Ann: Change of Director's Interest Notice, page-24

Drag

NWH's current RIO contract includes commissioning two 5-mtpa crushing plants for Silvergrass ore. I think the expansion plans include doubling that capacity to 20 mtpa. At what point, and under what circumstances would RIO want to operate the Silvergrass mine itself, I do not know. The decision may be based on a mixture of terrain, timing and volume factors. I am hoping that RIO will not be in a hurry to replace the Silvergrass mining that it has outsourced to NWH. The worst reasonable case is that NWH keeps the work until the 2-year contract expires circa July 2017 – a critical time for NWH, and a godsend for fleet utilisation.

RIO is the frontrunner when it comes to automating mining of iron ore in Australia, and it already operates driverless trucks at Nammuldi (walking distance from Silvergrass). However, with contract miners now in a pliant mood, RIO may prefer to focus its owner-operated mining on projects with favourable-to-automation characteristics, and leave the likes of NWH and BYL to handle the residual operations. This also means that RIO can restrict its CAPEX to automated equipment, rather than investing in conventional equipment. RIO gave BYL the 4.5-year, $300m contract for Western Turner Syncline Stage 2, for example, and BYL had to invest $30m in equipment to qualify for the job. Aboriginal-related politics may play a role too, and the JVs that both BYL and NWH have with Aboriginal businesses may be a significant factor.

You used the words “Loss of Middlemount or RIO could send RIO to the wall.” in your post on the “Looks cactus” thread. The issue is not what might happen, or can happen, but rather what is likely to happen. I do not see these contracts under threat of cancellation. Middlemount was to expire in June 2017, but in February 2015 the contract was extended to expire in June 2020. On the matter of debt that somebody mentioned in that thread, in this business debt in the sense of equipment leasing is normal, and usually backed by contracts long enough to ensure that by the time that they expire, the leases have expired too. If you remove lease-related debts that are covered by contracts, NWH's debt is not huge. On the Forresrfield-Airport opportunity – it is Salini's financial strength that the WA Government would look to for comfort, not NWH's. Whatever consortium wins, would need to use subcontractors, and NWH could get work even if the Salini-led consortium lost out – not that I would bank on NWH getting such work, but it is posible.