Macmahon (MAH) shares shot up yesterday when the embattled contractor finally reported some good news for once.
It told the ASX that the trading halt called earlier in the week was to allow it to finalise its extraction from a difficult mining contract in Mongolia.
As a result the exit from the deal will see the sale of its operations in Mongolia for $US65 million.
The company says it expects to receive about $US62 million in net proceeds from the sale, which was to an unnamed private company.
Macmahon said it would end the mining contract with Erdenes Tavan Tolgoi LLC, with whom it had been in dispute over payment delays.
That saw the shares leap to 6.7 cents – up more than 40%. They then eased a touch, then rose again late to finish on 6.8 cents and up nearly 48%.
As a result of the sale, Macmahon says it is now in a net cash position (that’s where it has more cash on hand than debt).
That in turn is likely to see Macmahon mollify its bankers after it breached a loan covenant in February, triggering a review of the company’s finances by the banks.
MAH 1Y – Macmahon exits mongolia
Macmahon Executive Chairman Jim Walker said in a statement to the ASX the Company’s positive cash balance represented a milestone in the transformation of Macmahon.
“As a result of our cost reduction program, the recent settlement of our CSA claim, and now the Mongolia sale, we are in a cash positive position.” he said.
"As previously announced to the ASX, Macmahon has been engaged in lengthy discussions with its lenders about a facility review event triggered in February 2015. These discussions were close to finalisation prior to the Mongolia sale.
"However, it is likely further discussions will now occur given the Company’s improved financial position,” Mr Walker said.
He added that since the event (the loss of the Christmas Creek contract with Fortescue Metals) the company has hacked into costs and streamlined the business.
“We plan to diversify our order book by broadening our business development focus to include a greater number of smaller opportunities. We are currently tendering more than a dozen opportunities totalling more than $2.2 billion,” he said.
“This work is spread across Australia and internationally, with more than half of the opportunities relating to gold projects that run for 3 or more years,” he added.
