Author: yinghui

Suppliers to Rio Tinto will be waiting twice as long for accounts to be resolved after the company announced it would extend it’s terms of payment to 90 days.

The West Australian suggested the move would give the company’s balance sheet a boost ahead of the departure of CEO Sam Walsh in July.

It is understood tens of thousands of suppliers and contractors around the world will be affected, who are outraged over the problems the move could introduce to a sector already under significant price pressure.

This is the second change to terms of payment dictated by Rio Tinto in nine months, when Rio Tinto shifted the goalposts from 30 to 45 days for payment of accounts.

In some cases time for payment could be blown out to 120 days, given that Rio Tinto only pays its bills at the end of the month of receipt of invoice.

A spokesman for Rio Tinto said the change was intended to “free up cash and reduce working capital so that we can preserve and maintain jobs and suppliers in tough global environment for commodities”.

BHP changed their terms of payment shortly after Rio’s last change, from 30 days to 60 days, leaving FMG the most prompt paying iron ore major in the Pilbara, keeping their terms at 30 days.

A spokesman for FMG said the company had no plans to change their terms.

Downer’s contract at Fortescue Metals‘ Christmas Creek mine will not be renewed as the miner moves to a an owner-operator model.

The contractor made the announcement yesterday, stating it has been in discussions with FMG about the transition of the mine to Fortescue following the expiry of the current mining contract.

“Over the course of the next six months it is Downer’s intention to provide a safe and orderly handover of the Christmas Creek mine to Fortescue,” Downer said in a company statement.

Fortescue Metals added: “A comprehensive change management plan has been developed. Production from Christmas Creek is not expected to be impacted during the transition.”

FMG CEO Nev Power thanked Downer for its work at the site.

“The Downer team have been involved with mining at Christmas Creek since the outset and have played an important role in Fortescue’s development of our facilities in the Chichester Hub.

“Adoption of an owner operator model will further reduce Fortescue’s costs through ongoing improvement of the efficiency and productivity of our Christmas Creek mining operations.”

It is unknown how the move will affect the approximately 900 workers at the site.

Downer has been working at the mine since 2010, and was handed Macmahon’s former contract last year after FMG merged two service contracts into one, creating a contract worth $500 million for Downer.

Despite the move off Christmas Creek, Downer does not expect the transition to have an effect on its 2016 financial results.

A major international quarry plant supplier has opened a new global parts facility that could have flow-on benefits for Australian quarry customers.
Terex Materials Processing Systems recently invested more than $USD7.2 million ($AUD9.4 million) to establish a state of the art facility in Dungannon, Northern Ireland.

Terex Materials is a global division of the Terex Corporation that encompasses the Powerscreen, Terex Minerals Processing Systems, Terex Finlay, Terex Washing Systems and Terex Environmental Equipment brands.

The new Terex Materials facility includes a 957m2 office space, where a team of parts experts will field technical and sales inquiries.

The facility is expected to be able to house more than 86,000 live inventory parts. In addition to having a warehouse capacity of 5463m2, the facility has a 650m2 external canopy that can provide overhead storage for larger product.

The facility has also been fitted with “leading edge” technology to help the company “expedite all orders efficiently”. This includes three Hanel Lean-Lift automated storage and retrieval systems, which will operate with the facility’s 168 bays of high-bay racking; three dock levellers designed to improve ease of access for deliveries and container shipments of large-scale parts; and a range of Linde electric material handling equipment, including an order picker and aisle masters capable of working at a height of 9m.

Australian distribution
Within Australia, Terex quarry equipment is distributed through four dealers: OPS Screening and Crushing Equipment, Finlay Screening and Crushing, Terex Minerals Processing Systems (MPS) and Lincom Group.

Terex Finlay mobile plant and Terex Washing Systems products are available through OPS in Western Australia and the Northern Territory, and through Finlay on the east coast of Australia, including South Australia and Tasmania. OPS is also the local distributor for Terex Environmental Equipment.

Terex MPS is responsible for the provision of fixed and modular crushing and screening plant to the Australian market and Lincom is the local distributor for Powerscreen.

Terex parts for each of the brands are available through their respective local distributors, and a Terex Materials spokesperson confirmed this would continue to be the case with the introduction of the new global parts facility.

However, the spokesperson noted the new facility would increase the inventory available to Australia’s local dealers, and improve Terex Materials’ response time to those local distributors, which could result in benefits for quarry customers further down the supply chain.

Galaxy Resources has officially begun production at its Mt Cattlin mine.

“Production has commenced, with both mining and processing operations having started up,” Galaxy said in a company statement.

