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
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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