Macmahon’s Telfer contract dispute talks collapse

Macmahon Holdings and Newcrest Mining are heading towards a legal battle, after talks over a mining services contract dispute at the Telfer gold mine fell through.

On June 12, Macmahon said it agreed to enter into facilitated, good-faith negotiations regarding its life-of-mine contract at Telfer.

“Macmahon (is) seeking an amendment to the contract rates as a result of changes in the mine plan and works program,” it said.

Macmahon first worked on the Telfer contract in February 2016, and said it achieved an operational turnaround in 2018 despite difficulties with the project.

“However, without a rate increase being agreed by Newcrest or some other form of contract amendment, the mine plan and program changes have a negative impact on Macmahon’s costs and returns from the project,” Macmahon said.

Macmahon flagged a potential $25 million to $35 million provision against its work at Telfer.

Today, the mining services contractor told the ASX negotiations concluded without an outcome it deemed acceptable.

“Macmahon has advised Newcrest that it will pursue a significant variation claim through the formal dispute resolution process contained in the Telfer contract,” it said.

“This process requires the parties to mediate before commencing litigation, however given the negotiations that have occurred, Macmahon will now seek Newcrest’s agreement to proceed to litigation immediately.”

Macmahon chief executive Michael Finnegan said the decision had not been taken lightly.

“We are disappointed we have got to this point, particularly after such extensive discussions to seek to agree an outcome,” he said.

“However, we have exhausted all options available to us to agree fair and reasonable rates with Newcrest for our work, so we are left with little choice.”

The Telfer contract is expected to be completed in early 2023.

Shares in Macmahon were flat at 17 cents each at 1.30pm AEST.