Gough Gough & Hamer lands $180m Macraes contract

By Chris Hutching

Friday 19th April 2002

Sharebrokers might be ambivalent about West Australian mining company GRD's latest capital-raising but South Island company Gough Gough & Hamer has landed a $180 million contract to supply machinery and maintenance over the next seven years.

GRD is offering a 1:10 renounceable rights issue to shareholders to raise $17.5 million that will be used to develop its Reefton prospect, projects in Australia, and expand refining activities at Macraes Flat in Otago - its star earner.

The expansion at Macraes Flat has given Gough Gough & Hamer its biggest contract ever, according to managing director Brian Hogan.

GRD recently reported a bottom-line profit of $11 million, down on the previous year's $12.1 million, and also announced the $17.5 million rights issue and raising of another $23 million through a private placement. Brokers are lukewarm on the rights issue and say some clients still remain aggrieved about the takeover of Macraes Mining by GRD three years ago amid accusations they were significantly disadvantaged.

GRD has changed its strategy at Macraes Flat in efforts to maximise margins and is directly controlling the mining and sub-contracting itself, instead of contracting out the entire project to a mine operator at a fixed price.

The first orders for equipment and maintenance teams would be worth about $73 million with the balance of the money to be spent over seven years, Mr Hogan said. Dump trucks being bought contain computers more powerful than the Apollo 13 moon lander and operate using GPS technology, according to Mr Hogan.

Ore-refining machinery contains software for grading and refining operations. Gough Gough & Hamer will build up a team of about 20 mechanics and other support staff based at Macraes Flat, which would become one of the company's biggest service branches. Part of the contract also requires Gough Gough & Hamer to make productivity improvements of 2% a year, Mr Hogan said.

Gough Gough & Hamer will also bid to supply equipment and services to GRD's Reefton mine later this year for a contract worth possibly $20 million. Preparatory work such as road building is under way ahead of mining beginning next year.

Gough Gough & Hamer is a family-owned company with $250 million turnover, $100 million in assets which employs 625 people.

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