Padbury’s Oakajee plan ‘unrealistic’: WA Premier

West Australian Premier Colin Barnett said there is “very little prospect” Padbury Mining’s $6 billion plan to develop the Oakajee rail and port project would gain his government’s backing.

In what comes as a blow to the seemingly shaky deal, Barnett told reporters “there is little substance behind Padbury.”

He said he had not meet with representatives of the junior mining company and did not intend to, The Australian reports.

The strongly worded comments come as Padbury is today preparing to announce to the market the funding arrangements for the deal.

Yesterday, Padbury revealed Sydney businessman Ronald Breyer was tied to the two companies involved the development, Superkite and Alliance Super Holdings.

Bleyer this week told the media he was ''chairman of the finance committee” for the companies.

Asked if he would support a ­realistic proposal put forward by Padbury, Barnett said:

“I don’t believe it’s realistic — simple as that.”

Padbury Mining first announced it had backing for the Oakajee project on April 11.

ABC reports the Australian Securities and Investments Commission is looking into Padbury's disclosure and share trading in relation to the deal.

Bleyer has been involved in a number of failed business ventures of late.

Last month the NSW Supreme Court ordered Superkite and Alliance Super Holdings repay money to aged care company Craigcare after a $500 million funding deal failed.

While last year, a $260 million deal with junior mining company Fairstar Resources also fell through.

Padbury is expected to announce the funding deal rests on the support of a Korean construction company fronting up 20 per cent of the project costs.

The company’s shares remain suspended.

$6 billion Oakajee port and rail deal funding partner revealed

Padbury Mining has again failed to reveal the identity of its $6 billion funding partner for the Oakajee port and rail project, but Sydney business man Roland Bleyer has claimed responsibility for the deal.

Following days of speculation as to who the mystery backer was, Bleyer reportedly revealed limited details to the Sydney Morning Herald.

The paper reports Bleyer said a number of private companies including Superkite and Alliance Super Holdings were working on a deal to fund the project.

Bleyer said he was a ''chairman of the finance committee'' for the companies.

The revelation comes as Padbury Mining, which first announced it had backing for the project on April 11, again failed to reveal details of the funding partners’ identity as ordered by the ASX.

Padbury first said it would update the market last Tuesday, but then extended the trading halt to Thursday stating it was seeking information from the backers of the deal “in respect of their capacity to meet their funding obligations.”

It also said it was seeking consent to disclose the agreement in its entirety with the announcement.

However the company had sought an extension again, this time promising to make an announcement tomorrow.

The delay has fuelled industry chatter that the deal won’t go ahead amid concerns over its viability.

Managing director Gary Stokes said the announcement was legitimate.

Stokes said the project would open up the Midwest region to the 21 companies operating in it.

The original announcement said funding for the project will come in three tranches with the first delivering $US470 million ($501.2 million) to complete design and construction plans.

Bleyer said further details would be made available shortly after lawyers for Superkite and Alliance Super Holdings had given the go ahead for Padbury to release a copy of the ''counter-signed shareholders agreement''.

Bleyer has been involved in a number of failed business ventures of late.

Last month the NSW Supreme Court ordered Superkite and Alliance Super Holdings repay money to aged care company Craigcare after a $500 million funding deal failed.

While last year, a $260 million deal with junior mining company Fairstar Resources also fell through.

An online blog claims Bleyer started his career in New Zealand as a hair and skin treatment specialist while also developing interests in fashion and manufacturing.

Minerals Council calls foul on “anti-mining” diesel tax

Minerals Council of Australia CEO Brendan Pearson will today insist that the government keep diesel tax breaks for companies operating in remote locations.

Pearson will appear before a senate committee today to defend the fuel credits scheme that provides tax breaks for the use of diesel in off-road capacities.

He will also reject arguments that miners already receive significant subsidies, and say that any call to scrap the tax break is part of a “thinly disguised anti-mining agenda”.

Diesel is widely used in all segments of the mining industry to fuel generators, heavy machinery and light vehicles, especially in remote locations.

Tax paid on the diesel used in such situations is currently refunded to companies, a scheme that has been in place for about sixty years for industries such as agriculture, manufacturing, health services, construction, as well as arts and recreation.

