MLG Oz (ASX:MLG) has inked its first contract with Rio Tinto (ASX:RIO) to provide haulage services for the latter at a mine based in the Pilbara.
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It’s a good move for MLG, a mining services player, given the obvious pedigree of being associated with Rio Tinto in a commercial capacity. That was obvious as shares jumped +6.2% to 69cps – bringing YTD performance to nearly +25% intraday.
“The execution of this contract signals MLG’s first supply agreement with RIO, establishing what the Company hopes will be a positive, long-term relationship,” MLG wrote on Monday.
It has twelve months to prove itself. But that could be a pretty decent twelve months, no matter what happens – MLG expects to net $20M (revenue, not profit).
“In particular, [Rio] have been focused on the efficiencies that can be gained through MLG’s hub and spoke delivery model,” MLG MD Murray Leahy said.
The ‘hub and spoke delivery model,’ called so for its vague resemblance to a bicycle wheel, refers to a company using one centralised ‘hub’ in an efficient location that effectively allows deliveries in an outbound radial.
(Depending on how far you zoom out, any distribution centre on earth could be considered hub and spoke, but don’t let that kill a good buzzword.)
Continuing, Mr Leahy said: “As a proud Western Australian company, continuing to expand our services beyond our heartland of the WA goldfields, MLG is delighted to have been selected as a supplier to RIO.”
MLG shares last sold at 69cps to open Week 22 trading.
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