Mining Success with Tailored Financing Solutions

Equipment is one of the most important investments a mine can make, and getting the financing right can be a key determinant of success. As SMS Equipment's point person for mining equipment financing, Mining Support Supervisor, Jeremy Fung explains, making the right choices depends on understanding the unique variables that each mine is subject to.

From your perspective, what are some of the challenges mines face in terms of financing?

First, each mining company is unique, so there is no generic way for a financing organization to assess the various risks. Each financing solution has to be tailored to the needs of the customer, and that requires a deep understanding of customer requirements and goals for financing.

There's generally some uncertainty with mines because the numbers that justify the investment come from the mine's future production volume and profit margins. So, unlike something more straightforward like a standard equipment lease, the assessment is subject to forecasts from geologists and mining engineers. While these people are extremely good at what they do and typically have decades of experience, it makes the due diligence process for financing fairly involved for a large scale mining project. Furthermore, variables like commodity pricing can vary over time, and that has to be taken into account.

Where do we typically source equipment financing for mining customers?

We will work with any financial institution our customers choose to get their financing. Some already have established relationships with traditional banks and can sometimes get preferred rates from them. However, many of our customers find that Komatsu Finance can give them competitive rates with greater flexibility.

What are some of the ways in which financing can be tailored to a particular mine?

We start by listening to our customer and putting ourselves in their shoes. It's basically about considering all the financing options and determining what's most advantageous for a particular mine. Several financial tools are available – fixed or variable rates, down payments, flexible payment schedules, rental or lease options, USD or CAD currency, etc. We encourage customers to contact us to start the discussion on tailoring the right financing solution for them.

What are some of the trends that you're seeing?

I've been with SMS Equipment for six years now and have seen a bit of a shift. Many of the bigger mining companies back then were buying equipment with internal financing sources. But more recently, they are looking more carefully at how best to manage their cash flow / banking requirements and using external equipment finance companies to support equipment transactions.

There is some give and take with interest rates being what they are, but more are leaning towards external financing options than in the past.