MacMahon Secures $210 Million Warrawoona Gold Contract

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MacMahon Secures $210 Million Warrawoona Gold Contract

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  • FY21 underlying Earnings Before Interest Tax Depreciation, and Amortisation (EBITDA) increased by 19 per cent to $77.2 million
  • FY21 statutory Net Profit After Tax (NPAT) up 19 per cent to $77.2 million
  • Awarded Warrawoona gold contract, forecast to generate $210 million in open cut mining revenue

Australian gold and iron producers have certainly caught the attention of investors this year, with attractive production guidance provided by favourites like BHP Group Limited (ASX:BHP). However, these are certainly not the only indicators to keep watch for, as far as the continuing profitability of the larger mining sector is considered. Supporting the anticipated production are mining service providers such as MacMahon Holdings Limited, which ensures the delivery of said production volumes, irrespective of favourable commodity prices.

In its announcement today, MacMahon Holdings finalised a $210 million Warrawoona gold contract, with Calidus Resources Limited (ASX:CAI) in Western Australia. This recent contract adds to the company’s existing portfolio of mining service projects, of which a majority are based in the western state. MacMahon Holdings revealed in 2020 that it had been identified as a preferred contractor for the project. Today, the company anticipates its main equipment to arrive on site during the first quarter of 2022, with the contract forecast to generate up to $210 million of revenue from open cut mining activities that will run up til December 2026.

The company reported record results for FY21, despite industry challenges faced by its Batu Hijau operations in Indonesia. Regardless, it presented shareholders with underlying EBITDA of $77.2 million, up 19 per cent from the previous year, along with statutory NPAT of $77.2 million — up 19 per cent. FY21 was the fourth consecutive year that saw MacMahon Holdings delivering according to guidance.

Long-term Growth Pipeline Aimed at Equalising its Mining Services Portfolio

MacMahon Holdings remains invested in growing its service portfolio as it develops its growth pipeline for the years to come. This includes improving on its systems and processes, and expanding on its capabilities as a mining services provider. The company aims to provide an even profile of services across its surface, underground mining, and mining support activities.

The mining services provider also reported a number of new contract awards, featuring within its current 5-year growth pipeline. Among these include surface mining and underground mining projects that were recently commenced, or scheduled to begin operating early next year. Additionally, MacMahon Holdings has also secured extensions for two of its ongoing projects with Silver Lake Resources Limited (ASX:SLR), and Pantoro Limited (ASX:PNR). In total, these contribute to the company’s current tender pipeline, worth $7.1 billion reported at the time of its FY21 results.

MacMahon Holdings anticipates a start to FY22 that sees tax rates normalising to ~30 per cent, while effective cash tax rates remain at ~15 per cent. Among its priorities for the coming year include a focus on improving safety performance, as well as the effective management of COVID-19, to prevent its spread from affecting providity. The company will soon be finalising its Batu Hijau Phase 8 extension, while it invests in its mining technology and digital transformation of various operating processes.

MacMahon Holdings provides FY22 guidance of revenue between $1.4 - $1.5 billion, with earnings before interest, taxes and amortisation of $95 - $105 million. At the time of writing, the company is trading at 8 per cent lower compared to the prior corresponding period

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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