Arrium to close South Australian iron ore mining operations

22 January 2015 (Last Updated January 22nd, 2015 18:30)

Arrium has announced plans to close its iron ore mining operation in South Australia, resulting in the loss of almost 600 jobs.

Arrium has announced plans to close its iron ore mining operation in South Australia, resulting in the loss of almost 600 jobs.

The company's latest decision aims to increase cash generation and deliver for sale around nine million tonnes a year (Mtpa) of iron ore for sale.

Arrium's re-design plan follows the substantial decline in iron ore prices over the last half year, as well as growing uncertainty around the timing of a price recovery.

Iron ore prices are said to be at five-year low and down 45% compared with previous years. This has pushed Arrium into a position where it is absorbing cash despite significant achievements in reducing costs and capital expenditure, the company said.

"The business is able to move to a lower cash-cost operation through its flexibility to alter volumes, grade and costs."

Arrium CEO and managing director Andrew Roberts said: "The business is able to move to a lower cash-cost operation through its flexibility to alter volumes, grade and costs.

"We are able to 'mothball' our Southern Iron operation and optimise our lower cost Middleback Ranges operation, including increasing the utilisation of its supply chain to deliver approximately 9Mtpa, six of high-quality, lower cost export iron ore for sale."

The company plans to complete the re-design process by the end of June 2015, leaving it well-positioned for maximising cash generation in FY16.

The mine closure is also expected to result in redundancies for 200 full-time positions and 380 contractors, ABC reported.

Arrium also announced that it is progressing with its divestment target of $100m for this financial year, with asset sale proceeds to date of around $60m.

In order to exceed the target, the company is continuing to look for additional opportunities.