The West

An Ausdrill drill rig.
An Ausdrill drill rig.

Cost pressures from mining clients have forced Ausdrill to consider moving some of its manufacturing work overseas.

The mining services provider is conducting a six-month trial of sourcing drilling and equipment parts in China and India.

"We are finding there could be up to a 30 per cent saving in terms of the cost of manufacturing certain products," Ausdrill chief financial officer Jose Martins said.

"It's really about cost, unfortunately. The high Australian dollar could stay high forever, who knows."

He said the type of products that could be made overseas included drilling consumables - items which were worn out or used up during the drilling process - and steel parts such as truck trays and digger and loader buckets.

"The key issue is quality and consistency of product and obviously reliability of supply," Mr Martin said.

He said even if the trials were successful, the company would still retain a manufacturing capability in WA.

Ausdrill has three manufacturing businesses operating in Canning Vale, Forrestfield and Kalgoorlie. Sales accounted for about 17 per cent of group revenue in the first half.

The manufacturing division suffered a $500,000 loss in earnings before interest and tax in the six-month period as the mining downturn saw client orders slashed and margins squeezed.

Revenue fell 37 per cent to $46 million, including internal sales.

The division had revenue of $128 million last financial year, including $75 million in external sales.

Ausdrill chief operating officer in Australia Alex McCulloch said high labour costs were also the driving force behind technological innovations in mining.

"It's a well-known fact in the Pilbara that to run a bit of gear it's possibly $1 million in operating labour per annum," Mr McCulloch said. "That's a frightening number.

"If you talk about technology in the Pilbara, it's a lot about automation and the minimising of the workforce, and of course, safety."

The West Australian

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