All Topics / General Property / Are Mining Towns a safe investment ?

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  • Profile photo of wealth4life.comwealth4life.com
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    Hello all,

    If China falls into this world financial correction and limits its coal import from Australia is investing in mining towns really that smart if you can't sell your asset.

    isn't it better to buy one bedroom apartment's on the fringe of the CBD as a long term investment strategy? … This was the key to Peter Spanns strategy I believe.

    So would you spend $400k in a mining town or $400k in a fringe CBD investment.

    D

    Profile photo of devo76devo76
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    CBD hands down. Most mining towns have had there run and to me are a higher risk at the moment.

    Profile photo of redleavesredleaves
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    devo76 wrote:
    CBD hands down. Most mining towns have had there run and to me are a higher risk at the moment.

    I've been listening closely to the stock market activity for the mining companies, and also the economies and exports for China and India.

    Is anyone out there still confident about buying in a Mining town?? or is it a certainty that activity in these areas will drop off?

    Profile photo of BRG1200BRG1200
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    I'm commenting from the UK, as I haven't mnaged to migrate to SA yet,but from here it looks like Australia is hanging out a remarkably long time from being sucked into this crisis. If China starts consuming less and mining areas go down surely they'll be among the first to come back up when China starts up in earnest again? Worth hanging out a long while to see how it plays?

    Profile photo of wellonthewaywellontheway
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    May I suggest that you look into some of the following: world's forecasted growth (e.g. BRICS), forecasted demand for energy (International Energy Agency), depletion of fossil fuel (primarily oil/gas/coal), investments (past and recent) by private and government bodies (e.g. even recently, there are still Chinese state companies buying into Australian mining companies).

    From my own brief research (plus the fact that the oil MNC I'm with is still investing USD billions into its people and assets in asia alone!), it is still a fair bet – as long as it is aligned with your investing strategy, risk profile and you've done your DD.

    Regards,
    Albert

    Profile photo of wealth4life.comwealth4life.com
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    Hello Albert again,

    I don't think anybody in this country can say what is happening and where this is going.

    Forget about foretasted growth … none of these stats predicted a depression worse than the 30's

    Look at the truth around the world Albert, all of our research docs from the last 3 years is out the window.

    The future is about low debt and no credit cards … lets reread my views again in six months.

    D

    Profile photo of TerrywTerryw
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    Another mine is closing down in Tasmania -was announced on Thurs last week.

    I think there may be some good returns in mining towns, but very risky.

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    Profile photo of wellonthewaywellontheway
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    D,

    I couldn't agree with you more – the forecasts have been off and none of the major institutions stuck their neck out to predict this earlier.  There are millions of economists out there whose full time job (if they haven't been retrenched) is to model the financial market – so if even they got it wrong, what chance have I got.

    Having said that, I don't believe they should throw out the models used to forecast economic expansions/consumption, energy needs, etc.  Rather, they should continuously review  the model to see where they are flawed, and how they can be updated.  For example, to say let's totally neglect the growh in BRICS and its impact on global energy needs (plus its correlation with depleting fossil fuels) would be unreasonable.  

    On mine closures – my personal view 
    There is no doubt that there is a current stall in energy consumption, however commodity Multinationals need to maintain a medium-long term look on the global demand – so they are not caught out like some of the coal majors in the past 24 months.  During the boom, some companies found themselves to have under-invested (both in assets and human capital) and tried to catch up through aggressive investments and acquisitions.  Since then, there have been a myriad of commodity companies setting up mines – however some were too aggresive either in their demand forecasts, or production economics. This would inevitably contribute to mine closures given the massive drop in price/demand.  As an example, some minor oil companies in the US acquired oil acrerage to produce based on a sale price of $70 – $90/barrel, compared to the majors who use sale price of $30/barrel.  As a barrell price drops below $40/barrel, we'll see all the earlier companies close down – but there's still profit to be made (albeit a much smaller one).

    I'd be most interested to hear people's views on the 12-24 months outlook.

    Regards,
    Albert

    Profile photo of timothy_us8timothy_us8
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    A marked improvement in fixed capital investment had taken place in the mining sector, Minerals and Energy Minister Buyelwa Sonjica said in her maiden budget vote speech in Parliament yesterday.

    The Chamber of Mines raised concerns towards the end of last year about what appeared to be an investment strike in the sector. Some suggested that the cause lay in the new legislative framework introduced by the Mineral and Petroleum Resources Development Act.

    The slowdown in investment was all the more inexplicable in the light of a commodities boom which saw mineral sales grow by a preliminary figure of 36.7% to R195.2 billion (US$27.4 billion) last year. At the same time, processed minerals grew at a moderate 14.5%.

    ____________________________________

    Montreal Furnished Apartment

    Profile photo of clonesclones
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    If you like ghost town go and buy a property in one of those mining towns. The smaller the mining company around the riskier the investment is. I am not saying large mining companies will survive, just look at what is happening to OZMinerals, they are the 3rd largest mining company in Australia and are close to administration.

    Clones

    Profile photo of acowl9acowl9
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    I have invested in mining towns for the past 10 years and believe they will continue to grow. Between now and 2020 China plans to build 59 cities (smallest one is the size of Adelaide). They require iron, coal, copper and aliminium. One country has all of these- Australia. They will still require these resources and I believe that this will push prices up in the future. You only have to look at Moranbah in Qld. The Moranbah North mine has a life of 20 years and many other mines are opening up there. A house costs about 400k and rents for about $900p/w.

    Has anybody invested in Alpha yet with the Warrata Coal mine? 

    Profile photo of nhb74nhb74
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    I totally agree with acowl9. Just because I Mining Company like OZminerals close to administration doesn’t mean the mines are going to shut down. Another company is going to buy and keep the mines running as there is still a need for resources and still lots of profit to be made for years to come. There might be a slow down but there will be no ghost towns.

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