FTSE 100 listed mining giants Anglo American (LSE: AAL) and Glencore (LSE: GLEN) are the comeback kings of the year. Of the two, Anglo American is the bigger hitter, its share price almost quadrupling since the lows of 20 January, from 221p to today’s 827p. Glencore also has plenty to brag about, its share price shooting up from 71p to 193p over the same period, a rise of 172%.

Fighting back

Long-term shareholders will be relieved but they won’t be getting over-excited, the fightback scarcely makes up for the losses incurred during a disastrous 2015. Over five years, the stocks are still down 62% and 46% respectively.

At Motley Fool we constantly encourage readers to hoover up stock in their favourite companies during times of trouble, which is when the real bargains can be found. Anybody who followed our philosophy and bought in January will be celebrating today, but for me the real surprise is that the fightback has been sustained for more than seven months. Over the last three months, both stocks are up around 50%, rewarding those who bought into the recovery a little late. How long can they maintain this blistering pace of recovery?

Earnings shock

The first reason Anglo American and Glencore rebounded so strongly is that they were oversold both in 2016 and during January’s China-fuelled panic. At its worst, Anglo American’s market cap fell to just £3.1bn and it traded at 1.96 times earnings. Today, its market cap stands at a more respectable £11.6bn while its valuation is 17.75 times earnings, capping what has been an incredible turnaround.

Both have been helped by the weaker dollar as US rate hike prospects wither, which makes commodities more affordable to other buyers. Global stimulus – in Japan, China, Europe and now the UK – has helped to prop up demand and investor interest. The two companies have also worked successfully to shore up their balance sheets: slashing capital expenditure, culling head counts, disposing of non-core assets and paying down debt.

Debt bet

Anglo American’s net debt at 30 June was $11.7bn – down from $12.9bn earlier – and it has a target of under $10bn by the end of 2016. In March, Glencore reported a 15% drop in debt but it still owed $26bn. Investors still have to face up to a slowdown in the world’s greatest commodity consumer China, which was never going to gobble up metals and minerals forever. The country’s Q2 GDP climbed a slightly-better-than-expected 6.7%, but this was largely due to stimulus rather than private sector activity and most analysts expect the slowdown to continue.

So the mining sector still faces headwinds. If the Federal Reserve does hike interest rates in September, the stronger dollar could knock both companies out of their stride. Neither are cheap, Glencore currently trades on a forecast price/earnings ratio of 39.9, although a forecast 55% rise in earnings per share next year may justify that. Forecast EPS growth at Anglo American is a more steady 9% this year and 5% in 2017. At these valuations, I believe the serious action is over now.

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