The fuel tax credit was reduced by six cents a litre as part of the carbon tax to put a price on the carbon content in diesel, which will be replaced if the carbon tax is repealed.

“Every year, the Productivity Commission conducts an exhaustive analysis of industry assistance. In the most recent … review concluded that budget and tariff assistance to the mining industry was negligible,” Pearson said.

Pearson will tell the inquiry the Commission of Audit is timely because Australia faces a budget repair challenge.

“But equally we need to recognise that the means by which fiscal repair is achieved will have a major bearing on growth, investment and job creation,” Pearson said.

Leighton appoints new CFO

Leighton Holdings has appointed Javier Loizaga as its new CFO.

Loigaza was previously the CEO of N+1 Mercapital, one of Spain’s leading independent investment firms.

His appointment comes as Spanish firm Hochtief takes over the company, and follows on from the immediate resignation of both CEO Hamish Tyrwhitt and CFO Peter Gregg after the takeover was announced.

Regarding the new CFO, newly appointed CEO Marcelino Fernandez stated: “As one of the most respected investment executives in Spain, Loizaga will bring to Leighton his vast experience in all aspects of corporate finance and financial management”.

“A civil engineer by training, Loizaga has both a thorough understanding of the operations of a large contracting company as well as proven expertise in financial management and corporate transformations.

“These skills will be valuable as we seek to more efficiently structure Leighton’s operations to the benefit of clients, employees, and shareholders.”

This structural review has seen Leighton subsidiaries John Holland and Thiess potentially earmarked for a sell off or a merger.

Former Leighton executives have raised fears that Hochtief will aggressively reshape the company and sell well-known assets.

Predictions are that the company will replicate its operating structure in Germany, and carve Leighton into new divisions such as mining, infrastructure and services.

Loizaga’s appointment is contingent on visa approvals.

McAleese wins Norton Gold Fields haulage contract

McAleese has won a four year, $65 million haulage contract with Norton Gold Fields.

The contract will start next month and see McAleese haul around 3.6 million tonnes of gold ore annually, and also includes the provision of road maintenance for Norton.

Mark Rowsthorn, McAleese CEO, said “we are pleased to have reaffirmed our long standing partnership with Norton by successfully re-tendering for their Kalgoorlie Goldfields work”.

“To complement its existing fleet of maxi-quad road trains first introduced in 2012 and to deliver even greater haulage capacity, McAleese Resources will invest in additional quad road trains that utilise eight wheel drive prime movers coupled with larger capacity quad trailers,” he said.

“McAleese has also introduced several key safety features and operational system improvements across the Resources business, including the introduction of IVMS (In Vehicle Monitoring Systems), and EBS (Electronic Brake Safety Systems) in all of its trailling equipment.”

McAleese employs more than 150 people in Kalgoorlie and operates 45 unites across the WA Goldfields.

Marketing to Mining: how to build credibility and business with end users in mining

Sitting across from you right now is a stern looking prospect – an end user in mining of the type of plant, equipment and services that your company provides.

“I don’t know who you are,” he says.

“I don’t know your company’s solutions.

 “I don’t what your company stands for.

 “I don’t know your company’s record.

 “I don’t know your company’s reputation.

 “I don’t see your name in any of the mining publications I receive.

 “I don’t see you mentioned in any of the mining websites I visit.

 “I don’t read your blog. I don’t subscribe to your newsletter.

 “I don’t hear my peers or suppliers talking about your solutions.

 “I don’t see you at any mining events.

 “I don’t find your content in Google Searches.

 “I don’t connect your solutions to my problems.

 “I don’t feel the gravity of your credibility or credentials.

 “I don’t have a tangible way of gauging your expertise or experience.

 “Now what was that you wanted to sell me?”

 The moral of the story here: sales in mining start long before your sales people call – with marketing. But I’ll return to this later.

The biggest problem I find among mining suppliers and service providers that invest in marketing is that they typically ask themselves, “How and when I am going to get a sale?” This is completely the WRONG question to ask.

 Investing in marketing is like putting petrol in your car: it’s a necessary, but not a sufficient step to get to your final destination.

 Will you have a better chance of reaching your destination with a tank of petrol? ABSOLUTELY!

Will you get to your destination on an empty tank? – NO WAY!

Rule #1: SELL the same way you BUY

The first less in marketing is that you need to sell the way you BUY.

