EQUIPMENT FINANCE, RENTAL AND LEASING
With cash still king,
mining companies are
looking at multiple
ways to procure the
equipment and services
they need to improve
their bottom lines while
retaining their financial
fire power. Dan Gleeson
speaks to some of the
big equipment finance
and rental companies to
get a read on current
market trends
The financial evolution
n the last decade or so, there has been a big
change in the way mining companies source
equipment for new and existing operations.
As the China-charged commodity upswing
came to an end, miners took a good look at
their balance sheets and focused their efforts
on generating cash flow to deleverage; pay back
disgruntled shareholders; or, in the case of
some bolder companies, acquire competitors.
Splashing out on the newest piece of
equipment, regardless of the impact it could
have on the cost and profitability of operations,
figured low down their priority lists.
This cash-flow focus also led many of the
companies that previously employed mining
contractors – which tend to come on site with
new, shiny equipment – to terminate their
agreements, instead bringing those services in-
house to reduce spending.
This created a void in the equipment industry
that needed filling.
Along came banks and financial institutions
with a ‘mining equipment finance specialism’,
looking to provide funding on suitable terms to
companies either looking to refresh their fleet or
acquire equipment for new operations.
The equipment companies also reacted, with
several major original equipment manufacturers
(OEMs) either establishing captive equipment
financing arms or offering more flexible
solutions for new and used machinery.
Others looked to find another niche,
providing a rental service for equipment that
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30 International Mining | APRIL 2019
could potentially speed up delivery of key
equipment and improve its utilisation.
This led to new equipment continuing to be
purchased, fleets continuing to be updated and
equipment manufacturers’ order books, once
again, continuing to fill up.
Cash and complexity
Fast forward to today, and cash flow is still king,
meaning mining equipment finance, rental and
leasing is big and competitive business.
Shawn McGill, Business Manager, Epiroc
Financial Solutions USA, the US financing arm of
equipment manufacturer Epiroc, explained the
link.
“What is important to them (mining
companies) is cash flow. That comes hand in
hand with financing and leasing; the affordability
of being able to make a monthly or quarterly
payment, or some sort of special structure that
gets them to where they can afford the
equipment over the longer term,” he told IM.
Björn van den Berg, Director Customer
Finance, Sandvik Mining & Rock Technology,
said consolidation in the industry is also leading
mining companies down this financing route.
“Acquisitions and mergers often demand
substantial cash to be available. With
equipment finance, you can unlock the value
embedded in the fleet and free up cash for
activities that will generate a higher return,” he
said.
And, with plenty of finance, leasing and rental
The introduction of new technology, such as
automation, has led to equipment finance
becoming a much more complex product,
according to Sandvik Mining & Rock
Technology’s Björn van den Berg
options out there, mining companies are asking
more of both the equipment and the finance or
rental package that comes alongside it,
according to van den Berg.
“In the past, customers had an OEM that
would supply them with the machine and
maybe some after-market services and they
would own and use the machine until it fell
apart,” he said.
“We are shifting more and more towards
where the customer is not necessarily looking
for an OEM that can provide a piece of
equipment or machine. They are looking for a
partner than can provide a solution, preferably
for the duration the customer requires.”
These demands are leading to the
introduction of several different products from
the OEMs’ equipment financing arms, van den
Berg said. This includes finance-leases, asset-
backed loans and trade finance solutions.
“What we also see is an increased demand
for operational leases, or short-term, rental-type
of solutions, including or excluding services,”
he said.
Bob Bennes, Vice President with responsibility
for Cat Mining Finance, the financing arm of
leading mining OEM Caterpillar, also saw
increasing demand for flexible finance solutions.