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Miners at '30-year lows' could bounce as rates rise

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Mining stocks slipped on Tuesday, as weak earnings from BHP Billiton and Glencore Xstrata sent the sector lower. Analysts said miners were now the cheapest they have been in 30 years, relative to the market, and were set to bounce back when interest rates begin rising.

The majority of global miners are in correction territory year-to-date, due to the slowdown in the Chinese economy and the slump in commodity prices. However, this "severe de-rating" has not hit earnings to the same extent as share prices, making mining stocks a compelling buy, according to Henry Dixon, fund manager at Matterley Asset Management.

(Read more: Is the rally in global miners too good to be true?)

"Miners had a torrid time in the first half. Mining has been the worst performing sector this year, leaving it as cheap relative to the market as we can find," said Dixon, who was confident mining stocks would be the first to benefit from the climb in bond yields that will follow the Federal Reserve's tapering off of its stimulus program.

Dixon said he had increased his exposure to mining stocks in recent weeks. "Obviously a lot has been made of the move we have seen in bond yields, and with history in mind, and rising bond yields, it is actually the mining sector that stands tall as one of the best under this environment, with the key being a little bit more growth in the system," he said.

(Read more: Gold miners insist they are not in 'dire straits')

British-Australian multinational Rio Tinto was Dixon's pick of the sector, as it has committed to trimming its capital expenditure by around $5 billion over the next 2 years, after a decade of "chronic" overspending.

"The consensus and fear around emerging markets [EMs] is at its height right now. I think EMs, relative to the incredibly depressed expectations, can appease investors in the next 6 months, so within that, I can see the more capital conservative mining sector actually finding a bit of favor… their earnings picture is actually getting a hell of a lot easier year-on-year," he added.

(Read more: The stocks Marc 'Dr. Doom' Faber actually likes)

Neil Dwane, chief investment officer at Allianz Global Investors, also backed mining stocks to perform well when the Fed starts tapering its asset-buying program, as many miners are lightly leveraged and so will be hit less by rising rates.

"Positioning in both oil and mining has been very low, so although the markets are selling off, because interest rates are rising and that effects certain parts of the corporate sector, it does not affect the miners, who would benefit from the volume," said Dwane.

(Read more: Why tapering could take iron ore to record highs)

Dwane forecast investors would sell bigger, more expensive industrial stocks in favor of miners such as Rio Tinto, which is much cheaper and is geared towards an improvement in economic prospects.

John Meyer, analyst at SP Angel said the mining sector was "quite ready" for new investment, and money was set to flow into the sector.

"Miners pulled back on a lot of concerns over what was going on in China through the first half of this year, and gold is always bad for sentiment when prices are falling, but I think we are now seeing re-stocking in China starting to come back, notwithstanding a little bit of profit taking and money off the table this morning," Meyer said.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

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