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Emeco seals its Lazarus deal

Improving demand for its mining equipment has positioned Emeco to take quick advantage of a recapitalisation and double-merger finally approved by investors yesterday.

The approvals, from consecutive meetings of noteholders and shareholders in Sydney, give Emeco a stronger balance sheet and greater scale, with its tie-up with east coast contractors Orionstone and Andy’s Earthmoving nearly doubling the size of its rental fleet to 850 pieces.

Yesterday’s successful meetings follow December’s hiccup when creditor Black Diamond Capital Management rejected the merger, only to agree a restructured proposal days later.

The US group will emerge with about 30 per cent of the expanded Emeco after converting its notes into equity and sub-underwriting the company’s $20 million rights issue.

When taken together with cost reductions already achieved at the group, the financial revamp and mergers have dovetailed nicely with an emerging recovery in the mining that sector that has increased customer demand for Emeco’s equipment.

Utilisation of its Australian rental fleet, which ranges from water carts to 240-tonne dump trucks, has tracked mineral commodity prices higher, improving to 58 per cent in February against a December-half average of 53 per cent.

The Orionstone and Andy’s Earthmoving mergers also diversify the group’s revenue and commodity risk. Mackay-based Orionstone, for example, is strong in Queensland, where it is exposed to coking coal, which is riding higher prices since last year. Meanwhile, Bendigo-based Andy’s last month won the mining contract for the listed CuDeco’s Rocklands copper project, also in Queensland.

Emeco managing director Ian Testrow said building on the improving utilisation rates “is very important”.

“It’s all about for us, integrating the businesses, continuing to improve that operational focus … and reducing debt,” he said.

Emeco was also intent on improving its “value proposition” by deploying its fleet management and mining technology platform to better help mining companies save money.

“So not only do we put a machine into you and maintain it … but we show you how you could potentially use it better, reducing your costs per tonne,” Mr Testrow said.

The objective was to create a stronger Emeco better able to ride the peaks and troughs that come with mining. “You have to create a business that is sustainable through the cycle,” he said.

Emeco shares rose 0.5¢ to 8.1¢.

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