Macmahon signs binding documentation for AMNT transaction
Tuesday, May 9 2017 - 01:22 AM WIB
ASX-listed civil engineering and contract mining company Macmahon Holdings Limited announced on Monday it has signed binding documentation to implement a potentially transformational transaction with gold and copper mining firm PT Amman Mineral Nusa Tenggara (AMNT) and its affiliated entities, subject to certain key conditions including Macmahon shareholder approval.
Pursuant to the transaction Macmahon will:
▪ be awarded a life-of-mine, alliance style contract to provide earthmoving and mining services for AMNT?s Batu Hijau copper-gold mine in Indonesia (Mining Services Contract);
▪ acquire certain existing mobile mining equipment from AMNT (Mobile Equipment) to perform the Mining Contract;
▪ pay for the Mobile Equipment by issuing new shares in Macmahon to AMNT?s subsidiary, Amman Mineral Contractors (Singapore) Pte. Ltd (AMC), which will result in AMC becoming Macmahon's largest shareholder (Share Issue); and
▪ have the benefit of an alliance agreement with AMNT, PT AP Investment (API), and AMC (Strategic Alliance Agreement) to support Macmahon?s potential future growth, (collectively, the Transaction).
?The Transaction is subject to a number of conditions. Subject to satisfaction or waiver of those conditions, the agreements referred to above will take full effect from completion under the Transaction Implementation Deed. It is currently anticipated that completion will occur (and the Transaction will be fully implemented) in July 2017,? Macmahon said in a statement.
Macmahon said all of its directors believe the Transaction has the potential to be transformational for Macmahon, and to position the company as a leading force in mining services. ?Macmahon Directors unanimously recommend that all shareholders support the Transaction in the absence of a superior proposal and subject to an independent expert opining that the Transaction is reasonable.?
The expected benefits of the Transaction (if completed) include:
▪ Improved forecast earnings: materially improved earnings expected with updated FY2018 guidance of $620-680 million revenue and $40-50 million EBIT;
▪ Increased diversity and scale of order book: a 4.2x increase to the existing order book by adding anticipated US$2.9 billion revenue over the life of mine of Batu Hijau, and increased diversity of the order book across commodities and customers;
▪ Attractive subscription price: a subscription price for AMC?s shareholding of A$0.203 per share, representing an attractive premium of 31 percent to last close and 40 percent to CIMIC's recent (expired) takeover offer. The subscription price is also at the top end of the February 2017 independent expert's valuation range;
▪ Improved growth prospects: the Transaction will provide Macmahon with regional profile and scale, potentially facilitate further growth in Indonesia, and involve the potential for future works at the Elang deposit and the Nangka prospect (should AMNT proceed to develop those assets);
▪ Strategic alliance: a supportive major shareholder to promote the business;
▪ Improved balance sheet strength and flexibility: a strengthened balance sheet with the addition of US$145.6 million of equipment, with corresponding increase in net assets to A$378 million. Increased cash flows will provide additional flexibility in tendering and funding capital requirements of future contract wins; and
▪ Risk management mechanisms: the Mining Services Contract adopts a ?cost-plus? payment model, with payments monthly in advance. Potential for further upside and downside sharing based on performance against targets, but with a floor on the downside at nil contract margin. In addition, AMC?s shares in Macmahon will be held by a custodian, in escrow, for 30 months and may be subject to being bought-back (and cancelled) in certain circumstances if Macmahon does not receive payment of the pre-agreed value of Mobile Equipment to be re-purchased by AMNT following any termination of the Mining Services Contract during that 30 month period.
Commenting on the transaction, Macmahon?s CEO, Michael Finnegan said: ?If completed, this transaction will see Macmahon?s scale significantly increase and that brings with it a number of benefits which will assist us in the execution of new and existing projects. It will make us a stronger and more robust business, and will provide us with a supportive and strategically aligned major shareholder which should help us to grow even further.?
AMNT?s Director, Alexander Ramlie said: ?This transaction is important in allowing PT AMNT to achieve important operational restructuring goals, which will allow us to more efficiently extract the resources from the Batu Hijau deposit, while simultaneously allowing us to explore and develop other opportunities in the region.?
Editing by Reiner Simanjuntak