Ausdrill Limited (ASX: ASL)

Undervaluation of the Wodgina Project - Ausdrill is a diversified mining company that witnessed its share price falling by 20.168 per cent on 12 June 2018 just after it released an update on its projects. African Mining Services (AMS), a wholly owned subsidiary of Ausdrill confirmed that mining operations at Yanfolila are now operating at full capacity and development works have started at the Komana West deposit. Contract negotiations have started with respect to the Wodgina project, but now it expects that the value of the contract will approximately half the previously announced $180 million over the initial three years.

This would materially impact the Company’s performance as Group reported a revenue of $440 million in the six months period ending on 31 December 2017. The Group announced that due to the recent incidence of wall failure at the Super Pit, the Group’s scope of works has currently reduced by 35 per cent and the Group continues to review the longer-term mine planning. As of now, it is little difficult for Ausdrill to outline a timeframe and an estimate of the impact on the Company’s earnings.


African Mining Service Performance (Source: Company Reports)

African Underground Mining Services (AUMS), a 50:50 joint venture between Ausdrill Limited (ASX: ASL) and Barminco Holdings Limited (“Barminco”) recently signed a mining services contract with SEMAFO at the Siou Underground Mine in Burkina Faso. The terms of the contract say that all underground mining services will be supplied for seventy-months for the Siou Underground Mine that will include development, production activities and associated services and will start from Q3FY18.

It successfully raised $100 million of equity to further strengthen the balance sheet and refinanced bank debt facility and upsized from $125 million to $200 million. As on 31 December 2017, the net interest cover increased to 6.3x from 4.7x. It is targeting to achieve a 40 per cent profit growth in FY18. Pressure on exploration margins will continue to increase until surplus fleet across the sector reduces. Meanwhile,UBS Group AG and its related bodies corporate ceased to be the substantial holder of the Group since 6 June 2018. The share prices were up by 43.37 per cent in past one year but started falling in last three months and were down by 11.19 per cent. We recommend to avoid the stock at the current price of $ 1.900.

 
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