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Buyers finding bargains in mining equipment glut
[SANTIAGO] As slumping metals prices force miners to scale back production, the scramble by some to sell idled equipment at a discount is producing bargains for healthier players.
Mantos Copper, a unit of investment firm Audley Capital, which bought two Chilean copper mines last year from Anglo American, is among those reaping the benefits.
Mantos recently bought idled loading equipment "at a competitive price" to replace rented equipment, helping to reduce costs, said executive chairman John MacKenzie.
At the height of the commodities boom around 2011, specialized mining equipment was in short supply and companies often had to wait as long as 18 months for a new truck or even tires.
That is no longer the case. Inventory of used equipment is piling up with dealers from Australia to North and South America.
Chile's state-owned copper miner Codelco noted that a shortage of new mining equipment ended with the end of the copper price boom.
Some mining equipment has been snapped up by companies in other industries, such as road construction or gravel, said Jake Lawson, group senior vice-president of the eastern US for Ritchie Bros Auctioneers.
Quarry and gravel companies have been eyeing equipment from shuttered US coal mines, said Jon Hager, who manages heavy equipment for Colas SA. The French company engineers and builds roads and other transportation infrastructure.
A used front-end loader could cost US$1 million less than a new model, Hager said. "People are picking and choosing what's coming out of the mining sector, and putting some of it back in play, but a lot of it is just being auctioned off in South America" to miners and construction companies, Hager said.
But Lawson said mining machinery tends to be more specialized than in other industries and much of it stays within the sector, unlike oil drilling equipment, which can sell for logging, construction and farming.
For those looking to sell, the options are limited. "Either you lower prices, which on occasion happens, or you wait," said Eduardo Bennett, business manager for used equipment seller Copal, based in Chile. "You need to be patient."