Mining Equipment - How to sell

Teck Cominco Ltd. - M. Talarico

May 6,2008

In this post, we will review the specific assets disposal options mining companies can use.

Equipment Brokers - Consignment

Consignment involves hiring an equipment dealer, typically the company that sold you the equipment, to market and sell your surplus equipment.

The consignment process:

1. Consignee (broker) and Consignor (owner) agree upon market value of equipment.
2. Execute or sign off on the consignment agreement.
3. Equipment is listed/marketed by broker.
4. Buyer submits a purchase offer on equipment.
5. Equipment is sold and broker collects payment; broker retains commission; remaining funds sent to Consignor or owner of equipment; equipment is released to buyer.

For this effort, the consignee or broker will charge a commission. Fees vary, depending on the asset type but typically range from 8-20 % of the final sale price. For example, on a $100,000 asset you can expect to pay $8-20,000 in commissions.

Auctioneers

This method has been around forever and in fact can be traced back to 500 B.C. There are many types of auction formats but we will specifically address a public auction for selling heavy equipment. In this format, the bidders' identities are not hidden and anyone is welcome to attend the auction or to place bids via the internet.

The equipment auction process:

1. Auction house or re-marketer appraises your assets and provides seller a proposal outlining their commission structure. The percentage is based on the amount and the value of the equipment a seller places at auction. Auction companies sometimes partner with sellers by offering a guarantee to the seller on what will net or be paid.
2. Location of auction determined. Large lots are subject to a lower commission and if it warrants the auction can be held on seller's site. For smaller lots, a higher fee is payable and the owner is required to transport the assets to the closest auction yard.
3. Auction agreement is finalized.
4. Auctioneer sets date and equipment is marketed.
5. Bidders register and viewing/inspection of assets take place.
6. The numbered asset is called and bidding takes place. Bidders can be physically present or place their bid on-line via an internet portal with the asset awarded to highest bidder.
7. Payment is collected by Auctioneer, fees retained or deducted from sale price with residual given to owner.
8. Asset is then released to buyer with conditions of sale attached.

Auctions can be risky as returns are not guaranteed, however, the process encourages competition and the hope is two bidding parties want the asset enough to pay fair market value or more.

There are some very reputable auctioneers; Ritchie Bros grossed more than US$3.1 billion in auction proceeds in the 2007 calendar year. If you are looking for an expeditious way to outsource your surplus disposal, this is a valid option.

Inside Sales (Sell it yourself)

Another attractive option is the disposition of the asset using your own personnel. As in any business transaction, by selling to an end user and cutting out the middle person you would expect to achieve a better return.

How to:

1. Use a reputable online equipment portal that ranks high with all major search engines. For example, Google "used mining equipment" and find a high ranking portal.
2. Take digital pictures highlighting areas of the asset you would want to see if you were the buyer.
3. If applicable, collect the maintenance history and the equipment/component hours.
4. Record the make, model, serial number and any other equipment specifications
5. Determine a selling price. If you are unsure of the market value of your asset you can pay for an appraisal, request a free one from the OEM dealer, and surf various internet portals reviewing sales history or asking prices of like or similar assets. Reviewing the original purchase price documentation will also help you ascertain a bench mark.
6. Post your assets using content rich relative keywords. In real estate it is location, location, location, with mining equipment it is details, details, details which will ensure you generate quality leads which will result in a sale.

In addition to the financial benefits, there are many advantages to selling your surplus equipment, such as, retaining control of the negotiation process and disposition time-line. By selling the asset with an "As is, Where is" condition you also eliminate further financial risk by no longer having to transport or dismantle the asset to auction.

As part of the due diligence process, a majority of the "sell it yourself" tasks should be done regardless of your final disposition decision, therefore, attempting to sell it yourself is the next logical step to take and is definitely worth the effort.

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