Mining services firms roll up contract wins, pitch for infrastructure bonanza

Australia’s diverse mining services sector is going through a purple patch as firms gather up contracts from miners flushed with cash from buoyant metals prices.

Some mining services firms are also pitching for a share of the federal government’s pipeline of spending on civil engineering projects, ranging from roads to rail, that add up to hundreds of billions of dollars in the years ahead.

The sector that provides everything from construction and engineering services through to rock crushing machinery and haulage services has bagged some large-sized contracts lately.

CIMIC Group (ASX:CIM) is one mining services firm that has netted a list of large contracts, and is bidding for more.

“At June 30, around $70bn of tenders relevant to CIMIC were expected to be bid and or awarded for the remainder of the year (subject to COVID-19) and around $470bn of projects were coming to the market in 2021 and beyond,” the company said in its first half results.

The major projects CIMIC is bidding on include some non-mining work such as the Sydney Greater West North-South rail link and the Changi Airport terminal 5 project in Singapore.

Mining contract wins for CIMIC

Large contract wins for CIMIC include the award in July of a $2.5bn contract to its Thiess subsidiary to provide mining services to Queensland coal miner Jellinbah’s Lake Vermont operation.

The five-year extension contract starts in January 2022 and is for the provision of a range of mining services including drill and blast, overburden removal, coal mining and operating and maintaining Lake Vermont’s coal handling and preparation plant.

Thiess is also providing autonomous drilling and semi-autonomous dozer push services.

This week has been a bumper one for CIMIC. The firm announced Monday its UGL subsidiary had landed $200m from a clutch of contracts for mechanical, electrical and instrumentation services for mining companies including BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Roy Hill.

Then on Tuesday, CIMIC said it had netted two contracts in Queensland and WA worth a combined $128m.

The work is for the company’s CPB Contractors at Queensland government-owned water service provider Sunwater, and at Fortescue Metals Group’s (ASX:FMG) Iron Bridge Magnetite project in the Pilbara.

Share prices of some ASX mining services companies

Macmahon lands coal mine, mineral sands contracts

Another mining services firm to win contracts is Macmahon (ASX:MAH), which this week has won a $23m earthworks moving and road access construction contract at WA mineral sands company Strandline Resources’ (ASX:STA) Coburn project.

The firm gained a $700m contract last month for expanded work at QCoal Group’s Byerwen coking coal mine in Queensland, putting Macmahon on track for revenue of $1.3bn in the 2020 financial year.

Byerwen is lifting its production to 10 million tonnes per annum, and there is an option for QCoal to expand Macmahon’s three-year contract for an extra two years.

This extension which would mean total revenue from the Byerwen contract for Macmahon could top $1bn, the company said.

Emeco grows on diversification

Emeco Holdings (ASX: EHL) increased its 2020 financial year revenue 16 per cent to $540m, and boosted its net profit 39 per cent to $87.5m, it said in its results presentation.

“Iron ore revenue more than tripled and gold revenue more than doubled,” said the company, which is seeking to diversify its business that was mostly focused on coal.

Coal mining companies provided 49 per cent of Emeco’s group revenue in the June quarter, down from 65 per cent in the 2019 financial year, it said.

Growth for Emeco is coming through new iron ore and gold projects in WA to replace legacy mines, while in eastern Australia customers are looking for cost effective services amid lower coal prices.

The company recently expanded its range of services with the acquisition of WA-based underground mining equipment provider Pit N Portal and is using data analytics to increase equipment efficiency.

Smaller mining services firms doing well

Perenti Global (ASX:PRN) provides mining services to some of Australia’s largest mines including the Kalgoorlie Superpit goldmine operated by Saracen Mineral Holdings (ASX:SAR) and Northern Star (ASX:NST), the Dawson coal mine in Queensland, and the Tropicana gold mine in WA.

Mining technology firm Imdex (ASX:IMD) recently strengthened its expertise in rock knowledge by acquiring automated mineralogy company AusSpec International for $6m.

Among Imdex’s products is cloud-connected sensor technology linked to drilling machinery that improves rig alignment and drilling productivity and remote working solutions for mining.