An Australian mining operation was preparing to commence production at a new mine site.
The opportunity was substantial.
Its forecasts showed a profit of approximately $220 million for the following financial year.
But there was a problem.
The business had been through the pre-production phase, which meant it had been investing heavily and burning cash before the mine started generating revenue.
They had spoken with all the major banks and none could get comfortable with the historical financials because those numbers didn’t demonstrate the capacity to service a $7.8 million facility.
But the historical financials didn’t tell the full story.
The company owned five unencumbered Cat 777 mining trucks.
They were owned outright, operational and worth approximately $9.75 million.
We identified a specialist lender that understood mining operations and structured a $7.8 million sale-and-leaseback facility—equivalent to 80% of the equipment’s market value.
The facility also gave the company the opportunity to buy it out at a discounted rate after 12 months.
The capital could then be used across the operation, including:
- Payroll
- Mobilisation
- Fuel and consumables
- Contractor costs
- Other operating expenses required to move into production
Dark Horse shaped the proposal, secured the lender’s initial expression of interest and wrote the credit paper supporting the application.
Instead of relying solely on historical financials from the cash-burning pre-production phase, we used the company’s production forecasts and forecast P&L to demonstrate its capacity to repay the facility.
The lender understood the sector, validated the forecasts and approved the $7.8 million capital raise.
The broader lesson is if your business has recently invested heavily in growth, your historical financials might not demonstrate what the business is about to become.
That doesn’t necessarily mean funding isn’t available.
If you own valuable, unencumbered equipment, it may be possible to raise capital against those assets and use the funds for working capital – not simply to purchase more equipment.
That can apply to mining businesses, but also to civil and commercial construction companies, transport operators and businesses with assets whose historical financials don’t tell the full story.
