BHP, Xstrata Attack Coal Costs in Australia; Jobs to Go
Top global miners BHP Billiton and Xstrata announced they were cutting high-cost coal production in Australia as they battle weak coal prices, rising costs and a strong Australian dollar.
The moves will add to worries that Australia's mining boom, the engine that pulled the country through the global financial crisis to post 21 years of growth, is fading, with jobs and production being cut.
BHP said it was closing the loss-making Gregory open-cut mine and said it would look to redeploy workers to its other nines run under a BHP Billiton-Mitsubishi alliance.
"The decision follows a continuing operational review of the Gregory Crinum operations, which 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," it said in a statement.
The Gregory mine is the second coal mine to be shut by BHP, following the closure of the loss-making Norwich Park mine in April.
Xstrata , Australia's top thermal coal exporter, said separately it was cutting around 600 jobs, including permanent staff and contractors, and would focus on curbing high-cost production at some of its 12 Australian mines.
Xstrata, the subject of a takeover offer from its biggest shareholder, Glencore International, said the cuts would not affect its production volumes materially nor affect its approved projects.
A spokesman was not immediately available to comment on what percentage of Xstrata Coal's staff were losing their jobs.
The moves by BHP and Xstrata come on the heels of no.3 iron ore miner FortescueMetals Group's move to cut more than 1,000 jobs due to a tumble in iron ore prices, and follows BHP's decision to defer more than $40 billion in projects, including a coking coal expansion.
Xstrata said its Ravensworth North, Ulan West and Rolleston expansion projects were continuing and remained on budget and on schedule.
Analysts have predicted Xstrata will delay its landmark Wandoan project, estimated at $6 billion and which would be Australia's biggest coal mine with a capacity of 22 million tonnes a year, due to the uncertain outlook for coal demand and rising capital costs.
"Feasibility studies into our Wandoan Project continue, to enable an investment decision once relevant approvals have been completed and market conditions permit," the company said.