Macmahon sees opportunity in Mongolia

MACMAHON Holdings has taken full ownership of its Mongolian contract as it uses its debt facilities to pay for the necessary infrastructure to ramp up production.

The WA contractor won a $491 million contract on the Tavan Tolgoi coal mine in Mongolia last October in a joint venture with German Operta GmBh.

Macmahon today said site operations at the mine - which is state-owned - started in January with mining, stripping and temporary workshop facilities constructed.

Calling it an “enormous opportunity” at the time, Macmahon chief executive Nick Bowen said the contract put the WA company at the forefront of an emerging mining region.

Though the chief executive reaffirmed the growth potential of Mongolia, in a presentation posted to the Australian Securities Exchange today, he also highlighted the need for more investment in infrastructure.

Mr Bowen said the Tavan Tolgoi was on target to deliver 3 million tonnes of coal in the first year and could reach up to 20mt a year depending on infrastructure.

To help get production to “around” 6mt in 2013, Mr Bowen also told shareholders today the company had taken over “responsibilities” for the entire contract as it would assist the “rapid ramp up” of production.

“To facilitate the required rapid start up, the initial capex over the next few months will be funded from Macmahon’s existing debt facilities,” the company said in a statement.

Mr Bowen said the debt would come off the WA company’s balance sheet once the contract returned to a 50/50 split in the 2013 calendar year.

“Full control of the project during ramp-up will assist Macmahon to efficiently align the project with our well-established operational process,” he said.

Macmahon said it had a current order book of $3.2 billion, slightly down from its first-half figure of $3.4 billion having won $520 million in contracts since December 31 last year.