Mining contractor Ausdrill fears its full-year profit will slump by 72 per cent, stunning investors with its second earnings downgrade in six months.
The company cut its annual net profit forecast to between $25 million and $30 million amid a raft of downgrades by mining services companies.
The guidance was a significant drop on its previous forecast of $35 million to $45 million made last November and well below the $90.4 million net profit made in fiscal 2013.
Ausdrill's shares dropped 11 cents, or 11.3 per cent to 86.5 cents on the news.
The Perth-based company's African underground mining services business is heavily exposed to the gold mining industry and was blamed for Monday's announcement.
The gold price has fallen heavily in the last 18 months from above $US1,600 an ounce to below $US1,200 discouraging capital spending by miners.
Ausdrill suffered two recent credit rating downgrades but said it remained comfortably within its debt covenants.
The African operations were suffering from higher-than-expected costs, foreign exchange losses and operational issues at the Glencore-operated Perkoa mine in Burkina Faso.
It is predicting a substantially improved result next year and was committed to the African business.
"Ausdrill is of the view that provided there is not a significant fall in commodity prices from current levels, the mining downturn may have bottomed out or be close to the bottom," it said.
"However, it anticipates that any recovery will be slow with challenging market and mining industry conditions continuing in FY2015, with subdued activity particularly in the Australian market."
100 Doors managing partner Peter Esho said he thought Ausdrill would struggle unless there was a rally in the gold price and money flowed into explorers again.
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