Rarely does a business go bankrupt from not making a profit; businesses go bust by running out of cash. The mining industry is presently experiencing at least a correction (if not a downturn) and it is time to trim the fat and explore immeasurable opportunities complemented by innovative funding models suited to capital intensive projects.
Recycling is fashionable and there is no shortage of government reports normalising the ?refuse is a resource? concept.The 2009 National Waste Policy sets Australia?s waste and resource recovery direction to 2020 and is being implemented by all levels of government. The Federal Government has commissioned several reports on waste management, including construction and demolition (C&D) materials, to support this policy:
? The Construction and Demolition Waste Status Report ? Management of Construction and Demolition Waste in Australia, which provides an overview of the generation, recovery, markets and products for C&D waste materials across all states and territories and outlines the barriers and opportunities in relation to improving performance.
? The National Waste Policy Implementation Report 2011, which outlines some of the initiatives for recycling and reusing construction and demolition waste in the states and territories. For example, in 2010, the New South Wales Government funded trials by Fairfield City Council
using recycled concrete and asphalt in road construction.
? The Australian Recycling Sector Report (2012), which provides information about the policies, programs and initiatives for the recycling sector in general. For example, Zero Waste in South Australia provides grants for new and existing facilities that recover materials for reprocessing or other reductions in waste going to landfill.
?Waste generation continues to grow so we do need to increase our efforts to recycle and reuse materials, including in the construction and demolition industry,? a spokesperson for Senator Don Farrell, the Federal Parliamentary Secretary for Sustainability and Urban Water, says. ?As the National Waste Policy explains, we also need to ensure that waste reuse is undertaken in a safe, scientific and environmentally sound manner.?
The message is clear: create a resource from waste materials, raise awareness of the environmental benefits and market the product to achieve a sustainable, profitable business. Quite a challenge, and not for the faint hearted.
The opportunities are compelling and building a sustainable business model would include proper risk mitigation, including understated revenue streams to take into account processing, testing and marketing of the newly created resource. More businesses fail for lack of cash flow than for lack of profit.
Procuring equipment as capital expenditure is an expense incurred to create future benefit, the acquisition of assets that will have a useful life beyond the tax year. Appearing on your balance sheet, the expenditure usually on assets such as buildings, machinery, equipment or upgrading existing facilities so their value as an asset increases, may have the desired effect. But it is usually a written down value on the balance sheet, effectively diminishing the paper value of your equity.
On the other hand, those expenditures required for the day to day functioning of the business, such as wages, utilities, equipment rental, maintenance and repairs, fall under the category of operational expenditure, which is the money the business spends to turn inventory into throughput. Operating expenses also include depreciation of plant and machinery used in the production process.
Renting mobile crushing and screening equipment is a good option for businesses that need to keep their equity high, debt exposure at a minimum and running costs stable. The combination also allows the less encumbered business to fund a growth phase, inevitable in the burgeoning recycling industry.
Michael Tripolone, from Tricon Mining Equipment, says increased inquiries from recyclers and strong interest in rental machines have masked the consequence of the slowdown in the resource mining sector for his mobile crushing and screening equipment business. He predicts the recycling industry sector will grow exponentially in the next five years. His modern rental fleet is growing in preparedness and he is keen to acquire machinery for customers to help build their businesses. The Tricon service team are also an important part of the operating expenditure business model, ensuring downtime is kept to a minimum for service, maintenance and wear part replacement.
Grant funding is also a means of retaining cash in the new and emerging industry sector. With interest in resource recovery from all levels of government, the availability of grant funding and other tax initiatives is certain. The challenge for industry is to tap into the incentives and be aware of how to stretch your own dollar further. Information regarding grant funding, clean technology innovation funding, clean technology investment, R&D tax incentives, import/export assistance and payroll tax incentive schemes are available and can be sourced direct, or with the assistance of AusIndustry or business advisers.
There is also a website for tax, grants and assistance information: www.business.gov.au
A business? cash flow is often cited as a key factor in its potential for long term success. A company may have all the revenue in the world but without the ability to progressively generate cash, it can easily fail.
Source: Tricon Mining Equipment