Macmahon Holdings, which is a takeover target of leading contractor Cimic, has unveiled an agreement for what it calls a “potentially transformational transaction” that also raises doubt about its suitor’s acquisition plans.
The Perth-based mining contractor said the non-binding heads of agreement (HOA) involved it acquiring assets from Indonesian miner PT Amman Mineral Nusa Tenggara (AMNT), which in return would become a major shareholder in Macmahon.
According to an ASX statement, Macmahon would acquire equipment with an estimated value of about $US150 million from the AMNT-operated Batu Hijau copper-gold mine. For the assets, Macmahon would issue AMNT with new shares equal to between 40-50.1 per cent of its expanded share base.
The shares would be issued to AMNT at 20.3 cents each, which is a 40 per cent premium on Cimic’s 14.5 cent a share offer price.
AMNT would also award Macmahon with a life-of-mine contract to provide earthmoving and mining services at the Batu Hijau mine.
The contract would have an order book of about $US2.7 billion over the life of the Batu Hijau operation, with about $US2 billion of that earned over the five years from January 2018, the Macmahon statement said.
Last month Macmahon announced it had signed a three-year memorandum of understanding (MOU) with AMNT for its services at Batu Hijau.
Macmahon chief executive officer Michael Finnegan described the Batu Hijau operation as a world-class mine with significant expansion potential through the Elang deposit and Nanga prospect.
“We have been developing the relationship with AMNT over the past six months. It’s great to be able to present this potentially transformational opportunity to our shareholders for their consideration,” Finnegan said.
He added: “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.”
In 2016, the Batu Hijau open pit operation produced about 216,000 tonnes of copper and 800,000 ounces of gold.
AMNT director Agus Projosasmito said the agreement would drive significant value through operational efficiencies given Macmahon’s open pit mining expertise.
“Mick Finnegan and the Macmahon team have considerable experience in the region and are respected members of the mining community, and we believe that Macmahon will assemble a strong and capable team at Batu Hijau,” Projosasmito said.
“Today’s announcement is a win-win for both parties and we look forward to working with Macmahon to develop a market-leading mining business in both Australia and Asia.”
The proposed agreement is subject to several conditions, including approval from Macmahon shareholders.
Macmahon’s board this week advised its shareholders to reject Cimic’s $175 million offer, which is now unconditional.