Macmahon talking Telfer terms

NEWCREST Mining and mining contractor Macmahon are discussing a potential change to the rates for Macmahon’s life-of-mine contract at Newcrest’s Telfer gold mine in Western Australia’s Pilbara.
Macmahon talking Telfer terms Macmahon talking Telfer terms Macmahon talking Telfer terms Macmahon talking Telfer terms Macmahon talking Telfer terms

Macmahon is talking rates at Telfer.

It is expected the facilitated negotiation process both parties have entered into will be concluded by August 5. If those talks do not work, Macmahon is prepared to initiate the dispute resolution process, which could ultimately lead to litigation.

Macmahon has been working at Telfer since 2016 and the contract is expected to be completed in 2023.

Telfer is a difficult project and has blighted Macmahon's returns in the past although the company achieved an operational turnaround there last year.

However, changes to the mine plan and works program have had a negative effect on Macmahon's costs and returns at Telfer.

Macmahon is also preparing to recognise a one-off provision for the contract in the order of $25 million to $35 million, should it not get a rate rise.

Excluding any one-off Telfer provision, Macmahon expects its earnings guidance for 2018-19 of underlying earnings before interest and tax to stay at $70-$80 million.

It also has an open cut mining services contract at Dacian Gold's Mt Morgans gold mine in WA's Eastern Goldfields.

Dacian announced another guidance downgrade last week.

According to Macmahon, Dacian is up to date on all its payments and the working relationship between the two companies remains strong.

In March Macmahon won the contract to develop the Boston Shaker underground operation at the Tropicana gold mine in WA's east.

Tropicana, the Batu Hijau copper-gold mine in Indonesia and the Byerwen coking coal project in Queensland, are the company's largest contracts.

Macmahon expects the Boston Shaker contract to help it shake-up its underground mining division.

As part of that the company entered into takeover talks with the owners of GBF Underground Mining at the end of May.