Macmahon is set to become mine services contractor for PT Amman Mineral Nusa Tenggara (AMNT) at its Batu Hijau Copper-Gold Project in Indonesia. Macmahon has signed binding documentation involving it acquiring assets from AMNT, which would become a major shareholder in the contractor.

Macmahon would acquire equipment with an estimated value of about $US145 million from the mine. Macmahon would issue AMNT with new shares equal to between 40% and 50.1% of its expanded share base.

If the transaction proceeds, Macmahon will become the life of mine services contractor, providing earthmoving and mining services for the mine. It will also acquire certain existing mobile mining equipment from AMNT to carry out the contract.

Macmahon, which is a takeover target of leading contractor Cimic, believes the transaction has the potential to transform the company and among the benefits include improved earnings for the 2018 financial year.

The Perth-based company’s guidance has been updated to $620-680 million revenue and $40-50 million earnings before interest and taxes.

The Batu Hijau open pit operation produced about 216,000 tonnes of copper and 800,000 ounces of gold in 2016.

Macmahon also considers that there are improved growth prospects, with the potential for future works at the Elang deposit and the Nangka prospect should AMNT decide to develop them.

Macmahon’s CEO Michael Finnegan said, “If completed, this transaction will see Macmahon’s scale significantly increase and that brings with it a number of benefits which will assist us in the execution of new and existing projects.

“It will make us a stronger and more robust business, and will provide us with a supportive and strategically aligned major shareholder which should help us grow even further.

“Whilst Macmahon has been operating in Indonesia since 2008 and has current operations at both the Martabe gold mine and a quarrying contract in Aceh, we believe that this strategic relationship with AMNT significantly strengthens our presence in the region.”

The transaction is subject to a number of conditions including Macmahon securing an independent expert to determine whether it is fair and reasonable to its shareholders and AMNT acquiring title to any parts of the mobile equipment currently held by the existing maintenance provider.

Macmahon’s board has advised its shareholders to reject Cimic’s $175 million offer, which is now unconditional.

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