How to: Finance Mining Equipment
From loans to leases, the process of acquiring mining equipment can sometimes seem overwhelming. In today’s age, however, there are numerous financing options available. Along with choices, financing equipment can provide helpful incentives and benefits for miners. We take a look at the available options for financing mining equipment.
You’ve got options
Securing financing for mining equipment isn’t as difficult as it may seem. Many companies provide business owners with financing and leasing options to acquire equipment without using working capital reserve or banking lines of credits. In today’s market, there is a wealth of selections to utilize and no matter what the reasoning is, you have options.
The first step in acquiring mining equipment is deciding if you’re going to purchase or lease. There are benefits for both options, depending on what the company’s needs are.
The advantages of financing equipment are wide open. Many companies provide lower interest rates; minimal down payment; extended payment terms; delayed payments; and seasonal skip payments. The options are limitless.
There are several lease options miners can choose from including capital leases or finance lease and true lease or taxes. This enables miners to lease new or used equipment and even sell their leased equipment. Depending on your needs, financiers will typically allow business owners to obtain equipment with little money down and with a lower payment than a traditional loan.
The benefits of leasing include: no down payment; lower monthly payments to preserve cash flow; tax advantages; increased bonding capacity; and reduced maintenance costs.
Before splurging on new equipment, miners should be aware of finance obligations. Lease contracts, for example, are usually “hell or high water.” Once entered into an agreement, miners are locked in and unable to get out of a loan or lease if the equipment breaks. An often-overlooked tip is something called a Termination Value Schedule. This provides the buyer an amount of money that is needed to be paid in order to terminate a lease.
Another tip for financing equipment is take caution with ‘net leases.’ These agreements require buyers to pay all taxes, insurance premiums, maintenance costs and other expenses associated with owning mining equipment.
To save on costs, the best tip to financing equipment is purchase new. New equipment offers lower maintenance costs and usually warranties that protect against largest unexpected repairs. This gives miners the benefit of less downtime for repairs and reduced maintenance costs. It also makes it easier to attract top quality employees that are looking to work with the best equipment on the market.
The easiest aspect of financing mining equipment is locating a service provider. There are literally thousands of options to choose from depending on your operation need and financial situation.
One of the largest financing companies to provide loans and leases for mining equipment is GE Capital. For more than 20 years the company has provided miners with equipment loans and leases, having provided more than $20 billion in commitments to the industry since 2000.
Balboa Capital is another option. The company provides capital equipment financing for mining companies nationwide and has a dedicated corporate financing division that works with companies in the mining industry. Balboa Capital facilitates transactions ranging from $250,000 to $50,000,000 for all types of mining vehicles and equipment.
Another option for miners is working directly with equipment manufacturers. Companies like Caterpillar have their own financing department with capabilities to offer everything from leasing and general financing to project and structured financing. Caterpillar has a long-term interest in the mining sector and CatMiningFinance give companies access to local people who can provide genuine personal attention and expertise.
Komatus is another company to offer equipment solutions. The company is helpful in arranging loans and leases through Komatsu Financial and other lending sources. They can arrange financing for new and used Komatsu and non-Komatus mining equipment and even secure financing for equipment purchase from another distributor.
Over the years, acquiring financing for mining equipment has gotten easier with more choices and availability. And while the options are limitless, miners should take their time when locating the right service provider for their equipment needs.
Codelco partners with Microsoft to extend digitisation
Chile's Codelco, the world's largest copper producer, has announced a deal with tech giant Microsoft to fast-track the digitisation of its sprawling mining operations, helping it extend automation and improve analytics.
The joint project with Microsoft will beef up the company's capacity to make its production processes more efficient and promote "sustainability" within its operations, Codelco said in a statement.
Codelco, like many Chilean miners, has fought in recent years to adopt new technologies to boost efficiency and keep down costs at its aging deposits, many of which suffer from declining ore grades.
"We are promoting profound changes so that different areas operate in a completely remote and automated way, reducing risks, improving productivity, safety and reliability of our operation," said company executive Alvaro Garcia.
Mining companies worldwide are pushing forward with plans to operate mines remotely, reducing the risk of accidents and boosting efficiency.
Codelco’s move towards automation however has led to confrontations with unions, who see it as a threat to their livelihoods. The company said the project with Microsoft will include a training component for the its workers.
The state-run miner has recently ramped up its use of technology to ensure its copper is 100% traceable, a vital step in reducing its carbon footprint and boosting sustainability within its operations.
Codelco’s CEO Octavio Araneda said that tracing copper through its mines would help the company more precisely measure progress on its social and environmental goals while providing proof to increasingly demanding customers of those efforts.
“We can now say that 100% of our products are traced…which will allow us to have a very strong transparency regarding our resource use footprint,” Araneda said.
The announcement comes amid a broader push by the company to reduce water consumption, recycle industrial waste and scale back carbon dioxide emissions by 2030.
Codelco said in a webinar that the tool it has developed to assure traceability will help assure those sustainability targets are met.
Soaring demand for electric vehicles, a key component in the global fight against climate change, has increased attention on the carbon footprint and sustainability of inputs such as copper, cobalt and lithium.