Contractors report results, detail nickel pain

Tuesday, 20 February, 2024 - 10:16

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Western Australian contractors and mining services providers have detailed the impact of the nickel industry woes in half year results reported to the market.

Perenti has recorded an $8.2 million ‘doubtful debt’ provision against shuttered miner Panoramic Resources’ nickel project in the Kimberley in its half year results.

The ASX-lister told the market the provision was recorded against Panoramic- which it had a $200 million contract with- as a result of its Savannah nickel project being placed on care and maintenance earlier this year.

Perenti said its underground mining division's results were impacted by the recognition of the $8.2 million ‘doubtful debt’ against the nickel project, which was operated by its division Barminco.

It comes after Panoramic Resources appointed administrators from FTI Consulting resulting in immediate redundancies for hundreds of staff.

At the time it was understood Perenti was working to transfer its impacted employees to other projects across its portfolio, and that it wasn't expecting redundancies.

In the first half of 2024, Perenti’s underground revenue grew 7.3 per cent to $1.1 billion while underlying earnings before interest, taxes, depreciation, and (amortisation) dropped 3 per cent to $120 million with a margin of 11.1 per cent.

Perenti said its margin excluding the provision to Savannah would be 11.9 per cent.

Hazelmere-based Barminco was also contracted for $200 million work on IGO's mothballed Cosmos nickel mine back in 2020, which will be placed onto care and maintenance from the end of May.

The group's net profit jumped 63.4 per cent to $64.7 million for the half, up from $39.7 million in the previous period. Its revenue came in at $1.6 billion, up 13.5 per cent from $1.4 billion.

Perenti said its contract mining division contributed 79.4 per cent of the group’s total revenue, and 78 per cent of underlying EBIT(A) before corporate overheads.

Within that division, its underground business accounted for 65.9 per cent of the group’s revenue and 68.9 per cent of underlying EBIT(A).

Perenti said it expects revenue of FY24 of between $3.3 billion to $3.4 billion, and underlying EBIT(A) of between $310 million and $325 million.

During the half, Perenti acquired local competitor DDH1 for more than $400 million, adding to its portfolio of businesses.

“We are pleased with the consolidated operational and financial performance that was delivered during 1H24,” managing director Mark Norwell said.

“One of the many benefits of our globally diversified business is that the overall performance of the group is not leveraged to any one project, commodity, jurisdiction or business.

“We have nearly four decades of experience across a range of our service offerings and are confident that the fundamentals of our business are robust, with the acquisition of DDH1 complete and with cash generation an ongoing strategic priority.”

Meanwhile, Emeco Holdings told the market it expected its underground rental earnings for the financial year to be “marginally lower” than 1H24 due to Wyloo Metal’s nickel project being placed on care and maintenance from May.

The mining equipment and fleet rental company said equipment redeployment opportunities were being explored for fleet coming off Wyloo’s nickel projects.

It comes after Andrew Forrest’s Wyloo Metals revealed it would place its Kambalda nickel operation on hold just six months after the private mining company bought the asset.

The nickel operation will be placed on care and maintenance from May 31, a move that resulted in BHP’s Nickel West division following suit and pausing part of its processing operations in Kambalda.

During the half, Emeco sold its Pit N Portal contract mining business to Macmahon under a $10 million deal, a move which impacted its half year results.

Pit N Portal- now owned by Macmhaon- is contracted for underground mining work on the Cassini mine at Kambalda nickel operations, at the time owned by Mincor Resources before the miner was bought by Wyloo.

Emeco recorded group revenue of $435 million, up slightly by 1 per cent compared to the prior period. Its operating NPAT was $33.2 million, down from the previous period.

“Positive mining industry conditions persisted despite volatility in some commodity markets and continued to underpin demand levels, along with an internal focus on cost efficiencies and returns,” Emeco managing director Ian Testrow said.

“This improved earnings base has been further strengthened with the creation of Emeco Underground following PNP’s exit from underground contract mining and repositioning to a pure rental model, in line with our core competitive advantages.

“Importantly, we were able to also secure a strategic rental agreement with Macmahon to drive growth in both underground and surface.”

Under the Pit N Portal deal, the two companies executed a five-year rental agreement under which Emeco will become Macmahon’s preferred equipment rental provider for surface and underground mining.

ASX-listed Macmahon’s revenue dipped 2.1 per cent to $966.3 million for 1H24, while its statutory NPAT lifted 56.7 per cent to $36.5 million.

During the half the contractor booked work with Talison Lithium to provide mining services at the Greenbushes lithium mine, which it said aided its revenue growth.

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