Macmahon Shares Tumble Nearly 10% to $1 as Mining Contractor Gives Back Gains Despite Strong Contract Run

SYDNEY — Shares of Macmahon Holdings Ltd. fell nearly 10% on Friday, giving back recent gains as the Perth-based mining services contractor slipped to the A$1 mark despite a string of contract wins that have helped more than double its share price over the past year.

The stock dropped 11 Australian cents, or 9.91%, to A$1.00, making it one of the weaker performers on the Australian market on a day when the benchmark S&P/ASX 200 index rose 0.58% to 8,664.6.

Macmahon did not appear to have released any new price-sensitive announcement to explain the decline. The fall followed a strong run in the stock, which had climbed from below A$0.95 in mid-September to above A$1.10 earlier this week, suggesting some investors may have moved to lock in profits.

A strong year for the stock

Despite Friday's drop, Macmahon remains one of the standout performers among Australian mining services companies. Its shares have gained more than 120% over the past 12 months, lifting its market value to more than A$2 billion.

The rally has been driven by a steady stream of new contracts and extensions, as well as rising activity across the gold and minerals sectors, which has increased demand for contract mining services.

The stock's rise has also brought volatility. Macmahon shares fell more than 9% in August after the company reported its full-year results, as investors weighed record earnings against high expectations already built into the share price.

Record results

For the fiscal year ended June 30, Macmahon reported record revenue of A$2.6 billion, up 8% from the previous year. Earnings before interest, tax and amortization rose 11% to A$189.8 million.

The company declared a dividend of A$0.0125 per share for the six months ended June 30. The shares traded ex-dividend on Sept. 18, and the dividend is scheduled to be paid on Oct. 12.

A busy run of contract wins

Macmahon has been particularly active in securing new work in recent months, adding to an order book of more than A$5 billion.

In July, the company signed a three-year, A$355 million underground mining contract at the Mt Marion lithium operation in Western Australia, which is jointly owned by Mineral Resources and China's Jiangxi Ganfeng Lithium.

In August, it was awarded a five-year underground mining contract worth an estimated A$406.2 million at the Snowy River gold project in New Zealand, operated by a subsidiary of Endura Mining. Work is scheduled to begin this month.

The company was also selected as the preferred underground mining contractor for Medallion Metals' Ravensthorpe gold project in Western Australia, a contract valued at about A$240 million over an initial 36-month term, with work expected to start in the December quarter.

Macmahon also secured a A$485 million, 42-month contract extension at the Telfer gold mine in Western Australia, owned by Greatland Resources, where it has operated since 2015.

At the start of September, it signed a contract for underground work at the Groundrush project.

Acquisition and corporate activity

On Sept. 18, Macmahon announced it would acquire Aspect Engineering Solutions, a move aimed at expanding its service offering. The company has been working to diversify its business beyond traditional contract mining.

Earlier in September, Macmahon responded to a letter from the Australian Securities Exchange regarding director share trading, and announced the resignation of a non-executive director.

Sector backdrop

Mining services companies have benefited from strong commodity prices in recent years, particularly gold, which has encouraged miners to expand production and develop new underground operations.

However, the sector can be sensitive to shifts in sentiment toward resources stocks, as well as concerns about costs, labor availability and contract margins. Contract miners typically operate on relatively thin margins, meaning investors closely watch the profitability of new work rather than just the headline value of contracts.

The broader Australian market has been volatile this week. The ASX 200 fell 2% on Thursday to its lowest level since mid-June as surging global bond yields weighed on stocks, before recovering partially on Friday. Lithium and other speculative resources stocks have been among the weakest performers.

Analyst views

Analysts have generally become more positive on Macmahon as its order book has grown. Some have raised their price targets in recent months to around A$1.00, close to where the stock is now trading, which may limit near-term upside in the view of some investors.

About Macmahon

Founded in 1963 and headquartered in Perth, Macmahon provides surface and underground mining services, as well as civil infrastructure work, to mining companies across Australia, New Zealand and Southeast Asia. It employs more than 10,000 people.

Investors will look to Macmahon's annual general meeting on Oct. 23 for any updates on guidance, contract pipeline and the integration of Aspect Engineering Solutions. The start of work at the Snowy River and Ravensthorpe projects in the coming months will also be watched closely as the company converts its order book into revenue.