How to Secure Asset-Backed Funding for a Mining Project in Australia

What Is Asset-Backed Funding in the Mining Sector?

Asset-backed funding is a form of secured lending where a lender provides capital against the value of a specific tangible asset — or pool of assets — rather than against the borrower's general creditworthiness. In the mining sector, this typically means borrowing against heavy mobile equipment, fixed plant, or in some structures, trade receivables against confirmed mining contracts.

For Australian mining companies and mining contractors, asset-backed funding is often the most efficient and least dilutive form of external finance available. Because the lender has recourse to a specific, realisable asset, these facilities can often be structured at better pricing, with lower equity requirements, and with fewer restrictive covenants than unsecured corporate debt.

Which Assets Can Be Financed?

Not all assets are equally fundable. Lenders assess fundability based on the asset's liquidity (how easily it could be sold if necessary), its useful life relative to the proposed loan tenor, its condition and maintenance history, and its relevance to the mining sector (specialist assets with limited secondary markets are harder to fund than standard mobile equipment).

The following asset types are commonly financed through asset-backed structures in Australian mining:

• Heavy mobile equipment — excavators, dozers, loaders, and haul trucks represent the most liquid category of mining assets and are routinely financed by specialist lenders.
• Drill rigs and blast equipment — used in drilling and blasting operations, these are less liquid than general earthmoving equipment but still fundable with the right lender.
• Underground mining fleet — boggers, jumbos, shotcrete units, and underground trucks can be financed, though lender appetite varies by equipment type and condition.
• Fixed plant and infrastructure — processing, crushing, and screening plant can be financed, often at lower loan-to-value ratios than mobile equipment due to lower secondary market liquidity.
• Trade receivables — confirmed invoices against creditworthy mining company clients can support invoice discounting or receivables lending facilities.

How Lenders Assess Mining Asset-Backed Transactions

Understanding how lenders think about these transactions is essential to structuring a successful facility. Specialist mining lenders — as opposed to general equipment finance companies — are better equipped to assess mining-specific collateral, but they still follow a consistent underwriting framework:

• Asset valuation — lenders will typically commission an independent valuation of the assets being financed, assessing both fair market value and orderly liquidation value. The loan amount is typically set as a percentage of the lower figure.
• Asset condition and age — newer assets in good condition attract better loan-to-value ratios and lower pricing. Lenders will often require evidence of maintenance history and service records.
• Remaining useful life — the loan tenor must be shorter than the asset's remaining useful life, to ensure the asset retains sufficient value as security throughout the facility.
• Underlying contracts — for contractors, the existence of a long-term mining services contract significantly strengthens the credit case. Lenders will assess the counterparty's creditworthiness, the contract term, and the revenue certainty it provides.
• Borrower's financial position — asset-backed lenders are less focused on the borrower's balance sheet than conventional lenders, but they still want to understand cash flow, existing debt obligations, and management capability.

Typical Facility Structures

Asset-backed mining finance can be structured in several ways depending on the borrower's objectives, the asset type, and the lender's appetite:

• Chattel mortgage / secured loan — the most straightforward structure: the lender provides a loan secured over the specific asset, which the borrower owns throughout the facility. This is the most common structure for mobile mining equipment.
• Finance lease — the lender (or a related entity) purchases the asset and leases it to the borrower, who effectively owns the asset at the end of the lease term. Finance leases can have accounting and tax advantages in some circumstances.
• Sale and leaseback — the borrower sells an asset it already owns to a lender or investor and leases it back, releasing the equity in the asset while retaining operational use. This is a common liquidity-generation technique for contractors with established fleets.
• Special Purpose Vehicle (SPV) — for larger or more complex transactions, assets may be held in a dedicated SPV, ring-fencing them from the borrower's other obligations. YellowChip Funds Group, a specialist partner of Phillips International Consulting, uses an SPV structure to provide access to mining equipment finance for wholesale and institutional investors.

The Process: From Initial Enquiry to Drawdown

Understanding the typical timeline and process helps companies plan their funding requirements effectively. Asset-backed mining finance typically follows this sequence:

1. Initial information gathering — the borrower provides details of the assets to be financed (make, model, age, condition, purchase price or current value), the funding requirement, and the proposed use of proceeds.
2. Structuring — an adviser or lender assesses the assets, proposes a suitable structure and indicative loan-to-value ratio, and outlines the likely pricing range.
3. Information memorandum — a formal document is prepared presenting the borrower, the assets, the transaction, and the credit case to prospective lenders.
4. Lender approach and term sheet — one or more lenders are approached; term sheets are received and negotiated. A competitive process typically produces better terms than approaching a single lender directly.
5. Due diligence and documentation — the selected lender conducts due diligence, commissions an asset valuation, and prepares facility documentation. This is the most time-consuming phase.
6. Drawdown — once documentation is executed and any conditions precedent are satisfied, funds are advanced.

From initial enquiry to drawdown, a well-prepared asset-backed transaction can typically be completed in four to eight weeks for straightforward structures. More complex transactions — involving multiple assets, SPV structures, or cross-border elements — may take longer.

Common Pitfalls to Avoid

• Approaching the wrong lenders — general equipment finance companies often have limited appetite for specialist mining assets or remote-site equipment. Working with an adviser who knows the specialist mining finance lender universe materially improves outcomes.
• Inadequate asset documentation — lenders need comprehensive asset information. Missing maintenance records, unclear ownership history, or outstanding encumbrances will delay or derail a transaction.
• Unrealistic loan-to-value expectations — borrowers sometimes expect loan amounts close to the purchase price of an asset. Lenders typically advance 60–80% of fair market value for mobile equipment; lower for specialist or older assets.
• Underestimating documentation time — particularly for first-time borrowers, the legal documentation phase can take longer than expected. Building adequate lead time into your planning avoids unnecessary pressure.
• Not considering the full cost — interest rate, establishment fees, ongoing fees, and insurance requirements should all be factored into the total cost of a facility before committing.

How Phillips International Consulting Can Help

Phillips International Consulting arranges asset-backed funding for Australian mining companies and contractors, working closely with specialist lenders including YellowChip Funds Group. We bring 19 years of mining finance experience to each transaction — which means we can assess your assets and situation accurately, structure a transaction that works for lenders, and run a competitive process that delivers the best available terms.

If you are considering asset-backed funding for a mining project or contractor business, we welcome an initial conversation — confidential and without obligation.