How to profit from the Mining Boom

We often hear about the so called ‘Two speed’ economy in Australia.  On one side you have the mining How to profit from the mining boomCredit: Phillie Casablancaboom which is growing exponentially and on the other you have the manufacturing and retail sectors, particularly those business’ on the East Coast of Australia which are struggling.  The mining industry directly employs less than 2% of Australia’s workforce and many of the remaining citizens are asking “how can I profit from the mining boom?”.  

It was the discovery of Gold by the early settlers who first put Australia on the map as a resource rich country.  This has never been more true than today.  The real gold rush is happening now but it's not just gold that is making many Australians wealthy,there are other things being dug up all over the continent.  Resources being mined today include Iron Ore, Copper, Uranium, Nickel, Diamond, Coal, Oil, Opal, Natural Gas, the list goes on.

How Can I profit from the Mining Boom in Australia?

Below are five things you could do to profit from the mining boom.  The list is designed to give you a brief overview and you should do further research before acting on any suggestions.

1.  You probably already are.  The mining companies are already coughing up big sums of money to the Government through taxes and with a proposed mining tax on the way and the carbon tax already in place, this is only set to increase.  These taxes are distributed across the nation and help provide the many great resources we enjoy as Australian citizens.  There are some who feel they are worse off because of the mining boom and they may be correct.  Global confidence in Australian as a result of our strong mining ties with China have resulted in investors putting their money on our dollar.  This has increased the value of the AUD which in turn has caused some industries to struggle.  If you own or work in these industries you may not be feeling the love but rest assured you are not missing out entirely.

2.  Invest directly into mining companies.  What better way to profit from a mining boom than to own a mining company?  Well at least a tiny piece of a mining company.  We may not all be Gina Rinehart’s or Clive Palmer’s but we can certainly have our piece of the pie if we choose to.  Broadly speaking there are two types of mining company, those companies that are established and those that are still up and coming (and everything inbetween).  If you want security and steady growth with less risk then go for the big names, such as BHP and Rio Tinto.  Up and coming or exploration mining companies are far higher risk, especially if they haven't yet discovered anything to dig up but the returns if they hit pay dirt (so to speak) could be massive.  If you have a superannuation fund then chances are you already own mining shares and are profiting from the mining boom.  Beware, an investment in a mining company is often also considered an indirect investment in the commodity that company mines.  For example Newcrest is a large Gold mining company whose stock price will often fluctuate day to day in line with the price of Gold.  

3.  Buy an ETF(exchange traded fund).  This is a basket of companies or commodities that will give you exposure to a broad range of mining companies or commodities without the risk of putting all your eggs in one basket.  They are easily traded on the ASX in the same way regular stocks are traded and generally closely follow the value of their underlying assets.

4.  Property in Mining regions.  There has been a property boom in mining regions, particularly Western Australia where the number of people relocating for work has increased significantly faster than the rate at which the properties can be constructed.  There is much discussion about a slowdown in Australian property prices but values in these regions seem to buck the trends.

5.  Get a job in the mining industry.  This is probably the most direct way you could make a profit from the mining boom.  It would also probably have the largest impact on your lifestyle as it may involve a move interstate or even overseas.   Most mines are located in very isolated regions of Australia and have a fly in fly out policy for its employees which can involve being away from family for periods of time.  Other mine employes can live in small and remote communities where living expenses are high and entertainment is hard to come by. Also be aware that although many mining jobs boast large salaries the cost of living in some of these areas is also very high and will erode some of that income.  You must weigh up the true financial benefit of these jobs with the lifestyle impact it may have.  If you are interested in mining jobs, I suggest visiting some of the company websites as they sometimes advertise directly.  Probably the best way to find work is to register with a reputable agency who deal in the industry.

If you are considering any of the options listed above I suggest you seek further professional advice from someone specialising in the chosen area.