Macmahon thriving with $250m in WA mining contract wins

Strong gold prices and a bevy of projects coming online has mining services company Macmahon Holdings (ASX: MAH) in hot demand, today confirming they have been appointed as the preferred mining contractor for the Warrawoona Gold Project, a contract worth $220 million.

Located in the WA’s lucrative Pilbara region, Warrawoona will be a new open cut mine owned by Calidus Resources (ASX: CAI) where Mcmahon would operate all open cut mining activities and some early stage civil works. Work is expected to commence in the first half of 2021 where Macmahon intends to deploy more than 120 personnel to the project over the next 4.5 years.

“We are delighted to be selected by Calidus as the preferred contractor for its Warrawoona gold project and look forward to being part of the successful development of the mine,” said Macmahon CEO, Michael Finnegan.

“This work will form a key part of our exposure to Western Australia’s thriving gold sector.”

Strong gold prices over the past 2 years where the spot price has steadily risen from AUD $1,500/oz to around $2,700/oz has seen a significant increase in gold projects expected to enter production over the next 12 months.

As per Calidus’ pre-feasibility study, the Warrawoona Gold Project has ore reserves of 13.6Mt @ 1.2g. From this, the Company is planning to extract 623,000 ounces of gold over an 8-year mine life. This would equate to a cost of production around AUD $1,251/oz which would deliver exceptional margins based on the current spot price of gold.

Beyond being appointed as preferred supplier by Calidus, Mcmahon has also secured a further $30m in contract wins for underground work at Bellevue Gold’s (ASX: BGL) mine and a civil contract from Strandline Resources (ASX:STA) for earthworks at their Coburn mineral sands project.

Strong commodity prices over the past 12 months have meant that Macmahon has been minimally impacted by the COVID-19 pandemic, reporting a 25% increase in revenue to $1,380m and 41% increase in NPAT to $69.4m for FY20.