When was the last time you bought plant and equipment or industrial services over the phone from someone you never met? – NEVER?

When was the last time you bought plant and equipment or industrial services via a SPAM email? – NEVER?

When was the last time you bought plant and equipment or industrial services just based on a brochure or flyer? – NEVER?

When was the last time you bought plant and equipment or industrial services just based on an ad? – NEVER?

So why don’t you buy this way? – Because there is zero value for you.

YOU don’t BUY this way, so why should your prospects?

The question you have to ask yourself is: what VALUE have I added to my prospects to EARN THE RIGHT to engage them and offer solutions to their headaches, pressures, demands, challenges and needs?

Rule #2: Referrals are great, but end users in mining aren’t MORONS

The second key lesson in marketing is that referrals and recommendations are great, but don’t hang your hat on them because end users in mining aren’t stupid.

Now I know what you’re going to say: ‘We don’t have to invest in marketing. All of our business comes by word of mouth.’

If that’s your attitude good luck!

You may get by on referrals for a while, but sooner or later a competitor will come into the market and take market share from you or market conditions will weaken – or all of the above.

The problem is you have no idea what’s driving customers and prospects buying decisions. But trust me: your customers and prospects will check you out before they pick up the phone or drop you an email.

And how do you think your prospects react when they discover:

Your outdated website. Look and feel from 2004? – Bad. Products and services on your site that you don’t offer any more? – Very BAD!

Your lone testimonial from five years ago from an unattributed source. C’mon. Who are you kidding?

Your sporadic blogs. You started blogging every week for a month or two but then stopped for six months before posting your next blog. This is disconcerting and makes people ponder ‘why did they stop blogging?’. Make time to blog or get someone to blog for you.

Your lame News page. Your last post was about what the workshop supervisor likes to do in his spare time – and that was six months ago. I hear crickets chirping.

Web links that don’t work. Outdated websites are a sin, but broken links, documents that don’t load or applications that don’t suit all types of mobile devices …these are cardinal sins.

Articles and press clippings from five, 10 or 15 years ago! Reminds me of that Bruce Springsteen song Glory Days. Get my drift.

Your bare bones LinkedIn profile. Would you rather connect with a person you’d never met whose LinkedIn profile has a photo of themselves on their last fishing trip with a one-sentence bio and one testimonial – and that’s from someone with the same surname? Alternatively, would you rather connect with someone you’d never met who had a LinkedIn profile with a professional photo, a fully and concise employment history, referrals and five quality recommendations?

Referrals and great, but they’re no substitute for relevant, up-to-date, and informative content on your website, and social media platforms.

Neglect RELEVANT and UP-TO-DATE content at your peril. Why? Because you run the risk of EMABARRSING yourself to advocates if they hear back from referrals about your outdated information or a lack of information.

The question you’ve got to ask yourself is this: does my overall online presence reassure and reinforce my credibility as a solution provider? Is there enough VALUE in the information about my company and me online for an end user in mining to make an informed decision about the purchase, procurement and specification of the plant, equipment and services that I provide? – If not, then you’ve got some work to do.

Rule #3: Become a TRUSTED ADVISOR

The final key point about marketing is that it is a process NOT AN EVENT. It is the sum of those events that leads to you being a trusted advisor and winning the work.

The process of building customer relationships begins with your REPUTATION; it is the beating heart of your business. Having a great company record in project delivery, for example, is not enough. If you think you work ‘speaks for itself’ then good luck and may the force be with you.

The second part of the marketing process is AMPLIFICATION. This is about COMMUNICATING what you do to your prospects and customers. This is where PR, social media, blogging, content marketing and SEO come into to play. Communication is king.

The third stage of the marketing process is LEVERAGE. By building a profile based on providing VALUE through articles, whitepapers, videos, interviews, blogging, case studies and social media you can then start to connect with customers and prospects using the credibility that you’ve built. It’s where you bait the hook – but not just any old bait, hook or rod; it has to be the right content, delivered via the right channel to the right people. Communication is king, but ENGAGEMENT is queen.

