Flexible Financing Provides Access to Quality

Retreading is incredibly valuable for mine operators. A standard heavy-duty, underground mine tire will have 100mm of rubber when it is sent to the site but even if the tire is properly maintained and the casing is protected with high-quality equipment, it will eventually wear down. Retread the tire and a company can not only save money but also limit the use of natural resources and energy, says Pedro Pacheco, Vice President of Latin America Operations at Kal Tire.

“Instead of scrapping the tire when it is down to 20mm, we can retread it by adding a further 80mm of rubber,” Pacheco says. “The client then has what is effectively a brand-new tire, without having to purchase a new product.”

Mining companies around the world are looking for productivity and efficiency but in Mexico price is a particularly big factor in decision-making. Pacheco says this has been challenging for Kal Tire because there are cheaper products on the market. “We have had to be innovative with our business model to secure new business,” he says. “In Mexico, there are a large number of small and mediumsized mining companies, which is unlike other countries such as Chile that are dominated by a small number of large companies. While these smaller companies represent an exciting market for us, their spending power tends to be more limited than that of our clients in other countries so we have adapted to the conditions in a variety of ways.”

Providing a range of financing options is among the company’s responses to Mexico’s peculiar market environment. A standard tire life with Kal Tire services is around 10 months, Pacheco says, and usually the client will have to pay the full fee in 30 or 60 days. This is appropriate for larger companies but it can be challenging for smaller enterprises that have limited liquidity.

“Smaller companies generally choose the cheaper option, despite the fact that they knew it would be up to 50 percent less productive, simply because they did not have the cash to pay the full amount upfront,” says Pacheco. To help them out, Kal Tire offers installments over a 10-12-month period. 

“This relieves some of the pressure on the client’s balance sheet in the short-term and generates significant savings over the long-term,” he says. “We have found such flexibility has been vital to our success in Mexico.”

In 2014 Kal Tire completed a deal to have Multillantas Grimaldi be its distributor in Mexico. As a result it now stands as the biggest tire-service company within the mining industry in the country. “In the last six years, our presence in Mexico has more than doubled and we can now provide a wider range of products and services to our clients than we could previously,” says Pacheco. At this point Kal Tire does not have a retread manufacturing facility in Mexico but expects to build its sixth plant in Mexico to serve its mining clients near Cananea, Sonora, which should be completed during 2017.

According to Pacheco, this was a strategic location for Kal Tire’s new plant. “Cananea is the biggest mine in Mexico and one of the biggest copper mines in the world, so we see plenty of business opportunities with the project operator, Grupo México,” he says. “Moreover, it is perfectly located to sell tires not only to the US market but also to the Mexican mining heartlands in Durango, Chihuahua and Zacatecas.”

The retread plant began construction in the final quarter of 2016. When completed, it will be a modern, world-class facility with new equipment that will help bring prices down and increase productivity for Kal Tire’s clients, Pacheco says. Much of the equipment is medium-sized, between 90 and 120-ton haul trucks, because Mexico is the largest market for medium-sized equipment in Latin America. “The plant will allow us to provide our complete range of services in Mexico,” says Pacheco. It will begin by manufacturing 49-51in tires but he hopes to start providing 797 retread tires for big trucks within three to four years