FIFO FUM!

FIFO. This catchy and slightly quirky phrase has recently made it into the mainstream vernacular with much fuss being made in the press about Fly-in/Fly-out (FIFO) workers as mining companies feed the mining boom giant.

When looking for your piece of the mining pie it’s important to understand what the effect of FIFO will be on the various communities where the miners live and work as it underpins the demand for property and impacts the local economies where they will be spending their large disposable incomes.

While it might sound like a fairy tale, the mining boom and the incredible wealth it can bring to Australia is not some altruistic fantasy, it’s a reality and it’s here now. The term ‘boom’ however can also bring up connotations of the other side of that cycle, ‘bust’ and there are many who are looking at this mining boom with skepticism and an expectation of it being short lived. So, to put to bed these concerns up front here’s a few quick facts:

  • 1.2 Billion people in Asia are becoming ‘middle class’, going through the process of urbanization and industrialization and increasing their consumption of well… everything, but especially energy.
  • That is more people than when all of the western nations went through this process in the late 1800s and early 1900s.
  • Queensland is already the world’s largest exporter of seaborne coal, the cheapest energy source in the world. The demand today is higher than it has every been and conservative estimates have this demand at higher levels in 2030 (after peaking in 2020) than they are today.
  • Australia’s LNG output is expected to increase fivefold in the next 9 years taking us to the largest LNG producer in the world.
  • Both the IMF and World Bank have said that Australia is positioned the ‘best in the world’ to benefit from the changes underway in the world economy.

Yes there will be highs and lows, and likely more volatility but, for the foreseeable future the lows are unlikely to be ‘busts’, rather a new level that is much higher than we find ourselves today.

So, back to the fuss about FIFO. In recent weeks there have been headlines discussing how, for example, Clive Palmer intends to recruit 2000 workers from the Sunshine Coast for his new operation in the Galilee Basin deep in the heart of Queensland. This is a significant boost to the Sunshine Coast economy and takes the pressure off the small mining towns currently in the Galilee that don’t yet have the infrastructure to support rapid growth. These towns will of course benefit too as some of the workers will choose to live in the town and many services to support the mines will be established there.

There is of course the other side of the coin with the State Government restricting the FIFO workforce of the BMA Cavil Ridge mine to just 20%. Located near the town of Moranbah, where the locals have vigorously lobbied to see larger percentages of the mine workforces live in the region they work, it means a significant increase in demand (in an already highly stressed housing environment) which is bringing with it a range of investment and infrastructure from the State and local governments, mining companies, business and private investment.

So while it’s important to understand the detail of the discussion and the pros and cons of FIFO in specific towns and regions, what is a more pressing question for you to answer today is why is there is so much discussion?. There is an advert on TV in Queensland at the moment that talks about the 3,500 jobs required now in the gas industry and the 38,000 in the near future. That says it all. Just one industry. It doesn’t include the massive expansion of coal mining or the demand for our other minerals, metals and resources.

This mining boom is of fairytale proportions. It has a longer life span than any of us need to create real wealth by leveraging the opportunities available today. The most money will be made by those who start climbing this bean stalk before the others realize what is happening. There are risks, as there has always been in investing, but you minimise these risks by working with those who understand the current climate, have been up that bean stalk looking for the opportunities and can support you on the journey to the golden goose.

You too can have a ‘happily ever after’ from this story… but only if you set off on the climb!

Jack.

 

2017-05-19T12:04:02+00:00