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Here’s why the Red 5 (ASX:RED) share price is surging today

Red 5 shares have bucked their 2021 trend today on the back of a company announcement
The post Here’s why the Red 5 (ASX:RED) share price is surging today appeared first on The Motley Fool Australia. –

The Red 5 Limited (ASX: RED) share price is racing higher today. This comes following an update on its King of the Hills (KOTH) gold project.

At the time of writing, the gold producer’s shares are up 4.29% to 18.3 cents.

What’s driving the Red 5 share price higher?

Red 5 shares are climbing after the company provided investors with a positive update this morning.

According to its release, Red 5 has awarded a mining services contract to Macmahon Holdings Limited (ASX: MAH).

This follows an in-depth tender process that saw a number of contracting companies compete for Red 5’s open pit and underground mining activities. Red 5 signed a letter of intent (LOI) with Macmahon in early March, leading to the formally awarded contract.

The contract will run for an initial 5-year period beginning in the March quarter of 2022. Macmahon estimates the award will generate revenue of more than $650 million over the life of the deal.

More on the KOTH gold project

The KOTH gold project, wholly owned by Red 5, is situated in the Eastern Goldfields region of Western Australia.

The gold mine has a 16-year life, with more than 2.4 million ounces of ore reserve, and 4.1 million ounces of mineral resource.

The open pit and underground mine is expected to have its first gold pour in the June quarter of 2022.

Management commentary

Red 5 managing director Mark Williams said of the award:

We’re pleased to have finalised agreed contract terms with Macmahon and formally appointed them as our open pit and underground mining contractor. Macmahon is one of the strongest mining contractors in the market, and we are looking forward to partnering with them to deliver Australia’s next significant new gold mine.

Importantly, the contract terms are in line with the mining unit costs outlined in the KOTH FFS. Operational efficiencies and cost benefits have been realised in having both mining operations managed by a single contractor.

Given the current tightness in the labour market in Western Australia’s mining sector, we believe Macmahon is well placed to secure the skilled resources required to operate the underground and open pit mines at KOTH.

The Red 5 share price has sunk more than 40% over the last 12 months. In addition, it is down 27% in 2021 alone.

The post Here’s why the Red 5 (ASX:RED) share price is surging today appeared first on The Motley Fool Australia.

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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.

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