Metarock at rock bottom?

Has ASX-listed mining contractor Metarock hit rock bottom? Bloodied investors in the one-time market darling underground coal contractor, then known as Mastermyne, will be hoping so.

The company’s stock was trading at A21c when it opted for voluntary suspension last month, capitalising it at about A$27.5 million.

This week’s “rescue” deal announced with Matt Latimore’s M Resources has the cashed-up Queensland coal miner set to grab 51% of Metarock at only 15c-a-share. That marks a precipitous fall from the $1.59 it touched in 2018 when then Mastermyne was charting a future growth course in the Australian coal sector.

Its move to alleviate coal-exposure risk in 2021 via the $47 million acquisition of privately-owned hard-rock mining contractor Pybar (plus assuming the latter’s debt) was the right one, strategically. However, little has gone right for Metarock since that time, when its market value was circa-$114m and the reported order book of $1.7 billion for the new entity was going to support full-year EBITDA of more than $60m and revenue of $590m.

The company has blamed a series of unfortunate events for the excessive strains on its balance sheet and finances ahead of last month’s ASX suspension and the subsequent proposed restructuring announcement. They were connected predominantly to protracted termination of a significant coal-mine contract, and losses on two metal-mine exposures.

Metarock booked a statutory net loss of $63.5m for the six months to the end of 2022, including $58.8m of write-offs, on 45% higher (year-on-year) revenue of $261m. The period saw group net assets fall from $83.2m to $19.5m, leaving it a net current deficiency of $63.9m at the end of December.

On a positive note, CEO Paul Green said about $210m of Metarock’s remaining $1.1 billion order book was due to be delivered in the current half-year, and about $900m was contracted for FY24 and beyond.

Coal ($456m) and hard-rock ($377m) accounted for most of a further c$900m of contract tenders in “the pipeline”.

“This recapitalisation is a key step in delivering the second stage of the turnaround of Metarock,” Green said this week.

“It provides additional capital to the company, increases liquidity and reduces our net debt position, and provides us with a strong financial base.

“The continuing core operations are performing well and this improved financial position will enable us to execute our go forward plan.”

Latimore’s M Resources, with Asian financial backing, has built a portfolio of Australian coal assets discarded by mostly major miners exiting the supposedly doomed sector. Stubbornly high thermal and metallurgical coal prices have left MRes, and other buyers of politically-stranded coal assets, rolling in profits.

Latimore has said he doesn’t see an end to those met-coal profits, at least.


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