Goldmine on Fire Sale! It's Cheaper Than a House in Sydney

Mining equipment
Truck mounted drill rigs and support trucks being sold by Tiger Asset Group Pty. Source: Tiger Asset Group Pty. via Bloomberg

Fancy owning an Australian goldmine? One’s for sale on minegraveyard.com.au, and for the price of an average Sydney house, you could add a dump truck and huts for more than 300 miners.

The end of Australia’s biggest resources boom since the 1850s has left a trail of unwanted assets nationwide. With mines shuttered, workers fired and companies in liquidation, billions of dollars of plant and equipment are being snapped up by buyers from Southeast Asia to the U.S. on online auction sites at knockdown prices.

The goldmine in eastern Australia, featuring a 130-foot shaft, processing plant and rights to explore an area bigger than the White House compound, is on the market for A$750,000 ($600,000). A 70-ton dump truck is going for less than the cost to fit it with new tires in Western Australia. And bids closing today start at A$609 for prefabricated homes and buildings in Queensland that once formed a village for 348 miners.

“The mine camp is the tip of the iceberg,” said Said Jahani, head of financial advisory in Sydney with receiver Grant Thornton Australia Ltd., which is selling the complex along with warehouses, crushing equipment and drilling rigs for other resource companies. “There’s so much surplus supply. It’s an absolute bloodbath.”

Commodity prices tell the back story. Iron ore, Australia’s most valuable export, has fallen 39 percent in the past year. Coal has dropped 20 percent, while gold has tumbled 37 percent from a 2011 peak. It all adds up to this decade’s worst price slump. More than A$28 billion has been wiped from the value of Australia’s miners and metal producers in the past year.

Dodging Bankruptcy

More than five mining companies a week appointed external administrators to help them avoid bankruptcy in the first two months of this year, according to Australia’s corporate regulator. And one in five workers in the industry -- or 52,300 people -- lost their job in the 15 months through February, government statistics show.

Now companies that helped spend A$334 billion on mining equipment and infrastructure from 2011 to 2014 -- more than the previous 23 years combined -- can’t sell their assets fast enough.

“We’re seeing equipment that would never normally go to auction, and that’s presenting some opportunities for cashed-up buyers,” said Damian McCarthy, chief executive office of liquidator Tiger Asset Group Pty. in Perth. “A lot of them are very good companies that were making money during the boom.”

Prices for mine equipment have fallen at least 20-to-30 percent over the past few years, McCarthy estimates.

They may tumble more.

Buyers? Where?

The Australian government forecast in its budget on Tuesday that mining investment would fall by 26 percent in the year ending June 30, 2016, and slump 31 percent more the year after. The Reserve Bank of Australia cut interest rates to a record low 2 percent last week and predicted slower economic growth and higher unemployment amid the mining bust.

“With ore prices so low there will not be much of a secondhand market,” said David Merrett, a business and economics lecturer at the University of Melbourne, who has studied mining booms and busts.

He sees a glut of disused haulage vehicles and earth-movers emerging after companies bought the equipment to extract larger amounts of dirt and ore from open-cut mines. “Who wants to buy the stuff and where would liquidators store it?” Merrett said.

In the coal-mining settlement of Eaglefield, in tropical central Queensland, dozens of four-bedroom mining accommodation blocks lay empty, awaiting buyers on graysonline.com, where they are offered alongside used white goods, TVs and weekly wine specials.

Kitchen, Anyone?

The most sought-after item has nothing to do with mining. The camp’s fully-equipped commercial kitchen, featuring a pastry mixer and meat slicer, has attracted bids as high as A$22,509, while an office building with desks, printers and a water cooler is so far fetching A$2,759.

About 25,000 mobile mining homes sit unused in the northeastern state of Queensland alone, and 25,000 more may reach the market by the end of the year, said Tiger Asset’s McCarthy.

While a 15 percent slide in the Australian dollar versus its U.S. counterpart in the past year has made the secondhand merchandise cheaper for many overseas buyers, demand for it is weak, he said.

“This is a global downturn,” McCarthy said. “The world is subject to the same economic conditions as we are.”

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