Hopes of a fleet rebound

After doubling the amount of engine rebuilds to make the fleets run longer, miners may be looking to buy some new gear.
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Miners may be pulling out their cheque books and buying new gear.

Noel Dyson

To make mining fleet run longer most miners opt for one to two engine rebuilds before scrapping the piece of equipment.

According to UBS Securities, some miners are going to three to four rebuilds.That means the life of some of the equipment on mine sites has been stretched further than ever before. The total hours worked is being pushed beyond the 100,000 hour mark.

It has been reflected in the poor sales figures for many of the original equipment manufacturers. The downturn in new equipment purchases has gone on much longer than many expected it would.

However, while doubling the number of engine rebuilds can stretch the life of a bit of kit, it can only go so far.

There are other issues to watch for, such as cracks to the chassis, that can be potentially life ending for a piece of equipment.

UBS believes there is a wave of demand for new fleets coming over the next few years.

“We are already seeing this with Caterpillar upgrading its production outlook,” the firm said in a letter to investors.

“We hear that lead times for new gear has lengthened anywhere from 10-28 weeks from zero.

“We see a risk that procurement teams across the bulk and gold mining sectors could all demand new capital equipment at the same time, which would drive prices higher and lengthen lead times further.”

There is still a way to go before the lead times hit boom time levels though. Around 2011 the wait time for a Caterpillar 793 was more than a year.

“For the contract miners, many of their balance sheets remain under some pressure and given that their margins are also depressed by the miners who continue to demand low rates, the ability for contractors to upgrade their fleets could be limited,” UBS said.

“Perhaps miners and service providers will need to work more closely together to ensure mutual longevity.”

Another change in this area is the type of equipment contractors are going for. 

Traditionally contractors took the most basic equipment models available.

However, miners are demanding more information from their contractors and to meet this need those contractors have started ticking the option boxes on any new gear they buy.

According to UBS, the fleet situation in the underground gold mining space is particularly tight.

“For the underground gold miners we hear that their heightened focus on availability, coupled with the intense usage of their fleet, means that they are continuously upgrading their fleet with a near complete change out every two years with no surplus trucks parked up,” the investment firm said.

“They argue that a lean fleet drives an increased focus on maintenance and optimisation, which prevents the mine from becoming capital heavy and lazy.”