In a surprising reversal of fortunes, the mining industry has been one of the market’s best-performing sectors this year after a dismal 2015, which saw shares in some of the world’s largest miners crash to lows not seen for two decades.

This year the sector’s fortunes couldn’t be more different. Yesterday shares in Anglo American hit a one-year high after rallying by more than 180% year-to-date. London’s largest listed miners Rio Tinto (LSE: RIO) and BHP Billiton (LSE: BLT) have also put in a strong performance this year, although they’ve severely underperformed when compared to Anglo. Indeed, shares in Rio and BHP have added only 24% and 27% respectively so far this year, trailing Anglo by a wide margin.

Still, over the long term Rio and BHP have chalked up a more impressive performance. Over the past five years, shares in Rio are down by 44% excluding dividends and shares in BHP have lost 60% on the same basis. Over that period, Anglo’s shares have fallen by more than 70%, which puts the last year’s gains into perspective. 

In the past decade, shares in Rio, BHP and Anglo have returned -12%, -7% and -66% respectively excluding dividends.

Based on the share price performance of BHP and Rio over the past six months, it looks as if these miners have turned a corner and are finally on the road to recovery but do the fundamentals support the same conclusion?

Do the fundamentals support the rally?

Rio is the world’s largest producer of iron ore. Over the past six months, the price of the steelmaking ingredient has pushed steadily higher. According to Bloomberg, the price of iron ore is up by 37% this year, but few analysts believe these gains are here to stay. For example, Goldman Sachs believes the price of iron ore could fall back by 30% over the next few months. 

Meanwhile, the prices of oil, copper, and coal, which are the three top commodities produced by BHP, are all up this year, but once again analysts are questioning whether or not these rallies are sustainable. Indeed, most commodity markets remain oversupplied, China’s growth is slowing and most economists are concerned about the state of the global economy.

Valuations are troubling 

What’s more, after year-to-date gains Rio and BHP’s valuations are troubling. Rio trades at a forward P/E of 17.1 despite the fact City analysts expect the company’s earnings per share to fall by 26% this year. While BHP trades at a forward P/E of 55.6 for the year ending 30 June 2016, falling to 27.94 for the year after. BHP’s shares currently support a dividend yield of 2.5%.

So overall, while shares in BHP and Rio may have outperformed the wider market so far this year, mining industry fundamentals are still weak. It looks as if mining stocks are being pushed higher by bargain hunters who believe there’s value to be found in the oversold sector. However, for investors who are unwilling to take on the additional risk, there could be better opportunities out there. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.