Why the Ausdrill Limited (ASX:ASL) share price just fell 25% lower

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Ausdrill Limited (ASX: ASL) was one of the worst performers on the local market in Tuesday morning’s trade. Shares in the mining services provider were down 25% to $1.79, following the release of an update on some of the company’s operations.

A wall failure has reduced the scope of Ausdrill’s works at the Kalgoorlie Consolidated Gold Mines by 35%. It is difficult to outline a timeframe for the reduction at this stage, and Ausdrill has not provided an estimate of the incident’s impact on earnings.

Furthermore, following ongoing negotiations with Process Minerals International for a contract on the Wodgina project, Ausdrill now expects the value of the contract to be about $90 million over the initial three years, half of the previously announced $180 million. This would be a material loss for the company, which reported $440 million revenue in the 6 months to December 2017.

Aside from the bad news, a correction could be natural for mining services stocks, after the outstanding growth delivered in the past two years. Ausdrill had gained 220% before today’s losses, with industry peers NRW Holdings Limited (ASX: NWH) and Emeco Holdings Limited (ASX: EHL) up 500% and 775% respectively over the same period.

 

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