Indigenous Australians have a growing capacity to extract monetary payments from mineral development on their traditional lands. Considerable controversy surrounds the possible use of these payments to fund services such as health, housing and education for the Indigenous groups concerned. Critics of such an approach argue that government should provide basic public services to all citizens, and that use of 'mining payments' for service provision denies Indigenous people specific compensation for the negative impacts of mining and an important opportunity to enhance their economic status. There is also a danger that government may reduce its existing spending on services, leaving Indigenous people no better off as a result of allowing mining to occur. This article argues that while there are certainly risks involved in using mining payments to fund services, Indigenous groups can generate substantial net benefits by doing so. Mining payments can leverage additional government spending; fund services at a level or of a sort that government will not provide; give Indigenous people greater control over service provision; and help develop Indigenous organisational skills and governance capacity. A strategic approach is required to minimise risk and maximise the available benefits, and the article identifies policy principles that can be applied to secure such an outcome.