The company announced it’s selling its mobile mining assets.
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At the time of writing, NRW shares are up 13.27%, trading at $1.75.
What’s driving the NRW share price today?
Investors appear to welcome the company’s latest news, sending the NRW share price to a new monthly high.
In its release, NRW advised that Boggabri Coal Operations, part of the Idemitsu Group, will acquire the majority of the major mining equipment from Golding Contractors.
Established in 1942, Golding Contractors is a wholly-owned subsidiary of NRW focused on delivering civil infrastructure, urban and mining services. The company is headquartered in Queensland and operates on the east coast of Australia.
Boggabri Coal exercised an option to buy 38 major mobile mining assets under the maintenance services and hire agreement. The companies are targeting a completion date for the equipment transfer by the end of this month.
While the transaction is being processed, Golding Contractors will continue to perform maintenance services on site, operating the existing mobile mining assets along with 50 other pieces of major equipment.
NRW revealed that the taken-up option would reduce the group’s pre-tax earnings of around $1.8 million per year. The equipment will be sold for roughly $81 million, with $64 million used to pay down asset financing debt. Unaudited pro forma net debt stands at around $115 million and is projected to fall to $34 million after payment.
At the end of June 2021, NRW had approximately $145 million in cash with $260 million of debt.
What did the head of NRW say?
NRW CEO and managing director Jules Pemberton touched on the sales agreement, saying:
The option for Boggabri Coal Operations to acquire all or part of the associated mining fleet was identified at the time of the acquisition of BGC Contracting. This transaction will reduce debt and increase return on capital employed.
We look forward to continuing to support BCO to ensure we are best placed to continue to provide our services beyond the current contract completion date of December 2022.
The NRW share price is trading 6.67% higher than this time 12 months ago. But after climbing to a 52-week high of $3.19 in January, shares in the company changed direction and have fallen more than 40% in 2021 alone.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.