Does Perenti’s expansion at Cowal put it further into value-play territory?

Perenti (ASX: PRN) – formerly Ausdrill - was up 21.15% an hour out from open today after the diversified mining company disclosed that the Barminco mining business has been awarded a $520m contract for underground development and production works for gold giant Evolution Mining's (ASX: EVN) Cowal project in NSW.

To the uninitiated, Barminco is a global underground mining services business, with operations in Australia, Africa and North America, and is currently conducting diamond drilling services at Cowal.

This new contract - one of the largest underground mining projects in Barminco's history – is for an initial term of four years, with a contract commencement of early July 2022.

Second portal

Perenti CEO Mark Norwell expects the new contract to significantly expands Barminco’s scope at the site to include the development of a second portal, all underground development and production works, and associated underground mining services required to support the continued mill feed of underground ore.

"This contract award represents not only a significant expansion and continuation of our first underground contract in New South Wales but is also a fantastic opportunity for Perenti to build on our strong working relationship with Evolution, one of Australia’s premier gold mining companies."

Buyback

News of a major new contract this morning was also accompanied by revelations Perenti has launched an on-market share buyback of up to 10% of its shares on issue.

The exact timing and actual number of shares to be purchased over the next 12 months will be subject to market conditions, available trading windows, the prevailing share price and other considerations.

Underground earnings base

Given that the Cowal project represents a significant improvement to the company's Australian underground earnings base - which will generate strong project cash flows and returns in support of our capital allocation and investment - investors should watch out for broker re-ratings later this week.

Management noted, “our purpose is to create enduring value and certainty for our clients, our people, our shareholders and the communities in which we work."

Perenti share price over 12 months.