Raudvatnet has its name from the mountain Raudfjellet (the red mountain), north of the lake. The mountain is red due to hematite, which historically was extracted in order to make house paint in Rana. From 1911-1919, the mining company Bossmo Gruber extracted pyrite from Raudfjellet in the mine Mossgruven. Hematite from this red mountain was also the source of house painting in Northern Sweden. It explains why most houses there are red, and also the Swedish common name den Røda Stugan (the red house) when referring to their homes in the Swedish municipalities of Sorsele and Storuman.