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

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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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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