Does Macmahon Holdings Limited have a robust balance sheet?Team Veye | 24 Feb 2020 ASX - MAH
Macmahon Holdings Limited (ASX: MAH)
GBF receives a letter of intent for further work with Silver Lake Resources
Macmahon Holdings Limited (ASX: MAH) (‘Macmahon’ or ‘the Company’) on 18 February 2020 advised that its recently acquired underground contracting business, GBF Group (‘GBF’), had received a conditional letter of intent from Silver Lake Resources (ASX: SLR) (‘Silver Lake’) for further work at the Mount Monger gold operations in the Kalgoorlie region of Western Australia.
(Graphic Source – Company Reports)
GBF has been operating at Mount Monger since 2014, and currently provides mining services to the Daisy Complex, Cock-eyed Bob and Maxwell's mines which form part of this operation. Under the new letter of intent, GBF’s tenure at these sites will be extended for three years from 1 March 2020, and GBF will also develop Silver Lake’s new Santa mine which is due to commence in March 2020. GBF estimates the value of the new work with Silver Lake will add approximately $200 million to its order book.
(Graphic Source – Company Reports)
Silver Lake and GBF will now negotiate the formal mining services agreement, with finalisation expected in March. (Data Source – Company Reports)
The letter of intent from Silver Lake will continue and expand on GBF’s successful track record at the Mount Monger projects. The new work is an important milestone in their strategy to further expand in the underground market and demonstrates the value in their GBF acquisition. Macmahon has a strong operating cash flow of $126m for FY19 underpinning its robust financial position. The company’s balance sheet supported the reinstatement of sustainable dividends after 7 years. The stock has crossed an important resistance at $0.28 and could be preparing to move another leg up. Veye recommends a "Buy" on “Macmahon Holdings Limited” at the current price of $0.29
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