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Macmahon soars on Mongolia deal

Macmahon Holdings executive chairman Jim Walker. Picture: Bill Hatto, The West Australian

UPDATE 2.45pm: Mining contractor Macmahon Holdings says it is cash positive after extricating itself from a troubled contract in Mongolia through a $US65 million ($84 million) sale.

It shares have soared by up to 50 per cent today on the news.

Macmahon said a private company it declined to identify had bought the Mongolian coal mining operations.

The WA contractor had been embroiled in a payment dispute with government-owned Erdenes Tavan Tolgoi which had seen work suspended since August 2014.

Macmahon said the purchase payment had been received in full, with net proceeds of about $US62 million expected.

The payment came as the company was close to finalising a new banking facility with financiers to reflect a lower revenue stream.

Macmahon said further talks were likely given the contractor’s improved financial position.

Executive chairman Jim Walker has overseen restructuring and job cuts to cope with the loss of a $780 million Fortescue Metals Group iron ore contract in the Pilbara.

The Mongolia deal follows a $19 million settlement in May over a contract termination at the Glencore Xstrata’s CSA coal mine in NSW.

"As a result of our cost reduction program, the recent settlement of our CSA claim, and now the Mongolia sale, we are in a cash positive position." Mr Walker said.

“We are resetting the business by stripping back our cost base. This has helped us to significantly improve our pricing and our competitiveness.

"In relation to new work, we plan to diversify our order book by broadening our business development focus to include a greater number of smaller opportunities.”

Macmahon shares closed up 2.2¢, or 48 per cent, to 6.8¢.