Financing Growth in Mining Supply Chains

 by Aleks Henderson, State Director, Western Australia, Export Finance Australia

According to KPMG, there are five leading challenges that business leaders are navigating in 2024, including cyber risks, talent acquisition, evolving regulatory processes, digital transformation and controlling costs in an inflationary environment. Looking ahead, the rise of new technologies is also expected to add a layer of complexity, which will require businesses to adapt quickly.

Navigating these challenges typically requires a significant investment of time and money, which directly impacts cash flow. This is true for businesses of all sizes, from startups to global corporates. For those operating in the mining supply chain, the global energy transition is anticipated to present new opportunities on large projects but also complexities.

As the State Director for Export Finance Australia, I have spoken to a range of businesses, particularly small to medium-sized enterprises, that are looking to take on additional and/or larger contract opportunities as part of these new projects. While these contracts offer substantial growth opportunities, they also come with challenges that strain cash flow due to upfront costs of mobilisation and materials, in addition to contract security requirements for performance and warranty.

Opportunities for Australian mining and supply chain businesses

As our economists highlighted in the July edition of World Risk Developments, rising investment and exploration are creating new opportunities for Australian mining services businesses. Over the past year, quarterly spending on exploration and support services averaged $486 million—a 25% increase from the previous five years. This growth, fuelled by demand for precious metals, critical minerals and traditional energy commodities, signals strong prospects for services like drilling, blasting, piping and electrical cabling.

Australian businesses such as Streamline Connect, JSW Australia and DCI Electrical have been able to take on similar opportunities, but they have all faced similar hurdles along the way. Covering long payment cycles, meeting contract security requirements and financing specialised equipment are just some of the challenges that can put a strain on cash flow. Ensuring that cash flow is protected is crucial for these businesses to not only fulfill larger contracts but also to reinvest and continue growing.

An alternative finance solution for growth

For businesses providing goods and services in the mining sector, tailored finance solutions can be a game-changer.

Securing finance from traditional lenders was challenging for JSW Australia due to the complexity in determining the value of its specialised drill rigs. We were able to provide the finance JSW Australia needed to deliver on its contract, including building a drill rig for use at an iron ore mine in the Pilbara region, and continue to invest in growth.

“The finance has helped us add to our workforce, which is great. It's all part of the growth. It’s helping us become more profitable and continue to meet our clients’ expectations.”
Chris Parkinson, Chief Financial Officer, JSW Australia

With the materials component and plant expenses of a project often costing up to 50% of an overall contract, Streamline Connect required a working capital facility to deliver on large projects. We provided Streamline Connect with a number of performance and warranty bonds to help the business secure and deliver on its contract security requirements.  

“The finance from Export Finance Australia was a big support. Protecting cash flow, while mobilising larger projects was a significant risk and area of uncertainty for us and Export Finance Australia’s support helped materially.”
Tony Farrell, Managing Director, Streamline Connect.  

To cover growing contract demands and upfront operating costs, we supported DCI Electrical with a loan to provide the additional working capital it needed to deliver on new contracts.

“They really understood the business. They understood that all our expenses would be at the front end, and they looked at our business rather than just the figures.”
John James Greene, Managing Director and Owner, DCI Electrical Services

Closing the gap for finance in mining supply chains

At Export Finance Australia, we tailor our solutions to meet the needs of our customers. As the local lead in WA, I understand the unique challenges that businesses in WA are navigating and take the time to learn about the businesses I work with to find the right finance solution.

If you would like to explore how our finance solutions could support your business to secure and deliver on mining contracts, please reach out to us today.

www.exportfinance.gov.au/supplychain

Tel: 1800 093 724