MACA in hunt for Downer’s WA mining services

The mining services industry has been consolidating of late and many large companies are looking to sell operations because of looming capital spending requirements.

The $281m mining services company MACA is believed to be in talks to buy Downer’s Western Australia mining services operation.

Some estimate that the division could be worth about $200m.

It comes after Downer hired Macquarie Capital to sell its entire mining services business in August last year.

It is understood Perenti Global was poised to buy the business In January and was planning an equity raising to pay for the transaction, but the $1bn listed group walked away following a fall in its share price.

Downer is looking to exit its mining services division because it is too capital-intensive, with mining services contributing about 12 per cent of Downer’s profit in the 2019 financial year but requiring more than 50 per cent of its total capital spending.

 

Private equity firm Oaktree was interested more than a year ago, but reportedly had concerns about a BHP contract.

The asking price for Downer Mining back then was thought to be at least $500m.

But Downer Mining has some exposure to coal, and since the start of the year there has been a major move by various groups to distance themselves from the coal industry, as banks and institutional investors shy away from companies exposed to the commodity due to concerns about its impact on the environment.

Since Perenti walked away, Downer has been looking to break up the portfolio and sell off parts.

Last month, Downer announced it had sold its blasting business for $62m to Enaex, a subsidiary of Chilean company Sigdo Koppers, which is believed to have been an earlier suitor of Downer Mining.

Downer has also sold its blasting services business, Snowden Consulting, and its share in the RTL Mining and Earthworks joint venture.

The company said last month that it was in active discussions about the rest of its mining services portfolio.

It comprises four components — Open Cut East, Open Cut West, Underground and Otraco, which is a specialist tyre management business.

In Western Australia, Downer has contracts with major mining groups including Fortescue Metals.

The mining services industry has been consolidating of late and many large companies are looking to sell operations because of looming capital spending requirements.

MACA is led by chief executive Mike Sutton.

Clients include Regis Resources, Ramelius and Pilbara Minerals.

It provides services in the areas of mining, civil and infrastructure maintenance and has $2.3bn worth of work in hand.

It also has an international mining services operation but recently ceased operations in Brazil, which had been impacted by the softening coal price.

While mining services conditions in WA are buoyant due to the rising price of commodities such as gold and copper, MACA reported a $17.4m bottom line loss during 2020 after it was weighed down by its international arm.

This is despite a lift in revenue to $808m and earnings before interest, tax, depreciation and amortisation to $120.4m for 2020.