, underground, silver-gold mines in Mexico. The stock carries a Zacks Rank #2 and a momentum score of A. The stock has gained 243.66% year to date.

For 2016, the Zacks Consensus Estimate is 4 cents, an improvement from the loss of 11 cents per share in the prior year. Estimates have moved north over the past 60 days.

Acacia Mining plc (ABGLF - Free Report)

Acacia Mining plc, together with its subsidiaries, mines, processes, and sells gold in Africa. The company also produces co-products, such as copper and silver.

The stock carries a Zacks Rank #2 and a momentum score of A. The stock has surged 133.96% year to date.

For 2016, the Zacks Consensus Estimate is 26 cents, a huge improvement from 2 cents per share in the prior year. Estimates have moved north over the past 60 days.

South32 Limited (SOUHY - Free Report)

Headquartered in Perth, Australia, South32 Limited operates as a diversified metals and mining company primarily in Australia, South America, and Southern Africa. It has a portfolio of assets producing alumina, aluminum, bauxite, energy and metallurgical coal, manganese ore and alloy, ferronickel, silver, lead, and zinc.

The stock carries a Zacks Rank #2 and a momentum score of A. The stock has surged 124.12% year to date. For 2016, the Zacks Consensus Estimate is 26 cents, a massive improvement from 2 cents per share in the prior year. Estimates have moved north over the past 60 days.