Hello. Welcome to Company Focus. My name is Aamer Nawid. I'm an Analyst at Fat Prophets and this week we're going to be taking a look at the mining sector.

Investors in the mining sector will be glad to see the back of January. In a month which has seen equity markets spooked by sovereign debt fears the miners which have rallied so hard since March 2009 have been on the receiving end, unsurprisingly, of some of the harshest treatment dealt out.

As you can see from the chart, although the outlook has actually improved in recent sort of days, since the beginning of January the outperformance of the miners had undergone, relative to the broader market, has come back quite significantly. Regular viewers will be aware that I'm a big fan of large cap defensives, particularly stocks which pay a decent dividend yield and feel they will increase in favour in 2010.

In addition to this, the mining sector, I believe, will continue the momentum on the back of a recovery in demand for commodities throughout the year also and I wouldn't be surprised if the mining sector is one of the top performing sectors in 2010 as well.

Recently released results from some of the big hitters provide us with an indication as to why. On Monday, first up, it was Xstrata. The company announced that they're going to be resuming dividends for the first time in 19 months, a positive move which underscores their confidence that a double dip recession is to be avoided.

Over the course of 2009 top line did drop by 19 percent, net profits did drop by 41 percent. This was to be expected in a year which saw a fall off in commodity demand impinge earnings. However, looking ahead, we're quite confident in Xstrata's long-term prospects. It's ticking the right boxes as far as we can see. Over 41 percent of the revenue comes from copper sales. Over 35 percent emanates from Asia and although it is not traditionally seen as a play on dividends, the dividend does increase investor sentiment and is, without a shadow of a doubt, going to improve the profile of the share.

Xstrata has improved its financial position significantly. However, it is not really a patch on BHP just yet. BHP's debt position, its net gearing, its cash position, are all superior and on Wednesday, the diversified miner reported its results for the six months from June to December '09 and topped analyst expectations by 11 percent. Underpinned by rising steel prices, BHP saw profits rise significantly. Demand for its steel making raw materials such as metallurgical coal, manganese, iron ore were all robust towards the tail end of the year and although the company didn't increase dividends by as much as was hoped, the result was a positive one.

Rio Tinto reported its results for the same period yesterday and like BHP, beat analyst's expectations. Rio has come through a tricky 12 months. It has overcome a debt crisis and has reinstated its dividends for the first time in a year. Although China accounts for 25 percent of its turnover, the company wasn't as cautious as BHP and the draw back in dividend is probably more likely to do with the fact they're trying to keep their powder dry surveying the mining landscape for possible acquisition opportunities.

Next week platinum focused Anglo American are set to report on Friday. The outlook statement again worth paying a lot of attention to. Platinum is an indirect play on China and the management outlook from Anglo will reveal both a unique insight into the long-term and short-term drivers and state of play off the Chinese economy.

Indeed, it's Chinese demand for commodities which in my opinion is going to underpin the long-term secular bull market in commodities. Just like BHP boss Marius Kloppers stated, I'm very sort of positive on the long-term outlook for the commodity spectrum. However, in the short-term, the outlook is a little bit more uncertain. China and India are going to be great drivers in the long-term. However, stimulus in the near term may have addressed certain issues, but weak labour markets and excess production capacity in developed economies still remain headwinds and what's more, should equity markets continue to be spooked by sovereign debt fears, we can expect the US dollar rally which is taking shape as this episode has unfolded to continue. This will weigh down on commodities prices and as a result, we could see significant buying opportunities across the big four mining shares.

Thanks for watching. Make sure you tune in again next week.