Tag Archives: mining equipment finance

United Overseas Bank to extend machinery finance options for LiuGong customers

Guangxi LiuGong Machinery Co Ltd and United Overseas Bank Ltd have renewed their memorandum of understanding to facilitate machinery financing for LiuGong’s customers as it expands its business across Southeast Asia, the companies said.

LiuGong and UOB have been collaborating since July 2018 to extend machinery financing solutions for LiuGong’s vendors and customers in the region.

Under the terms of the new MoU, UOB will develop an end buyer financing credit framework and offer asset financing and hire purchase or lease financing to LiuGong’s customers in Indonesia and Thailand. The bank will also provide LiuGong’s supply chain with other financial solutions such as cash management, trade finance, working capital loans and hedging facilities, the company said.

“The financing support for LiuGong’s customers will help the company drive the export of its construction equipment to the region, thereby growing its revenue,” LiuGong said.

Zeng Guang’an, Chairman of LiuGong Group, said of the MoU: “LiuGong is excited to continue its partnership with UOB. As LiuGong continues to expand our overseas business, one of our key goals is to provide customers with complete solutions beyond our machinery and financing is a large part of these offerings. UOB gives us this opportunity in Southeast Asia.”

Chen Hao, President of LiuGong Machinery Asia Pacific Pte Ltd, said the consumption rate for LiuGong’s machinery in Southeast Asia has been strong.

“For LiuGong, we are constantly listening to our customers and providing what they need, offering reliable machines with excellent after sales services,” he said. “Our customers told us that they require machinery financing assistance, we are happy to work with UOB to tailor made financing plans to them thus providing a total solution for them.”

Ronny Chng, Head of Corporate Banking Overseas, UOB, said the bank was committed to providing “integrated financial solutions that help companies optimise their business operations and expand across borders”.

He added: “Our unrivalled regional network connectivity, deep market insights, industry knowledge and strong expertise in supply chain financing enable us to support LiuGong as it expands its distribution network and increases its market share in Southeast Asia. We hope to work with more manufacturers from China to facilitate their growth plans in the region.”

The MoU was signed at the New International Land-Sea Trade Corridor Introduction and Marketing Conference, organised by the People’s Government of Guangxi Zhuang Autonomous Region.

The signing was witnessed by Chinese Communist Party Secretary of Guangxi Zhuang Autonomous Region, Lu Xinshe, and Wee Ee Cheong, Deputy Chairman and CEO, UOB.

Mining equipment finance competition heats up

Cat Mining Finance, the financing arm of leading mining OEM Caterpillar, says it sees increasing demand for tailored finance solutions from mining companies, with this flexibility often proving decisive when it comes to winning business.

Bob Bennes, Vice President with responsibility for Cat Mining Finance, revealed this when speaking to IM for an upcoming feature on equipment finance, rental and leasing (to be published in April).

Bennes said: “I would say we have seen the demand for tailored finance solutions increase.

“Our mission is to help customers, dealers and Caterpillar succeed through financial services solutions. A lot of mining companies have learned that Cat Financial has a specialised mining finance group which understands the industry and can leverage various offerings to meet customer needs.

“For example, providing corporate finance solutions, new and used equipment financing, project finance facilities in certain instances, extended warranty solutions, and financing to support certified rebuilds.”

He said Cat Mining Finance’s strong integration with the equipment and dealership side of the wider group was also appreciated by mining companies when it came to financing and delivering the equipment they required.

“It is a great advantage that we offer a total solution to customers. We are able to work seamlessly with Caterpillar and the dealers to get a transaction closed. It demonstrates to our customers that we have risk alongside them in their business in support of Caterpillar equipment over the long term,” he said.

“However, it goes even further than equipment and financing. Post close, customer support across the Caterpillar enterprise is critical and helps provide varying levels of maintenance and repair support depending on the mine’s requirements. The financing and support after the sale are important to winning business in the mining industry.”

