Equipment rental company Rentworks is experiencing a spike in its mining equipment rentals owing to the current economic downturn.

Rentworks managing executive for specialised assets Jacques de Klerk explains that this has been the case particularly in the past two months.

“In the past, mining was not our core business focus area. Mining companies were uninterested in renting equipment, but this has changed recently, and mining has become one of our core focus areas,” he says.

He says that mining companies are now turning to renting equipment because banks are becoming more conservative in granting credit. “Especially now, when the world is in an economic slump, companies need credit most.”

He says that companies are preferring to protect the cash they have for their core business either to buy a new mine or upgrade an existing one, rather than spending the money on equipment.

Equipment suppliers are also feeling the crunch, as mining companies are hesitant to buy new equipment.

However, De Klerk believes that renting equipment is now a viable option for mining companies.

“The second-hand market is crucial to mining companies that struggle to obtain credit. Companies need to provide a return to shareholders on assets bought, but if they do not want it to be shown as an asset, but rather as a business expense, they are able to get it off the balance sheet by renting. It is also a cost-effective funding solution and protects facilities and cash for core growth.

Companies still get the benefit from the machine, while using it for a flexible term agreed upon between Rentworks and the company, and are able to give the machine back to us once the rental period has expired,” he says.

Suppliers and banks also benefit from companies opting to rent equipment. The benefit to suppliers is that the rental company takes care of the supplied equipment on behalf of suppliers, and they do not have to do it on their balance sheet. Banks also benefit, as the rental company acts as a third party by carrying all the risk, because the bank does not need to fund the full equipment cost.

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