This expense would be in addition to a $5.8 million impairment flagged by the company in its half-year report last February.

The impairment comes as part of a preliminary review of the company’s carrying value of assets as of June 30 and will be further detailed in an annual report later this month.

“A review of the company’s longer-term forecast on the back of the recent fall in the iron ore price and continued challenging market conditions have resulted in a view being taken that the recovery of the Australian mining services sector will be slower than Ausdrill had previously anticipated,’ the company said.

“The board remains focused on improving the company’s performance and applying the free cash flow generated to reduce debt, with the company remaining on track with its previously stated strategy of de-leveraging the business over the next 12 months.”

Iron ore was last trading at about $US95.50 per tonne.

Ausdrill emphasised the non-cash nature of the expected impairment, noting that it would not have any impact on cash flow or operations.

It is also not expected to have a material impact on banking covenants.

The update coincided with confirmation by the company that its tax exemption for operations in Mali had been withdrawn with effect from January 1, 2014.

The company said it was considering its legal position in relation to the withdrawal and would provide income tax in the west African country of about $A2.7 million for FY2014.

Ausdrill had been operating in Mali under a corporate tax exemption, which was valid until December 2016.

Last June, the company downgraded its full-year net profit after tax, excluding significant items, to $25-30 million, compared to the prior guidance of $35 million.

This reduction was attributed to higher costs, mainly due to an ageing fleet, the adverse foreign exchange impact on receivables and a reduced scope of work in Ghana and Burkina Faso.