The future of a $110 million mining project in New South Wales is unclear today after commodities giant Glencore Xstrata froze work on an expansion of the CSA Cobar mine.
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Mining contractor Macmahon Holdings has revealed that its contract to deliver the Cobar expansion - by sinking the main shaft even deeper - was suddenly terminated late on Tuesday.
Shares in Macmahon are 2 cents lower at 16 cents today on the back of the news.
Glencore has run the mine - which mostly produces copper and silver, but has also produced lead and zinc - since 1999, and the expansion project was supposed to safeguard its future by going deeper underground and reducing mining costs.
But the cancellation of Macmahon's contract raises questions over whether Glencore plans to walk away from the expansion altogether, or is simply seeking a cheaper contractor.
The newly merged Swiss giant has added to the confusion by refusing to return calls to media to explain the termination.
More than 300 people are directly employed by the mine and it is crucial to the economy of Cobar.
In a statement to the ASX, Macmahon Holdings said it was still seeking an explanation for the termination and would report the answer back to market as soon as possible.
"MacMahon is currently seeking clarification on the reasons for, and consequences of, the termination," the company said.
The project was expected to deliver an extra $6 million of revenue to MacMahon this month, and a further $80 million in the 2014 financial year.
The fading of the mining boom has hit mining services companies harder than the miners themselves in many cases, with the share prices of Boart Longyear, Ausdrill, Monadelphous and many others falling steeply in recent months
Numerous mining services companies have had their contracts cancelled by big companies in recent months as the big miners try to force down costs.
BHP Billiton recently changed contractors on at least two Queensland coal mines in a bid to save money, with mining services company HSE Contractors picking up both contracts.