- The Ghana Manganese Company (GMC) has severed contract ties with Perenti Global’s (ASX:PRN) subsidiary African Mining Services (AMS) at the Nsuta mine.
- The termination comes after the Ghanaian government told GMC to cap its production at the mine
- The company now expects this financial year’s underlying net profit after tax to drop by nearly $25 million
- Perenti is down 18.90 per cent on the market today and is trading at $1.69 per share
The Ghana Manganese Company (GMC) has terminated its equipment hire contract with Perenti Global’s (ASX:PRN) subsidiary African Mining Services (AMS) at the Nsuta mine.
Perenti says the termination has nothing to do with AMS’ performance, but rather follows the Ghanaian government telling GMC to cap its production at the mine. GMS has thanked AMS for its ‘outstanding service’ at Nsuta.
Despite both companies parting on good terms, Perenti now forecasts a $25 million decrease in net profit figures.
Initially, the company expected to earn $140 million in underlying net profit after tax during the 2020 financial year. Now, however, those estimates sit between $115 and $120 million.
AMS is continuing to engage with GMC regarding payments for all the amounts owing under the contract.
The company expects AMS equipment at Nsuta will be utilised at existing projects, held fro deployment to existing and new projects in the future to offset new capital, or sold to third parties generating a cash inflow to the business.
Perenti has multiple sites in the West Africa region that could potentially utilise this equipment.
Managing Director Mark Norwell said the contract termination was an isolated incident that had no bearing on the strategic initiatives underway to transform AMS under the Group 2025 strategy.
“I stress that the termination in no way reflects AMS’ performance at the project, and the termination notice specifically thanked AMS for its ‘outstanding services,” he said.
“Although our surface mining business in Africa is facing some challenges, the balance of the business continues to perform well and provides a strong base from which to execute our strategy,” he added.
The company is continuing to focus on the transformation of AMS.
Perenti is down 18.9 per cent on the market today and is trading at $1.69 per share as of 1:21 pm AEDT.