After all, it has been a tough couple of weeks for mining contractors in general, typified by the ructions wracking Macmahon Contractors.

For an auto electrical firm turned listed mining contractor, things are not so bad, even with a couple of its clients drawing the shutters on a couple of projects.

Arrium announced its Peculiar Knob iron ore project would be “mothballed” last week.

While the full implications of that decision are yet to be realised, MACA reckons its full year revenue guidance for the 2015 financial year will drop about $A30 million to $620 million.

This came just days after MACA was told that Ivernia subsidiary Rosslyn Hill Mining had called a halt at its Paroo Station lead operation.

Ivernia called time on the project due to the declining lead price but could look to restart operations if the price improves.

Those setbacks aside, MACA touts that its work in hand remains strong at $1.4 billion.

The day before the Peculiar Knob announcement, MACA’s shares were selling for 97.5c. On Tuesday they were fetching 82c.

But it is clearly not all bad news for the contractor.

Broker Hartleys still recommends MACA as a buy because it has managed to lay off some of its iron ore risk by moving more heavily into the gold space.

“There has been significant speculation about potential mine closure [at Peculiar Knob] for several months, so although we had not expected it to close, the market has been well aware that it was a risk,” Hartleys says in a broker’s note.

“Hence, arguably, the impact has already been factored into the MACA share price.”

Indeed, back in September MACA’s share price was about $1.89 a share and the stock has been on a bit of a slide since. It hit a low of about 75.5c in December before rallying to 98c two days before the Arrium announcement.

“We estimate that the contract was worth roughly $100 million per annum of revenue for MACA.

“We have lowered our 2015 financial year net profit after tax estimate to $61.8 million – we expect first half NPAT of about $30 million, second half NPAT of $32 million given the full contribution from the Beadell Resources contract in the second half.

“We continue to expect 14c per share of ordinary dividends.”

In October MACA announced it had received a letter of intent to enter into a mining partnership agreement with Beadell at the Tucano gold project in Brazil.

Under the agreement MACA is to provide drill and blast, load and haul and crusher feed services for a five-year term.

That term started in November.

Beadell bought the Tucano project in 2010 and first gold was poured there in 2012.

The project produces about 180,000-200,000 ounces of gold per annum.

MACA also started a $9 million contract with Doray Minerals at its Andy Well gold project this month.

In November MACA chairman Andrew Edwards told shareholders that despite the tough times facing the company it was:

• Continuing to support its clients as best it could, citing the extended credit terms it provided to Regis following the weather event at its Duketon gold project as an example
• Maintaining a strong focus on its operating costs and safety performance
• Trying to diversify the company’s client base

On the diversification front, MACA is going from shovel operator to shovel leaner with its MACA Civil subsidiary picking up three road jobs. It has been selected by Main Roads Western Australia for two contracts and another for Rio Tinto.

The first MRWA project is the Marble Bar road upgrade, which is a construct only and schedule of rates contract with the initial value being about $9.5 million.

The second is the Manilya to Mia Mia section of the North West Coastal Highway, which is also a construct only and schedule or rates job.

The initial value of that contract is expected to be about $25.4 million.

With Rio Tinto MACA won the Brockman 2 to Brockman 4 access, a job that started in August and with an initial contract value of $13 million. The job is being done in joint venture with indigenous contracting business GLH.

Hartleys believes MACA’s civil revenue will peak at about $100 million per annum in the 2016 financial year.

The broker also believes the other steps the company is taking will help it out.

It is maintaining its buy recommendation because it believes the market had already factored in the Arrium project closure risk.

“Now the event has occurred the volatility in the stock should reduce and the market can focus on the underlying value,” the broker says.

“The key risk for MACA, like most industrial companies, is earnings disappointments given the industry is volatile and earnings can disappoint due to cost overruns, project delays, loss of contracts or slower than anticipated new project wins.

“Although some earnings disappointments can be short-term and just a timing issue, other disappointments can be materially value destructive and can sometimes overhang stocks for a long period of time. For example, contract disputes.

“Such disappointments can be difficult to predict and share price reactions can be severe and immediate upon disclosure by the company.

“Working capital funding could also be a risk for small companies in the current environment.”