ACS wins 3-year €137.5 million open pit mining contract in Canada

Intermoney | ACS (Buy, PO 46), through its subsidiary Thiess, itself part of Cimic, has won a mining services contract for an open pit project in Ontario (Canada) for a period of three years worth €137.5 million. The contract is with Vale, one of the world’s largest integrated mining companies, specialising in iron and nickel, headquartered in Rio de Janeiro, Brazil and employing around 125,000 people in more than 30 countries.

The contract will be performed at the Stobie open pit mining project, located in the Ontario city of Greater Sudbury. The mining facility, which had suspended operations, is ramping up production again in response to growing global demand for critical minerals needed for the transition to zero emissions.

Assessment: ACS owns 60% of Thiess, which it increased from 50% last April, causing the unit to consolidate globally thereafter. This is a game changer for the Group’s bottom line, as we expect it to contribute close to €1bn to EBITDA on a full year basis, or close to a third of the total.

Thiess’ mining activities typically achieve margins above 20%, although this requires heavy capex investments. Last June, we raised our ACS OP to €46 from €43, helped by the emergence of Thiess value, which we estimate contributes around €6/share after deducting minority interests.