“An initial 5-week program will sequentially recover and stockpile spodumene and tantalum concentrates from the fines circuit ahead of crusher and HMS (coarse circuit) commissioning in the June quarter,” the miner stated.

“Given the quantities of ore already mined and available for processing, the immediate focus at restart through to May 2016, is on the processing circuit. This work shall including progressive commissioning of the primary and secondary feed preparation circuits, thickener, fine and coarse circuit screens, mica removal screens, the tantalum spirals and tables, as well as the fines reflux classifiers and filter belt.”

As part of this restart of production, mining of blasted ore in the Dowling Pit has also begun and will be stockpiled, with feed for the processing circuit sourced from existing stockpiles.

Galaxy is aiming to reach a throughput rate of 800,000 tonnes per annum by the end of June.

First delivery of concentrate is on target for July/August.

Sandvik has unveiled a new business division, Sandvik Mining and Rock Technology.

The division was formed through the merging of the Sandvik Mining and Sandvik Construction divisions.

According to Sandvik, the new division “will be organised in a de-centralised business model with separate product areas based on the product offering”.

“Each product area will have full responsibility and accountability for its respective businesses.”

Bjorn Rosengren, Sandvik’s CEO, explained the reasoning behind the merger.

“Products developed for the customer segments mining and construction are based on common technologies with a similar aftermarket offering,” Rosengren said.

“In addition, manufacturing units are already largely shared with to some extent shared front line resources. By joining the operations into one business area we achieve a leaner and more efficient structure. The decentralised business model enables an even clearer focus and faster response to our customers.”

The new structure will begin operation in July.

Current head of Sandvik Mining, Lars Engstrom, has been appointed president of the new division, while current president of Sandvik Construction, Dinggui Gao, will leave the company on 1 July.

Businesses that operate in the Australian construction industry are at most risk of defaulting in the next 12 months, according to a report prepared by advisory firm SV Partners.

The SV Partners Commercial Risk Outlook March 2016 report places firms that offer professional, scientific and technical services as the next most likely to experience financial distress, while retail is the third most likely industry in which businesses are at risk of default.

Manufacturers and transport, postal and warehousing providers are also in the top five industries most at risk of default.

According to the report, which analysed retrospective commercial data, the next 12 months will be trying for Australian retailers.

The report predicts as many as 14 large and medium size retailers are at serious risk of financial distress, following in the high-profile cases of Dick Smith and Laura Ashley.

Three of these unnamed retailers have turnover of at least $1 billion in turnover, which SV Partners said “implies further adverse impacts within the retail industry with key retail players in financial distress”.

A further 11 unnamed retailers with annual turnover between $100 and $500 million are in the “highest risk category of financial failure”, according to the report.

Overall, SV Partners predicts close to 50,000 or 2.1% of Australia’s 2.34 million operating businesses will face “adverse financial events” within the next year.

Approximately 10,000 businesses are placed under external management in Australia each year, with the rate of external administrations appearing to be on the rise.

Appointments of external administrators increased by 8.3% in the September quarter of 2015, compared to the previous quarter, with retail appointments increasing by 9.8% in the same period.

Of the appointments in the September quarter, the construction industry accounted for 16.7% of administrations and the business and personal services category accounted for 41.2% of appointments.

The regions at most risk of default

According to the SV Partners report, businesses in the Northern Territory and Queensland are under financial pressure, with the two regions indicating the highest levels of potential defaults relative to the number of businesses operating there at 2.8% and 2.4% respectively.

However, specific locations along the east coast of Australia top the list of the locations where businesses are most at risk of default.

Melbourne’s inner suburbs lead the way, where 2% of the 2,552 businesses operating are at risk of financial distress.

Next in line is Queensland’s Gold Coast, where 3% of the 2,027 businesses are at risk, followed by Sydney’s city and inner south, where 2% of the 1,938 businesses are at risk.

Businesses operating in Sydney’s inner south west also make the top five (2.8% of 1,792 businesses, as well as businesses in Melbourne’s south east (2.6% of 1,730 businesses).

Why now is crunch time for many SMEs

Colin Porter, managing director of CreditorWatch, told SmartCompany March and April are often critical months in terms of cashflow for many SMEs.

One reason for this is tax returns to the Australian Tax Office are often due in March.

“Tax returns are critical large payments that some businesses hope to finance through miracles,” Porter says.

“The Tax Office is generally a good creditor and will provide funding, however at certain times they won’t and don’t.”

Porter says the first quarter of the year can also present cashflow problems for some businesses if invoices have not been issued and paid following the Christmas slow-down.

One a more personal level, Porter says the new year is often a time when business owners will also re-evaluate their business.

“There can be a realisation that this is how my business is and with starting the year, they will consider what needs to be done,” he says.