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Shares in Perth-based engineering company Monadelphous Group dropped more than 10% on Monday after news broke that it was being sued by Rio Tinto over a fire at one of the Rio iron ore export terminals at Cape Lambert in the Pilbara.


The shares ended at $7.99 as investors assessed the news that Rio is seeking $493 million in damages.


On Friday afternoon Rio filed a writ of summons in the Supreme Court of Western Australia in Perth. In it Robe River Mining and Pilbara Iron are seeking damages over the that broke out on January 10, 2019, at the Port Lambert terminal.


Monadelphous said in a statement that it would contest Rio's action. It said its unit Monadelphous Engineering Associates (MEA) had been performing maintenance shutdown services prior to the fire breaking out. Monadelphous said Rio has claimed that MEA breached terms of a contract with Rio and caused the fire.


Monadelphous Engineering Associates (MEA) had been performing maintenance shutdown services prior to the fire commencing, and Rio Tinto has alleged that MEA was in breach of the maintenance contract, thereby causing the fire, Monadelphous told shareholders this morning.


The fire damaged part of the plant that separates Robe Valley lump and fine products and led to Rio declaring a force majeure on some contracts. The damages being sought largely consist of losses due to the inability to process iron ore during the period of repair work at the facility.

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Monadelphous has forecast a 10 per cent boost to sales over the full year due to demand for engineering services from iron ore, lithium, gold and copper miners after delivering an 11 per cent increase in interim net profit to $31.6 million. Dividend increased by 2c to 24c ff.



While the global economic outlook in the wake of COVID19 remains uncertain, the resources sector is expected to provide a steady flow of opportunities for Monadelphous over coming years, the Perth-based engineering group said.



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Engineering company Monadelphous Group Limited (ASX: MND) today announced it has secured a new five-year crane services contract with Fortescue Metals Group Ltd (FMG), valued at approximately $150 million in total.


The contract is for the provision of crane services supporting general repairs, maintenance and shutdown activities to Fortescue's Solomon and Eliwana operations in the Pilbara region of Western Australia.

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Monodelphous will pay a final dividend of 21 cents per share, taking the full year dividend to 45 cents per share fully franked. This equates to a payout ratio of approximately 90 per cent of reported net profit after tax.


Performance Highlights


....Revenue $1.95 billion, an 18 per cent increase on pcp

.... Unprecedented shortfall of available skilled resources experienced

.... Net profit after tax $47.1 million, up 29 per cent

.... Secured $950 million of new contracts and extensions 39 per cent improvement in safety performance

.... Skills labour shortage to continue to be major challenge

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Matthew Kidman (Livewire Markets) : One of the big stories of the reporting season was cost inflation, especially for the mining sector and mining services. Monadelphous got whacked right between the eyes. Buy, hold or sell, James?


James Gerrish (Market Matters): It is a hold here. And we do hold this stock. I was disappointed with the result. Strong top line but weak profit. And that was not the case throughout mining services. There were some that had that influence and some that did not. So, I am a hold here on those cost pressures. We need to see some more evidence that they have started to dissipate.


Matthew Kidman (Livewire Markets) : Chris, it was surprising in the sense that commodity prices are strong everywhere. So, you would have thought mining services companies do well. But the border lockdowns and people movement restrictions really hit Monadelphous. Buy, hold or sell?


Chris Stott (1851 Capital): Hold, Matthew. Cost pressures are not going away any time soon. They delivered a below par result versus expectations in the last few weeks. But I am reluctant to put a sell on it given the management team are probably one of the best management teams in the business in that mining services space. So hold for now.

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  • 2 months later...

AGM today

• Australian iron ore industry remains buoyant
• Significant capital and operating expenditure levels driving heightened demand
• Maintenance activity expected to be strong
• Demand for battery metals rapidly increasing, presenting opportunities in Australia and overseas
• Market conditions in oil and gas improving
• Transition to clean energy will drive renewable energy developments
• 1H22 revenue expected to be similar to pcp
• FY22 revenue forecast to be lower than FY21
• Stronger construction activity expected in FY23
• Skilled labour shortages expected to continue
• Focus on attraction and retention, working collaboratively with customers and strategic targeting of new work

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