Monsters of Rock: It's the day of the contractor with NRW, Orica blowing up

[ad_1]

NRW Holdings boss Jule Pemberton eyes strong pipeline of projects in mining and civil construction across Australia, but says green metals will be an emerging priority
Orica boss Sanjeev Gandhi says energy transition means outlook for metals, especially copper, is healthy despite macroeconomic fears
Gold and lithium power ASX materials sector to 2.47% gain

One of Australia’s largest mining and civil contractors says it wants exposure to green metals as a priority and is predicting a strong pipeline of activity in civil and mining to continue over the coming years.

While recession fears and skills shortages have laboured the materials sector, a handful of mining contractors are continuing to see strong operating conditions, despite exposure to the industry’s inflation-led challenges.

Billion dollar capped NRW Holdings (ASX:NWH), up 52.12% over the past 12 months, has seen that first hand with the mothballing of Gascoyne Resources’ (ASX:GCY) Dalgaranga mine this week due to high costs.

NRW managing director Jules Pemberton said the impact from that contract would be minimised due to short payment terms it has commanded, with employees and equipment being moved to other operations.

“At 7 November, the date of the trading halt, our shares in Gascoyne were valued at $7.2M and we were owed $8.6M under the production royalty agreement that was established in 2021,” he told shareholders at the firm’s AGM in Perth today.

“The current receivables exposure is immaterial as we insisted on weekly payments.

“We will wait for further updates from Gascoyne as their process continues, but in the interim, we have fully mitigated any further exposure.”

NRW this year added a five year, $700 million contract at the Karara iron ore mine in WA’s Mid-West as its largest contract.

Pemberton sees continued activity in the infrastructure and large cap iron ore market, with a number of new projects in the bidding pipeline.

“Both sectors have a growing pipeline of opportunities,” he said.

“In WA, several large infrastructure projects are scheduled to be awarded within the next 12 months. In Queensland, there is a similar range of opportunities and in Iron Ore the next set of incremental and replacement tonnes projects are expected to be awarded soon and with further projects to follow will extend activity for several years.

“Additionally, our Urban business continues to grow in a sector of the market apparently unaffected by trends in the broader housing market.”

Having taken over lithium project specialist Primero Group, currently working on the massive Covalent Lithium JV between SQM and Wesfarmers (ASX:WES), Pemberton said securing work in green metals was a priority.

“The Mining business has secured most of the work expected to be delivered in FY23 and has long-term contracts for several years beyond,” he told investors.

“Presently, the business has submitted tenders of circa $2.23 billion including contracts where we can deploy currently available equipment, further contract extensions to current contracts and opportunities in the Green Metals sector – one we have prioritised for capital investment if needed.”

NRW Holdings (ASX:NWH) share price today:

Orica is blowing up

Also blowing up today, mine explosives specialists Orica (ASX:ORI), whose full year results announcement today revealed a swing from a $174 million net loss in 2021 to a statutory NPAT of $60m in 2022.

Underlying EBIT was up 36% to $579m, backing an unfranked final dividend of 22c per share, a payout ratio of 53%.

Orica was up over 7.5%.

Despite concerns about the global economy CEO Sanjeev Gandhi struck an upbeat note on demand for metals, with its return on net operating assets up from 8.1% to 11.4% and expected to rise to between 10.5 and 13% over the next three years.

“Look the macros are uncertain, we all understand that, there’s a lot of volatility, geopolitics and everything else happening,” Gandhi said.

“But the fundamentals are quite strong in my view because the energy transition of the world is not going to stop, it’s even going to accelerate given the challenges Europe is facing.

“There’s going to be more demand for renewable energy, there’s going to be more demand for wind and solar and you just can’t transmit electricity without copper.

“If you look at our portfolio we have already grown our copper exposure, we are the largest solutions provider to copper mines in the world, we expect that to continue.

“The copper price was US$10,000 (per tonne), it’s US$8000 today, but is it profitable? Yes it is extremely profitable. Is there enough supply? No, so the outlook is pretty healthy for copper.”

Gandhi said demand for gold and coal remains strong as well along with the quarry and construction market.

While Gandhi admitted steel demand in China, the main driver of downstream iron ore demand, was a big uncertainty, he said the broader outlook was ‘healthy.’

Orica (ASX:ORI) share price today:

And elsewhere…

Staying in contractor land, Monadelphous (ASX:MND) was up 2% after announcing $150 million of new contracts including with BHP (ASX:BHP) and Fortescue (ASX:FMG) on the Iron Bridge magnetite project.

The $1.3 billion services play is up 42% YTD. Meanwhile dual-listed SSR Mining (ASX:SSR) was up 9.3% on thin volumes despite a weak September quarter, with the restart of operations at its Copler mine in Turkey expected to smooth things over in the December term.

Gold stocks were up a ripsnorting 7.35% today, after prices breached the US$1700/oz barrier overnight on the back of a weaker US dollar and some serious volatility in the imploding crypto world.

Read all about that from resident coinhead Rob Badman here.

Materials stocks ended the day up 2.47%, with most of the majors up and a number of lithium plays at record highs.