MLD lands Karra contract

I do not know the details of the contract that BYL had with Karara Mining Limited (KML), but because for a time it was BYL's only mining contract, and profitability of that division of the business was low, I have assumed that it was a low-margin contract, and I was not too sad to see the end of it, and the end of the low-margin Bellamack contract too. With its strong Order Book, the last thing that BYL should do is weep over the contracts that it misses – I prefer to see less new business at higher margins in BYL's healthy current setting.

I also wrote recently, that in this business, at times it makes sense for earthmoving contractors to chase specific work enthusiastically, and at other times to be disinclined to secure specific work. It is interesting to learn that MLD has secured a $90M contract to mine haematite for KML, thus displacing BYL, while BYL secured the $300M RIO contract, thus displacing NWH. As a NWH shareholder, I only hope that NWH is lining up a contract to boost FY2015 and give FY2016 earnings greater visibility. I may be wrong, but I understand that BYL is not strong on: drilling, which it often outsourced to NWH's Action Drill & Blast unit; crushing; and screening, and BYL may have been loath to lease suitable equipment for a 17 month KML contract.  Drilling, crushing and screening is MLD's metier, so it was probably able to redeploy existing equipment to the KML site. Below is a cut and paste of part of the MLD announcement:

MACA Limited ('MACA') (ASX: 'MLD') is pleased to announce that it has executed a contract with Karara Mining Limited (‘Karara’) in relation to its Hinge DSO (Direct Shipping Ore) Hematite Iron Ore project in the Midwest region of Western Australia.

MACA has commenced initial civil and infrastructure works, with major works expected to commence during July. Major works consist of open pit mining services including drilling and blasting and loading and hauling as well as crushing and screening. Based on estimated volumes and rates the works are expected to generate revenue of approximately $90 million over a contract term of 17 months.

Operations Director Geoff Baker said “it is pleasing to have once again secured a new contract against the backdrop of a lower price environment for iron ore and a competitive market place. Our ability to continue to operate profitably and secure new work in such an environment is a credit to the MACA workforce and the operational efficiencies they drive”.