According to Datt Capital, the sector’s valuations are now favorable, both relative to other industries and relative to its historical averages. The sector is further supported by long-term global trends such as the shift to renewable energy and electric vehicles, which will further improve the outlook for lithium and copper.

Emmanuel Dutt, the firm’s chief investment officer, described the resources sector as “the most underpriced market” but warned that it only offered significant opportunities for those investors who understood its nuances.

“By applying global themes to local markets, skilled managers and investors can generate consistent alpha over time,” he said.

Similarly, Jamie Hanna, VanEck's deputy head of investments and capital markets, highlighted the sector's value and growth opportunities compared to other asset classes.

"Many other asset classes like equities have been in a solid bull market for several years, while certain key commodities are struggling for traction, but they are still critical to the day-to-day," he told InvestorDaily.

"Many large diversified resource companies have underperformed the market over the past few years, and there are strong reasons to say that many of them should now recover and could outperform the broader market in the coming years."

He also noted that the sector offers certain pockets of value, particularly in gold. The price of gold bullion has skyrocketed by 28 percent since the start of the year, and usually the share price of gold mining companies depends on the price of gold, he explained.

"Therefore, if gold goes up 28 percent, you'll typically see the gold mining company's share price go up more," he said.

“We've seen quite a bit of lag in that leverage effect in the current cycle, and it looks like there's value in that sector.

If a company is mining gold at an all-in maintenance price of $1,400/oz and the price of gold rises to $2,600, then this increase is net incremental profit for the company.

On the other hand, Dutt explained that inefficiencies in the sector stem from its complexity and lack of institutional focus, especially in smaller-cap companies, which creates greater opportunities for active investors.

"Natural resources are essential to everyday life and underpin global economic progress," Dutt said.

"World population growth, urbanization and growing prosperity in developing economies are driving increased demand for minerals and energy."

He also highlighted the sector's resilience during trade tensions with China in 2020, when the sector was hit with tariffs.

"Despite geopolitical opposition, Australia's iron ore and coking coal producers have thrived, underscoring the resilience of the sector," he noted.

Datt remained bullish on the supply-side outlook, pointing to cautious investment in mining and oil companies prioritizing debt reduction.

Also, key manufacturers in the sector tend to maintain strong balance sheets, which gives them more flexibility and allows them to better deal with market volatility, Dutt noted.

While acknowledging that some short-term challenges exist, Dutt is optimistic about the future of the sector.

“For investors, resource exposure offers a way to diversify portfolios while benefiting from global trends. This is a sector that combines strong fundamentals with significant long-term potential.”

Commenting on the challenges facing the sector, Hanna stressed that the resource sector is vulnerable to geopolitical risks.

"Production is still a key factor for the resource company and therefore they are affected by underlying commodity prices as well as the political and regulatory environment in the country of operation," he added.

According to preliminary estimates for November, the Reserve Bank of Australia's commodity price index fell 11.8 percent in the SRT over the past year, led by lower iron ore and coking coal prices. The index was also down 12.6% in Australian dollars.