Leasing and Contract Mining: Alternate Options of Procurement?


By: Arun MV -- Senior Research Analyst

17 June, 2014

Leasing and Contract Mining: Alternate Options of Procurement?

After a brief slump between 2007 and 2010, the global mining industry, backed by the boom in commodity prices, is set to grow from the current value of $1.3 trillion to $1.8 trillion by 2018 at 7% CAGR. To ensure maximum production and minimal labor dependence, mechanization is a must. Mining machinery forms a critical spend category for any mining company and it affects both the investment and operational cash flow of a company. Purchasing equipment with business equity and corporate loans from financial institutions, or, as deferred credit from equipment manufacturers have been the typical procurement appraisal method till date. Due to the increasing equipment costs, obsolescence of owned equipment and limited sources of outside debt capital, mining companies are considering alternative options. The most promising of these ?alternative? methods are leasing the equipment and obtaining machinery services from custom operators (i.e., contract mining).


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