Mining equipment firms betting rebound next year will drive sales

Suppliers and distributors of mining equipment are banking on a rebound in the industry starting next year to drive sales. Mining equipment include excavators, dump trucks, drill rigs, reef dozers, beltwagons, conveyor systems and crushers. "[Mineral] output seems to be increasing in the next 12 months. That gives us an opportunity to sell new equipment," Derrick Walker, manager of the Austral-Pacific branch of Sandvik Mining and Construction Australia Pty, Ltd., said at the sidelines of Philconstruct 2009 in Pasay City late last week. "Over the next 18 months we see strong potential for growth and we see that is going to be reflected in our sales." Sandvik, which has sold equipment to listed miners Philex Mining Corp., Atlas Consolidated Mining and Development Corp., and Apex Mining Co. since beginning local operations 10 years ago, targets higher sales next year. "Last year, we reached about P600 million. This year, we might go over that by 10 percent," Gener A. Rosario, Jr., manager for Customer Sales of Sandvik, said in a separate interview. "Next year, we are aiming for 30 percent [sales growth] or more because of new mining developments…big companies will start operations in the next three years." Citing tight credit and lower metal prices that weighed on mining projects at the height of the financial crisis, the Mines and Geosciences Bureau scaled down in August its full-year mining investment target to $650 million from the $800 million-$1 billion projected at the start of the year. As of late August, investments in mining reached $300 million, data from the Mines and Geo-sciences Bureau show. Actual investments in mining last year reached $577.25 million, lower than the $1-billion target for that year and $679.65 million in 2007. Still, mining investments are seen to reach $2 billion next year. "[A rebound in the mining sector] will definitely affect our sales," Jessie B. Balboa, sales manager of Monark Equipment Corp., said in a separate interview. "I would say we dropped about 30 percent-40 percent [in sales this year] from about P1 billion in 2008…Most of our stocked machines are still here and we do not have customers to sell [to]." Monark has sold heavy equipment of Caterpillar, Inc. to construction firm Leighton International Ltd., as well as listed firms Semirara Mining Corp., Lepanto Consolidated Mining Co. and Philex since starting operations 22 years ago. For next year, the firm targets more than P1 billion in sales, Mr. Balboa added. Jose Miguel E. Velasquez, assistant manager for parts sales of Komatsu Asia & Pacific Pte, Ltd., said, "When there is a downtrend in the economy, customers will not buy new equipment…the customer will concentrate on the maintenance of current machines. So we expected more parts and servicing; but unfortunately, that is not the case." He said that equipment sales of Komatsu dropped by more than 50 percent this year from 600 machines last year, with each machine costing about P5 million. Parts sales dropped by a tenth, he said, without citing figures. Komatsu, which has been selling mining equipment in the country for more than 20 years, has sold equipment to Semirara and Atlas subsidiary Carmen Copper Corp. "Next year there will be [higher sales], but I do not see sales to be back to 600 units," said John T. Cruz, parts and service sales chief for Komatsu. For the next two to three years, the miners are looking at big projects like the $5.2-billion Tampakan copper and gold project in South Cotabato of Swiss mining giant Xstrata Plc, Australia’s Indophil Resources and Filipino conglomerate Alsons Corp.; the $2.4-billion Mindoro nickel project of Oslo-based Intex Resources AS; as well as the Boyongan copper and gold project of Philex in Surigao del Norte. "The next mining company we are looking at is Xstrata," Sandvik’s Mr. Walker said. Monark’s Mr. Balboa concurred, saying "Tampakan is the biggest project we are looking at in the pipeline. We are preparing for that project." - BusinessWorld