Mining services company Macmahon has had a multi-million dollar mine shaft project unexpectedly shut down by a client.
Cobar Management – a subsidiary of the recently merged global giant Glencore Xstrata – terminated Macmahon’s shaft sinking project at the CSA copper mine in the central west of NSW on Tuesday, Macmahon said.
In a statement to the stock exchange today Macmahon said it is trying to find out the reasons for the termination, and will advise the market of the financial implications on its business once the full details are known.
The CSA project was expected to deliver a further $6 million in revenue to Macmahon in June, and $80 million in revenue in the 2013/14 financial year.
In a February update to the market Macmahon said the expansion project was worth $110 million.
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It’s been a rough year for the mining services provider.
It expected to have played a major role in the now-cancelled Olympic Dam expansion and in February this year it posted a massive interim loss adding that it expected to post a full-year loss of between $10 million and $20 million as the sale of its construction business to Leighton Holdings took effect.
Shares in Macmahon have halved from 36 cents to 18 cents since the February announcement.
In the six months to December 31, Macmahon posted a net loss of $37.6 million, well short of the $23.2 million profit recorded in the same period last year.
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The shaft extension project had been touted as the development of Australia’s deepest production mine shaft.
“Macmahon is delivering a complete engineering solution at the CSA Mine in a project that will see the development of Australia’s deepest production mine shaft,” the company said on its website.
“The existing No. 1 shaft is being extended to 1550 metres from the drive drum to the base of the shaft; the extension is to take place in two stages.
“Macmahon is assisting CSA Mine to introduce innovative methodology and technologies to help address challenging ground conditions at the site, with new technology being developed specifically for this project.
“The existing headframe at the site has been repaired and strengthened by Macmahon to provide access to the old shaft steelwork from the top of the shaft.”
Macmahon said its three state-of-the-art TT1000 winders, designed specifically for the project, were setting industry leading standards in winder technology.
As of late yesterday, the project is off the books.
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