Bowen Basin QLD Mining Towns – Opinion on offer

Hi guin_ness,

I was at the weekend too – wasn't it great? (I was the guy with his arm in a sling – it was a great conversation starter so we might have chatted )

I'd identified these towns about a week before API published on them, so by the time I acted my first 4 choices were under contract. That said, my thinking was along these lines:

1. I tried to think of resource-based activities that should be reasonably reliable for the next 50 years or so (I'm being hopeful )
2. I figured that with some minerals it might be harder to pick a winner over that timeframe. Eg metals get used for various things, and may come in and out of favour. Iron ore for example used in steel would be a good bet. But others I know less about and are more specialised eg tantalum???
3. Then I thought about coal, and the fact that even though it's got some green energy challenges, there are 2 things I'm confident about: Humans will continue to increase their energy consumption and it's unlikely that they'll come up with a more economical alternative in that timeframe.
4. So I looked at the major coal areas around the country. Those in NSW and VIC had pretty ordinary yields, but the Bowen Basin was still pretty good. Emerald had seen a bit of a boom, and I thought might flow out to nearby areas. The Surat basin south of Emerald had average yields, so I looked north.
5. Further research revealed that a lot of the coal taken from the Bowen is coking coal, which is used to make steel from iron, so that matched up nicely with my earlier conclusion about steel. Also made me feel a bit better about the green thing. The bowen basin is pretty much all coal, and it's a huge basin. I don't think they'll run out in my lifetime.
6. Then I analysed all the mines, and looked for towns with more than one mine, and more than one mine operator in the area. Then looked at the age of the mines and any activity associated with opening new mines. I gravitated towards the larger towns.

After that it was all about offers and building inspections etc. I didn't travel to see the places until after I'd bought them, so all my due diligence was remote. The good thing about these towns is that there are only about 4-6 types of house in each town, because the mining companies built them (presumably with 4-6 builders!). So I really only needed an assessment of the condition of the house to decide.

All research was on Internet, and a few phone calls to agents and councils.

I hope that helps your investment journey,

Daedalus. 

Hi Harry,

Remember that they are only projections.You need to understand what assumptions they are based on.
I have a property in Moranbah, and I'm aware that there are almost ZERO rental properties available to lease at the moment. So now is a good time to get in if it suits you, because you will lock in a tenant on a long lease at positive return (presumably).

From my perspective, I'm not investing on the assumption of a significant capital growth. Sure, it might happen in the short term, and that would give a margin of safety, but significant capital growth in the long term is unlikely. However, so long as the rental yield remains high for some time (which I think is very likely), I'm happy for the property to be a cash cow.

Moranbah has the largest open cut mine in the southern hemisphere, and at least 2 other significant pits nearby. The explosives plant looks like its back on the agenda as well. All other accomodation is significantly further away from the mines than Moranbah is, and Moranbah is the biggest town in the area, with excellent services etc.

So those are some of my reasons for moranbah, but you'll need to make sure your happy with your reasoning.

All the best,

Daedalus.

PS I have developed some pretty specific opinions about ONE of the property managers in Moranbah. If you want to PM me, I'll share them with you.