underground mining excellence

 

News

16 Jun 2016

Barminco secures major new contract, further pays down debt

Leading underground hard-rock mining contractor Barminco Holdings Limited (Barminco or the Company) is pleased to announce it has been awarded a major underground mining contract and has successfully completed an additional bond buyback.

Overview:

  • Awarded major underground mining contract, which will become one of the Company’s largest:
    • Three year A$275 million contract, with a two year option, at the Kundana gold
      mines in the Eastern Goldfields, WA
  • Completed repurchase of a further US$23.1 million in US high yield bonds, funded through existing cash reserves, delivering additional cash interest savings

New contract
Barminco has been awarded a three-year A$275 million contract, with a two year option, at the Kundana gold mines from the East Kundana Joint Venture (EKJV) (Northern Star Resources 51%, and Rand Mining and Tribune Resources together 49%).

Under the contract, which will be one of the Company’s largest contracts, Barminco will provide a full suite of underground mining services including development, production, bogging, haulage, maintenance, and operation of underground services.

Barminco has agreed to offer employment to all existing EKJV staff. Staff who accept this offer will retain all their existing entitlements, including those relating to continuity of service.

Barminco has also agreed that fly in-fly out staff will account for no more than 15 per cent of the total staff at EKJV. This is in-line with current employment ratios.

Barminco has a longstanding history in the Kalgoorlie community and is pleased to secure a major contract in support of the city.

Barminco Chief Executive Officer Peter Stokes said he was delighted Barminco had secured this major, high quality underground mining contract.

“The contract adds to the strong platform of work we have across the business and we look forward to strengthening Barminco’s relationship with this important client,” Mr Stokes said.

“Barminco has been providing diamond drilling services at a number of Northern Star sites and we welcome the opportunity to now demonstrate our underground mining credentials at Kundana.

“Barminco’s performance, during what has been a challenging period for the sector, is a real testament to our entire workforce, including our operators, maintenance, administration and executive teams, who have all worked hard to ensure the business is in the best possible shape both operationally and financially.”

Barminco’s Chief Operating Officer Victor Rajasooriar said: “Our focus over the year has been to implement additional, targeted operational efficiency improvements and a cost management strategy to establish Barminco as a leader in providing the most productive and efficient outcomes for our clients. This effort has built on our already solid reputation in the sector and has contributed significantly to our success in securing this work.”

Bond repurchase
In addition to the contract wins, Barminco has this week repurchased US$23.1 million in US high yield bonds, funded through existing cash reserves.

Following the latest buyback, Barminco has repurchased a total of US$175.8 million in high yield bonds since December 2014. Of this amount, US$124 million was funded via the resetting of a cross-currency swap – utilising a favourable AUD-USD exchange rate movement since the original issuance of the bonds in May 2013 – with the remainder funded through cash reserves.

The total repurchases have delivered Barminco an annualised reduction in net cash interest costs of A$14.4 million.

Barminco Chief Financial Officer Peter Bryant said it was difficult to find Barminco bondholders willing to sell their bonds, as the vast majority have been pleased with the Company’s performance.

“The decision to repurchase a further tranche of bonds made financial sense for the business, such as providing an ongoing cash benefit direct to our bottom line through lower interest costs and strengthening our balance sheet,” Mr Bryant said. 

Barminco has maintained a strong financial position following the repurchase and recent payment of its six monthly high yield bond interest, with approximately A$75 million cash on hand. This liquidity is supported by an effectively undrawn revolving credit facility of A$19 million and additional equipment finance lines of approximately A$45 million.