Mining giants cut jobs

CHRIS ZAPPONE
Last updated 16:05 10/09/2012

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Coal miners are cutting 900 jobs in Australia, in the latest sign that falling commodities prices and rising costs are taking their toll on the mining sector.

Xstrata Coal will cut 600 jobs, including office-based positions in Sydney, and warned of more cuts if needed, while BHP Billiton is cutting 300 positions as it closes its Gregory Crinum open-pit coal mine near Emerald, Queensland.

"In keeping with the cost savings objectives announced at our half-year earnings, we will be reducing our employee numbers by approximately 600," Xstrata said.

"The reductions involve both contractors and permanent positions."

The foreign-owned coalminer said contractors and permanent Xstrata Coal staff would be affected, but did not reveal how many jobs will be cut from each of its sites.

BHP said the decision to close the coal mine followed a review that had "determined that the Gregory open-cut mine production was no longer profitable in the current economic environment of falling prices, high costs and a strong Australian dollar".

'MORE CUTS LIKELY'

Fat Prophets resource analyst David Lennox said the slowdown in China, along with alternatives energy sources to thermal coal meant more coal production cuts and layoffs were likely.

"We would be expecting similar announcements coming out of some of the other majors in terms of their coal operations," said Lennox.

"We can't see the cycle for either thermal or coking coal really pushing on the price to see them go up."

Coking coal was under pressure from the slump in Chinese steelmaking, he said.

HUNTER VALLEY AND BOWEN BASIN

Most of Xstrata Coal's Australian operations are located in the Hunter Valley in NSW and Queensland's Bowen Basin.

The company employs 16,000 people worldwide, and says most are in Australia.

"The restructure is focused on scaling back high-cost production at some of our mines," the company said.

"We do not expect a material impact on Australian production volumes.

"We are also reducing some roles at our corporate headquarters in Sydney and consolidating our office-based operations in Queensland."

Xstrata blamed falling coal prices, the strong Australian dollar and high input costs for the Australian operations.

EMPLOYEES AND CONTRACTORS

“We understand that this decision will have an impact on our employees, their families and the Emerald community," said BHP Billiton Mitsubishi Alliance asset president Stephen Dumble, of the 50-50 joint venture with the Japanese industrial group that operates the open-cut mine.

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"We will work closely with our workforce and look for opportunities to redeploy affected employees to other BMA operations," said Dumble.

“We will also work with community stakeholders throughout the process,” he said.

BHP Billiton said the cuts affected 55 employees and 242 contractors. It added the Crinum underground mine and the Gregory Coal Handling Preparation Plant would continue to operate.

"The remaining operations will be made more competitive by the removal of the high cost Gregory production," said BHP's Dumble.

GLENCORE BATTLE

Xstrata confirmed growth projects Ravensworth North, Ulan West and its expansion of Rolleston, were "proceeding as planned" and remained both on budget and on schedule.

But it said feasibility studies of its Wandoan Project would continue "to enable an investment decision once relevant approvals have been completed and market conditions permit".

Parent company UK-listed Xstrata is battling to take over commodities trader Glencore in one of the largest mergers of the year.

Xstrata's chief South Africa-born Australian Ivan Glasenberg routinely makes appearances on the BRW Rich list, as one of Australia's wealthiest executives.

SHELVING PLANS

Today's announcements follows last week's shock revelation by iron ore miner Fortescue that it would cut 1000 jobs in response to the plunge in iron ore prices.

Mining giants BHP Billiton and Rio Tinto have also shelved billions in investment plans in recent months, as the outlook for demand from China becomes less certain.

Xstrata said its ongoing review would ensure the company "retains a highly competitive cost position" in the current market environment.

"If further adjustments are required, an announcement will be made at that time," the company said.

- Sydney Morning Herald

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