Macmahon shares slide after announcing early exit from Nigerian project

The mining services company’s shares have taken a hit after it flagged an early exit from the Calabar project in Nigeria.

Scenes from the mine site in Calabar, Nigeria.

Shares in beleaguered mining services company Macmahon Holdings have tumbled 4 per cent after it informed investors of plans to exit Nigeria and as it struggled to contain red ink in relation to Newcrest’s Telfer project in Western Australia.

The company (MAH) flagged a potential plan to shift out of Nigeria in August due to “heightened security concerns”, with the decision to pull the plug coming more than a year ahead of the contracted schedule.

“Calabar Macmahon has terminated its contract at Calabar in Nigeria,” the company said.

“Operations at Calabar will now cease on 28 October 2016 with demobilisation scheduled to commence immediately thereafter.

“The contract was scheduled to conclude in 2018, but has been underperforming due to ongoing low mining volumes linked to the client’s production plant and high rental and maintenance costs.”

Macmahon said project closure costs remained uncertain, but would likely be known in time to include in its results for the first half of fiscal 2017.

The troubled mining services company also confirmed it was still incurring losses at Telfer, a situation that has not abated since February due to higher-than-expected start-up costs, turbulent operating conditions and extra maintenance costs.

“Macmahon remains in discussions with its client, Newcrest Mining, regarding options to mitigate these issues,” the group said in a statement.

“Operational performance at Telfer is also expected to be to plan by the end of the financial year, however will negatively impact FY17 results.”

At 1.30pm (AEDT), Macmahon shares were off 4.2 per cent at 11.5c.