Dry hire an antidote to borrowing blues

As confidence in the Australian economy gradually improves in the wake of the Global Financial Crisis (GFC), some quarry businesses still find themselves (in old, clich?d parlance) ?between a rock and a hard place? when it comes to obtaining capital.

For many quarry producers and suppliers in 2009, the biggest stumbling block was being able to obtain the capital they needed to maintain healthy operations. Even with the Federal Government?s attractive capital investment incentives for new plant and equipment, loans were not forthcoming. Many banks and other fiscal institutions, reeling from the shock waves of the GFC, tightened the screws on borrowings.

With the Australian economy now markedly improved and with many of the Federal Government?s infrastructure stimulus initiatives now in full swing (after the initial lag time of 12 months), the demand for aggregate is again growing. However, the financial sector remains cautious about borrowings. How then do quarry enterprises meet growing demand from their customers if financial institutions continue to maintain a stranglehold on the financial bloodline?

The partial answer for large, medium and small quarry enterprises has been plant and equipment hire. Rather than raising the capital to purchase mobile plant and equipment for the quarry operation, the equipment is leased instead ? whether that be for a week, a month, a year or longer.

Ronnie Bustard, the hire and technical manager of mobile equipment supplier Finlay Screening and Crushing Systems in Brisbane, says that dry hire of plant and equipment accounts for about 40 per cent of Finlay?s business. Of that segment, he believes three-fifths of the customers hire machines with a view to purchasing them in the long term.

?The advantage of P&E hire is that you get to trial it before you buy it,? he says. ?Trialling a machine gives you the opportunity to put products on the ground and to make products that you can sell. You can build yourself a market before you have to justify making a purchase or you have the capital expenditure to purchase a machine.?

Ronnie says that some customers have leased Finlay?s hire fleet of 65 modern mobile crushers and screens for periods of up to two years. He says that even some of his largest clients, including the likes of BHP Billiton and Xstrata, ?tend to hire a lot because to get the capital approval is difficult. It is sometimes easier for the larger companies to hire our machines on a two year contract than it is to get the capital approval from head office?.

Even though you would expect them to have static, fixed plant of their own, Ronnie Bustard says the larger quarrying and mining operations are also dry hiring equipment to meet ramped up demand.

?Many larger operations are looking to expand and therefore dry hire to ensure minimum disruption to their processes. There?s also a need to dry hire when fixed plant has broken down or needs maintenance.  Taking the material to the fixed plant is expensive, so it can be more cost-effective  to take  mobile plant to the feed  source. They often hire in mobile plant  for three, six months, maybe a year or two, to keep their operations running when relocating their static plant.?

For Finlay?s client, Ostwald Brothers, a Queensland family company that specialises in civil construction, earthmoving and concrete and quarry services, dry hire is all about meeting demand. Ostwald operates a basalt quarry in Dalby, in southern Queensland, a sandstone site in Moura, in central Queensland, and a hard rock site in Greenvale, in the north of the State. All three sites produce about 1.2 million tonnes of aggregate each year. Aside from a fixed plant in Dalby, Ostwald Bros relies extensively on mobile plant at its other quarry sites and it has entered into a dry hire agreement with Finlay that utilises mobile plant and equipment on a need basis.

?It depends on what quantities need to be ?pumped? out at the time,? says managing director Brian Ostwald. ?Sometimes we might get a rush, like our fixed plant will do about 7000 tonnes a day and sometimes you need to ramp it up to about 20,000 tonnes a day. For example, we might be making road base at our Dalby plant and Queensland Rail might put in an order for ballast. We have to make extra aggregate, so we?ll set up two plants and we?ll have two different operations running simultaneously.?

Similarly, Brian says at the Greenvale site, he has five mobile crushers, four mobile screens and ?heaps of gear? in place to supply 500,000 tonnes of aggregate for Main Roads Queensland?s 1000km Kennedy Developmental Road upgrade, in Queensland?s north. ?Once the big contract is over, that gear will go away, and we?ll just go back to a skeleton crew,? he adds.

