Settlement for Macmahon shows on ASX

Macmahon Holdings will receive a payout of $19 million as settlement relating to termination of a shaft-sinking contract in 2013.

Cobar Management, a subsidiary of Glencore in charge of the CSA Cobar copper mine, agreed to the settlement which includes $3 million for project related assets held by Macmahon.

Macmahon announced the settlement would result in a profit of $16 million, which caused a trading spike from $0.0425 to $0.050, a 17.6 per cent increase.

Macmahon chairman Jim Walker said the cash settlement would be used to repay company debt.

“We have been working hard to sell surplus assets with a view to reducing over time the amount drawn under our syndicated facility,” he said.

“This settlement will provide a significant boost to our financial restructuring program and will help us to further reshape our organisation to become more resilient and sustainable against the backdrop of a challenging market.

Walker said a recent, broad ranging independent review of the company cost structure had identified specific cost saving initiatives, the implementation of which would result in a reduction of overhead cost base from $83.7 million in FY14 to around $46 million in FY16.

Revenue for Macmahon this financial year was expected to be within the guidance range of $600-700 million, Walker said.

Macmahon also announced the underground development contract at Olympic Dam would finish in September on schedule.

Macmahon also has two separate raise drilling contracts with BHP for slot drilling and surface holes, with the largest contract set to end mid-2018.