Borehole magnetic prospecting measures the three components of the magnetic field and is sensitive to the vertical depth of the magnetic source, which plays an important role in deep mineral exploration. Magnetic field transformations in the frequency domain constitute common and important processing for ground and airborne data but are rarely applied to borehole magnetic data. Here, we deduce component transformation and magnetization-direction transformation formulas for borehole data. It is found that the transformation factors differ from those of ground and airborne data. The new formulas depend on the position of the drillholes. The transformed data are then used to estimate the total magnetization direction by computing the correlation coefficient between the transformed components and the amplitude anomaly. The advantages of this method are that the borehole data yield a local and accurate magnetization direction and the total amplitude anomaly is computed directly from the individual anomalies in the observed components. The frequency-domain transformation is tested on the synthetic data, and the estimated directions are consistent with the true values. The processing procedure is applied to borehole data collected at the Mengku iron-ore deposit in Northwest China, where magnetic surveys from 55 boreholes have been acquired. The estimated magnetization directions yield good approximations of the results from the ground magnetic data and the physical property measurements of rock samples.