Macmahon (ASX:MAH) share price sinks on contract news

The Macmahon Holdings Limited (ASX: MAH) share price is sinking in early-afternoon trade despite being awarded a new contract.

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The Macmahon Holdings Limited (ASX: MAH) share price is sinking in early-afternoon trade despite being awarded a new contract. At the time of writing, the mining services company's shares are fetching for 19.7 cents, down 3.9%.

Contract award

Investors selling their positions on Macmahon shares despite the company's positive announcement.

According to its release, Macmahon advised it has been selected for a surface mining contract with Anglo American.

Under the agreement, Macmahon will provide an array of surface mining services at the Dawson South mine, located in Queensland. Furthermore, this will see the provision of drill and blast, bulk and selective mining, crushing, screening, train loading, and other services.

The Dawson South mine forms part of the Dawson Mine, which is an open-cut metallurgical mine. The facility is responsible for producing coking, soft coking, and thermal coal. The mine is a joint venture agreement by Anglo American and Japan's Mitsui Group.

The contract will have a 3-year term and is expected to generate around $200 million in revenue for Macmahon.

Both parties are yet to formally sign the mining services agreement, however, it is anticipated to occur in the near future.

Commencement of works is scheduled for July 2021.

Macmahon CEO and managing director Michael Finnegan commented:

We are very pleased to be selected for the Dawson South operation by Anglo American, a leading global mining company. We look forward to working very closely with our new client to ensure a smooth transition period and continuity of safe operations. This new project further strengthens our growing east coast presence.

Macmahon share price summary

The Macmahon share price has lifted close to 20% in the past 12 months. However, it is down 25% year-to-date. The company's shares reached a 52-week high of 28.7 cents late last year.

Based on valuation grounds, Macmahon presides a market capitalisation of roughly $424.5 million, with over 2.15 billion shares outstanding.

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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