City broker Jefferies reckons investors should buy into the big mining players in 2013 - with the soon to merge Glenstrata as its top pick.
It rates Rio Tinto (LON:RIO) a 'buy' and has upped its target to £43 from £40 previously, while BHP Billiton (LON:BLT), also a 'buy', goes to £26 from £24 previously.
"After having been cautiously optimistic for most of 2012, we have become much more positive on the fundamental outlook for the mining sector in recent months," points out analyst Christopher LaFemina.
The reason for his optimism he attributes to improvements in Chinese demand, cost inflation in the mining industry falling, and capital expenditure in the sector declining.
Indeed, today some highly encouraging trade figures emerged from China.
December exports rose 14.1% from a year earlier, up from a 2.9% gain in November, while imports were up 6% following zero growth the month earlier.
Groups like Rio and BHP, he says, are well positioned to deliver near-term organic growth and lower costs this year.
LaFemina highlights that supply constraints in the industry have been severe for a number of reasons such as declining grades, deepening mine pits, a more difficult permitting environment and shortages of labour.
"Mining companies have aggressively invested in organic growth in recent years, but much of this growth has been delayed due to these challenges," says the analyst.
"In 2013, however, there should be adequate supply growth to meet demand growth for almost all major industrial commodities (including copper) as new projects and mine expansions finally come online and grades in some mining operations temporarily increase," he points out.
In terms of commodity markets, the analyst expects balance in 2013 with prices on average not very different from the current relatively high spot levels.
He is most positive on the outlook for low-cost producers of major commodities, which have steep cost curves, notably iron ore.
"Low-cost producers such as Rio Tinto and BHP Billiton, who deliver iron ore to China at a total cost below $50 per tonne, should greatly benefit from this cost curve support. Like iron ore, thermal coal and copper also have steep cost curves," he says.
Assuming the merger completes between commodities giant Glencore (LON:GLEN) and miner Xstrata (LON:XTA), LaFemina says the new firm will be its podium pick in the sector, after the very strong performance of Rio and BHP in the second half of 2012.
Meanwhile, in the mid-cap market, Jefferies has a 'buy' recommendation on iron ore firm Ferrexpo (LON:FXPO) and has upped the target price to 300p from 269p. London Mining (LON:LOND) goes to 250p from 165p with a 'buy' stance, and Sirius Minerals (LON:SXX) is rated 'buy' with a 30 pence price target - up from 28p.