During the famous California gold rush of 1849, tens of thousands of hopeful miners trekked across the country (and across the seas) to the Sierra Nevada mountains, hoping to strike it rich. At the time, this was still a wild and untamed land with few laws and even fewer amenities. Claim-jumping disputes were often settled with violence.

At first, the getting was good. Lucky miners could earn a year’s worth of wages by plucking flakes and nuggets from local streams and river beds armed with nothing more than a simple pan.

But once the easy gold was gone, those who arrived late to the party were forced to scour for scraps. Few hit the motherlode. Many abandoned the search after a few difficult months and left empty-handed.

But still, they came.

The discovery proved to be a massive economic catalyst for the region. In just two years, San Francisco (the jumping-off point for many European and Asian immigrants) blossomed from a tiny backwater settlement into a thriving boomtown. The city’s population exploded 25-fold almost overnight.

And several enterprising businessmen made a fortune — not from digging, but rather from the diggers themselves.

One of these businessmen was a newspaper publisher turned store merchant named Sam Brannan, who first trumpeted the nearby riches in the streets and then cashed in on the frenzy by selling pickaxes, shovels, and pans. As the first retailer in the area, he reportedly sold $150,000 worth of goods per month — big money in 1849.

You see, not every prospector found gold. But they all needed supplies and equipment. Brannan parlayed his success into real estate and additional stores.

Shortly after, a German-born dry goods salesman set up shop and found a willing market for kettles, blankets, tents, and other such provisions. But he really made a killing with the invention and mass production of strong denim work pants. His blue jean overalls were quite popular with the workmen. Today, Levi Strauss (NYSE: LEVI) is a $6 billion global apparel manufacturer, still based near the wharves of San Francisco.

What’s the moral here? Well, with any commodity boom, there can often be bigger financial rewards hidden in picks and shovels.

The Real Movers and Shakers

This is by no means a new concept. In fact, my old Scarcity & Real Wealth publication had an entire portfolio dedicated to well-positioned service providers and equipment vendors. For every producer like Southern Copper (NYSE: SCCO) digging raw metals out of the ground, I held a Caterpillar (NYSE: CAT) that provided excavators and other heavy machinery (we’ve come a long way from shovels).

More often than not, I find these intermediate players to be in the sweet spot. They benefit directly from rising demand (and massive capex spending budgets) for certain resources, without the price volatility that comes with upstream production. And they are consistently some of my best performers.

Take oil. Nobody pours 15 gallons of crude straight into their car or truck. First, it must go through a refinery and be turned into gasoline or diesel fuel. Without this vital step, the black sludge isn’t terribly useful.

Valero’s (NYSE: VLO) 15 refineries churn out more than 3 million barrels of finished goods per day. And that output has been converted into a healthy 135% gain for investors over the past three years.

Natural gas isn’t used in its raw state, either. Pipelines carry it to regional processing facilities where impurities are removed and then to fractionation plants where valuable natural gas liquids (NGLs) are separated out.

Midstream giants like Oneok (NYSE: OKE) are well compensated for performing these tasks. And they reward their investors with some of the market’s richest dividends.

Nor do nuclear power plants run on raw uranium fresh out of the ground. The ore must first be milled, concentrated, and then enriched through gaseous diffusion or some other process into usable pellets. Without these finishing touches, there is no nuclear power.

That’s exactly what drew me to Denison Mines (NYSE: DNN). One of its greatest assets, aside from untapped reserves, is the McClean Lake mill, which is strategically located just a few miles down the road from two of the world’s largest uranium deposits. The facility processed 18 million pounds under a tolling agreement last year, earning Denison $5.9 million in fees.

And then there’s titanium.

Walk into any sporting goods store and you’ll find golf clubs, baseball bats, and bicycle frames built from titanium. The strong but lightweight and corrosion-resistant metal is also a favorite building block for carmakers, medical device makers, and the aerospace sector. The global market for titanium alloys is projected to double during this decade.

But this versatile raw material isn’t found in a usable metallic state in nature. Commercial deposits are typically either rutile titanium dioxide crystal or ilmenite oxides mixed with iron and other elements. Purification is a complex, energy-intensive process whereby metal-bearing ore is crushed, electrostatically charged, combined with chlorine gas, reacted with magnesium, melted down, and then placed in a vacuum arc remelting furnace.

You don’t just pick up a titanium Kroll reactor at Walmart. From there, high-grade slabs are milled and forged into plates, ingots, sheets, wires, and other fabrication feedstocks.

The Importance of Refineries

From lithium to lumber, few natural resources go straight from producer to end user without a few steps in between. In many cases, there are only a handful of specialists who can perform these steps. So they arguably play an even bigger role in the supply chain than those who extract the stuff.

This is true of metals, petrochemicals, and even agricultural goods. After all, when was the last time you munched on a handful of wheat kernels? Odds are, the grain was cracked, ground, sifted, and turned into flour first.

Perhaps the best example involves rare earth minerals.

Manufacturers around the world are growing hungry for irreplaceable metals such as dysprosium and neodymium for a host of critical 21st-century applications (from robotics to wind turbines to weapons guidance systems).

Despite their name, most rare earth ores aren’t terribly scarce. However, there is a chronic lack of refining and purification infrastructure.

China controls about 90% of global refining activity. Until a few years ago, there were only two facilities in the Western Hemisphere capable of concentrating and converting raw materials into finished rare earth products.

Given these metals’ importance in battery development and the green energy movement, the White House is taking steps to reduce foreign dependence and invest in homegrown supply-chain infrastructure.

A bipartisan bill has been introduced in Congress that would provide tax credits to incentivize the development of mining and processing activity at California’s Mountain Pass rare earths site.

It’s definitely worth keeping an eye on titanium activity in the U.S. We can consider these companies as picks-and-shovels plays that allow investors to profit from titanium without owning the metal itself.