IM 2020 April 20 | Page 80

EQUIPMENT FINANCE, RENTAL & LEASING “What we see more and more coming in is the need to finance a ‘mine concept’ – where we implement a solution for a mine that is not satisfied with their current level of productivity, or install a solution for a greenfields operation,” Sandvik’s Björn van den Berg says Capex vs opex “That flexibility extends to new machines as well,” it said. “Sometimes it may take several months before new equipment is up and running on site and lenders may defer payments during that time.” On top of this, working capital loans may also be an option for mines looking to inject cash into their operations, it said. Rise in rents As economic and operational volatility continue to hit mining companies, those that sell, lease or rent equipment are having to get creative, Dan Gleeson discovers n these uncertain times, the outright acquisition of mining equipment appears to have lost favour with contractors and mining companies. Volatile commodity prices, evolving technology offerings, reductions in discretionary capital spend, an increase in the use of fixed-term mining contracts and a rise in the availability of new and flexible financing solutions has changed the mining equipment market. This had led to several specialists filling gaps to provide services and equipment; it has also seen OEMs up their game when it comes to the way they sell and distribute their offering. Björn van den Berg, Director Customer Finance, Sandvik Mining & Rock Technology, said: “Economic cycles are changing and economic conditions are becoming less predictable, so there are more and more customers looking at using the equipment only for a period that they need it, versus owning it and betting on the economic life of the equipment over the required period of time.” These changes are leading to different types of procurement processes within the mining community. Those companies flush with cash looking for equipment for long-life operations may still look to outright purchases while ensuring the equipment is ‘automation-ready’ and can be retrofitted with emerging technologies. Others, as van den Berg points out, are looking for ‘solutions’ that are tailormade to their operations. They also want to guarantee the fleet they acquire has little downtime. This leads to OEMs bolting on maintenance contracts and, potentially, a digitalisation offering where real- time data is fed back to machine engineers and maintenance specialists to ensure the units are operating effectively and are not at risk of failure. It is these solutions that the financing arms of I 76 International Mining | APRIL 2020 OEMs have started to specialise in, with van den Berg noting that this offering has gained traction over the past year. “Historically, some of the financing we offered was, perhaps, tied to individual pieces of equipment or a fleet with a number of machines included. What we see more and more coming in is the need to finance a ‘mine concept’ – where we implement a solution for a mine that is not satisfied with their current level of productivity, or install a solution for a greenfields operation.” This can see mining equipment providers like Sandvik interpret a mine plan, the orebody conditions and the credentials of the mining company in question to suggest a solution that fits the equation. “Here, we can provide the holistic Sandvik solution – that could include machinery, automation, and IT support (with OptiMine),” van den Berg told IM. “If we add financing to that package as well, the client can spread the costs to match the income pattern of the operation. “While individual equipment transactions still represent the bulk of what we do, the percentage of transactions tied to these ‘holistic solutions’ – from a monetary point of view – is becoming larger.” Such solutions are important to new mines without existing cash flow. Where they would have previously raised more money for equipment procurement via equity or debt markets, they can now potentially move what would have been a capital expense to an operating cost. Cat Financial, a wholly owned subsidiary of OEM Caterpillar, is also aware of the need to align equipment acquisitions with first cash flow. The company says it will work with miners to, for example, modify existing contracts and, where appropriate, include an option to ‘skip’ payments to align debt service with an operation’s cash flow. Rental options are increasingly being factored into these equipment solutions due the volatile economic and operating conditions already mentioned. van den Berg said the shifting demand to rental options in the mining space is part of a much wider global trend seen across multiple industries. In mining, that trend has become more evident recently. In Australia, such a market has existed for several years with specialists such as National Group, Emeco Holdings, SMS Mining Services and others supplying equipment on a rental basis to both contractors and miners alike. In specialist markets like the Canadian oil sands, contract mining and rental companies like KMC Mining also fill a void. The OEMs are also getting involved in the market. Having seen the rental trend getting stronger in 2019, Sandvik’s van den Berg says he expects demand to accelerate this year. “That is why we will be investing in better rental solutions and a stronger value proposition going forward,” he said. That proposition is a “full-service rental offering” in the form of Sandvik Rental Services. The company explained: “Sandvik Rental Services encompass a wide range of the organisation’s world-leading equipment and technological solutions within surface and underground drilling, loading & hauling and rock tools, combined with a complete parts and service package.” This, according to the company, allows customers to predict operating costs, control budgets and minimise risk by paying a fixed price and “letting Sandvik take care of the rest”. The rental offering includes equipment bundled with genuine OEM parts, rock tools and aftermarket support. “Whether the customer is a contractor with an immediate requirement for a specific project or simply looking to grow their business while