In terms of where demand for mining equipment financing is coming from, Bennes said the market was “constantly fluctuating”.

“When a new mine is going into production, they’re usually committing to buying an entire fleet, so in some years that’s a bigger portion of the business than other years. The same goes for mining contractors when they win a new bid that requires an updated or expanded fleet.

“Generally, about 15-25% of Cat Mining Equipment sales are related to greenfield/brownfield projects with the remainder being expansions of existing mines as well as replacement business.

“This can vary widely based on commodity prices and the point in the cycle, with greenfield/brownfield projects representing a bigger opportunity during periods of high commodity prices,” Bennes said.

“Rental/lease companies would be in the 1-5% range while contractors can be a higher portion of the market in some countries, such as in Australia and Indonesia.”

Bennes also thinks that mining companies and the investors that back them have become a lot more aware of the benefits of employing a solutions provider like Caterpillar when it comes to keeping mine sites operating to their potential.

“Mining companies and their shareholders are used to making long-term investment decisions that have long payback periods. They understand the value of examining the total cost of ownership over the entire life of the mine including planned M&R and rebuild,” he said.

“Price is important, but losses from unexpected downtime can be costly.”

Bennes concluded: “Caterpillar’s global dealership network is designed to provide premium mine site guidance, service and support throughout a mine’s life.”

Earlier this week, IM published a piece on this subject that gathered the thoughts of Sandvik Mining & Rock Technology’s Director Customer Finance, Björn van den Berg.

The ‘value add’ in mining equipment finance and leasing

In the last decade or so, there has been a big change in the way mining companies source equipment for new and existing operations, with finance, leasing and rental now major parts of the system.

IM spoke with some of the major finance, leasing and rental companies around the globe as part of a feature (to be published in April) on the subject.

This is what Björn van den Berg, Director Customer Finance, Sandvik Mining & Rock Technology, had to say about demand for equipment finance and leasing solutions from the mining industry:

“If you have a look at the growth rate for customer finance, it has grown substantially,” he told IM.

“There are two underlying trends here. One is we see increased usage of contractors in mining, with contractors having a totally different cash position to producing mines. That’s one of the reasons why we see increased demand for different types of finance options – a trend we have seen occurring over a longer period of time,” he said.

“A more recent trend is what I would call the subscription-based economy, or ‘product as a service’. In the past, customers had an original equipment manufacturer (OEM) that would supply them with the machine and maybe some after-market services and they would own and use the machine until it fell apart. We are shifting more and more towards where the customer is not necessarily looking for an OEM that can provide a piece of equipment or machine. They are looking for a partner that can provide a solution, preferably, for the duration the customer requires.”

“In terms of the subscription-based economy trend, that normally includes a form of financing on the OEM side. That’s an emerging trend that has led to increased demand for different types of financial products.”

On these different types of financial products, van den Berg said: “We offer a finance-lease, loan – always asset-backed – and trade finance solutions, but what we also see is an increased demand for operational leases, or short-term rental type of solutions including or excluding services.”

The way customers are being charged is also changing, as their own internal cost structure evolves, he added.

“They might look for cost per hour, cost per tonne, cost per metre, etc,” he said. “Whatever defines a customer’s cost structure is the way they want to be charged.”

When it comes to providing not just a financial product, but a solution, van den Berg provided an example of how Sandvik’s equipment finance arm differentiates itself.

“We get requests from mines operating outdated machines where production levels and, therefore, cash flow isn’t where it can be. Sandvik comes in with a multi-disciplinary team, analyses the situation, assesses what the best alternative is for the mine, applies what impact that alternative will have on the cash flow and then structures a financial product around it that will let them achieve that cash flow.”

“A bank or generic financial institution might just look at the current balance sheet and profit and loss and decide not to finance the same initiative as the customer’s credit score does not support it.

“That is where we can add value over the customer’s house bank or other financial institution,” he said.

This interview is part of a wider feature on equipment finance, rental and leasing to be published in the upcoming April issue of International Mining