The final stage is GRAVITY. This is the payoff part of the marketing process. All the momentum you’ve built through REPUTATION, AMPLIFICATION and LEVERAGE starts to pay dividends. Prospects start approaching you. Not the other way.  Customers and clients turn to you for advice and guidance. Your customer base will grow and size of your customers will grow. As a result, you can charge a premium for plant, equipment and services with confidence because you know that people are getting more than a widget or a service; they’re getting VALUE.

As a mining supplier or service provider, do you want to make more sales to strangers or do you want to develop stronger, deeper and more rewarding relationships from people who come to know you and your company when they have a challenge, headache or problem they need solved? If the answer’s yes, stop trying to be another same-o lame-o supplier and start becoming a TRUSTED ADVISOR.

So let’s go back to that stern looking prospect sitting opposite you that I mentioned at the beginning.

How can you sell to this person without laying the necessary groundwork?

Answer: you can’t.

You can’t just like you can’t drive from Perth to Port Hedland if you haven’t first filled up on petrol, planned your journey, set your GPS, stopped off along the way for refreshments, and put in the hours and kilometres to reach your final destination.

Jamie Wade is the director of Wade Business Media. He helps industrial suppliers and service providers connect to end users in the resources, construction and infrastructure sectors.

Workers’ comp needs real reform, not ‘red tape’ fiddling

Prime Minister Tony Abbott’s “biggest bonfire of regulation in our country’s history” will allow some organisations to opt out of state compensation schemes and instead operate under the Commonwealth’s scheme, Comcare.

This change is likely to be counterproductive in an already messy system and has the potential to further undermine the viability and fairness of workers’ compensation arrangements in Australia.

Workers’ compensation does need regulatory reform. It needs real, ‘big picture’ reform, not piecemeal cuts or politicking.

The government is claiming the planned changes will save employers A$32.8 million per year in compliance costs, but at the same time workers’ compensation costs appear to be shifting from the state to taxpayers, workers and their families.

Cost shifting arises from two key problems with current workers’ compensation arrangements. First, the negative consequences of regulatory duplication and inconsistency. Second, the impact of financial pressures on the ability of schemes to meet their primary objectives.

Regulatory duplication

Presently, separate workers’ compensation schemes exist across Australia’s nine jurisdictions. This poses an important regulatory burden on firms operating in multiple states. Each scheme has different coverage, injured worker entitlements, scheme governance and business models, employer reporting requirements, claims excess arrangements, and employer premium rates. Their data capture and reporting processes also differ, making it impossible to compare raw injury data and claims performance across jurisdictions in a meaningful way. The repeal will not change this.

Even firms operating in only one jurisdiction are subject to unnecessary regulatory burdens. Governments compete against each other; taking turns in tweaking and reforming their systems to continually reduce premium rates for employers and modify flexible arrangements such as self-insurance.

The high price of low cost

Competition among schemes on employer costs assumes that lower premium rates improve business prospects and jobs (albeit with no evidence of employers relocating to minimise workers compensation premiums).

Pressure on governments to have lower than average premium rates has seen those with higher rates politicised as inefficient and ineffective. Little attention is directed to the different protections those jurisdictions may offer injured workers. The result is the inevitable “ratcheting down” of premium rates around Australia.

Premium reductions are appropriate responses to reduced administrative costs, improved governance and advances in health and safety performance. However, our report looking at changes to NSW’s compensation legislation suggests reductions can also be made by eroding the protections available under the scheme.

NSW workers’ compensation reforms

The NSW government’s latest workers’ compensation scheme reforms were prompted by a 2011 actuarial deficit estimated at A$4.1 billion. The deficit was attributed equally to the impacts of the 2008 global financial crisis on scheme investments, the discount rate used for actuarial estimation, and the expected increase in future liabilities for payments to long-term, seriously injured workers.

The government determined the deficit had to be eliminated quickly. Premium increases were unacceptable. Instead, the reforms sought to truncate the “tail end” of scheme liabilities by ejecting the majority of long-term injured workers from the system.

The changes eliminated or severely restricted access to weekly and medical compensation for many work-related injuries and illnesses. Furthermore, insurers are now unilaterally able to decide an injured worker’s capacity to earn a hypothetical income from a job that need not exist, and reduce their weekly income accordingly. Accepting legal fees for advising clients about an insurer’s decision was also made illegal.

