Perenti Limited Secures Contract Extension with Barrick Gold at Hemlo Mine
PRN (PRN) Share Update August 2024 Thursday 8th
Perenti Limited Announces Contract Extension with Barrick at Hemlo Gold Mine
Perenti Limited (ASX: PRN) has announced that its underground mining business, Barminco, has secured a three-year contract extension with Barrick Gold Corporation at the Hemlo gold mine in Ontario, Canada.
Instant Summary:
- Three-year contract extension with Barrick Gold at Hemlo mine.
- Contract includes two additional 12-month extension options.
- Contract valued at over AUD$200 million.
- Barminco to handle underground mine development, production, and support services.
- Barrick owns the current fleet of underground equipment.
Contract Details
Perenti Limited, through its subsidiary Barminco, has secured a three-year contract extension with Barrick Gold Corporation for underground mining services at the Hemlo gold mine in Ontario, Canada. The contract, initially set for 36 months, includes two optional 12-month extensions that could extend Barminco's operations at Hemlo until 2029.
Hemlo, located 350 kilometers east of Thunder Bay, has been in production since 1989. Barrick transitioned the mine to a contract mining model in 2019, with Barminco serving as the main underground contractor since then. Under the terms of the contract, Barrick will continue to own the current fleet of underground equipment and will procure any additional fleet required, reducing capital intensity for Barminco.
Financial and Operational Aspects
The total value of the contract exceeds AUD$200 million and involves comprehensive underground mine development, production, and mining support services. This contract is part of Perenti's strategy to secure capital-light contracts, which began in 2018.
Mark Norwell, Managing Director & CEO of Perenti, emphasized the importance of long-term relationships with clients, stating, 'The continuation of our relationship with Barrick at the Hemlo gold mine for at least the next three years is another great example of how our Contract Mining team extends contracts over the life of a mine operation.'
Strategic Importance
Gabrielle Iwanow, President of Contract Mining at Perenti, added, 'We are pleased to continue working with Barrick and demonstrating our leading underground capability in the North American market. Barrick is an important client for Barminco, and we look forward to continuing to partner with them to deliver safe production at Hemlo.'
This contract extension is a positive development for Perenti Limited, reinforcing its position in the North American market and ensuring a steady revenue stream for the next three years. The low capital intensity of the project is beneficial for Barminco, reducing financial risk and allowing for more efficient allocation of resources.
Investor Reaction:
Analysts are likely to view this contract extension favorably, as it secures a significant revenue stream for Perenti and demonstrates the company's ability to maintain long-term client relationships. The low capital intensity of the project is also a positive factor, potentially leading to increased investor confidence.
Conclusion:
Investors should consider the positive implications of this contract extension for Perenti Limited's financial stability and growth prospects. The company's ability to secure long-term, capital-light contracts is a strong indicator of its strategic acumen and operational efficiency.