TORONTO (Jan. 31, 2008) — Barrick Gold Corp.'s 10-year, $200 million off-the-road (OTR) tire supply deal with Yokohama Rubber Co. (YRC) Ltd. includes a $35 million loan to Yokohama to help finance an expansion of YRC's OTR tire plant in Japan.
The contract, which would start in 2009, covers five sizes of bias-ply OTR tires, including loader and haul truck sizes up to the 40.00-57 profile, Barrick said. In addition, Yokohama will provide technical assistance with each Barrick site to ensure that the proper compound, tread pattern, and other characteristics are optimized for the operation.
Barrick mines will receive delivery directly from YRC's plant in Onomichi, Japan, and direct-from-manufacturer pricing for the duration of the contract, Barrick said.
To meet the demand of the contract -– 1,300 OTR tires a year for 10 years — Yokohama will spend $50 million to expand the Onomichi plant with a new building, production line and related equipment, Barrick said. The expansion there is expected on stream late this year.
“This is an innovative response to the worldwide tire shortage now facing the mining industry,” Barrick CEO Greg Wilkins said in a prepared statement. “We are providing partial financing for our supplier´s plant expansion to secure a supply of high quality tires for our operations and our new projects.”
Barrick said a boom in recent years in the mining and construction industries created high demand and tire shortages as well as upward pressure on prices. At its mine sites, Barrick implemented strategies to maintain tires, including enhanced maintenance, on-site repair capabilities, sharing of inventory among sites, better maintentance of roadways at its mines and reduced vehicle operating speeds.
In addition, Barrick established that bias-ply tires can be cost effective if applied and maintained properly.
Barrick said it spent $80 million on tires in 2006 for about 3,000 tires giant tires (rim diameters of 45 inches or greater) and anticipates this demand to hit 4,500 by 2012. Barrick said it has negotiated long-term contracts with other, unnamed OTR tire makers and is negotiating additional contracts with others.