Here's a new mining-fuelled boom in Australia - hoarding dumpies

Bulk machinery is hitting the auction blocks and being sold off, in some cases at less than half the price it was fetching two years prior, as the mining industry nosedives.

Ben Gibson, director of asset disposition firm Tiger Asset Group, told Business Insider an oversupply of mining equipment has driven down prices and the lower Aussie dollar is luring international buyers.

The company has landed two significant contracts from McGrathNicol to offload a bunch of mining assets.

It will sell off an estimated $85 million worth of drilling and support equipment following the collapse of Nitro Drilling in Queensland’s Bowen Basin. All up it involves over 700 assets including drill rigs, trucks, and a 30-man camp set up.

Tiger will also act for the receivers and managers of Midwest Vanadium to sell several million dollars worth of processing and refurbishment materials.

While prices vary substantially between asset categories, Gibson explained a big Cat dump truck, for example, may have sold for $1 million 2.5 years ago, but today might sell for just $500,000.

“It has probably halved in the last two, two-and-a-half years,” he said.

“We’ve seen another drop, probably since maybe around October, November last year, to now — it has kind of stepped away again.”

Gibson said a big problem was during the boom – both in coal and iron ore – was service companies couldn’t get enough equipment to keep up with demand. But with mining gear flooding the market, there has been a number of private equity firms and funds based in Asia showing particular interest.

“We are, however, seeing buyers looking for quality mining services assets. Often the buyers are parties who have cashed in during the mining boom and are now looking to position themselves for the inevitable improvement in the market,” he said.

“There has been some private equity firms that are looking to partner with Australian operators and buy some equipment at a discounted price, park it up for a year or two years until the market turns and be ready to go and take advantage of that uptick when it happens.

“They’ll hold it in yards, wherever there’s plenty of space available in some of these mining facilities and mining towns in central Queensland or Port Hedland in WA. They’ll hold it and maintain it.”

Tiger Asset Group is also swooping in to take advantage of the downturn, which has seen a bucketload of mining services companies go belly up and is now opening up a Perth office to offload the gear and cope with rising demand from restructuring firms and banks requesting asset valuations and sell-off services.

Part-owned by Pickles Auctions and US-based Tiger Capital Group, the company’s new Perth outpost will be run by Gibson, a former GraysOnline executive.

“The slowdown in the mining and mining services sector has seen exploration programs reduced, which has impacted the drilling sub sector,” Gibson said.

“We are also noticing that the mining downturn is now affecting other industries and asset classes: general hire, engineering workshops, transport operators, caterers, maintenance facilities, pubs and motels.

“We are doing a lot of work in these areas as well.”

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.