Independent mining equipment rental business Emeco has entered into two binding agreements with diversified contractor Macmahon.
The first agreement involves Emeco transfering its Pit N Portal customer contracts, employees and non-mining fleet assets to Macmahon for about $10.1 million, in exchange for in-demand surface and underground mining equipment that costs the same amount. It first acquired the Pit N Portal business in 2020 for $72 million.
The second deal marks Emeco walking away from underground contract mining and entering into a five-year agreement with Macmahon where it will be Macmahon’s preferred equipment rental provider in Australia for surface and underground mining.
“The exit from underground contracting successfully resets and simplifies the business to improve overall returns,” Emeco managing director and chief executive officer (CEO) Ian Testrow said.
“By retaining our underground mining fleet, we can concentrate on our core capabilities of asset management, equipment rebuilds and providing customers with surface and underground rental solutions, while preserving exposure to the growing underground mining sector and providing a sustainable growth platform in hard-rock commodities.”
Macmahon managing director and CEO Michael Finnegan said the company’s strategic objective has been to continue building scale in underground mining to diversify earnings and operations.
“The acquisition of these Pit N Portal contracts and assets is 100 per cent consistent with this (objective),” he said.
“It adds significant capability to our underground business with the addition of around 260 skilled employees and builds on our existing client relationships. We look forward to working with Pit N Portal’s customers and strengthening our relationships with them.”
The transaction is expected to add about $140 million to Macmahon’s order book, and be immediately earnings per share (EPS) accretive.
“The rental partnership allows Emeco to exit from its underground contracting portfolio and to focus on its core rental business while building a long-term relationship with Macmahon with increased fleet rental opportunities in open-pit, underground and civil operations,” Finnegan said.
The transaction is expected to be completed in early 2024.
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