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Forge halts trade for the third time

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Mining services company Forge Group has today entered its third trading halt in as many months.

The troubled company today notified investors it will be placed in a trading halt pending another announcement related to its underlying earnings.

The announcement is expected to be made before Wednesday.

On January 10 the company entered into a trading halt before it revealed it had incurred heavy losses from the West Angelas Power Station project which has run over budget and missed delivery schedules.

“The company has identified previously unplanned scope and subsequent unplanned and extended delivery durations which are forecast to result in additional costs to complete,” Forge stated at the time.

Forge said $14 to $19 million net cash outlay is still required to complete the project explaining existing cash and facilities will be allocated.

In November Forge told investors it expects profits to be well below guidance this financial year, revealing a $127 million write down which it attributed to two power station projects.

At the time the company said an internal review had "identified concerns in relation to the underperformance" in relation to its $420 million Diamantina contract in Queensland and its $150 million contract with Rio Tinto at the West Angelas iron ore mine in Western Australia. 

To date Forge has found $10 million worth of cost savings across the organisation and expects to cut a further $5 million before the financial year is out.

Adding there is a further $5 million in one-off items expected to be achieved in FY14.

“These initiatives remain on track and will not impact ongoing business operations or project delivery,” the company said.

Throughout 2013 the profitability of mining service companies significantly declined, with the likes of WorleyParsons, Downer EDI, Leighton Holdings, Forge Group and NRW all reporting a tough year and some lowering profit guidance for 2014.

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