Moranbah and Surrounds

Just a post (a first for me on this forum) on this for anyone interested in an ‘on the ground’ view of what is the flavour of the month around Moranbah and Dysart. I am a local who works for BHP currently living in Dysart and working in Moranbah. My wife and I have been involved with PI.com pretty much since it began and have a medium level of investing experience under our belts just beginning to ramp up. We recently moved from Mackay into our first real mining town living (Dysart) after avoiding it for many years instead being part of the FIFO / DIDO crew. After only being settled in Dysart for a couple of months, I was part of the BHP mine which has been put in ‘care of maintenance’ (note this mine has not been closed as reported by many media sources) and been lucky enough to move to BHPs biggest site which will mean being relocated from Dysart to Moranbah. So it is with being on the ground I am happy to share information viewed from a layman’s eyes (disclaimer goes here).

First and foremost; I will note that I am not invested in any mining town at present. I find that there is always potential, and have talked to many people invested in mining areas with very successful returns. However I have seen the opposite also. It comes down to the simple term in general, the higher the risk, the greater the return (and therefore the greater the potential loss). I have told anyone asking about investing particularly in Moranbah and Dysart, as with any investment, calculate your worst case scenario: can you afford for this property to rent for less than half the current value or not rent at all ? Can you afford for the value to drop by half ?

I know a number of people investing, developing and renting property not only in Moranbah but in other Bowen towns. In talking to these people, reading media reports, looking at government and private sector activity for these areas (especially in the Fly-In-Fly-Out consideration), and actually working on the ground for a mine it’s easy to see that the coal resource is particularly strong and the outlook is favourable. Even such things as BHPs issue with strike action has its benefits in the reduced availability of particular blends of coal which can help inflate prices due to scarcity. There are a few things which I think are unique to being on the ground which I have observed over the last few months which are not necessarily easy to see from a distance – which may be important. I see a lot of investing media still advertising Moranbah as a green light for investors – I don’t necessarily disagree, but just as in tough times for standard residential require options, it would appear at present investors will need to be very creative to keep cashflow going the right way, into the bank account !

Some of the things which may not be easy to find out are:

At present, BHP does not lease private residential homes for employees. This differs from town to town, but the majority including Moranbah, Blackwater, and Emerald will not be adding any new lease agreements and it has been removed from the new accommodation agreement. On the ground it doesn’t add up looking at the current vacancy rate. When I am in town things are seriously busy. It’s favourable when a McDonald’s is opening in a town with such a small population – it’s not often that they get it wrong.

BHP is using a major contractor to build some very respectable modular housing to replace its need for having to outsource accommodation. In Dysart (not sure about other towns) the same contractor is also renovating existing houses to a high standard. From what I have seen, these houses are fabricated in one of the capital cities and shipped to the new location. They are very quick to put together. Something of note here, due to the style of housing, they may not necessarily be included in the median stats for these towns, yet will have an impact on overall supply.

One of the biggest providers of camp accommodation, The Mac services group while already having a substantial sized camp on the outskirts of Moranbah, has recently gained approval for one of the biggest mining camps to be built out of Moranbah – this has been opposed by the Mayor and many locals. However, when rents are so high local industry cannot support running business in town, a solution needs to be found. Part of the agreement with the mayor if this camp is built is that a certain number of rooms will be made available for town services which cannot afford to rent and make business profitable. Just a quick note here for those who have not seen a mining camp before, new camp accommodation would be close to a 4 star hotel quality room, with flatscreen TVs and Foxtel – some even have electrically operated blinds ! The advantage also is very good food hall facilities and very respectable watering holes

In conjunction with this BHP has also almost completed its own camp on the outskirts of town accommodating any BHP employees and sometimes contractors who do not live locally.

Rentals in Moranbah appear to be moving very slowly again, however, the rent range for houses with 3 BR now starts at $500 pw – still ranging up to as high as anyone would wish to pay pw for a premium property. Looking at Dysart, things are similar with some rentals being advertised reasonably ‘cheap’ to attract tenants. Also despite the suspension of mining at the Norwich Park Mine (which was accommodated out of Dysart), BHP is now housing new starters for its Peak Downs Mine – previously (and still for the majority) housed in Moranbah. This is located close to halfway between Dysart and Moranbah. So if anything, Dysart is actually gaining more people than less. In my opinion though, the commercial infrastructure does not support this – even to the point with one of the small shopping squares being closed down in favour of building residential units – that’s how great the difference in returns are.

So all in all it makes for adventurous investing. Am really happy for any readers to agree or disagree, or even PM if you have any questions. I don’t claim to be an expert in the area as it is not our location for investing, however I have learnt over the past few months of living in the region, even being a local doesn’t mean it’s easier to pick how to invest locally.

Happy Investing.

Alan.