Tough times for Ausdrill

TUMBLING commodity prices and lower levels of demand for its services have forced Ausdrill to announce that it will take a pre-tax writedown on plant and equipment of up to $A220 million.
Tough times for Ausdrill Tough times for Ausdrill Tough times for Ausdrill Tough times for Ausdrill Tough times for Ausdrill

 

Haydn Black

Ausdrill’s profitability took a further hit with the loss of two big underground contracts as producers looked to move to owner-mining to save costs.

The company said that while still to finance its December 2014 half-year accounts, it had realised the assumptions underlying its forecasts did not reflect the modern reality, and considering the hammering the iron ore and oil prices have taken, the company realised that its mid to long-term forecasts were now wildly optimistic.

When it releases its half-year results next week it expects it will realise a non-cash writedown of between $170 million and $220 million, mainly on plant and equipment.

In October the company expected to report EBITDA of between $150 million and $160 million for FY2015 on revenues of $840 million, a figure that showed the slowdown in resources that was starting to bite.

The firm had been stung by bad debts of $8 million and $16 million in lost revenue associated with the collapse of Western Desert Resources, and the Edna May gold mine contract was terminated early as revenue streams started to dry up.

The company stressed the $170-$220 million accounting treatment would not have an impact on cashflow or its banking covenants, and although gearing will increase by 7% it would still be well below the required limits, allowing the company to maintain a “significant level of headroom”

In Mali, its African Underground Mining Services Joint Venture with Barminco has been told by Randgold Resources that the contracts for the Gara and Talea operations will be terminated, as Randgold looks to bring more services in-house.

The parties are in discussions to organise the transition process and the possible purchase by Randgold of the plant and equipment associated with the underground gold mines.

It was at Gara, part of the wider Loulo- Gounkoto Complex, that AUMS achieved over 5km of development in a single jumbo operation since commencement of works in 2010 and 2011, setting a work record for the advance of 603.1m in a single month, then a world record.

The initial three-year contract at Gara was worth $US128 million to AUMS. That contract expired in 2013.

Ausdrill told shareholders that it was focused on improving performance and paying down its $125 million debt, and that its de-leveraging strategy was on track. A strategic review of the company is also almost complete, and should be released in the next week.

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