Be very, very careful when investing in remote mining town hotspots: Pete Wargent

It's been threatened for some time, and now Glencore Xtrata is to "freeze or divest" the Wandoan project in Queensland, which is hardly a surprise given the weakness of the commodity price.

It's a bit awkward for those who said Wandoan would "go ahead and grow exponentially" such as in this column posted on Property Observer.

My advice would be not to place any bets at all on the thermal coal industry right now.

The thermal coal spot price fell in the last fortnight to its lowest level in four years at well below $80/tonne, and prices are way, way, below their post-GFC highs of 2011 when they were at above $135/tonne. 

While we're on the subject, coking coal has fared even worse.

Thermal coal production costs in Australia are above $75/tonne, so steer well clear. 

Anyone with even a rudimentary knowledge of the mining industry will tell you that without a substantial bounce in the commodity price mega-projects will never attract green ticks while margins remain so slender.

Even more awkwardly, the same Property Observer column also said that BHP's proposed Olympic Dam expansion was "already underway" when in fact it was canned only three months later.

Be very, very careful about buying properties in remote region 'hotspots' based upon marginal resources projects which could then get axed.


Pete Wargent is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.

His new book 'Four Green Houses and a Red Hotel' was released on 1 September 2013.


Pete Wargent

Pete Wargent

Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.

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