WestStar Industrial subsidiary wins $10m contract on Fortescue iron ore development

An engineering subsidiary of construction conglomerate WestStar Industrial (ASX: WSI) has won a $10 million contract for electrical and associated works relating to an accommodation camp at the Eliwana iron ore mine and rail project owned by Fortescue Metals Group (ASX: FMG).

SIMPEC Pty Ltd was awarded the contract by ATCO Structures and Logistics for the supply and installation of electrical, communications and dry fire systems at Eliwana’s 800-room mining camp, located 90 kilometres from Tom Price in WA’s Pilbara region.

It represents SIMPEC’s first tier one contract on a Fortescue project and its largest single contract award to date.

It adds to the company’s current work in hand including an $8 million piping and insulation contract at Tianqi Lithium’s Kwinana processing plant and a $1.7 million contract for the installation of a flocculant treatment plant and associated works at Iluka Resources’ (ASX: ILU) Cataby mineral sands development, 150km north of Perth.

Fortescue’s $1.7 billion Eliwana project was approved for development in May 2018 and will underpin the introduction of a 60% iron grade product.

First ore from the project is scheduled for delivery in December 2020.

SIMPEC is expected to commence work at Eliwana in June and deliver its services over a nine-month duration.

Contract value

The SIMPEC contract boosts the value of contracts awarded to WestStar during the 2019 financial year so far to approximately $43 million.

In its quarterly report released this week, WestStar said the subsidiary continued to tender strongly during the period.

“The awards to date and the strengthened group balance sheet form a solid platform for SIMPEC to fulfil much larger contracts with its growing team,” it said.

WestStar’s prefabricated concrete subsidiary Precast Australia Pty Ltd added $2.7 million to the group’s books during the quarter, including $1.9 million worth of contracts for PACT Construction and Perkins Builders.

The company won a further $800,000 in contracts from repeat clients such as Mills Industrial, WBHO Infrastructure and civil engineering group Salini Impregilo.

“Generally, the precast market is showing signs of improvement with activity and award levels picking up significantly,” the company said.

“With the market improving, the outlook for [our] precast business is positive.”

Record cash receipts

WestStar continued its trend of posting record cash receipts with $5.8 million banked during the quarter representing a new historical high for the company.

An additional $2.1 million in cash receipts was banked immediately post-quarter due to the March month end falling on a long weekend, and will be incorporated into the June quarter financials.

The company reported a cash balance for the period of $1.1 million, which would have been boosted to $3.2 million with incorporation of the late receipts.

Post-quarter, WestStar completed a $2.4 million placement with strong support from existing shareholders and new institutional and professional investors.

The company said placement proceeds will allow it to “deliver on anticipated growth in contracted projects and high confidence project pipeline”.

At mid-afternoon, shares in WestStar were up 13.04% to $0.026.