JOHANNESBURG (miningweekly.com) – Australian mining contractor Ausdrill has slashed its profit forecast for the 2014 financial year, which ends this month, as the performance of its African Underground Mining Services (AUMS) business had disappointed.

The company, which owns 50% of AUMS, said on Monday that it expected to report a net profit after tax of between A$25-million and A$30-million for the financial year to June 30. This compares with profit of A$90.4-million the previous financial year.

Ausdrill reported that the AUMS operations had suffered from a higher-than-anticipated increase in costs, particularly maintenance-related costs, owing to its ageing fleet. In Ghana, Kinross’ transitioning to an owner-miner model also reduced AUMS’ scope and in Burkina Faso, the Perkoa mine, which AUMS operates for Glencore, had been operating at a reduced scale for longer-than-anticipated as Glencore addresses operational issues.

“Despite the disappointing result by AUMS in the 2014 financial year, AUMS has been a very good business and Ausdrill continues to see ongoing potential for this business in West Africa,” the company reported.

The AUMS joint venture board, which includes representatives from Ausdrill and Barminco, has appointed a new COO for AUMS to address the deterioration in the business’ performance.

Meanwhile, Ausdrill is optimistic that the 2015 financial year will be a better one for the group, with particular improvement expected in the Energy Drilling Australia business and in the AUMS business. “The anticipated improvements in these businesses are based on contracts which are now in place.”

Further, Ausdrill believes that, should commodity prices remain stable, the mining downturn may have bottomed out, or be close to the bottom. The company cautioned, however, that a recovery would be slow and said subdued activity was expected, particularly in the Australian market.

“Ausdrill expects the focus by the mining industry on deferring all nonessential expenditure, including capital works, exploration programmes and noncritical maintenance, will taper at some point, and possibly towards the end of the 2015 financial year, and that surplus capacity that exists in the mining services industry will then start to diminish,” the ASX-listed firm stated.