Swick flags $3m loss

Perth-based Swick Mining Services has flagged a $3 million net loss for the financial year, as the company works to improve productivity to weather the tough times for mining contractors.

In a statement today, Swick reported revenue of $32.7 million in the March 2016 quarter, down 13 per cent on the previous corresponding period.

This was due mostly to the renewal of a contract with Newmont Mining for work at the Tanami gold project in the Northern Territory at a reduced rate.

“Swick has experienced a decrease in rig utilisation during the quarter,” the company said.

“This has, however, been offset by an increase in productivity per rig, as a result of ongoing productivity improvements being implemented on our underground diamond rigs.”

Swick’s fleet utilisation fell 10 per cent to 60 per cent during the quarter, with a number of the company’s clients scaling down their operations.

As a result, Swick expects to report a $9 million fall in revenue to $123 million for the 2016 financial year, along with a $3 million loss.

However, the loss would be an improvement on the company’s $17.5 million net loss result in FY15.

Swick managing director Kent Swick said despite another tough year in the industry, the company was performing well given the circumstances.

“Swick’s ability to maintain volumes despite the hyper competitive market is testament to the service provision offered as a whole and the value created for our customers,” Mr Swick said.

“Year on year, we have seen a reduction in the nickel price of 31 per cent, copper is down 20 per cent and zinc is down 15 per cent, all in Australian dollar terms, so it is tough out there for many mining companies.

“Those three metals represent around 40 per cent of Swick’s drilling, so whilst we work as closely as possible with our clients on reducing costs and maintaining efficiency, volume is inevitably affected by that downturn.

“Gold miners are enjoying a 10 per cent year on year uplift in the price in Australian dollar terms, so it is expected that volumes will improve in this sector in the near term.”

Mr Swick said the company has the ability to reduce the impact of the market downturn by continually focusing on improving efficiency.

“With a broad regional spread and diverse commodity exposure, Swick is still expected to maintain its total volume of metres drilled this year to a level very similar to last year,” he said.

“Adjusting our rates to meet the market has led to lower overall revenues for that volume of work, however the net effect will be softened with reduced costs.”

Swick closed 6.4 per cent lower to 14.5 cents each.