Ronnie Bustard says that amongst its hire fleet, Finlay?s most popular machines with quarries and other customers are the Finlay J-1175 jaw crusher, the C-1540 and C-1540RS cone crushers and the I-130 and I-130RS impact crushers. He says, however, that the choice of machine is dependent on a customer?s needs.

?A customer will call me up and say, ?Right, I want to screen and crush a basalt or sandstone? ? or whatever the material might be ? ?to meet a roadbase, aggregates or even railway ballast?,? Ronnie conjectures. ?I will then work out which machines can produce aggregate to meet the spec required most efficiently.  I will give him an estimate in tonnage rate, at which point in time the customer will let me know if he needs to produce at a greater or smaller volume. At this time, depending on raw feed material, we decide what size machines are required. You have to gauge the machinery towards the customer?s request and to what he wants to make.?

Ronnie adds that if he thinks the value of leasing a machine might be more prohibitive than a purchase, he will recommend they buy it instead. ?When you sit down and work out the sums, how long the customer is going to hire it, what his contract is, and what his resale value of the machine may be at the end of that hire period, then certainly the option is definitely given to each customer that explains the benefits of a machine purchase versus hire. That option is explained to all customers. It is up to them to make sure they are aware of everything and it is up to them to make a business decision. We aim to give the customers as much information as possible and then they can make an informed decision.?

Ostwald Bros has recently leased the I-130RS crusher and an Anaconda TR6036H tracked stockpiling conveyor from Finlay. These were used not only for making aggregates and road base at its quarry operations in far northern Queensland, but also for coal crushing operations at Baralaba, in central Queensland?s Bowen Basin. Wayne Jones from Finlay?s Brisbane office was on hand to assist Ostwald in the setting up of the machines.

?We were looking for a machine that could deliver about 220 tonnes per hour,? explains Brian Ostwald. ?We spoke to Finlay about our requirements and they suggested the Terex Finlay I-310RS, whose capacity is about 450 tph. After playing with it and doing modifications, we have been able to get a peak of 350 tph and a constant of 280 to 300 tph. The Anaconda processes about 260 tph.
?The I-310RS has its own screening box (14? x 5?), so that has enabled us to cope without a separate screener. We?ve gone from a three-screen operation back to a two-screen, with the stockpiler. The Anaconda gave us extra stockpiling capacity.?

Brian is complimentary of Finlay?s service – ?Finlay?s back-up and support, in my opinion, is second to none? ? and he suggests that good back-up is critical for any small or medium scale quarry operation that is looking to dry hire plant and equipment for the first time.
?They have to look for back-up and product support,? he cautions, ?back-up, as in technical knowledge of the equipment they are hiring.?
Ronnie Bustard says that feedback from other customers about Finlay?s level of service has also been encouraging. ?The most positive feedback we?ve had is about our service and our honesty. We don?t overestimate our machines. If we say a machine will do 200 tonnes an hour, chances are that it is going to do more than 200 tonnes an hour, but we don?t overestimate. We don?t overestimate a machine?s capability.?

Ronnie adds that it is very easy to make that mistake. ?You have to pick the right machine in regards to tonnages. A lot of companies out there would overestimate a machine?s abilities. Some customers have been encouraged to hire a 12? x 5? sized swing machine, whereas I would be recommending a 20? x 5?, a larger swinging belt, which obviously costs more to hire. They then find the machine is too small for the kind of throughput they are expecting.?

He emphasises that when it comes to plant and equipment hire, customers must do their research. ?It?s about learning in the market, talking to other users of this type of equipment in the market place, identifying who is reputable. It?s also about customers being able to get the right machinery when they need it, to get the correct machine to do the job and that the material they make will meet the specifications required for that contract.?

In a still tender, economic climate, this is sage advice. With borrowings still tight in the broader financial market, wise investment in plant and equipment hire now should reap bigger rewards in the good times ahead. With Finlay?s fleet on average being less than a year old and having clocked up less than 2000 hours in the field, there is still plenty of time for quarry operations down the track to purchase a hire machine that has been a proven performer.

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