Boart Longyear $691m loss may prompt sale of division

Boart Longyear faces challenging times.Mining services company Boart Longyear may be forced to hive off one of its divisions after it plunged to a $US620 million ($691 million) loss in 2013 due to a sharp downturn in spending from global miners.

Boart has appointed investment bank Goldman Sachs to lead a strategic review of the company, with its products and drilling services divisions potentially in line to be sold as it grapples with weakness in its core markets.

The Utah-based company’s shares closed down 15 per cent after it failed to provide earnings guidance for 2014 due to ongoing industry volatility.

The company has again negotiated new financial covenants to cover its debt, with quarterly checks to be performed on the business to include minimum cumulative earnings over the last 12 months of $US45 million until March 31, 2015.

It blamed the weak result on an ”extremely challenging year” for the global resources industry as major miners slashed exploration, development and capital expenditure budgets during the 12-month reporting period.

It warned that analysts estimates of $US979 million in revenue and $US77 million in earnings may not be based on current industry conditions.

Boart also said the number of drill rigs being used by its clients has fallen below 2009 levels to just 38 per cent in 2013, from 56 per cent in 2012. ”We continue to work hard to hold price,” Boart chief executive Richard O’Brien said. ”But as I said about 60 per cent of the world’s drill rigs [are] not utilised, [so] we are expecting price pressure.”

Boart said the review aimed to preserve the value of the drilling services and products divisions, ensure the company continues as a going concern while capturing future growth when the market recovers.

”Each time the company reports, we think they have stabilised, yet the business continues to deteriorate,” Deutsche analyst Craig Wong-Pan said.

Boart recorded an adjusted net loss for 2013 of $US94.3 million, in line with expectations, and canned its dividend after paying out 1¢ a share the previous year.

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