The world’s leading diamond-mining company, De Beers, has signed a rental agreement valued at R170-million with asset rental company RentWorks.

RentWorks has 20 years’ global experience and is backed by the First Rand group. The company offers complete residual risk and currently rents R5-billion worth of assets, ranging from medical equipment and generators to corporate companies, government departments, small and medium-sized enterprises and the education sector.

RentWorks will supply De Beers with two Terex RH340 hydraulic shovels as part of a five-year rental solution.

Diamond-bearing rocks will be excavated with the help of the hydraulic shovels at the De Beers Venetia mine, in Limpopo province. The mine produces half of the diamonds that are currently being mined in South Africa.

“De Beers has engaged in a partnership with RentWorks, because it makes the best business sense to outsource costs, where possible, within the current economic downturn.

Our agreement with RentWorks will allow us to further reduce our net cost to the company for the services that we acquire from them,” says Venetia mine operations manager Johnny Velloza.

In the past, the mining companies were able to receive beneficial tax breaks if they bought mining equipment directly from suppliers. Recently, the tax legislation has been changed and renting of mining equipment is becoming a popular option. Mining companies are starting to realise that their core capital can be better employed for operating, expansion and growth purposes.

An enormous amount of capital is required to mine deposits once a mining company has undertaken to build an openpit diamond mine. And, at this stage in the mine management process, it makes much more sense to establish a rental agreement instead of buying the equipment.

“De Beers has chosen to move some of its mining fleet at Venetia mine from a capital cost to a pay-for-operating expense, as this allows it to protect its cash for acquisition growth and offers it added business flexibility.

When we originally sat down with management, it became clear that a rental solution, removing the risk and significant capital outlay, was the most viable solution in procuring the two giant Terex excavators,” adds RentWorks specialised assets managing executive Jacques De Klerk.

De Beers, with its joint venture partners, operates in 25 countries across five continents and employs about 20 000 people.