EQUIPMENT FINANCE , RENTAL AND LEASING
Third , it says that COVID-19 has taught all miners they need to retain flexibility to face the ‘ unknown unknowns ’ this world brings . The pandemic has shown that , in times of crisis , the world ’ s biggest miners must step up and support not only their own staff , but also the livelihoods of local communities and local companies to ensure their supply chains can continue operating over the long run .
All three of these observations bode well for the companies offering these equipment finance solutions , which became evident to IM after speaking with two of them .
Finance that facilitates
Twenty-twenty was a busy year for Sandvik ’ s financial services arm .
A rebranding from Sandvik Customer Finance to Sandvik Financial Services is the first change of note .
This shift sought to reinforce the holistic customer focus the company has taken on in recent years , as well as a global expansion , going from servicing less than 30 counties two-to-three years ago to more than 60 today .
Second up was the introduction of Sandvik Rental Solutions in Europe .
Originally planned for launch in late March 2020 ( when the COVID-19 pandemic was reaching its height ), the business offering was delayed to later that year .
This encompasses a range of Sandvik ’ s equipment and technological solutions for rental within surface and underground drilling , loading and hauling , and rock tools , combined with a parts and service package .
“ We ’ re very happy with the rental product in the market ,” Björn van den Berg , Director , Sandvik Financial Services , told IM . “ While we postponed the launch once , it has turned out to be a big success since .”
So successful in fact that the company is now looking to roll out rental services to four other unnamed regions , according to van den Berg .
Both planned developments have come at the same time as Sandvik Financial Services has had to react to unplanned changes that came with the onset of COVID-19 . van den Berg says the effects of the pandemic have made more mining companies and contractors realise the importance of retaining cash on their balance sheets .
In the first few months after the pandemic was accelerating in Europe and North America – a period roughly through to May / June – there was genuine concern exhibited by customers , according to van den Berg .
“ Commodity prices were going down rapidly on the lack of confidence in the global economy and fears over demand ,” he explained . “ At the same time , a lot of our customers were in shutdown mode due to COVID-19-related restrictions , so were not able to operate and generate cash flow .”
Both issues led to Sandvik Financial Services pivoting and offering concerned customers credit and payment postponement plans .
“ We very quickly created a dedicated COVID structure where , without any new credit checks , customers could postpone their normal payments by up to three months ,” van den Berg said . “ After this initial three-month period , we again offered them a three-month payment delay which came with an accelerated payment schedule for the remaining period thereafter .”
More than 50 customers took up this offer for various reasons .
“ Some had real cash flow issues – some temporary , some longer term – and some wanted to preserve as much cash for as long as they could , concerned about what the future might hold ,” van den Berg said .
This led not only existing customers to call into Sandvik Financial Services ; it also saw enquiries from miners and contractors normally reliant on other sources of funding .
“ After June , things changed with commodity prices going back up , economic activity slowly resuming and suspensions and shutdowns easing ,” van den Berg said .
As commodity prices ran up higher towards the end of 2020 , demand for ‘ normal ’ project financing started coming back .
Reflecting on close to 12 months of upheaval , van den Berg saw two long-term effects from COVID .
“ Some people realise more than ever how important it is to have cash reserves ,” he said . “ That is not to say any of our customers were close to bankruptcy ; it ’ s more that , through COVID and the need to unexpectedly apply cash elsewhere , they realise cash reserves are good to have at all times . This could prove favourable in terms of new equipment finance business .”
The second impact has come in the contract mining space .
“ What we see , especially from our contractor customers , is there are so many new projects , mine extensions and mine upgrades starting up that contractors are bidding on ,” van den Berg said . “ These contractors want the assurance that when they win these projects , they have both the equipment and funding available to move forward with them .”
This has led to contractors arranging credit lines with Sandvik Financial Services in accordance with the specific projects they are bidding on and the expected equipment fleet required to carry out the contract .
Such an increase in the project pipeline – catalysed by higher commodity prices – is seeing Sandvik flex its muscles more often than it has in the past .
“ What we see from a financing perspective is we , at Sandvik Financial Services , are now becoming more embedded in the total value proposition Sandvik offers ,” van den Berg said .
He provides an example here where Sandvik Financial Services was recently approached to provide a solution for a mine that has been on care and maintenance and is looking to restart operations to take advantage of higher commodity prices .
“ This is where the Sandvik Trans4Mine team comes in and advises the client on how to optimise the ore extraction process with equipment , new technology such as automation , financing , etc ,” van den Berg said .
“ Because we have all this knowledge inhouse , we feel comfortable , from a financial services perspective , that with the right equipment deployed and the solution proposed by the Trans4Mine team , the eventual cash flow will support financial payment obligations down the line .
“ Such solutions are driving customers to deploy these full-scale solutions that incorporate new technology a little bit sooner than they would have if it was a capex-only option .”
The accelerated take-up of Sandvik ’ s new technology will be aided by a different offering coming from its Parts & Services division .
Battery as a service is being developed to provide peace of mind to customers in their transition to battery-electric equipment – a space Sandvik has become a leader in thanks in part to its 2019 acquisition of Artisan Vehicle Systems .
This service offering , which is being piloted with clients in North America ahead of a planned launch later in 2021 , will see Sandvik provide the battery system to clients on an operating expenditure basis , removing the increased upfront capital requirement that comes with these new machines .
Sandvik Financial Services has been providing such flexibility to customers on an ongoing basis , helping them make automation , digitalisation and electrification leaps with tailored solutions that shift the onus from capital outgoings to operating expenditure .
Recently , this financing flexibility has been displayed with the mining OEM ’ s rotary drills , which , van den Berg says , are getting good traction across the mining market .
“ With rotary drills – like our mechanical cutting equipment – there is a lot of customisation that goes into the units ,” he said . “ A customised unit has a different requirement from a financing perspective , needing an assessment of the collateral value of the unit when it is placed with the customer and the potential on-sale value at the end of the agreed period .
“ While we regularly provide such flexibility ,
58 International Mining | APRIL 2021