BHP Billiton Mitsubishi Alliance (BMA) has terminated a coal removal contract signed with Downer EDI for its Goonyella Riverside mine in Queensland, with an aim to reduce costs at Australian coal operations.

Effective from 9 September, the termination will result in the removal of 427 contractors from four pre-strip fleets at Goonyella Riverside.

The termination of the contract, which was originally scheduled to complete in June 2016, will affect Downer’s business by approximately $360m.

According to BMA, the decision was made to ensure the continuing viability of its coal business.

"To be globally competitive we have to reset the cost base of the business."

BHP coal division president Dean Dalla Vale said that terminating the contract with Downer was a continuation of cost-cutting measures that have been underway for more than 18 months.

"Further measures to address wage and other costs are being undertaken at all mines in Queensland and New South Wales, as we continue our detailed reviews of every aspect of our coal operations to ensure every operation remains operating cash positive," Vale said.

"The coal industry is undergoing a difficult transition and to be globally competitive we have to reset the cost base of the business. Coal producers face challenging decisions."

However, as per the terms of the contract, Downer will receive compensation for early termination.

Downer CEO Grant Fenn said that the company would work closely with BMA through the transitioning process.

In addition to the open pit Goonyella Riverside mine, BMA operates six other mines in the Bowen Basin of Queensland state.

BHP also operates other coal mines in the state. The company recently closed its Norwich Park and Gregory mines in Queensland in 2012.