10/09/2008 - 14:44

FMG extends Ausdrill contract

10/09/2008 - 14:44

Bookmark

Save articles for future reference.

Fortescue Metals Group Ltd has extended a drill and blast contract with Ausdrill Ltd in a deal that will generate the mining services company over $300 million in revenue over five years.

FMG extends Ausdrill contract

Fortescue Metals Group Ltd has extended a drill and blast contract with Ausdrill Ltd in a deal that will generate the mining services company over $300 million in revenue over five years.

The latest deal is an expansion on a pre-existing arrangement at FMG's Pilbara operations, with the contract now Ausdrill's largest drill and blast agreement with more than 30 drill rigs in operation.

The contract surpasses the Ausdrill's current engagement at the Kalgoorlie Super Pit, where it operates 16 drill rigs.

Ausdrill chairman Terry O'Connor said that the work formed part of the more than $1 billion in contract extensions that Ausdrill was negotiating or tendering on in September and October.

He added that the company will start mobilizing its fleet to FMG next month.

Ausdrill is currently fending off a hostile takeover bid by Macmahon Holdings, which increased its offer from 1.45 to 1.65 of its shares in return for each Ausdrill share.

Below is the full announcement:

Ausdrill Limited (ASX: ASL) today announced that it had received a Letter of Intent and Authority to Incur Expenditure from Fortescue Metals Group Ltd (FMG) in respect of FMG's Pilbara operations.

The Letter of Intent (and subsequent contract) extends and expands Ausdrill's existing engagement with FMG to encompass drill and blast and grade control drilling. Subject to final scheduling, the expansion will generate revenue for Ausdrill in excess of $300 million over five years.

The contract expansion will be Ausdrill's largest drill and blast contract, with more than 30 drill rigs in operation. It will surpass in scale Ausdrill's engagement at the Kalgoorlie Super Pit, where Ausdrill currently operates 16 drill rigs and has been continuously operating for 20 years.

Ausdrill Chairman, Mr Terry O'Connor, said that the work formed part of the more than $1 billion in contract extensions that Ausdrill was negotiating or tendering on in September and October.

"This contract confirms a significant extension of our work, and demonstrates that Ausdrill is continuing to capitalise on its outstanding growth opportunities, both in Australia and Africa," Mr O'Connor said.

"Ausdrill will commence mobilising its fleet and workforce to the client's site in October 2008, with an ongoing ramp up in operations into the second half of the 2009 financial year.

"While the revenue and earnings benefits of this major expansion will flow from the second half of the 2009 financial year, the full benefits will be realised in the 2010 financial year and beyond.

"The contract extension represents a significant addition to Ausdrill's record level of committed work in hand, which is well in excess of $1 billion. We are confident that Ausdrill can continue to increase its work in hand to a level that represents 4-5 financial years' worth of revenue," Mr O'Connor concluded.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options