3 Top Resources Stocks For 2016? Rio Tinto plc, Anglo American plc & BowLeven PLC

The outlook for the resources sector is clearly downbeat, with the prices of a number of commodities showing little sign of recovery. As such, changes to business plans are required and, on this front, Rio Tinto (LSE: RIO) has today announced a degree of progress regarding its costs.

In fact, the mining major has stated that, by the end of 2015, its aluminium product group will have delivered around $300m of cash cost improvements, as well as a reduction of $45m in sustaining capital expenditure and a reduction in working capital of $400m versus 2014. Furthermore, Rio Tinto remains focused on improving its cash flow, with a broad range of initiatives set to remove around $300m in additional cash costs from the aluminium product group in 2016.

In addition, Rio Tinto expects to make improvements in productivity during 2016, with output from bauxite, alumina and aluminium set to increase. And, with Rio Tinto investing $1.9bn in the recently announced Amrun project in Australia, it is well-positioned to become the industry leading supplier of bauxite.

Clearly, Rio Tinto is enduring a challenging period, but today’s announcement shows that it is responding in a logical manner to the tough trading conditions which it faces. Certainly, more pain could lie ahead, but with the company trading on a price to earnings (P/E) ratio of 13.6 using next year’s forecast earnings figure, it appears to be a sound, albeit volatile, buy for the long term.

Also announcing changes to its business plan is Anglo American (LSE: AAL). It has decided to suspend dividend payments for the second half of 2015 and 2016 as it seeks to shore up its financial position. Although disappointing, this appears to make sense since the company is enduring an exceptionally difficult period.

In addition, Anglo American will seek to reduce its asset base by as much as 60% as it focuses on higher quality assets and will consolidate its operating units from six to three. This should lead to additional efficiencies and, alongside an additional cut in capex of $1bn and additional financing of $1.5bn before the end of 2016, the company’s cash position should improve. And, with Anglo American seeking to make cost savings of $3.7bn by the end of 2017, it could prove to be in a stronger position following the planned radical changes.

Clearly, Anglo American is enduring a very difficult period, but with an asset base which still has long term growth potential, it could prove to be a sound long term purchase.

Meanwhile, oil and gas company BowLeven (LSE: BLVN) continues to struggle amidst a lower oil price environment. In fact, in its recent results it reported a widening of its loss as well as major impairments, with it reducing the size of its asset base by $76m which contributed to a $90m pretax loss.

Clearly, this is a disappointing result, but is not a major surprise given the low oil price. And, with BowLeven having a debt-free balance sheet and a cash balance of $145m at the end of the last financial year, it remains in a relatively strong position to complete its drilling programme and potentially take advantage of discounted valuations within the sector.

As such, and while larger oil companies which are profitable provide more security for investors, for less risk-averse investors seeking an oil exploration play, BowLeven appears to be a relatively appealing opportunity for long-term capital growth.

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Peter Stephens owns shares of Anglo American and Rio Tinto. 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.