Macmahon’s CSA Mine Shaft-sinking Contract Terminated

Macmahon Holdings reported on June 5 that its contract for a major shaft-sinking project at Glencore Xstrata’s CSA underground copper mine in Cobar, New South Wales, had been terminated by the client. Macmahon said it was seeking clarification as to the reasons for and consequences of the termination and would advise of the impact on its stock market guidance once details are known.

The CSA project was expected to contribute approximately A$6 million of revenue to Macmahon in June 2013 and A$80 million of revenue in its fiscal year 2014.

Glencore Xstrata did not offer specific reasons for the contract cancellation but said it was considering its options for the project.

Macmahon was awarded the two-year, turnkey underground engineering construction contract, valued at approximately A$110 million, in August 2011. The contract called for Macmahon to provide complete project works, including engineering design, fabrication, procurement, construction and management of the deepening of the CSA mine’s No. 1 shaft from 1,050 m to 1,550 m. The scope of work included:

• Ground support and concrete lining;

• Equipping the shaft for hoisting to the surface, including steel guides and services;

• Construction of a new head frame and installation of a tower-mounted friction winder; and

• Construction of a new underground materials handling system, including crusher, ore bins, conveyors and loading station.

On completion, the new underground materials handling and shaft hoisting system were to have a capacity of 1.6 million mt/y from a depth of 1,500 m.

When the contract was awarded, Glencore said the project would allow lower-cost access to deeper resources in the CSA mine and an increase in annual production of around 50% to 270,000 dry mt/y of copper concentrate.

The total cost of the project, including the Macmahon contract and other works, was expected to be about A$150 million.

As featured in Womp 2013 Vol 07 -