Macmahon (ASX:MAH) share price climbs higher on positive update

The Macmahon Holdings Limited (ASX: MAH) share price is climbing higher today. Here's a look into why its shares are on the move.

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The Macmahon Holdings Limited (ASX: MAH) share price is climbing higher in early afternoon trade. This comes after the company announced it has won an underground mining contract.

The Macmahon share price rose to an intraday high of 27.5 cents in early trade. However, its shares have pulled back this afternoon to 25.5 cents at the time of writing, up 4.9%.

A closer look at the contract award

The Macmahon share price is on move today after reporting a positive update that has investors upbeat.

According to its release, Macmahon advised its subsidiary, GBF has secured a contract from Silver Lake Resources Limited (ASX: SLR) for mining works at the Deflector gold and copper mine in Western Australia.

Macmahon fully acquired underground mining company GBF in mid-2019 to expand its presence in the underground mining services market. It's worth noting that GBF has been performing works at the Deflector mine since mining operations began there in 2016.

Under the agreement, GBF will deliver all necessary underground development, ground support and production activities. This will include the supply of a workforce and mobile mining equipment.

The 4-year deal with Silver Lake is expected to generate around $220 million for Macmahon. Should there be no contract extensions, the award will expire in April, 2025.

Words from management

Macmahon CEO and managing director Michael Finnegan hailed the new agreement, saying:

We are very pleased to have won this tender and to be working with Silver Lake Resources at Deflector. This new contract is an important milestone in our strategy to expand our underground business, and is a clear demonstration of the benefits we are now realising from the GBF acquisition.

Importantly, the Deflector mine is a high-grade gold and copper asset in Western Australia, so is an attractive project in the current macro environment. We look forward to continuing to support the development of Deflector, and to achieving further scale in the underground market.

About the Macmahon share price

Over the past 12 months, the Macmahon share price has fallen just over 10%. After dropping severely during March last year, the company's share price somewhat rebounded to the mid-20 cent range. Since then, its shares have stabilised moving in small peaks and troughs.

Macmahon commands a market capitalisation of $553 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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