Magnetic field measurement is an important analysis method in mining industry. Magnetic distortion of inertial navigation system (INS) is one severe error of portable geomagnetic field vector measurement instrument. A correlation algorithm is proposed for component compensation, in which magnetometer attitude information is provided by INS, and the geomagnetic field vector without magnetic anomaly is measured. Experiment result shows that distortion field vector of INS can reach hundreds of nT, which are suppressed to about 4.8 % after compensation, thus it is effective for component compensation. The magnetic anomaly measurement using magnetic intensity test (TMI) method and the proposed instrument are analyzed. In application, the proposed compensation way shows effectiveness comparing with several traditional compensation methods. In addition, the potential applications in mining industry are discussed.