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May 26, 2014

BHP and Rio Tinto warn of further job cuts in Australian mining sector

Mining majors BHP Billiton and Rio Tinto have warned that the Australian mining industry will witness more mine closures and job losses this year due to the combination of high costs, high taxes and strong currency.

Mining majors BHP Billiton and Rio Tinto have warned that the Australian mining industry will witness more mine closures and job losses this year due to the combination of high costs, high taxes and strong currency.

BHP Billiton global coal president Dean Dalla Valle was quoted by The Sydney Morning Herald as saying that the industry would face tough times ahead in a period of over-supply, given that many operators are not making money at the current depressed prices.

"You are going to see more exits from the market," said Valle, who had announced earlier this month that the company is mothballing its underground and open cut coal operations in Hunter Valley, citing unsustainable financial losses due to the existing market conditions.

"The big established and high-quality resource bases where there are efficient and effective operations will have to continue this relentless cost drive." 

Rio Tinto Energy chief executive Harry Keynon-Slaney admitted that the company has shifted its focus on cost-cutting in the industry and is ‘prepared to kill sacred cows,’ like freezing salary increases.

"The big established and high-quality resource bases where there are efficient and effective operations will have to continue this relentless cost drive; they will probably survive," Slaney said.

"There are going to be some operations that are challenged."

Both Rio Tinto and BHP Billiton, which are among Australia’s lowest-cost producers and operate their businesses at a profit, predicted positive outlook for both types of coal, namely hard-coking coal and thermal coal in the long-term, according to the news agency.

The Australian mining industry is facing tough times with winding back or operations closure and massive job cuts, as well as a slide in coal prices over the past two years.

Approximately 12,000 jobs are believed to have been slashed from the mining sector by BHP Billiton, Rio Tinto, Glencore XStrata, Vale and Peabody Energy.

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