Together the NSW reforms not only managed to eliminate the $4 billion deficit in less than 12 months, but also enabled further reductions in NSW employer premiums of 7.5% in June 2013 and another 5% in January 2014. These came on top of an accumulated 33% reduction in premiums since 2005.

Who ultimately pays?

Our report for Unions NSW found reducing employer premiums and eroding systems of support for injured workers externalises the human and financial costs associated with poor work health and safety performance. That is, it transfers costs from employers to injured workers.

Without personal resources or family support, these workers can then be left to depend on a Centrelink disability support pension. Similarly Medicare provides a crucial safety net when compensation schemes (and private health insurers) refuse to cover ongoing medical treatment for work-related injuries. Together, these federally funded systems are subsidising premium reductions in workers’ compensation schemes.

Health minister Peter Dutton recently cited a 124% increase in Medicare costs over the last decade, calling the trend “unsustainable”. Social services minister Kevin Andrews made a similar statement with respect to “this relentless growth in [welfare] recipient numbers’. Yet the impact of cost shifting from workers” compensation systems remains unacknowledged.

In order to draw a direct line to increased welfare costs, more information is required. Broad quantitative data on scheme collections and expenditure, return to work, welfare and Medicare expenditure, along with specific case studies of individuals will help researchers establish the extent of cost shifting in the future.

Drift to failure

If government ministers are serious about reducing unnecessary regulatory duplication, they will focus on delivering nationally consistent arrangements. The recent efforts to harmonise WHS legislation was an important step in the right direction for ensuring the health and safety of workers and provides a clear example of what needs to be done.

It is time for a serious conversation in Australia about the value we place on workers and their health and safety. Competition is important but it needs to be driven by efficiency and effectiveness rather than the erosion of support for people who most need it.

The jurisdictional “race to the bottom” for lowest premium rates, arguably just shifts the costs of poor work health and safety onto federal social security systems (taxpayers), workers and their families, and reduces public policy incentives for investment in safe and healthy workplaces.

The Conversation

The International Governance and Performance (IGAP) Research Centre has received research funding from CPA Australia, the Institute of Chartered Accountants (ICAA), the Safety Institute of Australia (SIA) and Safe Work Australia.

Sasha Holley works with The Centre for Workforce Futures.

The Centre for Workforce Futures, Macquarie University received funding from UnionsNSW for research used in this article, as part of an ongoing research project into the NSW Workers Compensation System.

Ray Markey works with the Centre for Workforce Futures.

This article was originally published on The Conversation.
Read the original article.

The battle over Abbot Point risks losing the Great Barrier Reef war

“Save the reef” has become a popular catch-cry among many environment groups, with Greenpeace’s Great Barrier Reef website shared more than 125,000 times on social media to date. It and many similar campaigns have focused heavily on “massive dredging, dumping and shipping” for coal and gas ports, particularly the recent Abbot Point dredging decision.

There is no doubt that there are reasons to be gravely concerned about the Great Barrier Reef, with less coral in some parts of the 2300 km ecosystem than three decades ago (the finer points of the issue are detailed here, here, here
and here).

Yet groups such such as Greenpeace, the Australian Marine Conservation Society (AMCS), WWF, as well as The Greens, some scientists and, increasingly, the media and community, are wrong to portray dredging and dredge spoil disposal as a major threat to the reef’s survival.

This deliberate misrepresentation of the facts is evidenced in a recent comment by Felicity Wishart from the AMCS that: “If we are scaremongering it’s because the evidence is clear that there are real concerns to be worried about.”

Rather than saving the reef from decline, “scaremongering” over the Abbot Point dredging plan and the subsequent diversion of management, research and conservation efforts, are now threatening to undermine efforts at tackling the more serious issues facing the reef.

We risk seeing hundreds of millions of dollars poured into studies, offsets, monitoring, campaigning, legal costs and holding costs unrelated to the major factors that really affect the reef – just at a time when every available dollar is needed to focus on measures aimed at improving the reef’s resilience.

Wanted: reef science free from politics

According to the Australian Institute of Marine Science, nearly half of the reef’s decline to date (mostly in the southern part of the reef) can be attributed to impacts from cyclones, 42% to the crown-of-thorns starfish, and 10% to coral bleaching.

It is clear that the Abbot Point disposal site has no coral or seagrass and that risks from dredge spoil are low. Even ardent opponents of dredging have acknowledged that it is possible to manage port developments properly, pointing to the 1993 dredging at Townsville as an example.

