Convert owned mining equipment into working capital through a sale-leaseback. The machine keeps working; the equity goes to work as cash in your operation.
Equity locked in iron that is already paid off is not working for you. A sale-leaseback converts that equity into liquid capital without removing the machine from service. You sell the equipment to a lender at a negotiated value, the lender leases it back to you for continued operation, and you receive a lump sum of cash that you deploy into whatever the operation needs most. The shovel or the haul truck keeps digging on your site while the capital goes to work in a new drill program, a fleet addition, or a site acquisition.
This is a capital tool, not a distress transaction. The operators who use sale-leasebacks well are the ones who understand that keeping paid-off iron on the balance sheet while opportunities sit unfunded is a capital allocation decision, and often not the best one. If you own a Caterpillar 994 wheel loader free and clear and there is a contract that requires three more units, the equity in that loader is your down payment if you are willing to structure it.
How a Sale-Leaseback Transaction Is Structured
The mechanics are more straightforward than the name suggests. You and the lender agree on the equipment's current value, typically confirmed by an independent appraisal or by reference to published used equipment market data for that make, model, hours, and condition. The lender purchases the equipment at that value and simultaneously enters a lease agreement with you for the same machine. You receive the purchase proceeds minus any existing liens on the equipment, and the new lease obligation begins immediately.
Lease terms on sale-leaseback transactions in mining typically run 24 to 60 months, depending on the equipment's remaining useful life and the lender's view of residual value at end of term. End-of-term options mirror those in standard leasing: return the equipment, purchase it at fair market value, or exercise a predetermined buyout if one was negotiated at origination.
For operations that own multiple units free and clear, a portfolio sale-leaseback packages several machines into a single transaction. This approach generates substantially more capital than a single-unit transaction and can serve as a significant financing event for an operation looking to fund a major expansion or a permit acquisition without taking on corporate debt.Gold mining operationsandcopper producersin the Western US have used portfolio leasebacks to fund new exploration programs while keeping the production fleet fully operational.
Equipment That Qualifies for a Sale-Leaseback
The lender in a sale-leaseback takes on the residual risk: they need to believe the equipment will have meaningful value at end of term if the lease is not renewed or purchased. That requirement narrows the field somewhat compared to a straight loan. Major-brand mobile iron from Caterpillar, Komatsu, Liebherr, and Hitachi qualifies readily because used market depth exists for those machines. A well-maintainedhydraulic mining excavatorfrom a recognized OEM with comprehensive service records is close to ideal sale-leaseback collateral.
Processing equipment such as jaw crushers and ball mills is harder to structure as a leaseback because these assets are often permanently installed and difficult to remarket. Mobile crushing equipment qualifies more readily than fixed plant. Drill rigs from Sandvik, Epiroc, and Atlas Copco are regularly financed in sale-leaseback structures, particularly for contract drilling operators who want to free up capital for fleet growth.
Equipment that is heavily worn, significantly past a major rebuild interval, or has incomplete maintenance records may not qualify for a leaseback regardless of brand. A lender who buys a machine at value and leases it back needs confidence that the equipment will perform through the lease term without a major unplanned failure that creates liability and disputes. Hour counts and maintenance documentation are therefore scrutinized carefully.
Situations Where a Sale-Leaseback Fits
Operations that have been running for several years and have paid down or paid off significant fleet iron are the primary users of this structure. The equity built up over those years is a real asset that can be mobilized when the right opportunity appears.
Four specific scenarios come up repeatedly. First, a mining operation wants to expand its fleet to meet a new contract but lacks the cash for a down payment on additional iron. A leaseback on an existing paid-off machine generates the capital for the down payment without requiring a bank draw or a new equity raise. Second, an operation needs working capital to fund operating costs through a gap between production and payment from the off-taker. The leaseback generates a cash cushion without requiring the operator to sell the equipment outright or interrupt production.
Third, an operation going through a refinancing of its corporate credit structure wants to reduce the equipment count on the balance sheet to improve certain financial ratios. Moving owned iron to a lease structure changes how the asset and liability appear in the financial statements. Fourth, a sale-leaseback can serve as bridge capital during a permit or exploration phase where revenue is not yet flowing at full production levels but the operation needs to maintain and potentially expand its fleet. For operators runningsurface drill rigsin an early-stage development project, this use case is particularly relevant.
Understanding the Economics
A sale-leaseback is more expensive than a straight loan when measured on a pure interest-rate basis. The lender takes on residual risk that a loan lender does not carry, and that risk is priced into the lease rate. Whether that premium is worth paying depends entirely on what the freed capital can earn in the operation.
The relevant calculation is straightforward: what does the leaseback cost per year in incremental lease payments compared to what you would have paid on a loan to accomplish the same capital raise? Then compare that cost to the return on the capital deployed. An operation that uses leaseback proceeds to fund an expansion generating substantial incremental production may find the premium entirely justified. An operation using the proceeds to cover operating shortfalls during a prolonged price downturn is making a different calculation and should model the full scenario carefully before proceeding.
Tax treatment is another factor. Lease payments may be fully deductible as operating expenses depending on the lease structure, which changes the after-tax cost of the transaction. The interaction between a sale-leaseback and your depreciation position on the equipment is a specific question for your CPA. We can provide the financing structure; your advisor quantifies the tax outcome.