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#Contract Extensions
Added 2 weeks ago

22-7-2020:  Contract Extension - Ramelius Resources

MACA Limited (ASX: MLD) is pleased to announce it has executed a contract extension to continue to provide Mining Services for Ramelius Resources (RMS) at the Mt Magnet Gold Project. The project is located 560 km North East of Perth in Western Australia.

The project extension will consist of open pit mining services including drilling & blasting, and loading & hauling. It is expected the project extension will generate approximately $130 million in revenue for MACA over the 3 year term. MACA’s total Work in Hand position now stands at $2.3 billion.

MACA CEO and Managing Director Mike Sutton said ‘We are pleased to continue our relationship with Ramelius Resources at Mt Magnet for a further 3 years. The services we provide at Mt Magnet and Edna May for Ramelius make up an important part of MACA’s Work in Hand in the gold sector’.

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MACA (MLD) are up around +6% today on this report (at 2:40pm eastern time).

[I do not currently hold MLD shares personally, but I often do.  I like them as a mining services company, particularly as they mostly service gold miners, so they have some good industry tailwinds at this point.  They are also often on my Strawman.Com scorecard, including now - 22-7-2020.]

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#Company Update
Last edited 2 months ago

01-Jun-2020:  Board Appointment and Company Update

Board Appointment

MACA Limited (MLD:ASX) is pleased to announce effective 1 June 2020 Mr Mike Sutton will join the Board as Managing Director. Mike was appointed Chief Executive Officer in late February and will now hold the combined role of Managing Director and Chief Executive Officer of MACA. Details about Mike’s experience and qualifications can be found in the Company’s announcement on 20 February 2020.

In welcoming Mike to the Board, MACA’s Chairman, Andrew Edwards, said that Mike had made a strong contribution to the business following his appointment and the board was looking forward to the further contribution he will make in his expanded role. 

Company Update and Guidance

MACA continues to proactively work with our clients, suppliers and employees to manage the impact of Covid-19 in such a way as to minimise the disruption to the day to day operations. 

Mike Sutton CEO and Managing Director said ‘It has been pleasing to see the positive way that the business has responded to the recent challenges presented by Covid-19. In particular, I would like to thank our employees who have spent additional time away from their families whilst facilitating roster changes due to site requirements and border closures.’

As a result of scope growth and additional minor contract awards, MACA now expects Revenue to exceed $800M for the year ended 30 June 2020. EBITDA is expected to be between $110M to $114M before the impact of impairment and forex impact from the closure of Brazilian Operations as previously announced in January. 

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Disclosure:  I don't currently hold MACA (MLD) shares, but I do like the company and they're on my Strawman.com scorecard.  Just like Macmahon (MAH), MACA (MLD) predominantly do contract mining for gold miners.  MAH work in SE Asia and Australia, while MLD work in Australia and they did work in Brazil as well, but they have now closed down their Brazil office and they're focussing all of their efforts here in Australia.  Unlike MAH, MLD do a fair bit of civil construction (roads, etc.) outside of the mining industry as well.  In that respect they're more like NRW Holdings (NWH) who also do contract mining and crushing, mostly for gold miners, but also in other commodities, and NWH also do a lot of civil construction (road and rail) outside of the mining industry.  Leaving the engineering and construction contractors like MND (Monadelphous) out of it for a minute, when it comes to contract miners, particularly ones exposed to the gold industry, my 3 faves are NWH, MAH & MLD, and while all 3 are currently on my Strawman.com scorecard, I only hold NWH & MAH in real life at this point, but I've held MLD before and will do again probably, at some point.  MLD have a lot of long-life mining contracts, and they've been doing all of the open-pit mining for Regis Resources for many years.  I view the Regis contracts as the backbone of MLD's (MACA's) operations, but they do have a number of other clients as well, and most of their contracts are multi-year contracts.  They disclose their clients and contract lengths every year along with their results, which gives their investors some confidence around their base revenue numbers and predictability of income, particularly recurring income from those long-life contracts.  MAH do the same.

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#Opportunity in illiquidity?
Last edited 4 months ago

22-May-2020:  MACA (MLD) dropped -27% on Friday (down 19.5c), from $0.72 down to $0.525.  On no news.  Why?  Coronavirus fears?  Well, that's part of everything now, so that's part of this too, but the major reason was that MLD is one of those stocks that has very little liquidity - and a huge gap between the bids (buyers) and the offers (sellers).  As I type this (on a Sunday), the residual orders that are still in place show that the highest bid is at 52.5c (which is, unsurprisingly, where MLD closed on Friday afternoon) while the lowest offer (seller) is at 59c, but with only 2,197 shares for sale (so, just under $1,300 worth, i.e. almost nothing), and after that, the next lowest is 15,500 shares at 70c, and then 150,000 MLD shares at 71c.  What that means is that if the market opened tomorrow with all of that staying the same (it rarely does, but in this case it actually might, because MLD doesn't have many buyers and sellers, i.e. has very low liquidity usually), and somebody (anybody, could be you, could be me) placed one "at market" order to buy $1,500 (1.5K) worth of MLD, the price would jump +33.33% - from 52.5c to 70c, on a single order worth less than $2K. 

I am not currently holding any MLD, but if I had plenty of spare cash, I'd certainly be buying them below 55c.  My point however, is that a stock can fall a long way on very little volume if it's not very liquid.  Of course, it can rise just as far just as fast for exactly the same reason. 

All that said, I should also acknowledge that there were around 5.7 million MLD shares (worth around $3.27m) traded on Friday, which is well above their average.  Depending on how much data you look at, it's around 5 to 10 times their average daily volume, so somebody wanted to sell out of MLD, or reduce their exposure. 

But that's not always the case. 

GNG (GR Engineering Services), a company I do hold, rose +10.42% on Wednesday (18-Mar-20, from 72c to 79.5c), didn't trade at all on Thursday, then fell -9.43% back to 72c on Friday (20th).  The total volume of shares traded on those two days was just 8,854 and 31,207 shares respectively - worth a total of around $7,000 on Wed and about $23,000 on Friday.  So big moves on small volume.

Is any of this information useful.  Yes, I think so.  If you don't mind buying and holding companies with that sort of very low liquidity (lobster pot stocks; they can be relatively easy to enter, but hard to get out of in a hurry sometimes), and you have done the work and have a watchlist of ones you'd like to buy at the right price, then at times like these "the right price" just might happen, on any given day.  You just have to be prepared so that when the opportunity you've been waiting for does occur you are ready and able to act on it. 

Just make sure you understand the risks though, - if things go pear shaped for that company and everybody wants out, the exit is very narrow, and sometimes you have to go down a long way to find it.

For that reason, I only use this strategy for companies where I have good reason to trust their management, and where debt is not a problem (usually they would be in a net cash position, with no net debt, or at the very least they would want to have minimal debt that is easilly serviced from long-term guaranteed revenue and earnings), and where I'm also confident that they DON'T have massive headwinds to push through that are likely to bring them undone.

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#New Work/Contracts
Added a month ago

02-July-2020:  Mining Contract Award - Atlas Iron

Also:  Working Capital Update

Disclosure:  I'm not currently holding MLD shares, but I have in the past, and I may well do so again.  I do follow them and I do like that the majority of MACA's clients are gold miners.

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