Macmahon has secured a new three-year mining contract worth around A$390m ($260.3m) at Anglo American’s Dawson South project in Central Queensland, Australia.

The Dawson South project is part of the Dawson mine, located 180km west of Gladstone. Operating since 1961, the Dawson mine is an open cut steelmaking coal mine operation that comprises three operating pits, North, Central, and South.

Macmahon, which is the current mining contractor at Dawson South, will continue to provide services with its existing workforce.

The company will continue handling load and haul operations and equipment maintenance under a new contract effective from 1 July 2024.

The contract is expected to contribute nearly A$130m ($86.7m) annually to the secured order book of Macmahon. The company was awarded a three-year A$200m ($133.5m) surface mining contract by Anglo American in July 2021.

According to Macmahon, the recent sale of its Dawson South equipment fleet will significantly reduce the project’s capital expenditure requirements and capital intensity for the new term. The project will continue to utilise the sold equipment as planned, said the mining services provider, which is listed on the Australian Securities Exchange (ASX).

The mobile equipment was sold at market rates, which were at or above book value. This all-cash deal is expected to result in net inflows of approximately A$44m ($29.3m), to be realised during FY24 and FY25.

Macmahon CEO and managing director Michael Finnegan said: “We are delighted to be reappointed as mining contractor for the Dawson South project where we have worked to build an excellent relationship with our client.

“Macmahon recently sold a substantial portion of the Dawson South equipment fleet which will continue to be used at the mine. I believe the new contract structure benefits our client, is aligned with Macmahon’s capital light strategy, and improves return on average capital employed (ROACE) performance, where we recently increased the target from 15% to 20%.”