IN THE NEWS – Flexible Fleet Can Free Up Miners’ Working Capital
Resources Review
By Berkay Erkan
There is a growing trend towards renting mining fleets and equipment over purchasing them, caused by demand for equipment suited to major projects as well as miners’ need to reduce their initial investments.
Australia’s estimated total equipment rental market size in terms of revenue is about $8.8 billion a year, with around 8600 businesses servicing the sector.
Due to the harsh conditions of the mining industry, constant wear and tear of mining equipment typically results in high replacement rates, creating substantial depreciation costs to end users.
Most mining equipment and machinery also has significant upfront costs, requiring miners to make large capital investments when purchasing new equipment.
Management consultancy McKinsey noted that rental and rent-to-own solutions were an increasingly important dealership strategy for helping customers reduce capital expenditures and reliably secure access to higher-quality, more diverse equipment without concern for service and maintenance.
It also pointed out that rentals provide financial stability by reducing capital expenditure investments during tough financial periods and insulating operators from the effects of economic swings.
According to a mining services provider, the growth of Australia’s mining industry has positioned long-term dry hire as a highly attractive option versus purchasing equipment over the past five years, driven by strategies to increase production, export volumes, and bottom line profitability.
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