Of the many dredging programs in Australia, there are few cases in which trigger levels have even been breached, and none where impacts have exceeded those that were predicted.

If coral really has declined by half since 1985, as reported by the Australian Institute of Marine Science study, Australia appears to have as little as a decade to identify solutions, and then another decade to trial, implement, and scale them up.

If that time frame is correct, then it is even more urgent that we avoid devaluing the role of science in helping us “manage, mitigate, adapt or even discover solutions”, as Australia’s Chief Scientist Ian Chubb recently wrote on The Conversation.

A more urgent set of priorities

Granted, scientists need to get better at predicting and measuring the low-level, long-term, far-field and cumulative effects of dredging.

However, most of the technical ambiguity around dredging impacts is about fine-tuning tactical operational issues of dredge operation, or the optimum location of material placement to achieve a balance of community priorities.

The more important science challenges for the future health of the Great Barrier Reef are aimed at sustaining its various uses. These include improving our knowledge of how the reef changes and adapts to disturbance, and learning how to manage the reef to minimise harm and to boost its ability to recover. These will involve refocussing a bewildering array of scientific resources into a unified strategy.

So what should we be putting more effort into if we’re to look after the health of the Great Barrier Reef in a future that includes accelerating change?

Significant funds that might otherwise go to research are currently spent on trying to remove Crown-of-Thorns Starfish, even though scientists acknowledge that “manual killing can only work on the scale of a few hundred square metres”. This is despite the fact that the causes of outbreaks are still inferred, rather than known with any confidence.

Nutrients in municipal sewage are discharged all year round, but the relative risk this poses to the reef compared to that in agricultural runoff and flood waters, is still unclear.

Maintenance dredging, which involves the removal of fine sediments from near the coast, has the potential to reduce catchment-generated fine sediments that impact coastal reefs. The extent of this possible benefit has not been studied.

The ultimate problem is that the body of science available is often incomplete and there is no overarching, risk-based synthesis.

Intervention

If the Reef indeed faces accelerating change at a time when human uses also continue to accelerate, then it is inevitable that intervention programs for high value reefs – currently confined mainly to small-scale starfish control and coral reseeding – may become more urgent.

Mangroves, corals, seagrasses, fisheries and even the seabed itself are all capable of deliberate manipulation if it were deemed necessary to do so to protect, preserve or enhance a use or value of the reef. Options like building artificial coastal wetlands or even “barrier islands” to protect the coast might seem outlandish, but are technically feasible.

Yet little of the underlying science for this has been done, leaving a significant policy gap to guide potential future works. We should start studying these problems now.

Barriers to decision-making

As scientists, we like to imagine that regulators devour our work and convert it into useful policy. The unfortunate reality is that our work is unintelligible to all but a handful of people, and in the real world, reef users struggle to adapt their everyday practices to such complex advice.

For instance, reef managers now insist that industries that use the reef should incorporate the concept of resilience into their impact assessments. But many are understandably frustrated at being asked to adopt something so poorly defined.

Scientists need to rise to the challenge of translating their work into practical guidelines that can be implemented today. In the words of another contributor to The Conversation, “scientists should be provoked into thinking about the way science advice is given and how they communicate”.

This also means shying away from “scaremongering” that masks the real issues, creates widespread confusion and destroys the public’s confidence in their ability to rely on scientists. Its time for scientists to reject scaremongering or distortion of their results; to produce more cogent and practical guidance for policy makers; and to restore the faith of the community in science as a tool to help solve environmental problems. For the Great Barrier Reef, the clock is ticking.

This article was co-authored by Dr Brett Kettle, a marine scientist with 30 years of experience consulting to industry, government and the community. Among other projects, he managed the 1993 dredging at the Port of Townsville, which research scientists have recommended as “a model for all large development projects”. He also led the team of scientists that developed light-based thresholds for managing seagrasses during dredging.

The Conversation

Alison Jones does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation.
Read the original article.

The mining hire and rental question

There is an age old question when it comes to mining machinery – to hire or buy?

During the height of the boom this caught many miners out, as machinery costs were at an all-time high, but the lead-up times for hire and rental equipment was exceedingly long, putting project schedules back. 

