When to Fire Your Contractor.

In my last article, I argued that you should start your mine with zero CapEx by renting equipment (using a contract miner). This is what I called the Collaborative Model.

Let me now state that is how you survive the start; but that is not how you maximize the future and establish yourself as a serious mining entrepreneur.

This is how you avoid the rental trap - when you rent yellow metal (or use a contractor), you are paying a premium. You are paying for their finance costs, their maintenance, and their profit margin. In the beggining this makes sense as you are not sure of how the mining project will go and you are still learning the ins and outs of the project, the stakeholders and community.

The proposed Collaborative Model presents this financial situation ~

> Rent: Low Risk, High OpEx (Lower Margin).

> Own: High Risk, Low OpEx (Higher Margin).

But there exists a pivot point. Every mining startup reaches a mathematical tipping point where renting becomes "lazy money." This is the point where to buy makes more business sense than to rent or hire a mining contractor.

So, when do you fire the contractor and buy your own fleet?

The Rule of 6 Months: At Transvaal VC, we advise mining startups to follow the "6-Month Stability Rule." This period is not edged in stone and flexibility is important and pivoting is based on the material conditions arising from the specific project.

Do not buy a single machine until you have achieved 6 consecutive months of stable production and sales.

If you buy too early, a market dip will bankrupt you (loan repayments don't stop).

If you wait too long, you are bleeding unnecessary margin to your contractor or toll wash plant.

The "Hybrid" Strategy (Don't buy everything): You don't need to replace the entire fleet on Day 1 after the suggested 6-months. Start with the critical equipment first:

> Buy the Excavators: These are your primary production tools. They have high utilization. Owning them saves massive rental fees.

> Keep Renting the Trucks: ADTs (Dump Trucks) break down constantly and require expensive maintenance teams. Let the contractor handle that headache for now.

How We Fund The Pivot: This is often where Transvaal VC steps in.

- You used the "Starter Pit" model to prove the resource and the cash flow.

- Now, we provide the capital to buy the fleet.

The Result: Your monthly cash outflow drops (no more rental markup), your margin jumps, and you own the asset.

Renting buys you safety in the beginning. Ownership builds your wealth in the end. The secret is knowing exactly when to switch gears.

Rent to remove risk. Buy to capture profit.