De.mem kicks off 2019 with water treatment contract for Rio Tinto

De.mem ASX DEM Rio Tinto maintenance contract Amrun bauxite mine
De.mem has secured a $780,000 operations and maintenance contract for Rio Tinto's Amrun bauxite mine in Queensland.

Water and wastewater treatment company De.mem (ASX: DEM) has added to its order book after clinching a year-long operations and maintenance contract with Rio Tinto (ASX: RIO).

The new contract will see the company manage the potable and waste water treatment plants at the mining firm’s Amrun bauxite mine in Queensland’s Cape York Peninsula.

Valued at $780,000, the company said additional contract revenue could be secured from the delivery of spares and other equipment.

De.mem, which has operated Rio Tinto’s water treatment plant since 2016, said the contract gives certainty to the business for a minimum of 12 months.

Furthermore, De.mem said the order with the blue-chip customer underscored its healthy operations and maintenance business and added to a promising outlook for 2019.

“This new purchase order is another great success for De.mem as it underlines our well-established customer base in the mining and resources sector, and our strong, recurring operations and maintenance business,” De.mem chief executive officer Andreas Kroell said.

De.mem’s operations and maintenance business remain critical to its balance sheet, with the recurring cash flow generating predictable and dependable revenue streams over extended periods.

Over the course of 2018, the company’s operations and maintenance division accounted for one third of its revenue base.

Expansion plans underway

De.mem already provides operations and maintenance services for several water and sewage treatment plants at other mining sites in Australia, a luxury resort in Queensland, as well as at a number of industrial facilities in Singapore.

Other big-name resources-orientated firms it has worked with include Bechtel, a global engineering, procurement and construction company.

Mr Kroell told Small Caps that the company would look to build off the new contract with Rio Tinto so it can further grow the operations and maintenance arm of the business.

Work is already afoot in this space as it seeks to expand its product offering into other Australian states, with several opportunities currently being assessed.

“The operations and maintenance business  bears great growth potential for De.mem as we are poised to expand this service beyond Queensland, Australia, and Singapore into other locations,” Mr Kroell said.

In addition, the company is projecting growth opportunities in municipal, food and beverage and agricultural sectors.

The expansion strategy follows a strong December 2018 quarter for the company, which saw it secure new contracts to the tune of $350,000.

The projects include the delivery of a chlorination system to the Maranoa Regional Council, Queensland, and the sale of a membrane-based water treatment system to South32 Cannington.

Lauren has more than six years’ experience as a business journalist and editor in Australia and Southeast Asia. With specialist knowledge of the resources sector, including oil and gas, she has covered publicly listed companies of all sizes. Lauren has reported across a range of industries including mining and property.