Many miners were caught between a rock and a hard place – shell out for the high cost capital equipment now, or save money and rent but potentially miss out on record high commodity prices.

Now, with the boom well and truly over and the industry facing a crisis in confidence over whether costs can be controlled due to a downturn in profits, budgetary decisions are becoming crucial. 

According to Evans & Partners’ Mike Hawkins “the drag emanating from cutbacks in capital expenditure looks to intensify”. 

Aggreko has explained the current state of the market, and why companies are now choosing to rent instead of buy, especially when it comes to power generation equipment. 

“During an economic up-turn, the lead-time for the purchase of generation equipment can be anywhere up to two years, meaning that companies which need power urgently will find a rental option very attractive, due to the ‘fast-track’ aspect of rentals,” Aggreko said. 

“However companies are now considering rental, for different reasons, such as how to better utilise working capital and to ensure that it is not tied up in large capital purchases for items such as power plants. 

“In addition, power rental guarantees fixed and regular payment schedules over an agreed term with options to extend the rental period if required which improves cash flow and allows for more accurate budgeting.” 

It went on to explain that “when making the decision between purchasing and renting equipment, it is important for a company to evaluate the hidden costs that are incurred when equipment is purchased such as insurance, spare parts, and ancillary items to ensure the equipment is able to operate”. 

“With a rental solution all spares and ancillary items are the provision of the rental provider, enabling the customer to budget more effectively.” 

On top of this, rental also includes refuelling. 

“Another factor is human capital [as] all major equipment purchases require experts to manage the new equipment, either by allocating existing staff to the project, or by hiring new employees,” Aggreko said. 

It went on to say that flexibility is also provided compared to purchasing. 

“Projecting the power demand of projects also becomes a problem for companies when finances are tight; purchased generators are often either under or over-utilised since the power need on a construction site tends to follow a specific pattern of ramping up and then falling away, meaning that a contractor who purchase enough equipment to meet peak demand on site will find the generators are underutilised and burn fuel less efficiently for most of the project. 

“Renting power generation equipment allows the contractor to increase or decrease their capacity depending on the demand of their specific projects.” 

There is also the issue of risk management, as the rental avenue has a cushioning effect on companies which are uncertain about the long-term future of their projects, especially as investment concerns increase. 

“By renting equipment companies can ensure that they will not be left with equipment which will sit unutilised,” it said. 

“The flipside is the financial damage incurred by having purchased large amounts of heavy equipment can be a major blow for a company without large cash reserves.” 

The shrinking capital market is making the future difficult for miners. 

“While the economic downturn rumbles on,” Aggreko said, “it seems unavoidable that there will be some fundamental changes to the way that people think about investment and financing and how companies handle their asset management”. 

While cash reserves could regain common usage “it seems unlikely that companies will be willing to leverage their assets to the degree that has been the norm in the past decade”. 

“With a greater emphasis on keeping capital available and with rental providing benefits such as lowered capital expenditure, flexibility and risk management, the option of renting as opposed to purchasing equipment will likely remain an attractive,” Aggreko said. 

“Although the question: ‘Is it better to buy or rent?’ will continue to be asked by companies contemplating large equipment purchases, many companies will likely find themselves deciding that during this period of uncertainty, ownership may not be worth the hassle.”

Hexagon acquires SAFEmine

Collision avoidance Systems company SAFEMine has been acquired by technology company Hexagon AB.

Following the acquisition SAFEmine stated that “this is the next logical step in the development of SAFEmine, giving us the flexibility to grow,  expand, and to intensify customer contacts”.

It went on say that SAFEmine will continue to operate as its own organisation, but will now be within Hexagon’s mining division, alongside Devex and Leica Geosystems Mining.

“This acquisition is significant for our customers in mining and other sectors that are increasing the use of technologies in order to operate with the highest amount of efficiency while also improving safety conditions,” Hexagon’s president Ola Rollén said in a company statement.

“SAFEmine’s strong presence and technology leadership not only open doors to cross-sell complementary Hexagon offerings to the same market, but create integration opportunities across multiple businesses within Hexagon.”

While Hexagon did not state the value of the acquisition, it did note that SAFEmine’s turnover for 2013 was around 13 million Euro.

SAFEmine’s technology is focused on traffic safety solutions in open cut mines.

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