First Quantum seeks damages for copper trapped at Panama mine
The material, worth between $225 million and $340 million at current copper prices, has sat idle for months.
The mining equipment industry is not a cakewalk for those who desire to take up the elaborate market risks. However, the profits reaped, do bake a creamy galette for all those involved in the business. As relevant to this business, equipment leasing finance companies share both the cream as well as the risks of any after-mess. Any exploration project finalizes under a dynamically interdependent scenario. Once a “land of buried treasures” has been flagged, the quest for right mining equipment begins. Restrained by budget allocations and investments available, a company’s main objective lies within choosing the right financing solutions to procure required assets. These institutions offering equipment lease finance and their management could be viewed in the light of creating equal opportunities for those in construction and mining business. We, therefore, dig deeper into the industry to gain a structural understanding of the role of lease financing groups in world equipment mining industry.
Components of mining equipment market
Prior to any acknowledgement on the role of leasing finances in mining equipment market, a basic understanding of all industry components is necessary. This includes the products in context, their availability, costs, and procurement options. A named list of all types of mining equipment widely used in the industry would include mineral processing equipment, surface mining equipment, underground mining equipment, mining drills & breakers, and crushing, pulverizing & screening equipment. Mining equipment market products are available for ownership to their end users at a heavy price. Here is a small picture for your imagination. It costs a hefty million for single bull dozing or excavating equipment.
By and large, enormous investments are made towards the procurement of mining equipment. This burdens the operational budget for any-sized enterprise. Most companies cannot bear these hefty costs and opt for financial assistance from lease providers. Besides that, the market has settled down to a complacent place where area of expertise has been divided on the basis of approach. Product developers focus on cost-effective technical solutions, bespoke to the requisites in the mining environment. While those offering financial assists ensure that timely financial resources are handed over for obtaining quick regulatory approvals.
The ‘golden’ growth of mining equipment industry
A team of expert analysts at Allied Market Research recently reviewed the business structure of the global mining equipment industry. From a detailed study of current market size and share, with respect to the growth drivers and opportunities in the present scenario, they concluded that the world mining equipment market will grow at a CAGR of 7.9% during 2016 to 2022. The industry is bound to reach an overall worth of $150 billion by 2022.
International Monetary Fund (IMF) observes an insatiable demand for commodities from the world’s largest economies. Their respective economic growth per annum could be credited for this rise. Throughout 2014 to 2020, a rate of 4.6% has been projected in the multilateral organization’s latest World Economic Outlook. As a result, there followed an increase in consumption of natural resources, such as coal, diamond, and uranium. Industry vendors responded to this demand with technologically advanced mining equipment. The urbanization of developing regions across the world is another major driver for the industry which amounts to large scale infrastructure expansion given the need for more constructed space.
Motivational role of leasing companies
The global mining equipment market has an array of asset financing institutions to choose from; whether bank-owned or independent. Like any other equipment leasing finance scenario, mining industry looks at the two parties mining equipment manufacturers, the lessor, and the construction and mining companies, or the lessee.
Asia-Pacific, has continued being the hub of mining activities, and consequentially garners the maximum of global mining equipment market share in terms of revenue. One could consider the example of Asia-Pacific market which is designed mostly to benefit the lessors rather than the lessee. The lease structure, generally, keeps the lessors hands-free of all associated risks. The North American scenario, on the other hand, is completely different, where the balance tips heavier on the lessee’s side. Besides the surety of ownership at the end of lease ownership, they have the advantage of gaining it at a considerably lower price, after having utilized them for over 80% of their life-cycle.
Handling of resource and commodities by firms that provide asset financing and management solutions. The market is flushed by all sizes of financing institutions from where leases or loans can be easily obtained. As a new entrant in mining or construction business, it is like taking a tour of a fancy fair. The diverse options, spread over global kiosks, by equipment leasing finance groups is a warm welcome for the needs of these newbies. However, the competition among the solution providers becomes quite presumable for any onlooker.
Growth channels for financers and mining equipment lessors
Recently, high manufacturing volumes of base metals has been registered in global avenues. The metal mining segment accounted for 39% of the market share during 2015. Compared to all other segments, this one is to witness the maximum growth with an expected CAGR of 10.3% throughout 2015 to 2022. The solution portfolios of both the lessor and the financial institutions have been accordingly customized, based on options that the enterprises could possibly opt for. The choices made, are solely based on the financial strategies of the companies, with regard to the budget and size of their projects.
Investor relations matter a great deal given the high competition in the industry. Financial investment institutions definitely look forward to a mutual growth situation. There is an entirely different set of parameters that act key in deciding which companies are going to multiply their efforts and return huge profits. For instance, the performance of a company on promotional fronts could be considered as one important aspect. On the other hand, there could be rich history of successful projects which stand as a proof of their business judgements. The big fishes out there, literally hoard all major projects and ventures because none hesitate when it comes to opt for a brand. In order to be one, market players have to either choose the right projects, a right promotional strategy, or a proper balance of the two. Any of the two done right, gets a thumbs-up indication from mining equipment manufacturers and financers.
Regional drifts in world mining equipment market
Asia-Pacific accounted for the highest revenue of over $50 billion in 2015, closely followed by the LAMEA region. A revised edition of the World Urbanization Prospects was released by the United Nations in 2014. As per its estimations, “India, China and Nigeria together are expected to account for 37% of the projected growth of the world’s urban population between 2014 and 2050. India is projected to add 404 million urban dwellers, China 292 million, and Nigeria 212 million.”
These forecasts are justified considering the changing new business environment in these regions. In Indian subcontinent alone, the government’s inclination to motivate start-ups, has produced optimum results. Fresh enterprises, are ready to provide financial assistance to the domestic quest for power independence. They realize that even when aiming for low margins, they would still be looking at handsome figures of profit, with regard to the forecasted market growth. Given the right king of support from governmental organizations, such regions exhibit positive signs of emerging as the next global leaders.
