Investors return to miners after fleeing in 2008

Investors have speculated that Rio might have to amend the deal after its shares climbed above the conversion price on the first of two tranches of convertible notes that would be issued to Chinalco under the deal agreed in February.

FOCUS ON DIVERSIFIED FIRMS

Analysts remained in favour of large, diversified companies and said that aggressive measures taken by miners to tackle the financial crisis by cutting jobs, scaling down production and restructuring operations have raised investor confidence.

"I am optimistic. I think that the sector will be a good pick in the next 12 months. But I hesitate to recommend the small, illiquid companies with very large family holdings," said Iain Armstrong, analyst at Brewin Dolphin.

Two top picks are sector leaders BHP and Rio.

BHP's world class assets and its strong balance sheet should also be positive, analysts said, adding Rio's iron ore business has growth potential and most of its operations are in countries with lower geopolitical risk.

Barclays, along with a number investment banks, is positive on the sector, with an upgrade on Rio and Kazakhmys and rising its target price for major miners by 8-48 percent.

"While we expect mining shares to be volatile and the sector to have occasional pullbacks, we recommend that investors increase their exposure to the mining sector in general," said Christopher LaFemina, an analyst at Barclays Capital.