The mining services industry is an essential pillar of the Australian economy but has unique financial challenges. In a recent seminar in Perth hosted by the Lunch Money Podcast, industry experts gathered to discuss strategies for overcoming these barriers, offering valuable insights for SMEs in the mining sector. Here’s a summary of the key points covered during the discussion.

Ben Gibson, Head of Advisory at Pickles, highlighted the evolving landscape of mining equipment valuations. He noted a dramatic shift in secondary market pricing post-COVID as supply chains normalised. With big original equipment manufacturers (OEMs) now meeting demand, used equipment prices have dropped, and clearance rates have declined significantly.

Additionally, Gibson discussed how technological advancements, particularly around emissions reductions, have disrupted traditional equipment markets. Equipment compatibility, parts reuse, and emerging technologies like battery-electric and hydrogen-powered systems reshape market dynamics. These changes underscore the need for mining operators to carefully plan for the future lifecycle of their assets.

Richard Tucker, a Partner at KordaMentha, emphasised the challenges small-to-medium enterprises (SMEs) face when dealing with large mining corporations. Mining contractors often serve as de facto working capital providers, with extended payment terms of 60 to 90 days being the norm. This imbalance can lead to financial strain, mainly when contractors are slow to collect receivables or fail to leverage their position.

Dave Osmond of Acid Plant Maintenance Services (APMS) shared his company’s experience with client concentration risk. At one point, 60% of their revenue depended on a single mining corporation. Recognising the risk, the company diversified its client base geographically and by industry, significantly reducing its vulnerability. This proactive approach safeguarded the business and positioned it for sustainable growth.

SMEs should negotiate for shorter payment terms whenever possible. Osmond revealed how his team successfully secured 14-day payment terms for high-stakes projects by emphasising the unique nature of their services and building strong client relationships.

Tucker highlighted the importance of maintaining robust financial records and cash flow management discipline. Mining contractors should ensure their financing and operational plans account for cyclical market swings, commodity price fluctuations, and operational interruptions.

A “Plan B” is critical for handling payment delays or unexpected financial shocks. Options like invoice financing or overdraft facilities can provide a financial safety net. Open communication with financiers and having up-to-date financial records can facilitate faster access to emergency funding.

The push for net-zero emissions will radically impact the mining industry. Gibson cautioned that diesel-powered equipment, which dominates current operations, may become obsolete faster than anticipated. Contractors must stay informed about emerging technologies and plan their capital expenditures accordingly to remain competitive in the long term.

Tucker and Osmond stressed the value of early engagement with experts for contractors facing financial distress. “Hope is not a strategy,” Tucker remarked, urging businesses to seek help before a crisis spirals out of control. Proactive decision-making, such as formal restructuring or putting non-core operations on care and maintenance, can save a business and enhance its long-term value.

Conclusion

The mining services industry is inherently cyclical and challenging. Success hinges on effective financial management, strategic diversification, and staying ahead of technological advancements. By leveraging these insights, SMEs can build resilient operations that thrive even in volatile markets.

In our recent seminar, “Powering Production: Overcoming Capital Challenges in Manufacturing,” industry experts tackled the financial hurdles that small to mid-sized manufacturing businesses face in Australia. The panel, led by Nicholas Samios from Hermes Capital, included David Mansfield (DEI), Gary Tescher, (Promentor), and Josh Hallowell (Pickles), each bringing unique insights into funding, restructuring, and asset management.

The discussion began by addressing common financial challenges, especially for family-owned enterprises and SMEs. These businesses often struggle with:

• Asset-heavy operations: Manufacturing requires significant investment in equipment, which can be a barrier for businesses when capital is tight or machinery needs updating.
• Inconsistent cash flow: Long lead times and high upfront material costs lead to cash crunches, especially when payment terms from customers are extended.
• Capital access issues: Traditional banks may hesitate to lend to businesses with a limited track record or specialized equipment, creating a funding gap for these manufacturers.

The panel explored solutions to these challenges, from asset-based lending to restructuring options:

• Understanding and Valuing Assets: Josh Hannay discussed the importance of regularly assessing equipment value, including surplus items that could be sold to free up capital.
• Streamlining Production: Gary Tesar shared examples of manufacturers optimizing production processes and reducing waste to cut costs, particularly when new equipment isn’t feasible.
• Early Intervention and Restructuring: David Mansfield emphasized that timely restructuring and maintaining clear communication with stakeholders, especially banks, can prevent severe financial distress and preserve business value.

Panelists noted the growing demand for niche, high-value manufacturing, such as medical and defence products, which allows Australian manufacturers to compete despite high labour costs. However, government support was highlighted as critical for fostering growth and innovation in the sector.

Watch the full recording for a deep dive into these discussions, including practical strategies to navigate financial challenges and leverage existing assets in the competitive manufacturing landscape.

Interested in future seminars by Hermes Capital?

Check out our upcoming events here.

In this episode, recorded live at the Royal Exchange Club in Sydney, experts from the transport and finance industries come together to address the significant financial challenges currently faced by the Australian transport sector. The panel explores key issues such as the decline in asset prices, difficulties in capital raising due to aging equipment, increasing ATO debt, and tighter profit margins caused by stricter payment terms from suppliers.

The panel includes industry leaders:

• Nicholas Samios (Hermes Capital)
• Ben Gibson - (Pickles)
• Luke Andrews - (BDO)
• Roman Tepes - (Balance My Books)

Topics discussed range from asset valuations, equipment maintenance, and cash flow management to debt restructuring and stakeholder management. The seminar provides actionable advice on how businesses can navigate financial distress and make informed decisions in the current climate.

If you’re in the finance or transport sector, this seminar offers valuable insights into the unique challenges facing the industry, as well as practical strategies for overcoming them.

Key Topics Covered:

• Impact of COVID-19 on asset values and equipment availability
• The role of maintenance and fleet management in asset value retention
• Common financial pitfalls in the transport industry
• Strategies for restructuring and refinancing to maintain business viability
• Navigating ATO debt and managing stakeholder relationships effectively

Tune in to gain expert insights and practical advice on how to tackle the evolving financial landscape in the transport industry.