Published in June 2007 Australia’s Mining Monthly
In 2007, hire equipment rarely lies idle as contractors and mine principals weigh up equipment availability and lengthening lead times for delivery; capital cost outlays; cash flow; maintenance costs; and other factors that can push them towards hiring as the preferred option.
The hire companies’ case is a strong one especially in times of high economic activity and infrastructure and resource development.
The rental sector is giving contractors and mines access to a pool of equipment – the latest and most technologically advanced – eliminating maintenance costs, reducing investment and freeing up capital to allow growth of the core business.
Companies can link operational costs to their level of activity having a stabilising effect on profitability as well as removing liabilities from the balance sheet and eliminating equipment obsolescence and depreciation.
In a buoyant marketplace where it is making increasing sense not to be burdened in development and exploration by major capital costs, the hire companies have found a growth market unlikely to falter in its own expansion.
Many have plans to increase the number and range of equipment items and fleet sizes.
Wet hire – providing operators and personnel as well as equipment – is the growing part of the hire industry but demand is being taken up mostly by small operators.
Promac Rental and Sales managing director Jim Kenny said there was increasing demand for machinery, particularly on hire and especially with the wet hire of men and machines.
“A lot of owner operators and single operators are getting into the market and small operators starting up. But while there is more demand for wet hire, along with that comes the problem of getting experienced people to operate the machines,” Kenny said.
Ridwest Mechanical Contracting managing director Joshua Ridley agreed, saying there were a lot of “one, two and three machine guys out there” but for them to get bigger was much more of a jump.
“We see ourselves as being over that hump a few years ago and now we are into the mid-tier of company operators and have a contracting division providing that wet hire.”
Many hire and rental companies are benefiting not only directly from the mining and resource sector but through other sectors allied to the increased need in transport infrastructure, power generation and other areas of parallel development.
The expansion and growth strategies of the country’s hire companies, particularly those operating and/or based in Western Australia, are testament to their success on which demand from the mining and resource sector has had a marked effect.
You need look no further than Boom Logistics where the resource sector, with its big expansion and ongoing maintenance programs, has provided the company with about a third of its total revenue, which for the last financial year was reported as $253.8 million.
Admitted to the ASX Top 200 last year, its operating revenue increased 92% in the 2005-06 financial year and Boom general manager of business development Jim Carr sees further expansion ahead.
One of the “top end” hire and rental categories is the lift, shift and access equipment companies – top end because of the relatively high capital cost of large pieces of equipment such as the big 300-400 tonne AllTerrain cranes, each of which can be valued at $3 million-plus.
Boom Logistics, widely recognised as the major player in the category, has gained pre-eminence because of the sheer size of its fleet, the 53 depots across Australia and the large number of skilled staff.
Many of their 500 mobiles cranes – either wet hire or dry hire – and 2500 items of access equipment are located in the mining regions of Australia.
The crane fleet includes mobile cranes from 20t to 400t capacity. Access equipment is largely represented by items such as boom lifts, elevating work platforms and travel towers for lifting personnel, and some materials to above ground worksites.
The larger mining companies – mainly surface mines – represent the big volume of work for Boom and the vast majority of that fits in the mine maintenance activities, supplying equipment on hire either directly to mining companies or to the sub-contractors providing maintenance services.
The nature of the work largely requires long-term hire. The big mining company sites on which Boom equipment is seen include Rio Tinto, Alcoa and BHP in Western Australia, BHP Billiton Mitsubishi Alliance sites in the Bowen Basin of central Queensland and Rio and Xstrata operations in the Hunter Valley, where the company has ongoing contracts.
Although headquartered in Victoria, the company is represented in each state with its most extensive network of depots in the resource-rich states of Western Australia and Queensland.
“We see further expansion ahead, as there is an ongoing plan to continue with acquisitions to meet the needs of a resources sector driven by long-term ongoing expansion,” Carr said.
“The ongoing acquisition policy will increase our fleet size as well as expand our skill base and support services.”
Already well versed in expansion and acquisition, the country’s largest equipment hire company Coates, while operating in the civil sector, government and non-residential construction sector, took a major step in strengthening its mining and resource industry business when it acquired Allied Equipment some 18 months ago.
Coates, with more than 1 million assets under management and 200 branches and satellite operations across the country, added Allied – as a complement to the Coates portfolio to support the mining-resource sector – and this took the company to the bigger end of the market regarding equipment provision such as dozers, graders, wheel loaders, rear dump trucks, excavators and the like.
An industry leader itself, Allied has the capacity to provide specialist fleet services plus complete mining fleets backed up with maintenance and repair support and Coates services both contractors and mining companies direct predominantly in the WA and Queensland mining and resource sector but also supports the sector in the other states.
Coates group sales and marketing manager Kieran White said: “We are very active in Western Australia in the Pilbara, Murchison and Goldfields, focused around the mining and resource sector as we have been for a number of years, supporting the large contractors to mining.
“We hire out to contractors and principals. Our customer base is a cross-section of large international mining and resource giants and we are very active with the sub-contractors undertaking work for and on behalf of these mining and resource companies.
“Our core focus is on dry hire. We supply on both short- and long-term hire. We are either there to top up a customer’s existing fleet requirements or provide fleet for a short-term duration.”
Coates also offers customers considering purchasing the option of a term rental focused on a fixed duration of hire. This enables Coates to buy a new piece of equipment on behalf of the customer and offer this on a fully serviced and maintained fixed duration arrangement.
“Companies have to consider if they buy equipment themselves they have to service and maintain it, so if it’s not part of their core business, which primarily it wouldn’t be, a lot of them take the preferred option of longer term hire under term rental where maintenance and servicing is our responsibility.”
The strength of the WA mining and resource sector is mirrored in its hire market suppliers.
Perth-based Promac Rental and Sales carries out all its work in WA and like many others in the industry, has virtually all equipment hired out across the state with the vast majority in the Pilbara.
About 90% of its fleet is hired out for infrastructure projects such as minesite road building as well as civil sector work and the company is continually expanding its clientele base.
Promac’s machinery hire ranges from lighting towers to loaders, excavators and rollers covering about 120 pieces of varied equipment including large mining gear for openpit mining.
Kenny said...click here to read on.
